In the first four months of this year, the US primary aluminum price soared due to market expectations that the US government would impose a 10% import tariff on aluminum products. Before the tariff was imposed, the US primary aluminum price was already about 10% higher than the global average. Nowadays, tariffs are being imposed, and the rate of increase is close to 20%. Since the entry into force of the aluminum tariff on June 1, the forward price trend of US primary aluminum has stabilized, indicating that most investors expect that the tariff policy will not end in the short term.

sodium sulfite anhydrous

Although the United States has increased import tariffs on aluminum, the United States needs to pay higher prices for spot aluminum premiums, but the spot aluminum premiums in Europe and Japan have seen a significant decline. This is because the increase in US aluminum tariffs will curb the country’s consumption of primary aluminum, resulting in an oversupply of primary aluminum in Europe and Asia.

Import tariffs on imported aluminum will not only directly affect the regional pricing of primary aluminum, especially in North America, but may also have an indirect impact on the price of primary aluminum. Once the US aluminum tariffs trigger a slowdown in China’s economic growth or the depreciation of the renminbi, global aluminum prices will be under pressure. Like copper, iron ore and other industrial metals, the price of primary aluminum is also closely related to the Chinese economy, which is reflected in China’s official GDP and the more volatile volatility index. The Keqiang Index measures the growth of China’s electricity consumption, railway freight volume and bank loan balance

The correlation coefficient between the Keqiang index and the original aluminum price is between 0.5 and 0.6, and the trend is five quarters ahead of the original aluminum price. China’s official GDP is more correlated with the price of primary aluminum, only one year ahead of the original aluminum price, but the data is too stable. The growth rate in each quarter since the beginning of 2015 is between 6.5% and 7.0%. This apparent stability may be a manifestation of the diversification of the Chinese economy into the service industry, but we believe that this underestimates the true volatility of China’s industrial sector. For primary aluminum prices, industrial demand is the most critical. Therefore, when measuring China’s economic growth, we are more inclined to pay attention to the Keqiang Index rather than China’s official GDP data.

So far, the United States has only imposed a 10% tariff on China’s $34 billion worth of goods. The scale of taxation is small and has limited impact on China. However, if the United States imposes tariffs on China’s broader commodities, or increases the tariff rate from 10% to 25%, the impact on the Chinese economy will begin to become measurable. China is the world’s second-largest economy after the United States, and its economy has begun to slow down under the pressure of high debt levels and the collapse of emerging market currencies. Once the Chinese economy slows further and the renminbi depreciates further, the price of primary aluminum may face a sharp drop. US aluminum premiums may not be greatly affected, but the price of primary aluminum in Europe and Japan may further decline under the pressure of global aluminum oversupply.

The reason why China’s price of primary aluminum is so important is obvious, because China’s annual primary aluminum consumption accounts for 40-50% of the global primary aluminum supply. Therefore, any slowdown in the Chinese economy will make it more difficult to digest a large amount of primary aluminum supply each year. In 2017, the global primary aluminum production reached nearly 60 million tons, which has risen to more than three times that of 1994.

sodium metabisulfite