A new International Trade Commission report finds that the U.S. primary unwrought aluminum segment shrank significantly from 2011 to 2015 but the secondary unwrought and wrought product segments expanded. The report could be a factor in the Trump administration’s pending determination on whether to impose import restrictions on aluminum.

The Department of Commerce is conducting a section 232 investigation into whether imports of foreign-made aluminum are harming U.S. national security. If the DOC’s determination is affirmative, and the president concurs, the president will have the authority to adjust imports, including through the use of tariffs and quotas. Trump had pushed for the DOC to conclude its investigation by the end of June (two months after initiation, in contrast to the nine months allowed by law), but it remains unclear when a final decision may be announced.

The ITC report includes findings that could be cited as support for a potential affirmative DOC determination and subsequent decision to restrict imports. It assesses the strengths and weaknesses of major aluminum producing and exporting countries, provides qualitative and quantitative assessments of the impact of foreign government policies, identifies countries where primary unwrought aluminum capacity has substantially increased, and includes information on trade flows of aluminum through third countries. Highlights of the report (which focuses on the period from 2011 to 2015 but documents some trends occurring since 2001) include the following.

Domestic Producers. The domestic primary unwrought aluminum sector (producing aluminum used in applications such as aircraft and weapon systems, construction, manufacturing, and electrical transmission) faced declining prices, relatively high production costs (i.e., electricity), and limited investments in smelting technologies. On the other hand, secondary producers benefitted from access to abundant, low-cost aluminum scrap (their main input) while producers of wrought (semi-fabricated) aluminum took advantage of proximity to and close collaboration with their customers in the large and growing U.S. market.

China. China was largely responsible for increases in global production of primary aluminum and wrought aluminum, each of which rose by roughly 25 percent. As of 2015 China accounted for more than 50 percent of global production and consumption of primary unwrought and wrought aluminum and ranked second (behind the U.S.) among all secondary unwrought producers.

Export restraints significantly limited China’s exports of unwrought aluminum while established suppliers such as Russia, Canada, Norway, and Australia continued as the world’s leading exporters. However, China strengthened its position as the world’s leading exporter of wrought aluminum, followed by Germany and the U.S.

Global Markets. The global primary aluminum market experienced price declines of about 30 percent due to oversupply and falling production costs, which produced divergent responses from producers: the U.S. lost 19 percent of its primary aluminum capacity (along with another 39 percent in 2016) and Europe lost 11 percent while China and the Gulf Cooperation Council countries expanded their capacity by more than 40 percent.

The global aluminum industry is characterized by extensive government policies that affect all segments of the supply chain but are principally aimed at lowering production costs for primary unwrought aluminum. The chief determinants of competitiveness are low electricity costs for most primary aluminum producers, reliable scrap supplies for secondary producers, and proximity to end-use markets for wrought producers, although China is a major exception.

Copyright © 2021 Sandler, Travis & Rosenberg, P.A.; WorldTrade Interactive, Inc. All rights reserved.

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