Chinese Aluminum Giant Is Tied to a $2 Billion Mystery Mexican Stockpile

Treasury Secretary Jacob Lew Tours Alcoa's Davenport Works Facility
Slabs of aluminum sit on the production floor of the Alcoa Inc. Davenport Works facility in Riverdale, Iowa, U.S., on Tuesday, July 29, 2014. Treasury Secretary Jacob Lew, while speaking to reporters today, said U.S. sanctions are designed to maximize the economic pain on Russia while minimizing the effects elsewhere. Photographer: Daniel Acker/Bloomberg via Getty Images
Daniel Acker — Bloomberg via Getty Images

Six hundred workers lost their jobs earlier this year when Alcoa (AA) closed its aluminum smelter in Warrick County, Ind., which had cranked out the metal since 1960.

Alcoa’s CEO Klaus Kleinfeld blamed low aluminum prices, down 20% last year amid a flood of supply from China. Chinese smelters supply half the world’s aluminum and, as the lifeblood of many small towns, enjoy subsidized power and taxes from local governments. But that may not be the only advantage they have. Aluminum trade groups have long contended the Chinese companies engage in more underhanded moves to evade import restrictions and anti-dumping laws.

See also: China’s Inflation Trends Point to a Stabilizing Economy

Now there appears to be a strong case for their accusations. A Chinese aluminum company stockpiled more than $2 billion worth of aluminum in Mexico with intentions of shipping it to the U.S. to avoid tariffs on Chinese exports, according to a Wall Street Journal report on the scheme. Records linked China Zhongwang Holdings (CHZHF) with the stockpile, much of which has since been moved to Vietnam following a U.S. trade group’s petition to the Commerce Department, the WSJ said.

The account reads like a case of globalization gone amuck. Chinese smelters, hurt by China’s slowing infrastructure buildout, have turned to India, the U.S., and elsewhere for market share, thanks in no small part to government support.

An oversupply of Chinese steel in global markets has gotten recent attention, but Chinese aluminum may be just as damaging.

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