May Aluminum Exports Hit 18-Month High, Steel Demand Under Pressure

Overview

This research report interprets China's major commodity trade data for May 2026, with the core conclusion being significant divergence among products. Aluminum exports surged to阶段性 highs driven by tight overseas supply and price arbitrage; copper imports remained resilient with solid physical demand; however, weak downstream steel demand led to double-digit declines in apparent consumption; iron ore and coal imports declined month-on-month or year-on-year respectively due to high inventories and seasonal off-peak periods. Based on this, the institution maintains its positive stance on the Greater China materials sector but remains cautious on the coal segment.

Core views

Strong growth in aluminum exports was the biggest highlight of this period's data. In May, China's aluminum and aluminum product exports reached 632,000 tons, up 16% year-on-year and 6% month-on-month, marking the highest level since November 2024. The report attributes this growth primarily to external factors: supply disruptions in the Middle East tightened supply outside China, pushing up LME aluminum prices and thereby expanding export arbitrage margins. As semi-finished exports increased, domestic aluminum inventories in China also began to decline. The steel industry chain presented a pattern of "month-on-month improvement in exports but clear weakening in domestic demand." May steel exports reached 10.3 million tons; although this was a 9% month-on-month increase, it was largely based on a low base in April, with year-on-year figures still down 2%; cumulative exports for the first five months fell 8% year-on-year. More critically, on the domestic demand side: estimated based on the decline in daily production at member steel mills of the China Iron and Steel Association, May steel apparent consumption fell 10.4% year-on-year and 11.1% month-on-month, reflecting insufficient terminal demand and accumulating inventories. Copper, iron ore, and coal showed varied performance. Regarding copper, despite rising prices, the import arbitrage window opened intermittently in April-May; refined copper and alloy imports in May totaled 446,000 tons, up 4% year-on-year; the Yangshan premium remained at $60-75/ton, indicating that physical demand remains solid. For iron ore, May imports were 98 million tons, down 6% month-on-month; port inventories began to slowly draw down but remain at high levels. For coal, May imports were 33 million tons, down 8% year-on-year, mainly suppressed by seasonal off-peak periods and high imported coal prices; however, with domestic coal prices rising, import arbitrage has reopened, and imports are expected to rebound month-on-month in June.

Analysis framework

The report adopts an analysis framework of "trade flows + price spread arbitrage + supply-demand verification." First, it captures marginal trends through year-on-year and month-on-month changes in customs import/export data; second, it combines domestic and international price spreads (such as aluminum export arbitrage, copper import arbitrage, and coal import arbitrage) to explain the economic drivers behind changes in trade flows; finally, it cross-validates production-side data (e.g., steel mill daily output), inventory data (e.g., aluminum inventories, iron ore port stocks), and price indicators (e.g., Yangshan premium) to distinguish whether trade fluctuations stem from real demand changes or merely inventory or arbitrage behaviors, thereby making differentiated judgments on the fundamentals of each product.

Methodology notes

• Industry/Industrial Analysis FrameworkSupply-demand framework

  Derive apparent consumption from import/export volumes, production, and inventory changes

  The report uses the logic of 'production + net imports - inventory change' to estimate steel apparent consumption; when the decline in production is smaller than the decline in consumption, it implies inventory accumulation and weak demand. This is a core method in commodity research for judging real domestic demand, as direct consumption data is often lagging or unavailable.

• Industry/Industrial Analysis FrameworkVolume-price decomposition

  Analyze trade flow drivers by combining trade volumes with price spreads (arbitrage windows)

  Looking solely at import/export volumes can lead to misjudgment; the report simultaneously observes price spreads between LME and domestic aluminum, copper import profitability, and domestic-international coal price differentials to confirm whether changes in trade volumes are driven by fundamental supply-demand or short-term arbitrage, improving judgment accuracy.

• Industry/Industrial Analysis FrameworkUpstream-Midstream-Downstream Chain Transmission

  Chain verification from upstream raw material imports to midstream smelting to downstream processing

  For example, flat copper concentrate imports but slowing refined copper output growth, supported by sulfuric acid prices for smelting profits, indicates bottlenecks are at the mining end rather than the smelting end; comparing iron ore imports with pig iron production assesses steel mills' willingness to restock. This chain verification avoids the one-sidedness of single-link data.

Key data

• Aluminum and Aluminum Product Exports632,000 tonsUp 16% YoY, up 6% MoM, highest since November 2024
• Steel Exports10.3 million tonsDown 2% YoY, up 9% MoM; cumulative YoY change for first 5 months: -8%
• Steel Apparent Consumption (Estimated)Down 10.4% YoYDown 11.1% MoM, reflecting weakening domestic demand and inventory accumulation
• Copper and Copper Product Imports446,000 tonsUp 4% YoY, down 1% MoM; Yangshan premium $60-75/ton
• Iron Ore Imports98 million tonsFlat YoY, down 6% MoM; port inventories beginning to draw down but remain high
• Coal Imports33 million tonsDown 8% YoY, up 1% MoM; cumulative YoY change for first 5 months: -3%

Impact & implications

The report believes that sustained strong aluminum exports will help alleviate domestic supply pressures and support aluminum prices, coupled with the start of domestic inventory drawdowns, constituting a positive signal for the aluminum industry chain. The double-digit decline in steel apparent consumption suggests sluggish downstream demand recovery, potentially subjecting steel mills to further production cuts or profit compression pressure. The resilience of copper imports indicates that despite higher prices, physical demand has not been significantly inhibited, providing bottom support for copper prices. The seasonal decline in coal imports is a normal rhythm; as domestic coal prices rise and arbitrage windows reopen, imports are expected to recover in June, but the overall stance on the coal sector remains cautious. From an industry allocation perspective, the institution maintains an 'Attractive' rating for the Greater China materials sector but marks the coal sub-sector as 'Cautious', reflecting structural trade-offs among products.

What to watch

• Whether June coal imports rebound month-on-month as expected, verifying the sustainability of import arbitrage windows
• Progress of aluminum supply recovery in the Middle East; rapid restart could narrow export arbitrage spaces
• Speed of steel inventory drawdown and execution of steel mill production cuts, to judge whether domestic demand stabilizes
• Trend of copper concentrate treatment charges (TC) and the impact of sulfuric acid prices on smelting profits