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Who isn’t playing the China card in Europe? Enter major aluminum producer Norsk Hydro.

While the price of aluminum has climbed off the mat in recent months, it’s still well below the heady days of early 2022, when the metal’s spot futures price was charging toward $4,000 per ton (it’s now around $2,200). The downturn has come amid Hydro closing a smelter in Slovakia in the wake of surging energy prices brought on by Russia’s invasion of Ukraine, as well as the constant uncertainty of watching China decide whether it’ll stick to its world-leading annual production cap of 45 million tons (for now, it has).

Enter the latest worry for Hydro: As an increasing number of Chinese-made electric vehicles are imported into Europe, carmakers on the continent may become unable to compete price-wise, ultimately hitting demand for aluminum, which is used to help cut weight in battery pack casings. Hydro CEO HIlde Merete Aasheim told the Financial Times over the weekend: “That is a threat that we are following: if European automakers start reducing their demand [for aluminum] because they are outcompeted.”

The West Eating its Own

The risk for Hydro seems to be of the “smaller piece of a growing pie” variety:

• Aluminum prices got a boost last week after China announced it plans to borrow an additional 1 trillion yen for manufacturing investment, raising the expectations for future industrial-materials demand by the world’s top consumer.
• Meanwhile, China exported $13.1 billion of EVs to Europe in the first seven months of 2023, compared with $15.4 billion in all of 2022, the FT reported. Ironically perhaps, most of those vehicles are China-built versions of Western brands like Tesla.

When America Sneezes: Chinese aluminum manufacturers may face their own demand hit, if the recent somberness out of their US EV maker customers is any indication. Ford, General Motors, and Tesla all recently have indicated plans to pause expanding manufacturing capacity as a host of factors like affordability and concerns about charging infrastructure and driving range have limited wider adoption. Ford just reported a $1.3 billion loss in its EV division, and even Elon Musk said Tesla would reflect upon market conditions before going “full tilt” on opening a factory in Mexico. It can’t be a good sign when you’ve rendered Elon just another meek industry participant.