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127-Year-Old U.S. Aluminum Industry Collapses Under China's Weight
- tomkinstinch 11y agoAluminum is interesting. It's sort of a way to do energy arbitrage, since its production needs an immense amount of electricity to reduce bauxite into usable aluminum. Iceland has sufficient surplus energy to "export" electricity in the form of refined aluminum, making them a big player in the global aluminum trade. 1. https://en.wikipedia.org/wiki/Economy_of_Iceland#Aluminium https://en.wikipedia.org/wiki/Economy_of_Iceland#Aluminium
- usaar333 11y agoIt seems pretty horrible for the environment for a country to be using coal-powered electricity for aluminum smelting. If a global carbon tax existed, aluminum production would correctly be even more skewed toward counties with surplus renewable energy (iceland, canada, norway, brazil)
- jacobolus 11y agoThis article points out that US plants in places where there is cheap hydro power will stay open. Sounds like at least in the US the market for aluminum is working as it should. It’s horrible to be using coal-powered electricity at all, and especially for anything that can be produced with “free” surplus electricity and then stored indefinitely and shipped relatively cheaply. We can all only hope that prices of wind/solar continue to drop, and governments around the world – especially China, the US, and India – have enough governmental/institutional strength to overcome corporate and government corruption and rein in their use of coal power in the coming years.
- rmason 11y agoExplain then why Canada isn't producing more aluminum? They have vast untapped hydro power resources.
- dgemm 11y agoCanada is the 3rd largest producer of aluminum.
- esaym 11y agoI've never understood how the Asian countries that don't really have that many natural resources[1], could out pace American manufacturing. Do we seriously ship scrap metal over there to them just to have it shipped back to us in a different form?? Sounds like a horrible waste of resources (fuel, oil, ect)... [1]http://en.people.cn/92824/92845/92876/6442551.html http://en.people.cn/92824/92845/92876/6442551.html
- ska 11y agoShipping is very cheap. Smelting (aluminum) is expensive. I'm going to guess that most scrap is recycled locally, but shipping bauxite to China and buying back bulk aluminum is cheaper than doing it locally. Is recycling done this way also?
- Qworg 11y agoI think you're right about local recycling - it only takes about 5% of the energy to recycle vs. direct from bauxite. Here's a list of recycled smelting operations: http://www.lightmetalage.com/producers.php http://www.lightmetalage.com/producers.php
- maxerickson 11y agoThe reports here break out the numbers some: http://minerals.usgs.gov/minerals/pubs/commodity/aluminum/ http://minerals.usgs.gov/minerals/pubs/commodity/aluminum/ Recycling is ~75% of imports. About half of recycling is from manufacturing waste, about half from recycled aluminum products. The major source of US imports is Canada, in 2013 they supplied 64% of US imports (China was 4%, behind both Russia and the UAE at 5%). It'd be interesting to see if China is exporting raw aluminum or finished products.
- wil421 11y agoIf it's cheaper to out source it American companies will. Interestingly they do this to recycle paper because its really toxic to do so. Never understood why, pine trees are a fairly renewable resource. In Georgia we have plenty of pine trees that grow pretty fast and a forest can be replanted fairly easily.
- thinkcontext 11y agoI thought we would become more competitive with the drop in natural gas prices. Is it that the strong dollar has been greater than the energy price drop?
- Qworg 11y agoCoal is still cheaper, as is subsidized energy in the Middle East. =/
- toomuchtodo 11y agoAny chance demand from domestic US automakers would increase enough to stem US aluminum industry losses? With higher MPG CAFE fleet requirements, I'd assume a surge in demand for aluminum for vehicle unibodies (which is stronger and lighter than steel). Also, I'd be curious if aluminum plants might start buying renewables with locked in rates to compete against foreign firms who have access to cheaper energy (utility scale solar is already down to 4 cents/kwh).
- ams6110 11y agoCarbon fiber is stronger and lighter than either.
- dev1n 11y agoYes but carbon fiber shards. Aluminum crumples, which is good for absorbing energy and keeping people safe while in a car.
- toomuchtodo 11y agoYep, exactly. Carbon fiber is great for aircraft, not so good for cars. Boeing 787 Wind Failure Test: EDIT: Link removed due to comment advising there was malware. Google for "boeing wing stress test" to find a Youtube video
- groks 11y agoA carbon fibre car performing well in a crash test: https://www.youtube.com/watch?v=guOq9cdFbJA
- ARushingWookie 11y agoJust a headsup,a link inside the article about a video of an airplane wing failing has gone bad and now leads to a malware site.
- 11y ago
- Qworg 11y agoIt is directly driven by the cost of energy, as tomkinstinch brought up. China burns an incredible amount of coal for power, which brings the cost of energy down at the price of huge amounts of pollution. As China and other places green, you can expect the price of aluminum to rise and production to float to other places.
- bildung 11y agoChina is pretty interesting in this regard. While they really do burn incredible amounts of coal, they are also worlds biggest producers of photovoltaic and wind energy and strife for a renewable share of 16% by 2020. https://en.wikipedia.org/wiki/Energy_policy_of_China#Renewables https://en.wikipedia.org/wiki/Energy_policy_of_China#Renewab...
- jerven 11y agoAnd it is starting to work http://www.reuters.com/article/2015/03/26/china-coal-idUSL3N0WL32720150326 http://www.reuters.com/article/2015/03/26/china-coal-idUSL3N... with decline in coal use starting.
- Qworg 11y agoActually, I think it is debatable - a large portion of the decline could be pinned on the reduction of demand. If China roars back, so will the coal plants.
- jerven 11y agoCould be, but I guess that burning coal will not lead to enough value and will roar back less than the other sources.
- toomuchtodo 11y agoBy the time China roars back (years, at least), coal won't be economically viable (as long as wind and solar manufacturers continue to manufacture at full tilt).
- 1971genocide 11y agoChina is almost like a big blackhole. Destroying industries one by one - the coolest thing about it is they are only doing it to improve the standard of living for their people - having a global monopoly is not the #1 reason. Like the rest of the world's economy wont matter and are like small planets.
- gotchange 11y agoThat's creative destruction. Nothing wrog about that. If China's competitive advantage lies in manufacturing Aluminum more efficiently than the US, the market forces and even economic common sense dictate that they expand in this activity and for the US to abandon theirs and focus more on what they're really good at and what could prove as a competitive advantage for them.
- SixSigma 11y agoRicardian Comparative Advantage of Nations. Keeping agrarian societies in their place since 1817.
- krschultz 11y agoChina generally is not more efficient. Rather, China doesn't have the cost of externalities included in the price of the goods. The US doesn't ensure that all the cost is put back on the manufacturers, but our environmental and labor regulation ensures at least some of it is included in the price. I imagine if China had the same requirements on its power plants and manufacturing facilities as the US does then the advantage (if any) would not be very much.
- gotchange 11y agoI was referring implicitly to the fact that China is the single largest coal producer in the world. Setting aside the environmental considerations for a moment here, this is definitely a competitive advantage in electricity generation given that aluminum production is an electric energy intensive activity.
- 11y ago
- wonkaWonka 11y ago<mind-control-sarcasm fetch-type="eager">Cool, maybe we'll finally see what happens when there are no American vested interests in fluoridating water now.</mind-control-sarcasm>
- SixSigma 11y agoNot bad Wonka, shame you haven't got the chops to make it undead
- __jal 11y agoI didn't really follow along at the time, but there was a bunch of noise (http://www.cnbc.com/2014/11/19/senate-panel-accuses-goldman-sachs-of-manipulating-metal.html http://www.cnbc.com/2014/11/19/senate-panel-accuses-goldman-...) about Goldman manipulating aluminum markets last year. Googling turns up more about it.
- rblatz 11y agoSeems like the best way to defeat the American War machine, is to dismantle it's manufacturing sector. Artificially lower <manufactured product> prices by subsidizing production in China, wait for American producers to fold. Wash rinse repeat as necessary.
- fspeech 11y agoPart of China is closing capacity too: 2 million tons, more than the entire US capacity. It's just that another part of China is still adding capacity, because "Inside China, the growth of new smelter capacity has been in the northwest, often based on captive, low-cost coal deposits for power generation and utilizing the latest smelter technology that, combined with large economies of scale, has made these Chinese smelters some of the lowest cost of production in the world." https://agmetalminer.com/2015/08/28/china-to-close-millions-of-tons-of-aluminum-smelter-capacity/ https://agmetalminer.com/2015/08/28/china-to-close-millions-...
- fspeech 11y agoChina also has a 15% export tax to discourage export of primary aluminum: "The Chinese government, which relies heavily on imported bauxite, has long applied export taxes on primary aluminum as part of a broader strategy to discourage exports of energy-intensive products and emphasize sustainable, quality growth" http://www.aluminum.org/news/aluminum-association-concerned-about-cnia-call-removal-export-tax-primary-aluminum http://www.aluminum.org/news/aluminum-association-concerned-... While it can be worked around by exporting semi-finished products instead, it must be doing something. Otherwise the US Aluminum Association won't be so concerned about its removal.
- Asbostos 11y agoHere's some good news about somebody doing something important more efficiently than their competitors and gaining economic benefits from that. But many comments seem to be suggesting it's a bad thing because of environmental costs. When US car companies started to recover from the recession, were people equally critical and complaining that the US's economic recovery was coming at the expense of the environment? That they should try to continue underperforming at manufacturing? Afterall, a world with less competition between car makers is surely a more environmentally friendly one. Were people complaining that GM should have been allowed to fail not because it was uncompetitive but because it was damaging the environment by making bigger cars than Japanese rivals? It seems like a double standard of people with a protectionist attitude that's pro-American-corporation and anti-American-consumer.
- mjevans 11y agoI can't speak for anyone else, however I can say that the reason that I, as an American, do not own an American made car (but I do own a car made overseas) is because I have no respect for the quality of engineering, workmanship, or value that those cars offered at the time I purchased. Event today, the only American car I can truly be proud of is a Tesla; and that is because in it I see quality engineering, workmanship, and, even as expensive as they are, value. Literally the only poor things I've ever heard of relating to Tesla's involve rare owner error, more frequently error on the part of others on the highway, and occasionally a design flaw that the company owns up to and fixes. I think most people who complain that X (car company) or Y (big bank) should have been allowed to fail (controlled orderly liquidation) see it as a lost opportunity for something smaller, nimble, and filled with the vitality of new ideas to take it's place. Being allowed to fail is the fire of the ecosystem of industry; in it's wake the green sprouts of a new better thing are possible.