Declining prices, relatively high production costs--particularly for electricity--and limited investments in smelting technologies all played a role.
The U.S. International Trade Commission (ITC) has released the results of its Section 332 investigation into primary aluminum imports, finding that multiple factors are responsible for the industry’s contraction since 2011—with secondary and downstream players benefitting.
The segment “shrank significantly” from 2011 to 2015 in the face of “declining prices, relatively high production costs (i.e., electricity) and limited investments in smelting technologies,” all while primary aluminum production by Chinese companies grew dramatically, the ITC said in a statement released with the full 610-page report on July7.
The ITC also nodded toward the importance of government subsidies for the survival of aluminum value chains globally, stating that “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 ITC’s report will be tremendously valuable as lawmakers, industry participants, and Trump Administration officials work together to find targeted, effective and appropriate solutions to the problem of Chinese overcapacity and other distortions in global aluminum markets,” Rep. Kevin of U.S. House of Representatives’ Ways and Means Committee, said on July 7 following release of the ITC report.
Members of the Committee had received the report late last month.
“After the idling and closings of aluminum plants across the country, including in Wenatchee (Wash.) in my district, it was important to take a deeper look at the causes behind the disruptions in the aluminum industry,” trade subcommittee chairman Dave Reichert (R.-Wash.)
said. “Maintaining our competitiveness in the global market is critical to the many good-paying American jobs that depend on the
strength of the industry.”
The committee last year requested the investigation under Section 332 of the Tariff Act of 1930, targeting trends and developments
in the global aluminum market, particularly production changes and increased output.
The ITC does note that while primary aluminum in the U.S. suffered during the investigated time period, both secondary aluminum and wrought product producers have seen their fortunes improve due to easy access to aluminum scrap and growth trends in the U.S. downstream segment.
An abundance of scrap has been a recurring theme in the aluminum spot market this year, with the Midwest aluminum premium’s decline being linked to consumers opting to purchase scrap in lieu of primary metal, forcing producers to offer more attractive prices.
The aluminum industry’s attention is largely turned to the U.S. Department of Commerce’s section 232 investigation, which could result in significant tariffs placed on steel and aluminum landing in the U.S.