Source: General Administration of Customs' Website
According to customs statistics, 3.773 million tons of aluminum oxide were imported into China from January to October this year and worth of USD 1.51 billion, respectively decreased by 14.6% and 11.3% as compared with the same period last year (similarly hereinafter), but the average import price thereof was USD 401/ton, increased by 4%; this October, 259,000 tons of aluminum oxide were imported and worth of USD 110 million, respectively decreased by 45.1% and 39%, but its average import price was USD 434/ton, increased by 11.3%.
I. Main features of aluminum oxide's import into China from January to October this year
(I) The import volume of aluminum oxide continues falling this October, but its average import price obviously rebounds. Since this July, China's import of aluminum oxide has been declining for the successive 4 months, dropping from 424,000 tons in June to 259,000 tons in October. However, since this August, the average import price thereof has been increasing for the successive 3 months, increased from USD 369/ton in August to USD 434/ton in October, which manifested an obvious rebound.
(II) Aluminum oxide is mainly imported via the general trade. From January to October, 2.619 million tons of aluminum oxide was imported into China via the general trade, decreased by 27.3%. This figure accounted for 69.4% of the total import volume during the same period, but fell 12.1 percentage points as compared with the same period last year. In addition, 1.084 million tons aluminum oxide were imported via the mode of inbound & outbound goods in bonded warehouse, increased by 40.4%, which accounted for 28.7% of the total import volume thereof during the same period.
(III) Aluminum oxide imported from Australia accounts for 80%. From January to October, 3.144 million tons of aluminum oxide was imported into China from Australia, decreased by 13.9%, which accounted for 83.3% of the total import volume during the same period. In addition, 575,000 tons thereof were imported from India, increased by 1.9%, which accounted for 15.2 % of the total.
(IV) Aluminum oxide imported by state-owned and foreign-invested enterprises drops, while that imported by private enterprises grows against the mainstream. From January to October in this year, 1.752 million tons of aluminum oxide was imported by state-owned enterprises, decreased by 32.7%, which accounted for 46.4% of the total import volume during the same period; 1.364 million tons thereof were imported by foreign-invested enterprises, decreased by 4%, which accounted for 36.2% of the total. In the meantime, private enterprises imported 649,000 tons of aluminum oxide, increased by 66%.
(V) Beijing, Shandong and Ningxia are major import provinces and municipality for aluminum oxide. From January to October, 879,000 tons of aluminum oxide were imported by the enterprises in Beijing, decreased by 45.7%; while Shandong and Ningxia imported 679,000 tons and 563,000 tons thereof, respectively increased by 40.5% and 56.2%, all of which added up to 56.2% of the total import volume during the same period.
II. Major reasons for import decline of aluminum oxide in China
I. Due to recession of the global economy, the market demands for non-ferrous metal decline. On 6th November, the International Monetary Fund (IMF) substantially decreased the growth rate of global economy in the coming year and forecasted that the developed economies would confront with the first year of recession since the War, especially the U.S.A, which would appear the negative growth of 0.7%. Also, the IMF substantially decreased the anticipated economic growth from 6.9% to 6.6% in emerging markets and developing countries in 2008, and in 2009, this anticipated figure would dramatically drop from 6.1% to 5.1%. Thus, we can see to it that the global economy is in recession. On 10th November, the Chinese government's plan to input fiscal expenditure of RMB 4 trillion Yuan in the future two years was officially promulgated, which shall be deemed as an intense signal for economic stimuli. However, the recession of global economy results in the decline of demands for non-ferrous metal, including Aluminum, so the driving force for the import of aluminum oxide also obviously shrinks.0}
II. With the continuous expansion of domestic productive capacity, the import of aluminum oxide could be gradually substituted. In the wake of continuously enhanced productive capacity of aluminum oxide in China, the import thereof could be obviously substituted. According to the data released by the National Bureau of Statistics in October, from January to September this year, the output of aluminum oxide in China was 17.44 million tons, increased by 21.3%, thus leading to the decline of import demand. In addition, In June and July of this year, the National Development and Reform Commission respectively approved Yunnan Wenshan's aluminum oxide project with the annual output of 800,000 tons as well as the expansion project of Zhongzhou Branch, China Aluminum Co., Ltd, the annual output of which could reach 700,000 tons.
III. Domestic electrolytic aluminum enterprises reduce output, so the demand for aluminum oxide appears significant reduction. Rigorous regulatory policies have been carried out on the electrolytic aluminum industry that is featured with high energy consumption. In addition, the recent price rise of power impels some electrolytic aluminum enterprises to reduce output, thus the demand for aluminum oxide in the domestic markets tends to be stabilized. At present, the monthly demand for aluminum oxide in the newly added production of electrolytic aluminum in China is about 83,000 tons, obviously lower than the 228,000 tons of newly added output of aluminum oxide each month. In the meantime, as pointed by China Non-ferrous Metals Industry Association, the output of virgin aluminum is estimated at 14.5 million tons in 2008, decreased by 6.5% or 1 million tons as compared with the anticipated figures. Due to the price slump of electrolytic aluminum as well as the declining demand for aluminum products abroad, on 23rd October, the China Aluminum Co., Ltd declared to carry out output reduction on electrolytic aluminum. The related enterprises in Shandong, Henan, Liaoning and Inner Mongolia, etc are restrained through limited production or partial production halts, thus the productive capacity of electrolytic aluminum is decreased by 720,000 tons/year, accounting for 18% of the overall output of the company. So, in the days to come, the demand for aluminum oxide would be further lowered.
IV. The price of aluminum turns downward and the import of aluminum oxide lacks driving force. Under the influence of world financial crisis, the futures price of aluminum is continuously declining and its upstream product like aluminum oxide lacks driving force of import. On 17th October, the aluminum's futures price for 3 months was offered at USD 2,225, decreased by 34.2% as compared with the historical peak of USD 3,380 in July. As per the trend chart of aluminum prices of the London Metal Exchange, the aluminum prices dropped from the peak of over USD 3,000/ton this July to about USD 2,000/tons at the end of this October. In light of the Shanghai Aluminum Index and the LME aluminum price from December, 2007 to October, 2008, the aluminum prices was continuously declining since this July (see Figure 2). According to the data released by the National Bureau of Statistics, in October, the ex-work prices of industrial products achieved 6.6% year on year increase, but those of non-ferrous smelting and rolling processing was decreased by 9.8% year on year, wherein the aluminum price was dropped by 7.5%.
III. Key problems in the development of aluminum oxide Industry
In recent years, as driven by high profits, China's aluminum oxide industry continuously expands productive capacity. It is estimated that the domestic output of aluminum oxide would be 27.69 million tons in 2008, increased by 32.5% as compared with last year and the annual productive capacity would reach 33 million tons. Thus, the matters of concern arising from are listed as below:
I. The guarantee of raw material supply in China is weakened. Bauxite, as the raw material for the aluminum oxide industry, pertains to unrenewable resources. The bauxite reserves in China only accounts for 2.4% of the total in the world, but the yearly output accounts for 8% of the total exploitation in the world. Unchecked excavation on bauxite resources in China is indeed serious and the recovery ratio can only reach 40%, far lower than the level of 80% abroad. As per the current rate of development, the detected reserves of bauxite in China could only maintain 10 years or so. Thus, the guarantee of material supply for the aluminum oxide industry would be weaker and weaker.
II. Independence on import of raw materials is higher and sources of supply are too much centralized. In the wake of larger gap on the supply of raw materials, China's independence on imported bauxite would be increased from 9.4% in 2005 to 47.3% in 2008. According to customs statistics, altogether 23.12 million tons of bauxite was imported into China from January to October this year, increased by 18.8%, mainly focusing on Indonesia, India and Australia. In particular, the import volume of aluminum oxide from Indonesia in this year accounted for 67% of the total during the same period. In addition, this July, 4 enterprises from Henan jointly acquired the exploration right on the mining area in BOKE of Guinea, which covers an area of 558 square kilometers. According to experts' initial forecast, this mining area is reserved with 10 billion tons of mineral resources, far more than the total of bauxite reserves in China (bauxite reserves in Chinese are 2.658 billion tons). Although the prospect is promising, effective supply could hardly be achieved in a short term.
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