The ongoing conflict in the Middle East is disrupting global metal supply chains, creating the most favorable external conditions in years for Chinese aluminum and copper exporters. As clashes involving the US, Israel, and Iran effectively block the Strait of Hormuz and severely damage aluminum smelting capacity in the Persian Gulf, London aluminum prices hit a four-year high last month. The price spread between Shanghai and London aluminum widened to its largest gap since 2022. The China Nonferrous Metals Industry Association forecasts that China's aluminum product exports could reach a record high this year. Concurrently, exports of copper wire, solar cells, and lithium-ion batteries are also surging, with March data showing strong monthly growth. For Chinese metal producers, this geopolitical shock is translating into tangible order benefits. The explosion in overseas demand is not only filling the gap left by weak domestic demand but is also elevating China's dominant supply position in the clean energy industrial chain to new heights.
**Persian Gulf Smelting Capacity Damaged, Aluminum Spread Hits Four-Year High** The Middle East conflict that escalated in late February quickly spread to commodity markets. The effective closure of the Strait of Hormuz dealt a particularly direct blow to aluminum smelters in the Persian Gulf. The region accounts for approximately 9% of global aluminum supply, and damage to facilities caused a sharp drop in output, pushing prices on the London Metal Exchange to a four-year peak last month. The price spread between London and Shanghai aluminum subsequently widened dramatically. Mo Xinda, Director of the Light Metal Department at the China Nonferrous Metals Industry Association, stated at an industry conference last month that overseas premiums had climbed to "unbelievable" levels. Notably, because China maintains export tariffs on aluminum to safeguard domestic supply, large volumes of primary aluminum cannot flow directly to the international market. This policy constraint has, in fact, amplified the impact of the Persian Gulf supply disruption on international prices. According to six traders surveyed, overseas orders received by Chinese aluminum processing plants have increased noticeably since late March, with demand for aluminum products used in power grids and automobiles being particularly urgent. Reports indicate that order books at some hot-rolling mills are full until June. Products leading the gains include aluminum for electric vehicles, battery core materials, cooling plates for energy storage, and heat dissipation materials for data centers. Exports of duty-free product categories are also showing signs of increased volume. For instance, it is estimated that combined exports of aluminum strands in April and May could double compared to the same period last year, reaching 40,000 to 50,000 tonnes, primarily destined for countries along the "Belt and Road" initiative.
**Copper and Clean Energy Product Exports Surge in Tandem** A similar trend is emerging in the copper sector. Chinese customs data shows that copper wire exports surged 36% year-on-year in March. Other products related to the clean energy transition also showed strong performance: solar cell exports jumped 80% in March, lithium-ion battery exports rose 34%, and electric vehicle exports increased by 53%. An analyst pointed out that China's export advantage in clean energy is not accidental, stating that Chinese manufacturers already lead in cost, scale, and supply chain integration. When global demand accelerates suddenly, they are best positioned to respond rapidly. High oil prices are a key driver behind this trend. A consultancy noted last month that higher fossil fuel prices "help sustain the strength of electric vehicle exports, which in turn will support copper demand in the coming months." The analyst added that rising fossil fuel prices are stimulating demand for solar and energy storage products. Markets in Southeast Asia and Africa with tight power supplies are accelerating the adoption of "solar plus storage" solutions to replace diesel generators, a trend directly reflected in China's export data. However, adjustments to export tax rebates remain a potential constraint. Solar cells and lithium-ion batteries have already been affected by the cancellation of rebates. Whether the current export growth rates can be sustained will depend, to some extent, on subsequent policy directions. China's April trade data, scheduled for release this Saturday, is expected to provide further clues through export figures for key categories like aluminum, copper, and electric vehicles.
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