U.S. President Donald Trump's plans to impose a 25% tariff for steel and 10% for aluminum are expected to be a bigger threat to Chinese aluminum producers than it would be for steel mills, according to analysts.
"Chinese steel mills have been well supported by the rapid price increases in the domestic market, and their intention to export products have weakened," said Liu Xinwei, an analyst with commodities consultancy SCI International.
Liu did not expect to see a strong reaction from China's steel industry to the planned tariffs by the U.S., given the low volumes of steel exports to America. In 2017, China exported over 70 million tonnes of steel products, among which only around 1 million tonnes went to the U.S., according to Liu.
"The situation is more dire for aluminum producers as the U.S. is the top buyer of China's aluminum exports," Liu said. The U.S. accounted for around 13% of China's total aluminum exports of 4.1 million tonnes in 2016, according to data from SWS Research and China Customs.
Xu Ruoxu, a nonferrous metals analyst with SWS Research, said in a Feb. 26 note that the planned tariffs will worsen the oversupplied market in China and hurt aluminum prices, and expected the Asian nation to respond with retaliatory moves. Beijing has launched a probe into U.S. imports of sorghum in February and is likely to expand the investigation to other agriculture products, such as soybeans, according to Xu.
Beijing has not yet reacted to Trump's comments on the planned tariffs. However, in a March 1 statement from the Ministry of Commerce, a spokesperson said in response to an investigation completed by the Office of the U.S. Trade Representative that Beijing will take measures to protect its rights and interests.
Meanwhile, Liu Xiaolei, a senior aluminum analyst with Shanghai Metals Market, believed that Chinese aluminum producers would survive the 10% tariff, citing their cost advantage and the inability of U.S. aluminum producers to fill in the demand.
"I think the 10% tariff is not very high. Chinese producers should be able to adapt their production to it," he said. "Plus, in the short term, we don't think other suppliers, either from U.S. or other countries, would be able to provide the aluminum needed by U.S. downstream companies."
He added that over the long term, Chinese aluminum producers may seek to diversify export destinations or shift supply to the domestic market as a response to the tariff.
