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Title: When Mexican Aluminum Isn't Actually Mexican Aluminum
Source: Weekly Standard
URL Source: http://www.weeklystandard.com/the-m ... inson-revealed/article/2007014
Published: Feb 28, 2017
Author: Kevin Cochrane
Post Date: 2017-02-28 12:21:05 by Tooconservative
Keywords: None
Views: 1126
Comments: 12

In the final week of the Obama administration, the outgoing president filed a complaint at the World Trade Organization (WTO) accusing China of unfair trade practices. This wasn't a big surprise: Obama averaged one complaint against China every six months throughout his presidency. Indeed, Donald Trump's tough talk about China is really just a continuation of what the Obama White House had been actually doing for the last eight years.

But this latest WTO filing is a little unusual. The U.S. is alleging that China, through a series of low interest loans and subsidized power rates, is unfairly competing in the market for aluminum. Over the past few decades China has risen to become the world's largest producer of aluminum, commanding about 50 percent of the global market. However, much of that aluminum is made from recycling old aluminum scrap (which is significantly cheaper than smelting new aluminum from Bauxite).

And where does most of that scrap China melts down come from? The United States.

The Census Bureau reports that almost $2 billion dollars of old beer cans and used car parts were exported to China for recycling in 2016 alone. And while government-subsidized loans and cheap utility bills may be helping Chinese companies produce inexpensive aluminum, it's also cheap because it's recycled, and it's made by low wage non-union workers in more modern and efficient factories.

All of this cheap Chinese aluminum flooding the world market has driven down prices over the past few years to levels where U.S. firms can no longer compete. In the past six years, the U.S. has gone from hosting 14 aluminum smelting plants to just five. And in 2016, Alcoa, the biggest aluminum producer in America, closed its Evanston, Indiana, plant—the largest single facility in the country. And all of this downsizing and loss of competitiveness comes even with the U.S. charging Chinese companies sky-high tariffs on their sales of aluminum to America—some as high as 300 percent.

But here's where the story becomes a bit more than a typical unfair trade dispute.

Billionaire businessman Liu Zhongtian, operates the largest aluminum company in China—the second largest producer in the world. And it appears he's grown weary of paying exorbitant tariffs to take America's junk, melt it down, and sell it back. A year ago a plane chartered by a suspicious American aluminum executive flew over a relatively unknown small town in central Mexico, San Jose Iturbide. What he saw and photographed was almost unbelievable. Hidden under tarps and stretching across giant fenced yards were stacks of new aluminum ingots. It's estimated to be about 6 percent of all of the aluminum in the world. And tracing the path of how all that aluminum came to be sitting in a small town in the Sierra Gorda Mountains leads back to Mr. Liu.

Through a complex series of deals involving Chinese trading companies, a Singapore investment firm, and a small Mexican aluminum company of which Liu's son was formerly the CEO, the metal ultimately found its way to this town of 50,000 inhabitants. But before its discovery, it was also finding its way into the United States labeled as Mexican aluminum—free from those pesky import tariffs because of the protection of NAFTA. And if this doesn't sound like a plot straight out of a spy novel, when the Wall Street Journal reported on this circuitous route, things really started getting interesting.

Suddenly, Mexico's exports of aluminum soared, and interestingly, Vietnam's imports of aluminum did too. And now while the stockpile in San Jose Iturbide has shrunk by over 500,000 metric tons, huge stacks of ingots have appeared in the jungle surrounding Vung Tau, Vietnam. And the owner of all of that new Vietnamese aluminum is Perfectus, Inc., a company started and owned by… wait for it… Mr. Liu's son. Clearly this was a bet on the Obama supported Trans Pacific Partnership (TPP) surviving under a Clinton presidency. But with Trump's election and the end of TPP, the story doesn't end here.

Late last year China Zhonwang Company, a large publicly traded aluminum manufacturer, agreed to buy Cleveland-based Aleris Corporation for $2.3 billion dollars. Aleris is one of America's largest producers of rolled aluminum for industry and its sale price is the highest ever paid for a U.S. metals company by a Chinese investor. But when you peal back the layers, the Chinese buyer is really Mr. Liu. It turns out that he's the founder and chairman of Zhongwang.

But remember that WTO complaint the Obama administration filed just a few weeks ago? It claimed unfair competition because of subsidized power being provided to Chinese aluminum manufacturers. It doesn't take too much research to discover that in 2007 Alcoa received a subsidized electricity deal from the New York Power Authority valued at $5.6 billion dollars in savings over the next 30 years. And as recently as a year ago, the state of New York—along with help from its governor Andrew Cuomo and Democratic New York senator Chuck Schumer—Alcoa received an outright gift of $69 million to help with its operating costs and electric bills. Doesn't the old saying begin, "people who live in aluminum houses?"

Poster Comment:

Seems like a perfect story for Trump on China cheating on trade and the loopholes in NAFTA. Especially in light of how many American aluminum plants have closed as a result.

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#1. To: Tooconservative (#0)

The headline (and story) should be, "Recycling Puts American Companies Out Of Business".

misterwhite  posted on  2017-02-28   13:24:14 ET  Reply   Trace   Private Reply  

#2. To: Tooconservative (#0)

"But when you peal back the layers ..."

What can happen when you rely solely on Spellchecker.

misterwhite  posted on  2017-02-28   13:26:53 ET  Reply   Trace   Private Reply  

#3. To: misterwhite (#2)

What can happen when you rely solely on Spellchecker.

True. But WS is a pretty intellectual shop so I assume it was just a slip. What I always wonder is why they don't have an editor proofread these things before they're published. It's a lot harder for these things to creep in if you have proper editing standards. But a lot of tony publications are surprisingly sloppy about this and seem to let writers just print directly to their site with no editor, at least until it is shown on the site.

Surely it can't be so hard to assign writers to proofread each others' work and/or have an editor who proofs and signs off on each published piece before it goes live on the site.

Anyway, I didn't post it so we could critique the spelling. It seems to me that a big fat juicy shiny aluminum talking point just dropped right into Trump's lap, given his anti-NAFTA stance and his talk about Chinese dumping and unfair trade practices. I'd think he could make some hay out of this.

Tooconservative  posted on  2017-02-28   15:26:34 ET  Reply   Trace   Private Reply  

#4. To: misterwhite (#1) (Edited)

The headline (and story) should be, "Recycling Puts American Companies Out Of Business".

Not exactly. Recycling aluminum is a lot cheaper, easier and more eco-friendly than smelting and handling bauxite ore to get fresh aluminum.

It's not the recycling, it's the Chinese avoiding the 0bama tariff on their subsidized aluminum by sending it to Mexico where it then enters America tariff-free under the terms of NAFTA. They are turning tariffed Chinese aluminum into untariffed Mexican aluminum just by unloading at the big Mexican port and shipping it across the border. Poof! No tariff.

NAFTA is being used by a ruthless Chinese tycoon to dodge a tariff and to undercut the remaining American aluminum industry so he can buy it all up cheap and establish a big monopoly in key markets, especially America and in China itself.

I can hardly imagine an issue more ripe for Trump.

Tooconservative  posted on  2017-02-28   15:30:42 ET  Reply   Trace   Private Reply  

#5. To: Tooconservative (#4)

So our aluminum cans are shipped to China where they're recycled. The finished product is then shipped to Mexico. Then they're trucked across the border to the U.S.

And all of this is done less expensively than local recycling plants. Something's not right.

misterwhite  posted on  2017-02-28   17:26:17 ET  Reply   Trace   Private Reply  

#6. To: misterwhite (#5)

Something's not right.

A Chinese tycoon is using his monopolistic pricing to dominate the Chinese market and to subsidize his takeover of our aluminum industry via importing his metal through Mexico under NAFTA, turning the recycled American aluminum into Mexican aluminus to avoid the tariff against Chinese aluminum.

Something is rotten in the state of Denmark. Cheap fake-Mexican Chinese aluminum sneaking over our border, harming our hardworking taxpaying American aluminum.

Tooconservative  posted on  2017-02-28   18:03:36 ET  Reply   Trace   Private Reply  

#7. To: Tooconservative (#0)

Damn cleaver these chinese, don't you wish you had thought of it first, but nevertheless here is another reason for Dump to accuse the chinese and slapp a tarriff on their ass

paraclete  posted on  2017-02-28   19:49:26 ET  Reply   Trace   Private Reply  

#8. To: paraclete (#7)

Damn cleaver these chinese, don't you wish you had thought of it first, but nevertheless here is another reason for Dump to accuse the chinese and slapp a tarriff on their ass

I wish our highly esteemed ninnies in D.C. had discovered this foul scheme years ago before it largely destroyed our aluminum industry for no good reason.

Tooconservative  posted on  2017-03-01   1:06:04 ET  Reply   Trace   Private Reply  

#9. To: Tooconservative (#8)

I wish our highly esteemed ninnies in D.C. had discovered this foul scheme years ago before it largely destroyed our aluminum industry for no good reason.

Our steel industry has been destroyed. When Bethleham steel went under it took the economy of NW Pennsylvania with it, plus the coal mining economy of WV and several other states. Much of our steel comes from China.

rlk  posted on  2017-03-01   1:33:39 ET  Reply   Trace   Private Reply  

#10. To: rlk (#9)

So your steel comes from China and your aluminium comes from China, remind me not to buy an american auto, I may as well buy a Chinese car

paraclete  posted on  2017-03-01   6:53:39 ET  Reply   Trace   Private Reply  

#11. To: paraclete (#10)

I may as well buy a Chinese car

Yes do that. They are quite reliable.

A K A Stone  posted on  2017-03-01   6:59:48 ET  Reply   Trace   Private Reply  

#12. To: A K A Stone (#11)

es do that. They are quite reliable.

well maybe but they use some undesirable technologies like asbestos gaskets

paraclete  posted on  2017-03-01   21:00:33 ET  Reply   Trace   Private Reply  

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