The future of these tariffs – introduced by US President Donald Trump in March 2018 – remains uncertain with President-elect Joe Biden soon to take control.

The American Primary Aluminum Association (APAA), representing US primary aluminium producers Century Aluminum Co and Magnitude 7 Metals LLC, urged the Biden administration to keep the Section 232 tariffs in place.

“As a result of [the tariffs], prices have stabilized and the US industry has begun to recover. Total US primary aluminium production has increased by nearly 60%, and two idled smelters were successfully restarted,” APAA chief executive officer Mark Duffy said in a letter to Biden on Tuesday January 13.

Duffy also warned the administration of potential consequences if the tariffs are removed.

"If the Section 232 measures are removed before balance is restored in the global market through the elimination of excess capacity and trade distorting subsidies, it is likely that the remaining US smelters will be forced to shut down, leaving supply chains for this critical material vulnerable to disruption,” he added.

Century Aluminum’s smelter in Hawesville, Kentucky, is the only US smelter producing high-purity aluminium, often used in defense applications, Duffy noted.

The APAA has repeatedly endorsed blanket Section 232 aluminium tariffs in the past.

That has put the group at odds with the US Aluminum Association, which represents market participants across the supply chain - including downstream and midstream.

The Aluminum Association opposes blanket tariffs on all imports and is instead calling for a country-specific approach.

“Across-the-board tariffs have failed to dent the non-market-based structural subsidies that drive overcapacity and hurt US aluminium producers and workers. We look forward to working with President-elect Biden’s trade team on new, creative approaches to combat this perennial challenge, including renewed cooperation with traditional trading partners and allies,” Aluminum Association president and chief executive officer Tom Dobbins said in a statement on January 14.

Canada uncertainty
Traditionally the US’ largest primary aluminium supplier, Canada sits at the center of this debate. The nation is subject to a hard quota introduced by Trump in October, under which it can ship a certain volume of primary aluminium to the US market tariff free on a monthly basis. In November, the quota was 85,000 tonnes.

That quota system expired in December, leaving the treatment of imports from Canada uncertain.

Still, US market participants don’t expect a flood of primary aluminium from Canada due to the uncertainty.

Sources told Fastmarkets that Canadian P1020A metal has been destined for Europe, while Canadian smelters have also shifted production to slab aluminium and value-added products. That has kept P1020A flows to the US from Canada at a minimum.

“We’re not seeing a good flow from Canada. They’ll stick with their quotas. There’s no direction. From our standpoint, it’s status quo. There’s a lot of slab being produced,” one trader source said.

Moreover, US Customs and Border Protection data released earlier this month indicated that Canada’s unwrought, non-alloyed shipments to the US in November was roughly 20,000 tonnes below that month’s quota.

Market participants pointed to those paltry volumes as evidence of Canada's discipline.

“That certainly counteracted overages from October. It’s reflective of Canada shipping more value-added products, which is better for them to ship anyway,” a second trader source said.

Indeed, other participants also pointed to strong value-added product demand in the US, particularly for billet.

Fastmarkets assessed the aluminium 6063 extrusion billet premium, delivered Midwest US at 11-12 cents per lb on January 15, up by 26.3% from 9-10 cents per lb previously and the highest point since it was assessed in the same range on April 26, 2019.

Status quo on tariffs bullish for US aluminium premium
Fastmarkets assessed the aluminium P1020A premium, ddp Midwest US at 15-16 cents per lb on January 15, unchanged since December 18.

Market participants are mostly bullish on the premium, with supply heard to be tremendously tight and demand picking up in recent days.

“I think the premium will keep at the same level, as nobody knows on the tariffs with the transition in the US administration. The industry is pushing Biden to keep [Section] 232. If that happens, the premium will get stronger,” a third trader source said.

A fourth trader noted that, “the market eventually needs a dutiable unit. The market will keep destocking. Fundamentally it should be higher but there’s political uncertainty.”

A fifth trader offered a similar view. “People are nervous of what’s coming. The premium’s going to come up. But we need direction to see how this new administration acts,” this source said.

The Biden transition team did not immediately respond to questions on his administration’s intentions with these tariffs.