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RPT-COLUMN-Is China's aluminum sector too relaxed about U.S. dumping moves?: Russell

Russell@ (Repeats earlier story for wider readership with no change to text. The opinions expressed here are those of the author, a columnist for Reuters.)

LAUNCESTON, Australia, Nov 30 (Reuters) - It will be tempting for China's aluminum market participants to dismiss as inconsequential the latest move by the U.S. Commerce Department to impose anti-subsidy and anti-dumping duties on imports of aluminum alloy sheet.

The proposed moves would affect only a small amount of China's aluminum exports, but the main issue isn't the economic value of the U.S. action, but rather where it ultimately may lead.

U.S. Commerce Secretary Wilbur Ross, in announcing the move on Nov. 28, said it was "one more step" in fulfilling President Donald Trump's campaign against what he termed unfair trade practices.

The United States' imports of flat-rolled alloy sheet from China were just $603.6 million in 2016, and the latest action doesn't affect the considerably more valuable trade in aluminum used to make beverage cans.

The new move comes after the Commerce Department in October imposed preliminary duties on imports of aluminum foil from China.

Again, the amount of aluminum affected is negligible compared to China's total exports, but it does illustrate a wider trend.

While China's aluminum producers may feel they can afford to be relaxed about the imposition of U.S. anti-dumping measures, the example of what has happened to their counterparts in the steel industry may prove instructive.

The United States has also leveled accusations against China about dumping steel, and although the issue was discussed at high-levels talks in Washington in July, no measures have yet been imposed on Chinese exports.

Similar to aluminum, China's steel exports to the United States are a small percentage of its overall shipments abroad, a factor that allowed Chinese steel mills to appear nonchalant about the threats of action by the Trump administration.

Also similar to aluminum, China isn't a major supplier of steel to the United States, with it ranking 10th, well behind the top suppliers, the U.S. neighbors of Canada and Mexico.

In theory, for both steel and aluminum, Chinese exporters should be able to shrug off U.S. anti-dumping duties, or the threat thereof.

But the importance lies much more in the symbolism.

IS STEEL THE TEMPLATE?

Long before the latest spat on aluminum, Chinese steel makers have been losing ground in export markets.

Like aluminum, China's steel sector accounts for roughly half of the world's production, and up until a few years ago it was a net importer of products.

Again like aluminum, this changed as China overbuilt both steel and aluminum capacity and then relaxed regulations, thus allowing for rising exports of both finished commodities.

In 2015, China exported 112.4 million tonnes of steel products, a rise of 20 percent on the prior year.

But this fell to 108.5 million last year, and in the first 10 months of this year, steel product exports were down to just 64.5 million tonnes, a drop of 30.4 percent on the same period in 2016.

The decline in steel exports has coincided with increasing rhetoric and actions by several countries against Chinese exports.

There are other reasons for China's steel exports to drop, chief among them has been strong domestic demand this year.

But the fact remains that Chinese steel mills are struggling in export markets, and the trend has been accelerating in recent months.

China's aluminum sector may be starting down the same path, and other countries may be emboldened by the U.S. protectionist moves to impose similar measures of their own.

Exports of aluminum semi-finished products were 3.52 million tonnes in the first 10 months of the year, a gain of 3.7 percent over the same period last year, according to China's customs data.

The other major category of exports, those for aluminum alloy, saw an 8 percent hike to 445,905 tonnes in the first 10 months of this year.

This isn't a bad performance as far as China's aluminum producers are concerned, and exports have gone some way to soaking up the 3.7 percent increase in the country's output, to 27.2 million tonnes, in the first 10 months of 2017.

But the risk for the aluminum sector is that increasing exports becomes increasingly harder to do amid a more hostile global environment.

Countries don't necessarily have to adopt tough anti-dumping measures, they can generally influence the behavior of buyers and sellers by making explicit threats or working behind the scenes in support of an outcome that would result in buying less aluminum from China.

While the Trump administration's preferred method seems to be wielding the sledgehammer, perhaps the greater risk for China's aluminum sector may be more subtle, and possibly more effective, steps by other countries seeking to protect their own aluminum smelters.

(Editing by Christian Schmollinger)