Although the U.S. is on the attack against China over subsidies provided to some of its aluminum producers, the Asian powerhouse has far greater worries than the penalties it faces from the World Trade Organization case.
The U.S. filed a complaint with the WTO against China in early January, alleging that the Chinese government was providing loans and other financing to primary aluminum producers, as well as coal, alumina and electricity to one producer.
The argument is that the subsidies are "causing adverse effects to the interests of the United States."
However, S&P Global Platts senior managing editor, markets Mok Yuen Cheng said that while it is too early to say what the outcome of the case will be, China is not overly worried.
"They are not too concerned because it's only targeting exports from China and as far as the Chinese are concerned, if you look at last year's figures, exports actually reduced compared to the previous year," Singapore-based Mok told S&P Global Market Intelligence.
"The Chinese have a lot of domestic concerns and factors that they are looking at right now and this is not a big issue anymore as far as the Chinese are concerned with aluminum."
China is more focused on the government's move to reduce pollution and shut down up to 30% of aluminum capacity in Henan, Shandong and Shanxi.
This a concern for not just China, but the global market, given the country is the world's largest producer of aluminum, accounting for about 54% of global production in 2016, according to SNL Metals & Mining data.
China is also the largest consumer of aluminum, accounting for about 50.2% of the world market.
"Everybody is kind of mixed right now as to whether that will actually happen and how that will impact the market," Mok said.
Chinese aluminum producers are also experiencing rising input costs due to changes to transport policies and increasing coal and alumina prices in the latter half of 2016.
"The underlying costs are going up in terms of transportation and labor," Darryl Pilgrim, AME Group industry director – light metals, told S&P.
"The general transport rates were hiked in China. They also had the floods within southern and central China. So that was affecting both the coal prices and availability and alumina prices and availability."
Meanwhile, Pilgrim suggested the WTO case against China could drive the country to limit exports to the U.S. and increase exports to other markets, which could displace other aluminum supply.
"Just because the Chinese don't sell to the U.S. doesn't mean they can't sell into other markets, which then I guess there's a big shuffle of supply/demand dynamics around the world," he said.
There is some question as to the strength of the U.S. case against China, given the country is not the only one providing subsidies to struggling producers.
U.S. heavyweight Alcoa Corp. received more than A$200 million in government financial assistance to bring its Portland smelter in Victoria, Australia, back online following a power outage in late 2016.
The company also reached an agreement with AGL Energy to secure power at below market price for the operation.
"China isn't the only place subsidizing production," Pilgrim said. "Obviously we've seen Portland come back on with a lot of support from the governments, both state and federal.
"In the U.S. last year there were a lot of smelters looking to close down trying to negotiate very good power deals and in some cases they were getting what I would guess you would term assistance potentially. I don't think it's something that you can just point the finger at China currently."
Alcoa CEO Roy Harvey said during a conference call last week that the company is following the WTO case closely and waiting for further details to emerge.
"I think there are a lot of questions still out there as to exactly the approach that these discussions will take," he said. "We're very supportive of a marketplace that is fair and where we can all compete together."
Alcoa forecasts that the aluminum market will be in surplus in 2017, but is expecting Chinese demand to grow by 6%.
AME's prediction, meanwhile, is a little more conservative at 4% growth, but the company is currently reviewing its 2017 forecast due to a more positive outlook.
Stronger demand is expected to have a positive impact on aluminum pricing, with SNL forecasting the lightweight metal to average about US$1,750 per tonne this year, which is slightly more bullish than consensus pricing predictions.
SNL Metals & Mining is an offering of S&P Global Market Intelligence. S&P Global Platts and S&P Global Market Intelligence are owned by S&P Global Inc.