“My Moby-Dick has been Zhongwang”

September 8, 2016 1:12 PM

Two years ago, a California aluminum executive commissioned a pilot to fly over the Mexican town of San José Iturbide, at the foot of the Sierra Gorda mountains, and snap aerial photos of a remote desert factory. He made a startling discovery. Nearly one million metric tons of aluminum sat neatly stacked behind a fortress of barbed-wire fences. The stockpile, worth some $2 billion and representing roughly 6% of the world’s total inventory—enough to churn out 2.2 million Ford F-150s or 77 billion beer cans—quickly became an obsession for the U.S. aluminum industry. Now it is a new source of tension in U.S.-Chinese trade relations. U.S. executives contend that the mysterious cache was part of a brazen scheme by one of China’s richest men to game the global trade system. The Wall Street Journal reports

Related:
Possible Fake Semi Connection as Aluminium Exports Cascade out of Mexico for Vietnam in June
Liu Zhongtian – A Magnet for Controversy
Aluminicaste's 850000T stockpile a concern

posted by chavenet (25 comments total)

And I'm suddenly reminded of Goldman Sachs' aluminum Kansas City Shuffle con.
posted by NoxAeternum at 1:14 PM on September 8, 2016 [7 favorites]

(Main link appears to be paywalled, ugh.)
posted by RedOrGreen at 1:17 PM on September 8, 2016

Copy the link, paste it into Google, then follow the first Google result.
posted by gwint at 1:18 PM on September 8, 2016 [3 favorites]

Copy the link, paste it into Google, then follow the first Google result.

Alternately, search “chinese billionaire wsj”
posted by Going To Maine at 1:29 PM on September 8, 2016

It sure looks like the folks got busted, so I'm not sure they are trying to game the system (?)
posted by k5.user at 2:00 PM on September 8, 2016

They're going to use all that aluminum to build that wall?

But people will just tear it down to recycle the metal ....
posted by hank at 2:00 PM on September 8, 2016

How can he be a magnet for controversy? Aluminum? Come on, someone make a joke.
posted by Stonestock Relentless at 2:11 PM on September 8, 2016 [15 favorites]

Oh, the iron-y.
posted by dr_dank at 2:15 PM on September 8, 2016 [7 favorites]

What brass balls.
posted by Melismata at 2:15 PM on September 8, 2016 [3 favorites]

Ugh. Melting aluminum down takes much less power then the initial refinement, but this scheme was not a great use of resources.

From what I can tell, the process was:

1) Aluminum refined in China, and extruded into finished product by China Zhongwang
2) Sold through various middlemen and shipped to Mexico
3) Original extrusions are melted down at Aluminicaste Fundición into stock
4) Aluminum shipped from Mexico to US
5) Aluminum stock re-extruded into finished product in US factory

All to try to get around tariffs, which ended up not working anyway. Aluminum laundering.
posted by figurant at 2:26 PM on September 8, 2016 [8 favorites]

All to try to get around tariffs, which ended up not working anyway. Aluminum laundering.

It seems like it was shipped in as scrap or waste which is possibly a loophole in Mexican tarrifs - I wonder if that was the angle.
posted by GuyZero at 2:40 PM on September 8, 2016 [1 favorite]

Ah, that might be it. The WSJ article wasn't very clear about that. I assumed NAFTA would have applied to nominally Mexican aluminum, but that didn't explain why it needed to go through a US factory.
posted by figurant at 2:42 PM on September 8, 2016

Usually in commodities FPPs I post my good ol' pork bellies line from Trading Places, but it turns out it doesn't quite work in this context... much like a bacon, lettuce and tomato sandwich.
posted by infinitewindow at 2:43 PM on September 8, 2016

Too bad it wasn't transparent aluminum.
posted by Melismata at 2:45 PM on September 8, 2016 [6 favorites]

From the final link in the OP: "The billet we produce in Mexico is made from global scrap, aluminum press scrap," Johnson said, adding that most of the material had come from factories in China."

But although it was "scrap" it was still pretty pure aluminum thus my speculation.
posted by GuyZero at 2:45 PM on September 8, 2016

So remelting at the Mexican plant was intended to supply a thin oxide layer of legitimacy to their tariff evasion operation?
posted by indubitable at 2:48 PM on September 8, 2016 [3 favorites]

Looking forward to the day when China gets its fucking act together.
posted by My Dad at 3:13 PM on September 8, 2016

How can he be a magnet for controversy? Aluminium? Come on, someone make a joke.

Leaving the obvious intended pun aside, its hard to laugh about aluminium since the Russian Aluminum wars of the 1990s, in which many many people (managers, journalists, etc, over 100) were killed. Made GoodFellas look like Mary Poppins.

Still has fallout, as the winners are with us (Abramovich, Daripaska) and many of the losers not.
posted by C.A.S. at 3:29 PM on September 8, 2016 [4 favorites]

Yeah, that's standard tariff evasions scheme stuff. The smae the world over. Kinda amateur in fact.
posted by fshgrl at 4:04 PM on September 8, 2016 [1 favorite]

Like NoxAeternum I was also reminded of the Goldman Sachs scam. That was three years ago and seems to have been different people. A different market manipulation, too.
posted by Nelson at 4:27 PM on September 8, 2016

".... and snap aerial photos of a remote desert factory. He made a startling discovery. Nearly one million metric tons of aluminum sat neatly stacked behind a fortress of barbed-wire fences...."

For lack of a tarpaulin, the ruse was lost.
posted by storybored at 4:35 PM on September 8, 2016 [5 favorites]

But aluminum doesn't ruse.
posted by carping demon at 5:18 PM on September 8, 2016 [3 favorites]

And I'm suddenly reminded of Goldman Sachs' aluminum Kansas City Shuffle con.

The Goldman Sachs Aluminum Conspiracy Was Pretty Silly
posted by jpe at 5:35 PM on September 8, 2016 [2 favorites]

There is also a vat evasion angle on the Chinese side

Anywho. I once sent a work memo out that just consisted of the Google maps image of the pile of aluminum.

So it's kinda fun to see this here.
posted by JPD at 6:11 PM on September 8, 2016

Can I just say that these dick jokes about the Chinese language are microaggressive, othering experiences? Consider for a moment that "Wang" has different a pronunciation than the English slang for penis. Firstly in Pinyin Mandarin, Wàng indicates a falling tone, and secondly, and more egregiously, the "a" vowel is pronounced like "a" as in "father". Alternatively, in Cantonese, the phoneticization is "Wong".

Semantically, 忠旺 has a rather beautiful ring to it, the first character meaning "loyal", and the second meaning "prosperity". The full name of the company is "ZhongGuo ZhongWang" which when pronounced with tone is rather melodious. I mean, if you want to make fun of that, then might as well point out the irony of "China Loyal Prosperity" under a regime of authoritarian capitalism in relation to global trade.

See for example this chart; the linguistics is utterly fascinating mind-expanding stuff.

Anyways, I wish I could express my reaction to this without making others feel worse. Let's treat this as a learning moment.
posted by polymodus at 2:59 PM on September 9, 2016 [1 favorite]