On April 22, the Mexican government announced the implementation of a large series of duties on over 500 product categories, including 20 – 35% on aluminum, aluminum alloys and aluminum products. This move was highly welcomed by the US, especially the Aluminum Association and others that had been accusing Mexico of unfairly circumventing US duties, allowing massive transshipments of off-shore metal into the US (duty-free under USMCA) while ignoring traceability and enforcement of USMCA rules of origin
A mere three weeks later, on May 8, Mexico dropped the duties on unalloyed and alloyed aluminum (35% tariff on items 7601.10 -primary unalloyed aluminum and 20% on 7601.20 – primary alloyed aluminum), following massive lobbying by the Mexican aluminum industry represented through the Cámara Nacional de la Industria del Aluminio – Canalum – and the Instituto Mexicano del Aluminio – IMEDAL. Duties on other aluminum products remain in place. The argument brought forward against the duties is the fact that Mexico has no primary aluminum or primary alloy production, and that the USMCA region is already in a strong deficit with respect to primary aluminum, with a demand of about 6 million tons p.a. and production of only about 4 million tons. The sudden and unexpected implementation of these duties would have cost Mexican aluminum processors (foundries, extruders, etc.) a significant amount of money as many have annual contracts with their offshore suppliers and could not easily get out and replace them with local suppliers. The implementation of the tariffs immediately started increasing the US price for aluminum (on April 22 it was at 18.20 ct/lb and on May 8 it had already reached 19.55 ct/lb). Mexico has several trade agreements (e.g. with Europe), so the duties would not have affected aluminum coming from these regions, as the duties in each trade agreement would have remained binding, but it was deemed that even all available metal from these trade partners would have been insufficient to cover the deficit. With the price of any commodity being determined by the marginal producer, it was expected that the price of primary aluminum in Mexico would have increased very quickly as a result of the duties. This rise would have been necessary to attract sufficient Canadian aluminum that is currently going to the US, but would have higher freight costs if shipped to Mexico. With Canadian metal going to Mexico instead of the US, the deficit in the US would have widened quickly, increasing the need to attract more offshore metal (i.e. driving up the US Midwest Premium). With European metal’s ability to come into Mexico duty free, the European aluminum price would also felt the impact, as Europe is already a deficit region that needs to attract offshore metal to cover the demand for primary aluminum.
The implementation of these duties by the Mexican government came as a surprise to many but were also expected to eventually happen due to immense pressure on the Mexican government from the US trade officials as well as many industry associations like the Aluminum Association and Aluminum Extruders Council. Besides disrespecting the USMCA rules of origin (70% of aluminum used in cars sourced in the USMCA), the main issues are transshipments of Chinese aluminum as well as the now banned Russian aluminum. On May 2, the US Department of Commerce had announced affirmative preliminary dumping determinations on imports of aluminum extrusion from 14 countries including Mexico, with announced duties on Mexican extrusions of 9.18 – 82.03%. Mexican aluminum processors have a clear advantage over their US counterparts for a number of reasons. The US has the 10% Section 232 duties on aluminum, while Mexico does not have duties, resulting in a lower raw material cost for Mexican foundries and extruders They have been able to use cheaper offshore (non-USMCA) metal, including from China and Russia. The USMCA rules of origin were found to be hard to monitor and enforce (to avoid circumvention). It has therefore become clear that it is necessary to ramp up trade monitoring systems to quickly identify transshipped and otherwise unfairly traded aluminum, and to harmonize and synchronize actions like implementing tariffs. With the USMCA heading towards its mandatory review in 2026 and a rapidly growing dissatisfaction with Mexico from the US, the Mexican government imposed the import duties, but had not specifically tailored these duties to address Chinese and Russian imports but they were considered and appreciated by many as such, aligning with the United States Section 232 aluminum tariff regime.
While Mexican aluminum processors are relieved for now, it is obvious that they must prepare for both duties on offshore metal as well as much improved monitoring and enforcement of rules of origin coming in 2025. The revoked duties will likely be reimposed, as they prevent the USMCA from being circumvented and equalize trade amongst the USMCA signatories. A diversified supply portfolio with some flexibility seems therefore to be the most prudent move for all purchasers of aluminum. Eccomelt’s factories in Houston, Texas, and Manchester, Georgia are both flexible and ready to supply USMCA compliant metal to Mexico in the most sustainable manner, thereby alleviating all concerns explained above. To further discuss your needs, please contact our team.
