aluminum coils

US primary aluminum industry debates Section 232 tariffs

Some aluminum producers have sent a letter to U.S. Trade Representative Lighthizer supporting continued tariff exemptions for Canadian imports, while others have voiced their opposition.

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June 25, 2020

Aluminum imports from Canada into the U.S. have been exempted from the Section 232 tariffs since May of 2019. The Trump administration introduce the tariffs, which are designed to protect national security interests, in 2018.

In a letter to U.S. Trade Representative Robert Lighthzier dated May 20 of this year, Tom Dobbins, president and CEO of the Aluminum Association, Washington, mentions the exemptions extended to Canadian and Mexican imports, stating, “Those agreements, which took effect one year ago and prioritized a shared commitment to monitor imports from outside the region, have allowed for the return of consistent and reliable trade of aluminum and aluminum products within North America. This is particularly important as we move toward entry into force of the U.S.-Mexico-Canada Agreement (USMCA).”

The USMA is scheduled to go into force July 1. In Senate hearings on U.S trade policy in June, Lighthizer indicated that the Trump administration likely would reinstate the tariffs if imports from Canada were higher than before. The introduction of quotas also has been mentioned.

"I would say there have been surges of steel and aluminum, substantially from Canada and some from Mexico, and it is something that we are looking at," Lighthizer said during the June 17 Senate hearing on trade policy. "The way the agreement worked is both countries agreed that they would maintain substantially the same trade as they have before, but we are seeing surges in some products."

According to Reuters, lifting of the exemption completely “would slash Canadian imports and trigger a large price rise, anchoring the viability of high-cost U.S. smelters such as those owned by Century Aluminum and Magnitude 7 Metals.”

The news outlet adds that the aluminum market is pricing in the possibility of the U.S. replacing Canada’s exemptions with quotas.

Reuters reports that the U.S. premium has fallen below $180 per metric ton from roughly $400 per ton during most of last year because of reduced demand brought on be pandemic-related lockdowns.

“The market is trying to (price in) the odds of the U.S. giving Canada a hard quota,” Reuters reports CRU analyst Gregory Wittbecker as saying.

“Canada’s exemption completely evaporated the intention of Section 232, which was to help remaining U.S. smelters survive,” Jorge Vasquez, founder of Harbor Aluminum, told Reuters. He shared data with Reuters that Harbor Aluminum compiled showing Canada exported nearly 550,000 metric tons of primary aluminum to the U.S. in the first four months of this year, more than double the number from the same period last year when the 10 percent tariff was still in place.

However, a number of CEOs and other senior executives representing the aluminum industry value chain in the United States sent a letter to Lighthizer calling for continued quota-free Section 232 tariff exemptions for aluminum in North America. They say 97 percent of U.S. aluminum industry jobs are in mid- and downstream production and processing and rely on a mixture of domestic and imported primary aluminum.

Despite recent claims of a “surge” of primary aluminum imports from Canada into the U.S. made by the American Primary Aluminum Association (APAA), Washington, the Aluminum Association says previously released U.S. government data demonstrates that current import levels are largely consistent with historical trends and market fundamentals.

The letter states: “The integrated North American aluminum supply chain has been a crucial element of the U.S. aluminum industry’s ability to invest and grow over the past several decades. The U.S. aluminum industry needs a reliable source of input aluminum material to manufacture semifabricated products like aluminum foil, sheet, plate, wire, extrusions and other products. Even at full capacity, U.S. primary aluminum smelters can only meet about one-third of the demand for this vital material. The aluminum industry has no choice but to import a significant amount of primary aluminum to meet demand—the only question is from where?” 

In addition to Dobbins, the letter was signed by:

  • Steve Fisher, president and CEO, Novelis Inc.;
  • Jean-Marc Germain, CEO, Constellium;
  • Henry Gordinier, president and CEO, Tri-Arrows Aluminum Inc.;
  • Roy Harvey, president and CEO, Alcoa Corp.;
  • Erin Fauber, CEO, American Metal Chemical Corp.;
  • Tim Myers, CEO, Arconic Corp.;
  • Charlie Straface, business unit president, Hydro Extrusion North America;
  • Lee McCarter, CEO, JW Aluminum Inc.;
  • Jack Hockema, CEO and chairman, Kaiser Aluminum;
  • Terry Hogan, president and CEO, Real Alloy;
  • Murray Rudisill, vice president, operations, Reynolds Consumer Products;
  • Alf Barrios, CEO, Rio Tinto Aluminum;
  • Garney Scott, president and CEO, Scepter Inc.;
  • Gary Karnish, CEO, Silberline Manufacturing Co.;
  • Wes Oberholzer, CEO, Smelter Service Corp.; and
  • Kevin Person, CEO, Wagstaff Inc.

“Today’s letter shows an industry united in support of the continued free flow of metal within North America,” Dobbins says. “After all of the hard work that has gone into making the USMCA a reality, it would be a shame to move backward by reapplying tariffs or quotas on aluminum. We trust that the administration will heed the advice of representatives from the impacted industry who recognize that this action would only hurt U.S. aluminum companies and workers.”

Earlier this month, the Aluminum Association criticized the APAA for making what it says are “several” inaccurate claims recently arguing for the reimposition of Section 232 tariffs on aluminum imports from Canada into the U.S.”

Century Aluminum and Magnitude 7 Metals launched the APAA in mid-2018 “to advocate for the distinct interests of the primary aluminum industry in the United States.”

APAA CEO Mark Duffy voiced his support for resuming the tariffs to S&P Global Platts.

"Canadian product has surged into the US, causing the domestic price of aluminum to fall, capacity to stall and workers to be laid off," Duffy says in an S&P Global Platts article. "Canadian imports have surged by 24 percent over the period prior to the imposition of tariffs and over 80 percent above previous tariffed quarters."

"The Section 232 tariffs helped level the playing field for the domestic industry and American workers as formerly idled capacity restarted in places like Kentucky, Indiana, Missouri and across the United States, until the Canadian exemption was put into place," Duffy told S&P Global Platts.

He added, "It is no coincidence that US smelters were viable when the Canadian tariffs were in place, and now that the tariffs are no longer in place, the smelters are under threat.”