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Released August 17, 2018 | SUGAR LAND
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Researched by Industrial Info Resources (Sugar Land, Texas)--While the 25% tariff on U.S. steel imports has been hailed as giving the U.S. steel industry a much-needed boost, the 10% tariff on aluminum imports has had more mixed results, with some industry players calling for a more nuanced approach to the situation.
The aluminum import tariff went into effect in June after an investigation under the Trump administration determined that high imports posed a national security threat. The investigation found that aluminum imports have risen to 90% of total U.S. demand for primary aluminum, up from 66% in 2012; and that from 2013 to 2016, aluminum industry employment fell by 58%, six smelters shut down, and only two of the remaining five smelters were operating at capacity, even though demand has grown considerably. The investigation report, released in January, said military consumption of aluminum was a small percentage of total consumption and therefore was insufficient by itself to preserve the viability of the smelters.
Industrial Info is tracking more than $366 million in aluminum smelter-related project activity in the U.S.
Click on the image at right for a graph showing aluminum smelter project activity by state.
In the downstream aluminum sectors of bars, rods, plates, sheets, foil, wire, tubes and pipes, imports rose 33% from 1.2 million metric tons in 2013 to 1.6 million metric tons in 2016, according to the investigation report.
In hailing the aluminum and steel tariffs, U.S. Commerce Secretary Wilbur Ross said U.S. aluminum companies are now modernizing and restarting production lines in Hawesville, Kentucky, and Marston, Missouri.
At its Hawesville Smelter, Century Aluminum (NASDAQ:CENX) (Chicago, Illinois), the largest producer of primary aluminum in the U.S., is working to restart three idled potlines to add 150,000 tons per year of capacity. In Marston, Magnitude 7 Metals LLC is performing construction to incrementally restart two of three potlines at a 263,000-ton-per-year smelter that was closed in 2016. See Industrial Info's project reports on the Hawesville and Marston restarts.
However, the Aluminum Association (Arlington, Virginia), a trade group with more than 50 producer members, has been more circumspect regarding the tariff issue.
"While the Aluminum Association appreciates the president's attention to the domestic aluminum industry, across-the-board tariffs won't address the fundamental problem of massive aluminum overcapacity in China," according to a statement on the association's website. "China's illegal subsidies to producers of both primary aluminum and semi-fabricated aluminum products have resulted in significant overcapacity in the market, hurting the plants and people of the U.S. industry. Chinese primary aluminum overcapacity continues to grow unabated, significantly distorting markets and encouraging illegal dumping. Excess capacity alone in China last year totaled 11 million metric tons of aluminum -- 40% of the rest of the world's total production of 27.5 million metric tons."
The association said that instead of imposing blanket tariffs, the U.S. should implement permanent, quota-free tariff exemptions for countries that are designated as market-based economies; create an aluminum import monitoring system to provide greater transparency for aluminum and aluminum products that enter the country; continue targeted trade enforcement actions on products that benefit from illegal government subsidies; and begin immediate government-to-government negotiations with China to address trade-distorting practices.
The association noted that the U.S. aluminum industry continues to rely heavily on imports: "Even if we brought every U.S. aluminum smelter back online tomorrow, we could not produce nearly enough primary aluminum domestically to satisfy growing demand. The U.S. produces less than 1 million metric tons of primary; our total capacity is less than 2 million metric tons; and we consume between 5 and 6 million metric tons."
Global aluminum producer Alcoa Corporation (NYSE:AA) (Pittsburgh, Pennsylvania) has viewed the aluminum tariff in a less-than-positive light.
Chief Financial Officer William Oplinger said during the company's second-quarter earnings conference call in July he expects to see a $12 million-to-$14 million negative monthly impact as a result of the tariff. Alcoa operates three aluminum smelters in Canada. "Simply put, for our Canadian production, we will either pay tariffs on metal we import into the U.S. or we will sell it outside the U.S. at a lower premium," he said.
Alcoa Chief Executive Officer Roy Harvey said while the Trump administration's efforts to address the situation are appreciated, the tariffs don't address the underlying global aluminum market issues of unfairly subsidized smelter capacity in China and "the persistent operation of uncompetitive money-losing capacity worldwide."
Harvey continued: "In a 5.7 million-metric-ton U.S. market, restarts attributed to tariffs have totaled 300,000 metric tons, all of that from competitors. As for Alcoa, our sole U.S. restart in Indiana is based on cost efficiencies. By bringing part of the work smelter back online, we provide a very specific benefit to our onsite rolling mill that improves its operational and financial performance."
Alcoa is performing site preparation for the restart of the 50,000-ton-per-year #4 potline at its smelter in Newburgh, Indiana. For more information, see Industrial Info's project report.
The tariff also has prompted a number of U.S. aluminum product producers to seek exclusions. Automotive sheet producer Novelis Incorporated (Atlanta, Georgia) recently filed for tariff exclusions for its aluminum products, specifically for those made at Novelis' facility in Kingston, Ontario, according to industry news provider American Metal Market. A subsidiary of the Aditya Birla Group (Mumbai, India), Novelis operates in 10 countries.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
The aluminum import tariff went into effect in June after an investigation under the Trump administration determined that high imports posed a national security threat. The investigation found that aluminum imports have risen to 90% of total U.S. demand for primary aluminum, up from 66% in 2012; and that from 2013 to 2016, aluminum industry employment fell by 58%, six smelters shut down, and only two of the remaining five smelters were operating at capacity, even though demand has grown considerably. The investigation report, released in January, said military consumption of aluminum was a small percentage of total consumption and therefore was insufficient by itself to preserve the viability of the smelters.
Industrial Info is tracking more than $366 million in aluminum smelter-related project activity in the U.S.
In the downstream aluminum sectors of bars, rods, plates, sheets, foil, wire, tubes and pipes, imports rose 33% from 1.2 million metric tons in 2013 to 1.6 million metric tons in 2016, according to the investigation report.
In hailing the aluminum and steel tariffs, U.S. Commerce Secretary Wilbur Ross said U.S. aluminum companies are now modernizing and restarting production lines in Hawesville, Kentucky, and Marston, Missouri.
At its Hawesville Smelter, Century Aluminum (NASDAQ:CENX) (Chicago, Illinois), the largest producer of primary aluminum in the U.S., is working to restart three idled potlines to add 150,000 tons per year of capacity. In Marston, Magnitude 7 Metals LLC is performing construction to incrementally restart two of three potlines at a 263,000-ton-per-year smelter that was closed in 2016. See Industrial Info's project reports on the Hawesville and Marston restarts.
However, the Aluminum Association (Arlington, Virginia), a trade group with more than 50 producer members, has been more circumspect regarding the tariff issue.
"While the Aluminum Association appreciates the president's attention to the domestic aluminum industry, across-the-board tariffs won't address the fundamental problem of massive aluminum overcapacity in China," according to a statement on the association's website. "China's illegal subsidies to producers of both primary aluminum and semi-fabricated aluminum products have resulted in significant overcapacity in the market, hurting the plants and people of the U.S. industry. Chinese primary aluminum overcapacity continues to grow unabated, significantly distorting markets and encouraging illegal dumping. Excess capacity alone in China last year totaled 11 million metric tons of aluminum -- 40% of the rest of the world's total production of 27.5 million metric tons."
The association said that instead of imposing blanket tariffs, the U.S. should implement permanent, quota-free tariff exemptions for countries that are designated as market-based economies; create an aluminum import monitoring system to provide greater transparency for aluminum and aluminum products that enter the country; continue targeted trade enforcement actions on products that benefit from illegal government subsidies; and begin immediate government-to-government negotiations with China to address trade-distorting practices.
The association noted that the U.S. aluminum industry continues to rely heavily on imports: "Even if we brought every U.S. aluminum smelter back online tomorrow, we could not produce nearly enough primary aluminum domestically to satisfy growing demand. The U.S. produces less than 1 million metric tons of primary; our total capacity is less than 2 million metric tons; and we consume between 5 and 6 million metric tons."
Global aluminum producer Alcoa Corporation (NYSE:AA) (Pittsburgh, Pennsylvania) has viewed the aluminum tariff in a less-than-positive light.
Chief Financial Officer William Oplinger said during the company's second-quarter earnings conference call in July he expects to see a $12 million-to-$14 million negative monthly impact as a result of the tariff. Alcoa operates three aluminum smelters in Canada. "Simply put, for our Canadian production, we will either pay tariffs on metal we import into the U.S. or we will sell it outside the U.S. at a lower premium," he said.
Alcoa Chief Executive Officer Roy Harvey said while the Trump administration's efforts to address the situation are appreciated, the tariffs don't address the underlying global aluminum market issues of unfairly subsidized smelter capacity in China and "the persistent operation of uncompetitive money-losing capacity worldwide."
Harvey continued: "In a 5.7 million-metric-ton U.S. market, restarts attributed to tariffs have totaled 300,000 metric tons, all of that from competitors. As for Alcoa, our sole U.S. restart in Indiana is based on cost efficiencies. By bringing part of the work smelter back online, we provide a very specific benefit to our onsite rolling mill that improves its operational and financial performance."
Alcoa is performing site preparation for the restart of the 50,000-ton-per-year #4 potline at its smelter in Newburgh, Indiana. For more information, see Industrial Info's project report.
The tariff also has prompted a number of U.S. aluminum product producers to seek exclusions. Automotive sheet producer Novelis Incorporated (Atlanta, Georgia) recently filed for tariff exclusions for its aluminum products, specifically for those made at Novelis' facility in Kingston, Ontario, according to industry news provider American Metal Market. A subsidiary of the Aditya Birla Group (Mumbai, India), Novelis operates in 10 countries.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
