Trump Offers to Cut Aluminum Tariffs in Exchange for Investment

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Written by Danny Levin, Deputy Editor for IIR News Intelligence (Sugar Land, Texas)

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Summary

President Donald Trump on Monday signed a proclamation that would reduce Section 232 tariffs on primary aluminum for companies that invest in U.S. aluminum smelters.

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Trump's Proclamation

President Donald Trump on Monday signed a proclamation that would slash the Section 232 tariff rate on primary aluminum for companies that invest in U.S. aluminum smelters.

Trump introduced an "investment incentive program for companies investing in new U.S. production capacity for primary aluminum," which would reduce aluminum tariffs as long as their project plans are approved by the U.S. Department of Commerce.

Industrial Info Resources data show nearly all of the capital investment for primary aluminum production in the U.S. is wrapped up in a proposed $5 billion grassroot smelter.

"Any onshoring plan shall at least include a commitment, if the plan is approved, to build, refurbish or expand a facility in the U.S. that will produce primary aluminum [and] a commitment that construction will start by Jan. 20, 2029," according to the proclamation.

If the plan is approved, companies can "annually import primary aluminum of a quantity that corresponds to the U.S. production facility's reasonably anticipated annual output of primary aluminum" when the onshoring project is completed, at half the Section 232 tariff rate in effect (currently 50%). For refurbishments, the tariff relief will be tied to the value of the company's investment.

Project plans must have "commercially reasonable" timelines, milestones and projected costs and provide expected production figures.

While the proclamation frequently mentions primary aluminum, it does not mention secondary or recycled aluminum. However, Joseph Govreau, VP Metals & Minerals Research for Industrial Info Resources, said the tariff relief could support growth in the aforementioned downstream processing.

Major Grassroot U.S. Aluminum Smelter

A joint venture between UAE state-owned Emirates Global Aluminium (60%) and U.S.-based Century Aluminum (40%) is proposing a $5 billion grassroot smelter in Inola, Oklahoma: the first new U.S. primary aluminum smelter to be built since 1980. Century Aluminum is the largest primary aluminum producer in the U.S.

The smelter is designed to produce 750,000 metric tons of aluminum per year, which would more than double the current U.S. production (roughly 700,000 metric tons per year.)

The project has plenty of support from Trump and state and local officials--who say domestic aluminum production is key to national security--but the construction timeline currently is up in the air.

The project has faced pushback from Oklahoma Attorney General Gentner Drummond--who is running for governor--and local residents, respectively.
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Drummond in early June filed a petition in state court that would block construction, citing environmental concerns and the project's ties to the United Arab Emirates. And at a June 29 meeting, after weighing residents' concerns, Inola's mayor and board of trustees officially approved a 60-day pause on zoning approvals for the smelter.

In response to the moratorium, Oklahoma Primary Aluminum--the local arm of Emirates Global Aluminium--threatened legal action.

While the attorney general maintains his intentions are pure, Governor Kevin Stitt has tied Drummond's opposition to Trump's endorsement of another gubernational candidate--Mike Mazzei--who supports the project.

Looking to ease concerns, Assistant U.S. Secretary of Energy Audrey Robertson also attended the meeting and said $500 million in federal funding pledged to this project requires meeting clean energy standards.

She also read a letter from the president, who urged approval "without delay."

The state of Oklahoma has promised $225 million in incentives for the project.

IIR is tracking construction of the Inola smelter with a medium probability (70-80%) of kicking off in December, although plenty of factors could delay, cancel or alter the project's timeline and/or investment. Industrial Info Resources offers more information in its GMI Metals & Minerals Project and Plant databases through a detailed project report and plant profile.

One project aimed at boosting primary aluminum production is in the site preparation phase: Century Aluminum's expansion and restart of a potline at its Mount Holly Aluminum Smelter in Goose Creek, South Carolina will increase the facility's total nameplate capacity from 165,000 to 230,000 tons per year. Readers can learn more from a detailed project report and plant profile. The expansion is the second part of a two-phase, $93 million project that kicked off in first-quarter 2021.

Trump Tariff Relief May Not be Enough

However, "tariffs alone will not help the U.S. primary [aluminum] producers," Govreau said. "They need cheap electricity so that they can compete with foreign producers."

According to The Aluminum Association, one primary aluminum smelter requires about 11 terawatt-hours (TWh) of electricity per year--enough power to supply a major city like Detroit or Boston for a year.

The trade group notes a smelter requires a 10 to-20-year power contract at about $40 per megawatt-hour to be globally competitive.

In addition, the group says the U.S. would need around five new smelter facilities to make the country self-sufficient for its current primary aluminum needs.

Key Takeaways

• Trump looks to incentivize reshoring primary aluminum production by providing tariff relief.
• This would apply to new construction, expansions and rebuilds.
• Tariff relief alone may not be enough to help U.S. producers. Cheap electricity is required so they can compete with foreign producers.

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About Industrial Info Resources
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, Industrial Info Resources is tracking over 250,000 current and future projects worth $30.2 trillion (USD).