Aluminium industry neither deserves nor can afford new US Section 232 tariffs, assn says

The aluminium industry neither deserves nor can afford the shock that would come from the United States' reintroduction of Section 232 tariffs on imports from Canada, according to Aluminum Association president and chief executive officer Tom Dobbins.

Citing the latest government data from the US Census Bureau, Dobbins noted that US imports of primary aluminium from Canada were nearly 5% lower in the first six months of 2020 versus the same period in 2017 – the year before Section 232 tariffs were introduced.

Similarly, overall US imports of primary aluminium from Canada declined by about 2.6% month on month in June, he said.

“This latest data release is consistent with our position all along – claims of a ‘surge’ of primary aluminium imports from Canada are simply not accurate. It is disappointing that the few companies who stand to benefit from reinstated Section 232 aluminium tariffs on Canada have cherry-picked government data and omitted important context to build their case,” Dobbins said.

“Especially now, the US should be focused on getting the manufacturing economy going again in the region – not picking battles with US-Mexico-Canada trading partners. With US aluminium demand down almost 25% so far in 2020 – the first decline in nearly a decade – the industry can simply not afford more shocks to the market,” he added.

Dobbins comments come as those familiar with the matter said that a US executive order is scheduled to be signed imminently that will authorize the reintroduction of a 10% tariff on imports of aluminium from Canada. The White House announced in a tweet on Thursday August 6 that US President Donald Trump was scheduled to sign a “Buying American” executive order later that afternoon.

The initial Section 232 tariffs were introduced in March 2018.

Different views
Data from both the Canadian and US governments show that the US’ overall primary aluminium imports from Canada remain near traditional levels, with barely any movement in percentage terms for the past 30 years.

But the American Primary Aluminum Association (APAA), which represents US producers Century Aluminum Co and Magnitude 7 Metals LLC, is calling for a return to tariffs. According to the APAA, imports from Canada have “surged” since the tariffs were removed and are threatening the viability of the US primary aluminium industry.

Imports of one type of primary aluminium – P1020, or unalloyed – did increase during the first half of the year. But this growth was offset by a decline in imports of the other type of primary aluminium – value-added products (VAP), or alloyed aluminium.

Production at North American smelters shifted away from VAP and toward P1020 during the first half of 2020 due to a drop in demand from the automotive sector and other end-use markets as a result of the Covid-19 pandemic. This included Alcoa Corp, Rio Tinto Group and Century Aluminum.

“Aluminium producers worldwide have shifted to more P1020 production in recent months amid lower demand for VAP aluminium,” Dobbins said.

“This was a completely predictable outgrowth of Covid-19 demand impacts and doesn’t change the fact that overall imports of primary aluminium from Canada into the US are stable to declining. Unfortunately, a handful of market actors are taking natural market fluctuations to try and create a crisis where there is none,” he added.

The vast majority of US aluminium companies and users are united in opposing the reimplementation of Section 232 tariffs or quotas against Canada. This includes the Aluminum Association, which represents more than 120 companies across the industry value chain.

In June, more than 15 chief executive officers and other senior executives representing the entire US industry value chain sent a letter to US Trade Representative Robert Lighthizer calling for continued quota-free Section 232 tariff exemptions for aluminium in North America.

This letter was signed by the heads of Alcoa, Rio Tinto Aluminium, Novelis Inc, Constellium, Arconic Corp and Kaiser Aluminum Corp, among others.

A group of trade associations has said that aluminium premiums in the US could nearly double if Section 232 tariffs or quotas are imposed, which will have a “financially disastrous” effect on American manufacturers.

Fastmarkets assessed the aluminium P1020A premium, ddp Midwest US at 11-12 cents per lb on August 4, up by 4.5% from 10.5-11.5 cents per lb previously – a range that it had maintained since July 21.

The premium is now at its highest point in nearly four months, since reaching 10.5-12.5 cents per lb on April 7.

Most market participants are bullish in their outlook, with strong expectations that Canada will lose its Section 232 tariff exemption and in turn send the premium up by several cents per lb.