Unrolling the fake semis data - a little

The issue of China’s continuing export of aluminum into export markets is top of mind in many corners of the world. Fake semis, as they are called, are the hottest topic in many aluminium circles. So it is worth looking just a little deeper into the data to understand what is really happening.

I was looking through January’s import/export data (thanks to Melanie for sending the info to me), and I happened to notice the detail in the semis section. China exported 330,000t of semis in January. That’s a drop of 13% on January 2015.

But there are 5 categories in the semis data - solids, hollows, sheet and plate, foil and wire. If you are going to make fake semis for export, you aren’t going to make a hollow shape, or foil or wire. These products require too much work, or you end up shipping air in the case of hollows. So it’s worth stripping these items from the semis data.

Once we do that, we find that China exported 235,000t of potential fake semis in January 2016. I must underscore the word “potential”. If the metal is going to be a fake semi it is going to be in one of these two categories, but that doesn’t mean that all the metal in these categories is fake.

In January 2015, China exported 281,000t in these two semis categories. That means the drop was more like 16% year on year.

The big drop was in rolled products. China exported 134,000t of plate and sheet last month, compared with 214,000t in January 2015. That’s a drop of 37%.

My theory on this is that the cost advantage still lies in the billet area, not the P1020 area. In other words, if you are going to produce fake semis, you still need a positive return on your investment. Converting an extruded shape back into 6063 alloy still gives you the delivery premium and the alloy premium, so your chances of making a dollar are better. If you are going to ship plates then remelt them into P1020, your input costs are similar but your return will be lower. Consequently, less sheet and plate will export when the price spreads are tight.

For more on this subject, be on the watch for our next World Aluminium Monthly, which is coming out in the next 48 hours. Not a subscriber? Simply complete this contact form, and we will send you pricing information.