Recently, trade friction between China and the United States is on the rise, and a trade war is about to start.
On March 8, 2018, US President Donald Trump signed a notice based on 232 findings that imports of steel and aluminium products threaten the national security of the United States, and will impose a global import tariff on steel from March 23. Import tariffs on aluminum products are 25% and 10% respectively, but they are exempted from Canada and Mexico. Early on March 23, Beijing time, US President Trump formally signed a trade memorandum with China at the White House. Announcing that it would be possible to impose tariffs on $60 billion of imports from China and to limit Chinese investment in mergers and acquisitions in the United States, Trump also declared: "this is just the beginning."
China has taken action against trade restrictions imposed by the United States. On the morning of March 23, China's Ministry of Commerce released a list of disallowed products for 232 U.S. imports of steel and aluminium products and consulted the public. We intend to impose tariffs on some products imported from the United States in order to balance the losses to the Chinese side caused by the imposition of tariffs on steel and aluminium products imported by the United States. The list includes seven categories of 128 items, Involving US exports to China of about US $3 billion. In the first part, 120 taxes are to be levied, with a duty of 15%. In the second part, a total of 8 taxes are to be levied, with a tariff of 25%, including waste aluminium, the Ministry of Commerce said. If China and the United States fail to reach a trade compensation agreement within the specified time, the Chinese side will exercise the right to suspend concessions on the first part of the product and, after further assessing the impact of the US measures on China, will implement the second part of the list.
China is the world's largest producer of recycled aluminium, and some of the raw materials it needs are imported. According to Chinese customs statistics, China imported 2.17 million tons of waste aluminum in 2017, of which 476000 tons were imported from the United States, or $630 million, or 22, 000 tons.
The aluminum industry in the United States started early, with huge domestic aluminum reserves and abundant waste aluminum resources. According to relevant US statistics, the United States produced about 4.21 million tons of recycled aluminum in 2016, of which 44 percent came from the recycling of used aluminum. Besides for domestic use, The United States is also the world's largest exporter of waste aluminium. According to the International Trade Organization, the United States exported 1.525 million tons of waste aluminum in 2017, or $2.25 billion. China is the largest destination for U.S. scrap aluminium exports, accounting for 31.2 percent of U.S. scrap aluminum exports in 2017.
Considering the time of implementation and other factors, if China imposes a 25% import tariff on waste aluminum from the United States, we estimate that China's imports of waste aluminum from the United States will be reduced by about 350000 tons in 2017, estimated at 80% of which contains aluminum. It accounts for less than 1% of the total supply of aluminium in China.
In terms of waste aluminum consumption, most of the waste aluminum imports in China are used for the production of recycled aluminum foundry alloys, such as automobile chips. Since China allows processing trade exports of aluminium alloys, 15% export duties are levied on general trade exports. Most of the aluminum alloys exported by China are recycled aluminum casting alloys exported through processing trade. In 2017, China exported 536000 tons of aluminum alloys, of which 533000 tons were exported under processing trade, accounting for 99.2 percent of the total exports, while only 977.5 tons were exported to the United States. It can be considered that the impact of this measure on China's aluminum exports is also minimal.
Compared with the amount of waste aluminum imported by China from the United States and the aluminum alloy exported to the United States, we believe that the imposition of import duties on waste aluminum imported from the United States will not have a material impact on the overall supply and demand pattern of China's aluminum market.