Soviet aluminum dumping and Alcoa/Norsk Hydro market collapse

Used to explain why aluminum is "canned electricity" and why bulk-electric transmission limits drive the Soviet decision to export aluminum from Siberian hydropower. Affected Alcoa, Norsk Hydro, Alcan.

So you can look at the energy content of materials. This is megajoules per litre — that's your volume — and this is megajoules per kilogram, so this is density. Way up here, hydrogen's over here and aluminum's up there, and everything else is down in here. So aluminum is sometimes called "canned electricity." When peace broke out with the Soviet Union — with Gorbachev in 1985 and then into early '90s — the Soviets had tremendous electric capacity in Siberia. You can't transport electricity more than about a thousand miles. Why? Anybody know why?

Russia, being eight billion square miles, has got a lot of coal. China has a tremendous amount. If you look at aluminum production in the world in recent years, you'll see China has increased by two and a half times in six years. The price of aluminum has dropped dramatically. And this is my take on this: China is overproducing aluminum as a means of exporting coal. When the former Soviet Union first started to open up in the early 1990s, they started dumping aluminum on the world market, and it just destroyed the profitability of Alcoa and Alcan and all the other aluminum producers around the world, because they dropped their price by a factor of three. That's because they were producing their aluminum in Siberia where they had lots of energy, and they were producing it for their own use. When they joined the world economy, they wanted to get capital, and the only way to get capital — because they didn't have the pipelines to get the oil and gas to market — they would produce aluminum and ship the aluminum. It's canned electricity. The Chinese right now are doing the same thing. It's their way of exporting all their coal. We're having another shock to the aluminum market. Other producers that are using hydroelectric power are going by the wayside because they just can't afford to compete with the Chinese dumping their aluminum on the world market, because that's the way they're going to get their capital. Okay. Tomorrow Dr. Belmar will be here. I'll be at jury duty unless I get excused.

In fact, right after the former Soviet Union broke up and peace was breaking out in the early 1990s, the Soviets had big aluminum plants out in Siberia. They were also looking for foreign exchange, and what did they do? They couldn't — they hadn't built pipelines yet to get the oil or the gas from the area — they had to ship the aluminum. People for decades have been calling aluminum canned electricity, because you refine aluminum by using electrons. They build aluminum plants right next to big hydroelectric plants — the Grand Coulee Dam, wherever they have big hydroelectric plants they build aluminum smelting plants. Alcoa's got a huge production facility in Iceland because they've got lots of hydroelectric power and you can't transport the electricity off the island unless you do it as aluminum.