Matt makes a move

Well-known and well-respected aluminum professional Matt Powell has accepted a position at Liberty House Group.

Matt was previously at Century Aluminum, then at Ormet.   When Ormet closed about 3 years ago, Matt started his own trading and consulting company International Aluminum Solutions.  But soon after that, Matt also joined forces with Michael Wrotniak at Aminco.    Matt’s time at Aminco was so successful it moved Michael Wrotniak to write a heart-felt press release thanking Matt for his “immense” efforts with their customers.

Matt will become the Director of Global Aluminium Development for Liberty House.   Liberty are best known in the aluminum world for their recent purchase of the old Lochaber smelter, formerly owned by Alcan then Rio Tinto. Liberty are deep into steel, but their purchase of the Lochaber plant combined with hiring a man of Matt’s abilities signals to me that they aren’t yet finished with their growth plans for the silvery metal.

Matt joins Liberty effective July 1.   I don’t have his new Liberty email address yet, but if anyone wishes to contact Matt let me know.

We at AZ China wish Matt all the best in his new gig.

 

Qatar conflict and Qatalum

A conflict between Middle Eastern nations has isolated Qatar from its neighbours.  In the process, it has caused problems for the Qatalum smelter.

Norsk Hydro, 50% owner of the smelter along with Qatar Petroleum, has published a statement saying that shipments of finished metal have struck problems.  According to the announcement, shipments go through the port of Jebel Ali in the United Arab Emirates, but this port is blocking Qatari exports, as part of the diplomatic dispute.

International affairs in the Middle East are not my domain, but if this issue continues, it’s not just the shipment of finished metal that I would be worried about.   Qatalum will need alumina shipments to arrive unimpeded.   Vessels that would have otherwise stopped at neighbouring smelters to offload partial alumina cargoes may find themselves blacklisted or prevented from sailing to or from Qatar if this dispute gets any worse.  And it won’t be just alumina that could be impacted.  All smelters need regular deliveries of other essential ingredients, from aluminum fluoride to calcined petroleum coke, to collector bars and pot covers.

Most smelters run on alumina inventory levels of about 30 days, so if Qatalum is running to the same algorithms, there won’t be a problem for a while.   But one of the things about the international smelting community is that even though plants may be competitors to each other, they try to help each other out. (Back channels have existed long before Jared Kushner thought of them.)  If one plant runs short of say aluminium fluoride, or any of the other essential raw materials, that plant’s neighbours will usually step in to help if possible.  Because of this diplomatic dispute, that hep may not be forthcoming.

This is all just nervous speculation on my part – none of the above may happen.  Let’s hope this dispute is resolved quickly, not just for Qatalum’s sake.  But if it drags on, then it’s worth watching what happens to the total logistics situation, not just the delivery of finished metal to the market.

Feature image thanks to Qatalum.

Goodbye America

The world is dealing with and reacting to the announcement this morning that the USA will withdraw from the Paris Environment pact.  While there is already plenty of comment floating through social media, I felt moved to express my own views.

As always, it’s best to start with the facts.   America can’t actually withdraw until the end of 2020.   There is plenty of technical commentary that says that the environment can still be improved even without America’s contribution.   And even if America withdraws, at least 3 US States have said they will continue to follow the Paris Accord.

The trouble is, the task ahead of us requires a concerted effort by all.   We owe it to our children and grandchildren to do what we can today to provide them with a world that they can live in.  I grew up in the 1960’s, when all the talk was about Make Love Not War, and about a social revolution that would throw out the old outdated values of the previous generation.   50 years on, those same people are now entering retirement, and a new generation is seeking to change the world.  In the context of how we older folk sought to stamp out hunger, stop wars and imagine a new social order, Trump’s actions are a retrograde step.  Stopping the Vietnam war was an important issue in its time.   Stopping global warming is an exponentially greater task.

There’s a lot of commentary also doing the rounds that this own-goal by Trump is a gift to China’s President Xi.   In terms of China’s abysmal record on climate, it’s a pyrrhic victory.   China is still burning huge amounts of coal, and will continue to do so for many years to come, even as renewable energy sources grow.   China’s economy may be going through some sort of transition, though this is debatable, but secondary industry will remain a vital part of the picture.   And decades, even centuries of lack of care for the environment will not be eradicated any time soon.  Factories will continue to pump effluent into rivers and bury toxic waste because that’s what they have always done.   It will take countless more environmental inspections and punishments before that mentality is eradicated.

In terms of the optics, there is no doubt that America is receding in the rear vision mirror.  Goodbye America.   Whether the space created by Trump’s retreat is filled by President Xi, Angela Merkel or Emmanuel Macron or someone else remains to be seen.

For aluminum, Trump’s decision probably means little.   Outside China, the industry has stepped up to its responsibilities, acknowledging that CO2 and other pollutants are created with each ton of the light metal produced.  We now have the Aluminum Stewardship Initiative, not to mention aggressive PR campaigns by Rusal, Rio and others claiming the high moral ground.   Inside China the same cannot be said.   China makes 55% of the world’s aluminum, but if one were able to measure these things on some sort of scale, it could be argued that China accepts well below 55% of the responsibility for the environment.

So it does seem that the rest of the world will gradually leave America behind, though this won’t really start to happen for a couple of years.  Exactly who steps into the void that Trump has created remains to be seen.   China seems keen to do so, but doesn’t have the credentials, though it does have the money to buy the influence.

 

Acknowledgements to You Tube for the feature image.

 

OBOR rail – did you know?

China has been making a lot of its grand One Belt One Road initiative, better known as OBOR.   At the highest level, it is essentially about China transferring capital into neighbouring countries and developing factories in those regions, so that those factories can supply China.   Along the way, Chinese labour and Chinese technology go into those factories and related infrastructure developments.

To call it a grand plan is an understatement.   OBOR involves many countries, international banks and massive investments.

One part of this grand plan is to ensure the logistics are in place so that all that capital equipment, raw materials and finished goods can get to their intended destinations.  For China servicing Europe, there are two choices as the feature image shows.   This is where perhaps the most progress is being made in real terms.  Rail freight between China and Europe is now booming.

To illustrate, consider these simple questions.   How many rail services do you think presently run between China and Europe?   How many Chinese cities presently offer rail services to Europe?  How far into Western Europe does the China rail service extend?

The answers might surprise you.   Right now, there are 23 rail services running out of 18 Chinese cities.  Chinese trains now run into central Asia of course, but now reach down as far as Germany and even into Spain.

That’s as of now.  According to some work done by Tristan Leonard, another 20 services are still to be added.  In January, China ran its first rail freight service to London.

Running 20,000kms to London means 2 changes of railway gauge.  As well, freight going into the UK must be transferred to special containers suitable for the Channel Tunnel.  Still, the service to London takes 18 days off the time taken to send a container via sea freight.  That’s a significant advantage for shippers of time-sensitive goods such as food, and especially good for managing cash flow.  A friend of mine in Beijing who sells steel products into Europe uses rail to deliver to his customers.   He says his customers are willing to pay the higher freight cost because they get their goods so much quicker.

 

May Day holiday

AZ China is closed today for the May Day holiday.

The May Day holiday used to have more significance, at least in China.  Ten years ago the holiday was spread across 3 days, but that got cut back a few years ago.  It makes a real difference – 3 days means people can travel, and I remember making a trip to Boracay for the May Day holiday.  But one day means that people don’t travel.  But they do shop, and China’s many shopping malls will have a busy day today.

AZ China’s weekly reports will be published tomorrow.

Meantime, if you are a subscriber to any of AZ China’s Monthly Reports – the Black China Report, the World Aluminum Monthly or the Pipeline Report – then why not use today to download WeChat onto your mobile phone and get set up to join AZ China’s exclusive WeChat groups.   Our two new WeChat groups will be open for business from tomorrow.  WeChat allows us to deliver the absolute latest news right to your mobile phone.

Not a subscriber yet?  Feel free to try our “try before you buy” group where you will be able to see a sample of what’s going on in the paid-for group.   You can still join the paid-for groups by paying US$400 per year for access, and the try-before-you-buy group will give you an idea of the value of the paid-for groups.

To make it easier for you, here is a contact sheet so you can ask us to add you to the groups.  Just remember we are closed today, so we won’t answer until tomorrow.

[contact-form][contact-field label=’Name’ type=’name’ required=’1’/][contact-field label=’Email’ type=’email’ required=’1’/][contact-field label=’I am interested in the …’ type=’checkbox-multiple’ options=’AZ China Aluminum Group,AZ China Carbon/raw materials Group’/][contact-field label=’I want access to the full paid-for group’ type=’checkbox-multiple’ options=’I am a subscriber to one of the AZ China Monthly Reports,Please bill me US$400 for a one-year access,I would like to access the %26quot;try-before-you-buy%26quot; group’/][contact-field label=’Comment’ type=’textarea’/][/contact-form]

Thanks to Wikipedia for the use of the image.

National security aluminum – wrong fight

The world media has been awash with the news that President Trump has ordered an investigation into whether there is a national security threat angle in the USA’s imports of aluminum.   Several counties are caught in this investigation, but the main target is China.

Known as the 232 investigation, Trump’s action on aluminum follows a very similar investigation into steel.   The USA already has a complaint lodged with the WTO against China, but Secretary of Commerce Wilbur Ross says it is likely that the WTO action will be “subsumed” into the 232 investigation.

The National Security argument says that in times of war, the USA may not be able to get hold of sufficient quantities of high-purity metal for applications such as the F-35 fighter.  In times of war, no country wants to be dependent on another country for vital supplies.

But therein lies a problem.   According to our information, there are only a small number of smelters in China that make military grade aluminum.   And none of them are anywhere near a shipping point.   Chalco is the main supplier to China’s military, using metal from its Baotou Inner Mongolia smelter and Southwest Aluminum..  Zhonghe smelter also produces military grade metal.

The fact is, China is actually a net importer of high purity aluminum.   Really, it is quite embarrassing for China – the world’s largest producer of aluminum cannot make enough of these grades of metal for itself, much less to sell to anyone else.

Still, once an investigation is launched, there is no telling how the terms of reference might be amended or broadened.  But on the face of it, and to the extent of the information published so far, this appears to be the wrong fight for Mr Trump, if he is really interested in supporting the American aluminum industry.