The aluminum stockpile located in Vietnam is large enough to end a global shortage. However, it could not be used, becoming the symbol of a very confused aluminum market.
About an hour’s drive east of HCMC is an industrial area with huge piles of raw metal covered with black tarps. Stretching for miles, this coveted asset could be worth around $5 billion at current aluminum prices.
In the world of aluminum traders, they consider this stockpile located in Vietnam to be the largest they have ever seen. However, while the market’s supply is severely short, it is not expected that this stockpile can be released to the market anytime soon.
This stockpile is equivalent to the entire annual aluminum consumption of India, the world’s second most populous country, said Duncan Hobbs, analyst at Concord Resources. “We’re seeing the biggest shortfall in world markets for at least the last 20 years. This stockpile not only fills that deficit, it’s left over.”
Aluminum stockpile worth USD 5 billion in Vietnam. Photo: Google Maps.
This aluminum warehouse was seized as part of an anti-dumping investigation initiated by the US in 2019, targeting a Chinese billionaire who is known as the “aluminum king”. Aluminum is imported from China by a company called Global Vietnam Aluminum Ltd (GVA). The investigation was not closed, although the initial findings of the GBA investigation were dropped due to lack of evidence.
1.8 million tons of aluminum are still kept under the supervision of security personnel, with only a small amount entering GVA’s production line. Bloomberg said it was unable to reach the GVA for comment.
The rapid recovery of the world economy means that the value of this aluminum mountain has increased by 50% since it was confiscated. If the depot begins to release, its impact can generate seismic. It is enough to erase the global deficit that has appeared in the aluminum market this year, and a sell-off could send prices plummeting.
However, CRU, one of the industry’s most important consulting firms, has removed its aluminum stockpile in Vietnam from its inventory estimate. The company said part of the aluminum mountain is more than 10 years old and may have to be sold as scrap.
What this metal mountain offers is a reminder of the recent tumultuous history of the aluminum market.
Over the past decade, aluminum traders have been constantly worried about the massive oversupply that has taken place. More than half of global manufacturers have lost money, but they cannot turn off the furnace because then, the loss will be even heavier. Therefore, each month, the amount of metal stored continues to increase.
At that time, banks and traders started buying and hoarding this metal. As the global economy began to recover in the 2010s, major manufacturers like Coca-Cola or MolsonCoors found themselves short of aluminum while mountains of the metal remained in major ports around the world. . When demand increases again, aluminum is still only being supplied to the market in a trickle. Even last year, there was continued fear of the continued glut caused by the pandemic.
However, with demand soaring this year and China constraining supply, the aluminum hoards are starting to “evaporate” when manufacturers need them most. “Aluminum hoarding has been falling at a very rapid rate, in a way that nobody could have prepared for,” said Kamil Wlazly, senior metals analyst at Wood Mckenzie in London.
Aluminum prices escalated, inventories dropped sharply after many years in a state of oversupply.
Scarcity of this item occurs in many major industrial ports in the world. Satellite images show a large warehouse in New Orleans owned by Casleton Commodities being downsized. A large stockpile at the Malaysian port of Klang also disappeared in 2019. The London Metal Exchanges warehouses in Detroit and the Dutch port of Vlissingen are now mostly empty while at the peak, banks and Traders hold more than 3.5 million tons. A similar story takes place in the port of Rotterdam.
However, it is China that has seen the most severe shortages. Total aluminum inventories in China are currently only about 1.2 million tons – equivalent to 2 weeks of use, according to the AZ research group.
The country is also frantically importing aluminum. After “flooding” aluminum on the global market for many years, China is now causing the world’s aluminum stocks to drop rapidly.
Reference: Bloomberg.
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