A major complaint frequently lodged against Chinese industry
, frequently by US politicians or media outlets , relates to state-subsidized industrial production that allows Chinese producers to sell below cost in international markets. Most recently these complaints are focused on the aluminum industry. In the graph below, one can see the dramatic increase in Chinese aluminum production over the past 13 years.
In one of his last acts as President of the United States, Barack Obama launched a formal complaint with the WTO with regards to artificially low-interest rate loans that allow Chinese aluminum facilities to modernize their facilities and increase production. Going back to the graph, however, one can see the major dip in production in January of 2016, which many attribute to falling aluminum prices due to oversupply. Are Chinese aluminum producers really immune to market forces, as so many have suggested?
News stories also report on subsidies for coal, electricity and other inputs for the production of aluminum. Coverage reached its shrillest pitch upon the discovery of a massive aluminum stockpile in Mexico, which was subsequently shipped to Vietnam, becoming a part of an even larger stockpile valued at over $5 billion. Some suspect Chinese aluminum producers are engaging in such movements in an attempt to avoid protective US tariffs that prevent firms from “dumping,” or selling below cost, in US markets. Such huge volume, however, has broader implications for the economics of aluminum production, as many worry the movement of a stockpile of such tremendous size has the potential to impact aluminum prices in markets around the world.
Some of these beliefs, however, do not mesh with other aluminum production numbers coming out of China at year’s end. In fact, Chinese aluminum output growth was at its lowest level since 2009 in 2016. Between decreased output growth and a global supply glut, this year may signal a shift in the global aluminum market, with stabilizing levels of production which could allow demand and prices to stabilize as well.