It has been three months since The President of the United States, Donald Trump introduced 10% tariffs on all aluminum and steel imports.
It has been a little over a month since the tariff exemption on aluminum imports was lifted for key American allies, including Canada.
The purpose: The Trump administration is determined to curb imports of aluminum and steel. In doing so, it aims to revive some of the country’s dormant metal production capacity, to protect American metal producing businesses, and to create jobs for Americans.
According to President Trump, the tariffs were levied for National Security reasons. He laid the blame on China for flooding global markets with subsidized aluminum, essentially taking away business from American producers and pushing plants to the ground. In April, he ordered the Commerce Department to consider quotas or tariffs to shelter American producers from foreign competition.
The Challenges to Reviving Idle Aluminum Plants in the United States
It is hard to say whether or not President Trump will meet his goals to revive the American aluminum manufacturing businesses.
In 1998, the United States had 23 operating aluminum smelters. Today, that number has dwindled to five (and soon to become six). Three more smelters are in the process of being revived.
The main reason for the decline is that the industry took a big hit during the global financial crisis of 2008-09. The demand for aluminum collapsed as the U.S. automotive industry went into meltdown. The price of aluminum (London traded) hit a low of $1,279 a tonne early in 2009. As a result, four aluminum plants halted production.
Although there is a little over a million tonnes of capacity laying idle and ready for restart, most of the smelters are long past the revival stage. The good news is that the country is moving in the direction of the administration’s target of a national operating rate of 80% of capacity. With the right electricity and aluminum prices, some of these smelters can be back up and running. However, this process will not be a quick one and it will take years before the United States will be able to maintain equilibrium between supply and demand.
The Impact of American Trade Tariffs on China
The Trump administration’s tariffs are having no effect on China, the world’s largest producer of aluminum. While U.S. aluminum smelters are slowly restarting, Chinese exports seem not to be affected. Just last month China exported around 437,000 tonnes of aluminum in semi-manufactured form, the second highest total ever. The main reason for this is the discrepancy between supply and demand of aluminum in the United States. While Americans consume 5.5 million tonnes of aluminum each year, its local smelters are only able to produce 700,000 tonnes p.a.
Aluminum production in China is showing no signs of declining. In the last month, the overall output of aluminum has increased by 16% to 2.83 million metric tonnes. The rise in production seen this past month was largely due to the launch of new smelting capacity in Guangxi, Inner Mongolia, and Shanxi.
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Aluminum is one of the most recycled and recyclable materials today, so much so that almost 75% of all aluminum ever produced in the U.S. is still being used today. The best part is that the quality of the metal does not change with the times it is used and recycled – aluminum can be recycled indefinitely.
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If you are an industry affected by the tariffs and proposed sanctions and looking for alternatives please give us a call. We can be contacted at (888) 356-9557 or visit our website and fill out our contact form.
