Alcoa Inc (NYSE:AA) Facing Risks As China Increases Aluminium Exports To Europe

The increasing amounts of aluminium exports from China might pose a challenge for Alcoa Inc (NYSE:AA). Among various reasons is the dropped down aluminium premiums in the U.S. and Europe.

Are analyst calling AA a long-term hold?

China’s Aluminium Exports to Europe Pose Threat for Alcoa

Over the recent months, China has been exporting more aluminium to Europe. This in turn is acting as a serious threat for the companies who have noteworthy amount of exposure to Europe. Apart from Alcoa, companies like Glencore International PLC, St. Helier (OTCMKTS:GLNCY), Vale SA (ADR) (NYSE:VALE) and Century Aluminum Co (NASDAQ:CENX) also have their operations in the Eurozone. So, it is most likely that these companies will also face the risks.

China taking a transition from being aluminium importer to exporter

On taking a peep into the history, one can find out that China has rather been the major importer of aluminium, instead of exporter. Chinese producers often face the increased unit production cost. This is the reason China has always remained the major importer instead of exporter. China also does not have access to the cheaper sources of energy. Electricity costs alone, can consume around 1/3rd of the overall aluminium production cost.

Chinese producers have yet another disadvantage. The Government there levies the heavy duty of 15% on all primary exports of this metal. This gives a competitive drawback to the Chinese producers. Meanwhile, China also needs to manage the huge proportion of bauxite export.

The Exports Increase of China

China has a considerable share of exporting unwrought aluminium. In fact, it is the primary form of this metal being exported by the Dragon. In 2014, the aluminium exports of China increased by 20% (on the basis of YOY). It is quite startling that the exports of unwrought aluminium from China to Europe increased by over 150% in February 2015 on YOY basis.

Brown Terrel

Brown Terrel

Terrel is US Markets Daily's business news reporter. She joined US Markets Daily after five years as a print reporter.