THE country’s imports of aluminum are about to hit their highest levels in a decade, traders and analysts said, as an arbitrage opportunity created by demand recovery after the coronavirus outbreak makes it cheaper to buy metal from outside the country.

China, the world’s top producer of the metal used in everything from cars to cans, normally has little need to import primary aluminum, made from alumina rather than scrap. Imports for all of 2019 totalled just over 75,000 tons versus output of 35 million tons.

This year, though, as demand in the rest of the world collapses and metals consumption in China recovers from coronavirus-induced shock, its aluminum imports are set to top 100,000 tons in May alone.

The draw is that Shanghai aluminum prices above 13,000 yuan (US$1,800) a ton far exceed London Metal Exchange prices of US$1,500, opening an arbitrage that has Chinese buyers looking overseas for bargains.

“The last time we saw anything like this was in 2009, but that was a government stimulus to the industry, not natural market forces,” said Paul Adkins, managing director of consultancy AZ China Ltd.

China’s monthly record for aluminum imports — including primary metal — was 440,000 tons in April 2009.

China could import 120,000 tons or more of primary aluminum in May and the same in June, if the arbitrage persists at least in part due to post-outbreak economic stimulus, said Roman Andryushin, head of sales and marketing at Russian aluminum giant United Co. Rusal.

Around a third of this might be of Russian origin, he said.

As Chinese prices recovered, the spread between Shanghai and London cash aluminum contracts hit a six-year high of around US$250 a ton May 20.

Aluminum was the top performer among Shanghai base metals in April and May. An open arbitrage also lifted imports of copper and tin in April, although China is typically a big importer of most other metals.

(SD-Agencies)