Impact of US Trade Sanctions on China’s Aluminum Consumption

Abstract: Data shows that for every 1 trillion yuan increase in China’s GDP, aluminum consumption will increase by 500,000 to 600,000 tons. We believe that the amount of aluminum consumption affected by the US trade sanctions exceeds 600,000 tons.

Since this year, a trade war between the US and China continued to heat up. On July 10, local time, the office of the U.S. trade representative released a new tax list, which plans to impose a 10% tariff on Chinese goods worth 200 billion dollars. The sanctions are expected to be officially implemented on August 30. Less than a month ago, on June 15, the U.S. trade representative’s office had released a sanction list worth $50 billion covered 1,102 goods. The sanction measure that imposing a 25% tariff on imports of $34 billion worth of Chinese goods had come into effect on July 6.

The $200 billion sanctions list includes 6,031 products by HS code. It can be clearly seen that there are 31 items of products related to the aluminum industry, including bauxite (HTS 2606.00.00), Aluminium hydroxide (HTS 2818.30.00), Aluminium fluoride (HTS 2826.12.00), Carbon (HTS 8545.19.20), Aluminum scrap (HTS 7602.00.00) and other raw and auxiliary materials. Aluminium powder (HTS 7603.10.00 and 7603.20.00), 18 items of aluminium ware (HTS 7610-7616); It can be said that the list covers the upstream and downstream of the aluminum industry chain. According to Antaike, the 31 items of goods that the U.S. imported from China in 2017 totalled $1.92 billion.

The office of the United States trade representative previously released a $50 billion list of goods directly related to aluminium. The first list of goods $34billion, aluminium electrolytic capacitor（HTS 8532.22.00）has used aluminium foil, US imported from China totalled $43.72 million in 2017. Two types of aluminum cables (HTS 7614.10.10 and 7614.90.20) and a type of product used directly for aluminium – a heat exchanger containing brazed composite aluminum rolling material (HTS 8419.60.10) were included in the second batch of 16 billion. The US imported from China totalled $30.34 million in 2017. Among them, the import quantity of two kinds of aluminium cable was 5404 tons.

Compared with the previous 50 billion sanctions list, the 200 billion list is characterized by a wider range of attacks, with the focus shifting from “restraining catch-up” to “reducing trade surplus”. From the perspective of the aluminum industry, the scope of the crackdown has further expanded from aluminium products to the entire industrial chain. Technology and labour-intensive products have become the key targets. All this suggests that the US trade deterrent to China is escalating.

The above two trade sanctions based on the 301 survey, together with the previous 232 investigations and the double countermeasure against Chinese aluminum materials. The upstream and downstream of China’s aluminium industry has been almost entirely hit by the US. Manufacturing in key sectors such as electrical machinery and equipment, general equipment, automobiles and computers are also important sectors for aluminium consumption. Therefore, the US sanctions will not only have a direct impact on China’s aluminum industry but also have an indirect impact on aluminum consumption.

In view of the wide application of aluminum, the consumption scale of aluminum is highly correlated with the level of economic development and the growth rate. Antaike’s study of historical data shows that for every 1 trillion yuan increase in China’s GDP, aluminum consumption will increase by 500,000 to 600,000 tons. A rough estimate is that $250bn in trade sanctions on goods will cut aluminium consumption by 250,000 tonnes. In addition 301 survey and 232 investigations to Chinese aluminum, we believe that the amount of aluminum consumption affected by the US trade sanctions exceeds 600,000 tons.