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The $ 5 billion aluminum treasure the world wants but can’t have



In an industrial park about an hour’s drive from Ho Chi Minh City on the way to the South China Sea coast, are giant mounds of raw metal wrapped in black tarpaulin. Stretching a mile long, the coveted treasure could be worth around $ 5 billion at current prices.

In the esoteric world of aluminum, connoisseurs say the inventory in Vietnam is the largest they’ve ever seen – and that’s in an industry that spends a lot of time building up stocks while analysts spend a lot of time trying to locate them. But as for the increasingly under-supplied market, it is a market that we may never see again.

Why he’s unlikely to move anytime soon involves Vietnamese customs authorities. How its existence has become so important, meanwhile, opens a window to a ubiquitous, but erratic product at a time when manufacturers of everything from auto parts to beer cans argue more as they emerge from the market. coronavirus pandemic and that China is limiting supply.

While there were millions of tons of aluminum in the ports of Detroit and New Orleans in the United States in Rotterdam in Europe and Port Klang in Malaysia, market watchers say the stockpile at 50 kilometers (31 miles) from Vietnam’s largest city is probably the only notable one. left.

To put it in perspective, this equates to the total annual consumption of India, the second most populous country in the world, said Duncan Hobbs, a London-based analyst at commodities trader Concord Resources, which covers the markets. metals for 25 years.

“We are seeing the biggest deficit in the world market for at least 20 years, and this stock would not only make up for that deficit, but it would also leave you with something surplus,” he said.

The treasure was seized in a 2019 anti-dumping investigation by the United States involving a Chinese billionaire. Vietnamese authorities say it was accumulated from China by Global Vietnam Aluminum Ltd., known as GVA. They have not completed their investigation, although the initial investigation into GVA was dropped due to a lack of evidence.

The 1.8 million tonnes of aluminum remain in storage under the watchful eye of security guards, with only tiny amounts released to GVA for its production line, according to an official from Vietnam’s general customs department. The company could not be reached for comment. Part of the region has been strictly closed because of the Covid-19.

The skyrocketing prices mean the metal has risen in value by more than 50% since it was impounded. If the stock started to move, the impact could be seismic. That would be more than enough to wipe out a global deficit that has arisen in the aluminum market this year, and a clearance sale could push prices down.

Yet CRU, one of the leading consulting firms the industry relies on to track inventory in the world’s largest base metals market, has now removed Vietnamese stock from its inventory estimates. The London-based company estimates some of the metal is over 10 years old and should be sold as scrap metal anyway.

“Normally, inventory is available at the right price, but one of the problems with this material is that it’s not entirely clear under what circumstances it would become available,” said Ross Strachan, senior analyst at the aluminum at CRU in London. “There is little evidence that Vietnamese stocks should bring any comfort to consumers.”

What metal piles can offer is a reminder of the recent turbulent history of the aluminum market. Interest in the inaccessible treasure reflects the metal’s watershed moment as an era of oversupply gives way to shortages due to Chinese restrictions on production to reduce emissions.

Aluminum traders have spent much of the past decade fearing that a colossal glut accumulated during the global financial crisis could return to the market and suppress already low prices.

Auto makers in Detroit, for example, have drastically cut back on purchases while producers have continued to pump metal in hopes of knocking out competitors. More than half of the world’s producers were losing money, but for many, the huge costs of shutting down their smelters would have been even higher. So, month after month, the excess of unwanted metal increased.

Then in banks and trading houses. Their plan was to make money by buying back the surplus and putting it aside for the leaner years. As the global economy began to recover in the early 2010s, manufacturers like Coca-Cola and MolsonCoors ran out of aluminum when mountains of metal found their way into major ports around the world.

Eventually the metal was re-injected into the market as demand rebounded and not even later than last year the industry was comfortably supplied. At the start of the pandemic, it looked like the market would be overwhelmed again.

Now, with rising demand and shrinking supply from China, the consensus is that the outlook for prices has never been brighter as the mountains of aluminum disappear just as manufacturers in need it most.

“The stocks have fallen at a very rapid pace, in a way that no one was prepared for,” said Kamil Wlazly, senior metals analyst at Wood Mackenzie in London.

Far from Vietnam, the transition from industry to scarcity is evident in other major industrial ports around the world. Satellite imagery shows that a huge reserve in New Orleans owned by Castleton Commodities has been pulled, shipped to U.S. consumers who have had to spit more for their aluminum since President Donald Trump imposed tariffs on imports from from China and elsewhere.

A large stock at Port Klang in Malaysia also disappeared in 2019, around the same time customs data showed an increase in shipments from the country to Vietnam.

Despite Malaysia’s relatively modest position as a consumer of aluminum, Port Klang has also emerged as the largest storage point in the London Metal Exchange warehouse network, but these reserves are also dwindling rapidly.

LME depots in Detroit and the Dutch port of Vlissingen are now virtually empty, having held more than 3.5 million tonnes at the height of warehousing by banks and merchants. It’s a similar story in Rotterdam, which held millions of tons of metal in LME depots and private warehouses.

But the situation is arguably most serious in China, where total stocks across the country now stand at around 1.2 million tonnes, which equates to two weeks of demand, according to estimates by the group of AZ China research.

The most striking sign of the growing shortage can be found in the country’s trade data, which shows how the world’s largest producer is now becoming a net importer of aluminum as cuts in domestic production intensify. After years of flooding the global metal market, China is now leading to a rapid reduction in global aluminum reserves.

“For China – for the size of this country – if the Vietnamese stock could come back, it would be easily absorbed,” Wlazly said. This hiding place, however, remains incredibly out of reach.