Elimination of tax rebates on aluminum exports. It is not an exaggeration to say that China’s announcement made the world tremble.
On November 15, the Ministry of Finance and the State Administration of Taxation issued an announcement that since December 1 this year, the export tax rebate for aluminum and other products will be abolished, and the aluminum products involved almost cover the main aluminum profiles, aluminum sheet and strip foils, aluminum bars and rods and other aluminum products.
As of now, China is the undisputed absolute hegemon of the global aluminum industry, and China’s aluminum exports reached 5.287 million tons in 2023, accounting for about 35% of the total global trade.
In terms of production, China’s absolute dominance is even more terrifying, in which primary aluminum production accounts for 59% of the world, aluminum production accounts for about 66%, electrolytic aluminum accounts for 60%, and smelted aluminum is also close to 60%.
According to statistics from the United States Geological Survey (USGS), China’s smelting aluminum production in 2023 will be ten times that of the second-ranked India, and the total production of other countries in the world is only 70% of China’s.
As an extremely important basic resource, aluminum products play a key role in industries such as construction, rail transit, automobiles, and cables. Due to the super status of Chinese aluminum products in the world, countries around the world can hardly bypass China when using aluminum products.
Even though the United States has imposed various trade measures such as anti-dumping duties, countervailing duties and tariffs on my country in recent years, it remains the world’s largest buyer of Chinese aluminum products and the world’s largest importer of aluminum to this day.
The aluminum industry chain, especially electrolytic aluminum, is a “power-eating behemoth” with a huge appetite, which seriously restricts the development of the aluminum industry in other countries and regions. Based on my country’s aluminum exports last year, at least 740GW of electricity was consumed. By the end of September this year, my country’s total photovoltaic installed capacity had reached this figure.
Due to geopolitical conflicts and the pursuit of reducing carbon emissions by mainstream countries around the world, the power supply is insufficient and the energy crisis has emerged. The electricity left for electrolytic aluminum will only become less and less. China’s reduction in aluminum exports will mean a large number of chain reactions for countries around the world, and a subsequent reassessment of China’s industrial capabilities.
1.Electricity-Eating Monster
Aluminum was once more precious than gold.
Aluminum was a very rare metal more than a hundred years ago due to the difficulty of refining. In order to show his lofty status, Napoleon III specially made an aluminum crown, and only he could use exclusive aluminum tableware, and others could not. Only gold or silver cutlery may be used.
Aluminum itself is the most abundant metal element in the earth’s crust. It was not until 1889 that Austrian scientist Bayer invented a method of extracting aluminum oxide from bauxite, and then invented the electrolytic production method, which officially opened the prelude to the large-scale industrialization of aluminum. Currently, almost all aluminum companies in the world use the “Bayer process”.
The efficiency of aluminum smelting has been greatly improved, but the disadvantage of electrolytic aluminum is that it consumes huge amounts of electricity, making it a “power-consuming monster.” It takes 13,600 kw/h of direct current (nearly 14,000 degrees) to produce one ton of electrolytic aluminum. Once upon a time, my country had to use more than 7% of its annual electricity to produce electrolytic aluminum. This was just one link in the electrolytic aluminum industry. The electricity consumption of the entire industry chain was an extremely huge number.
In 2023, the national production of 41.513 million tons of electrolytic aluminum, this calculation, power consumption of up to 564.6 billion kWh of electricity, equivalent to 5646GW, last year’s aluminum exports of 5.287 million tons of power consumption close to 740GW.
To know, at the end of last year, China’s cumulative installed capacity of photovoltaic power generation is less than 610GW, the global cumulative capacity of 1546GW. to June this year, China’s photovoltaic cumulative total of 713.5GW, as of the end of September, only to reach 770GW, that is to say, just China’s exports of aluminum will need to be powered by all of the photovoltaic in China.
At the end of last year, Europe’s cumulative installed capacity of photovoltaic climbed to 263GW, the United States 162GW, India has just exceeded 60GW. relying only on photovoltaic clean energy, the gap is very huge.
Aluminum electrolysis at the same time is still a high-emission industry, smelting process carbon emissions had accounted for about 5% of China’s total carbon emissions, second only to steel and cement. Such a huge amount of carbon emissions is unaffordable for any country pursuing a green energy transition.
In November 2018, the European Union proposed to achieve carbon neutrality by 2050, and has since further established a target of 55% emission reduction (compared to 1990) for member states by 2030; the United States plans to reduce greenhouse gas emissions to half of the 2005 level by 2030, and to achieve “net-zero” emissions by 2050. “emissions by 2050.
Of course, this goal may become recurring as new administrations come to power.
That’s why India, the world’s second-largest aluminum producer, is the world’s third-largest carbon emitter after China and the United States. In order to realize the completion of 500GW of clean energy in 2030, India is frantically mounting photovoltaic projects, and in the first half of 2024, its photovoltaic new installations of 14.9GW, a year-on-year surge of 282%, a record high for the same period in history.
And China is the world’s top PV country, with a complete whole industry chain absolute advantage, India 80% of PV components rely on Chinese manufacturing.
Have no choice, there is news that even India’s second largest aluminum group Indian Aluminum Industries has begun planning to enter the field of solar modules. The company also at the end of last year, plans to invest 80 billion rupees to establish a battery foil manufacturing plant.
Therefore, China’s tightening of aluminum exports this announcement, so that the world vibration, will pay more attention to China’s industrial capacity, whether it is traditional industrial products or photovoltaic, wind power and other new energy products.
2.The world can’t do without Aluminum China
Countries around the world are basically dependent on Chinese aluminum products.
Based on its huge scale advantage, Chinese aluminum products are making inroads into the world.
Especially the United States. Even though it has introduced various trade restrictions, it is still the largest buyer of Chinese aluminum products.
As early as 2018, the United States initiated a 301 tariff review of China, involving 33 sub-divisions of aluminum products; in October 2023, the U.S. Department of Commerce announced that it had imposed a preliminary anti-dumping duty of 167.16% on China’s ordinary aluminum alloy plates, 59.31% on China’s aluminum profiles, and a countervailing duty rate of up to 137.65% on Chinese companies involved in the case;
September 13 this year, the United States and decided to China’s exports of electric vehicle batteries, key minerals, steel, aluminum, masks and other products, the tariff rate will be raised to 25%.
The rounds of tax increases, almost all of the aluminum is covered. It can be said that the United States of China’s aluminum products for a full range of non-discriminatory “comprehensive blow”. But because the United States is extremely dependent on aluminum imports, to 2023, the United States is still China’s largest export market for aluminum products, exports to the United States totaled 694,000 tons, exports of 3.79 billion U.S. dollars.
Due to the continued increase in demand from the automotive lightweight, rail transportation and other industries, Goldman Sachs expects the global aluminum market will also see a shortfall of 7.24 million tons this year.
However, due to the constraints of zero carbon emission targets, China’s electrolytic aluminum has been close to the ceiling of compliance capacity. Some brokerage calculations, electrolytic aluminum compliance capacity limit value of 44.67 million tons, the expansion of space has been little.
According to the previous departments to clean up and rectify the electrolytic aluminum illegal and irregular special action provisions, where the electrolysis process contains the project, must be implemented electrolytic aluminum capacity replacement, that is, “the construction of electrolytic tanks, must be replaced”.
Overseas, in Russia played “cut off” king bomb, Norway Hydro decided to close Slovakia aluminum smelter, Germany’s large aluminum rolling company Speira announced a cut of its German smelter half of the production capacity of Europe’s largest aluminum smelter France Dunkirk Aluminum also said that the production reduction of 22%.
By incomplete statistics, the overseas capacity closure in 2022-2023 is as high as 1.581 million tons, superimposed on the impact of dual-carbon policy and energy issues, further production cuts are more likely.
In fact, the main force of new overseas production capacity or Chinese enterprises, Huaqing Aluminum, Huayou Holdings, Nanshan Aluminum, Shandong Weiqiao / China Liqin and other overseas investment and construction of up to 6,050,000 tons of production capacity scale, the new production capacity of aluminum enterprises in other countries is only 714,000 tons, but also face a lot of uncertainty.
In order to bypass the trade sanctions in Europe and the United States and other countries, China’s aluminum companies also accelerated overseas production, especially Indonesia landed a number of projects, superimposed on the rebound in aluminum prices, the domestic aluminum company performance, Nanshan Aluminum industry in the first three quarters to achieve a net profit of 3.49 billion yuan, an increase of 62.94%; Aluminum Corporation of China in the first three quarters of the ho earned 9.017 billion yuan, an increase of 68.46%; China Hongqiao first half of the storm earned 9.155 billion yuan, a jump of 2.7%. billion yuan, a year-on-year surge of 2.7 times.
At present, the world’s top fifteen electrolytic aluminum producers, China alone accounted for seven seats, respectively, Chinalco, Hongqiao, Xinfa, Guodian Investment, Oriental Hope, Jiujiang Steel and Shenhuo, production accounted for 37% of the global total.
And Alcoa (Alcoa) due to soaring energy and other costs, sustained losses since 2022, after the permanent closure of the Intalco aluminum smelter located in Washington State, production has withdrawn from the world’s top ten.
The crisis of the United States and European aluminum companies, the United States of America’s dependence on Chinese aluminum products will further deepen.
3.The bottom line of industrial scale
The global aluminum industry landscape is solid.
The huge scale of the aluminum industry allows China to hold ample trade leverage, allied with the South in one hand and exported to developed countries in the other.
China’s aluminum manufacturing capacity dominates the world, but its upstream resources rely heavily on overseas imports. China’s bauxite and alumina reserves account for only 2% of the world’s total, and currently around 70% of bauxite needs to be imported.
The world’s bauxite is concentrated in Guinea, Vietnam, Australia, Brazil, Indonesia and other countries, which together account for 65% of the world’s reserves. In particular, Guinea is world-famous for its high-grade, large-scale bauxite resources. It has been the main source of global bauxite growth in recent years and is currently the largest source of minerals for my country.
In October this year, Chinalco’s mining volume in Guinea hit a record high for a single month, and the amount of ore shipped back to China hit the best level in the same period in history; Tianshan Aluminum recently stated that the company’s bauxite project in Guinea has entered the production and mining stage and will soon be shipped to China. , the cost of bauxite raw materials can be greatly reduced in the future.
Judging from the distribution of source countries of my country’s imported bauxite in recent years, my country’s dependence on Guinea has increased rapidly. In the first nine months of this year, 74.5% of the bauxite came from Guinea, and its dependence on Australia has decreased significantly.
Another core country is Indonesia. In June 2023, Indonesia issued a bauxite export ban policy, requiring local resources to be tied to local alumina production capacity, landing projects domestically, creating more jobs and national income. Therefore, China’s aluminum Many companies have set up factories directly in Indonesia to reap the cost benefits brought by the local low-priced bauxite.
Jinjiang Group has planned a 6 million ton alumina production capacity in Indonesia in five phases. The first phase of 1 million tonnes was put into construction in April this year. The 2 million tonnes alumina project of Tianshan Aluminum, the world’s second largest alumina producer, was listed as Indonesia’s national strategic project; Nanshan Aluminum is also promoting a 2 million ton alumina expansion project and a 250,000 ton electrolytic aluminum project; Shandong Innovation Group also plans to build a 2 million ton alumina project in Indonesia.
Under the impetus of Chinese enterprises, advanced smelting technology, complete industrial chain have stationed in Indonesia, formed the upstream bauxite, alumina and electrolytic aluminum production in Indonesia, the domestic focus on aviation panels, automotive panels, and other high barriers, high value-added products development pattern.
Made in China to help, rough estimates, Indonesia’s alumina production capacity this year may exceed 50 million tons, is expected to increase to 80 million tons in 2026, become a global alumina production power, more China’s midstream and downstream aluminum products strategic back.
Currently, the economic development of the world’s countries is extremely unbalanced, many southern countries have rich reserves of upstream resources, but lack of mining, smelting and processing technology and market capacity. China is the combination of manufacturing capacity, advanced technology and the resources of the southern countries, mutual benefit and win-win; on the other hand, by virtue of the crushing supply advantage, so that the developed countries have to purchase.
The global aluminum industry pattern is the best embodiment of this pattern.
4.Conclusion
China is the only country in the world that has all the industrial categories, complete, prosperous and powerful, is the distinctive label of China’s industrial manufacturing resonates globally.
Compared with the comprehensive, complete, people generally overlooked, it is the huge scale advantage, so that China’s industrial products – including such as electrolytic aluminum, such as primary industrial products, can be in the price relative to global competitors have enough advantage. In Europe and the United States erected trade barriers against China at the moment, the value of scale, is the Chinese products continue to expand in the global killer app.
Based on the huge scale of manufacturing, China can, on the one hand, work in solidarity with developing countries to purchase resources; on the other hand, it can manufacture high-level, cost-effective industrial products for global distribution. And in the energy side, and formed a photovoltaic, wind power and other clean energy industry chain advantages, leading the global industrial civilization forward, but also from the side to enhance the barriers to industrial production.
Even in the global energy low-carbon transformation of domestic, other countries have to buy China’s new energy products.
It is no exaggeration to say that in the context of increased global economic turmoil, no country dares not think about the consequences of China’s restrictions on the export of certain industrial products. Starting with various rare earth and aluminum products, the world will have a clearer understanding of this.
