
127-Year-Old U.S. Aluminum Industry Collapses Under China's Weight - pavornyoh
http://www.bloomberg.com/news/articles/2015-11-03/when-a-127-year-old-u-s-industry-collapses-under-china-s-weight
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tomkinstinch
Aluminum 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
It 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
This 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.

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Qworg
It 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
China 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#Renewab...](https://en.wikipedia.org/wiki/Energy_policy_of_China#Renewables)

~~~
jerven
And it is starting to work [http://www.reuters.com/article/2015/03/26/china-
coal-idUSL3N...](http://www.reuters.com/article/2015/03/26/china-coal-
idUSL3N0WL32720150326) with decline in coal use starting.

~~~
Qworg
Actually, 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.

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toomuchtodo
By 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).

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justincormack
Coal is subsidised in China, and a lot is produced by state owned firms. So
price does not necessarily matter so much, it is political will.

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esaym
I'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)

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ska
Shipping 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
I 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)

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fspeech
Part 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-...](https://agmetalminer.com/2015/08/28/china-to-close-millions-of-
tons-of-aluminum-smelter-capacity/)

~~~
fspeech
China 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-...](http://www.aluminum.org/news/aluminum-association-concerned-
about-cnia-call-removal-export-tax-primary-aluminum)

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.

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toomuchtodo
Any 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).

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ams6110
Carbon fiber is stronger and lighter than either.

~~~
dev1n
Yes but carbon fiber shards. Aluminum crumples, which is good for absorbing
energy and keeping people safe while in a car.

~~~
toomuchtodo
Yep, 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 __

~~~
ARushingWookie
Just 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.

~~~
toomuchtodo
Thanks for the heads up!

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__jal
I 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-...](http://www.cnbc.com/2014/11/19/senate-panel-accuses-goldman-
sachs-of-manipulating-metal.html)) about Goldman manipulating aluminum markets
last year. Googling turns up more about it.

------
Asbostos
Here'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
I 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.

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thinkcontext
I 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
Coal is still cheaper, as is subsidized energy in the Middle East. =/

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1971genocide
China 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.

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gotchange
That'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.

~~~
krschultz
China 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.

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meric
Then U.S. is benefiting from China drawing down on its natural capital (much
of the pollution from Coal excluding CO2 emissions is local to the continent).
U.S. should mothball it's aluminium industry and buy China's.

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bzbarsky
China makes it illegal for foreigners to own controlling interests in Chinese
companies, so your last proposal won't work.

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meric
I mean China's aluminium.

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bzbarsky
Ah, that makes more sense.

Though note that there may be strategic reasons for having some aluminum
production capability.

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rblatz
Seems 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.

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wonkaWonka

      <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>

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SixSigma
Not bad Wonka, shame you haven't got the chops to make it undead

