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China's exports of aluminium products have continued to surge, a trend that if continued may push the rest of the world toward a surplus. China's exports of primary, alloy and semi-finished aluminium grew by around 43 percent in the first quarter respect same period last year, according to preliminary customs data. 

While the initial data release doesn't provide the detailed breakdown, figures for January and February show that the overwhelming is semi-finished products, such as bars, rods, wire, plates, sheet and foil.

In the first two months of the year, exports in this category, commonly known as semis, surged 91 percent to 770,000 tons, a trend that will almost certainly be continued when the detailed March figures are released later this month. Exports of semis have surged because they get a 13 percent value-added tax rebate, that largely offsets the 15 percent export tax on aluminium.

The tax rebate doesn't apply to exports of primary aluminium, but it's a common view in the market that much of China's exports of semis is melted down and re-fabricated by importers. These semis are attractive to aluminium consumers outside China, as they are competitively priced against supplies sourced through the London Metal Exchange system, especially once the delivery premium is taken into account. With more Chinese aluminium finding its way to regional and global markets, the likelihood is that premiums will continue to drop, at least to the point where supplies from elsewhere become more competitive.

What appears to be happening is that the world's aluminium market is starting to converge. Up to now China has accounted for about half of world production and demand for the metal, and has been largely shut-off from the rest of the world, at least as far as exports are concerned. But the massive overcapacity of smelters in China has resulted in a surplus of aluminium, which is now finding its way out of the country, either as semis or the so-called fake semis.