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Argentina, Brazil split on 232 ali restrictions

May 04, 2018 | 08:34 AM | São Paulo | Danielle Assalve

Argentina has welcomed the US government’s offer of a tariff-free quota for aluminium shipments to the United States, while the Brazilian aluminium industry has opted to bear the imposition of a 10% tariff on such shipments with no limit on volume - deeming it a “less harmful alternative.”

Under the quota, a total of 180,000 tonnes per year of Argentina-origin aluminium will be allowed to enter the US without facing the 10% import tariff linked to the latter’s Section 232 investigation.

The 180,000-tonne volume is equal to the average amount of Argentinian aluminium shipped to the US on an annual basis over the past three years, according to Francisco Cabrera, Argentina’s minister of production.

But the quota is about 30% lower than the 260,000 tonnes of aluminium exported to the US last year.

Despite this, the Argentinian government deemed the quota a success, highlighting that it had achieved a better deal than South Korea, which had settled for a tariff-free quota that equaled 70% of the Asian nation’s average annual exports to the US in 2015-17.

Aluar, Argentina’s sole primary aluminium producer, also said that the negotiations had delivered a positive result but added that the final evaluation of the deal will depend on the terms reached by other countries with the US.

"It's a complex chess game in which, until all the pieces are there, it is not possible to know the triangulations. So far, with the information available, it's good to have been one step ahead," Aluar president Javier Madanes Quintanilla told Argentinian national newspaper La Nacion.

Meanwhile, Argentina has agreed to limit exports of steel products to the US to 180,000 tonnes per year, based on the average of steel exports during the past three years plus an additional 35%.

On Monday April 30, the US government announced that it had reached agreements in principle with Argentina, Australia and Brazil with respect to steel and aluminium quotas, but it did not give further details.

Then on May 1, when the new Section 232 tariffs were due to come into effect, the US government announced its decision to postpone imposing tariffs on steel and aluminium imported from the European Union, Canada and Mexico until June 1.

Meanwhile, the Brazilian aluminium industry has opted to bear the 10% tariff on its deliveries to the US without a quota in place, stating that this was “a less harmful alternative for its interests,” according to a joint statement from Brazil’s Foreign Trade and Foreign Relations ministries.

The decision came after the US halted the negotiation process with Brazil’s government on April 26 and gave the country the choice of either accepting restrictive quotas or facing the tariffs, the ministries added.

In contrast, the Brazilian steel industry saw the imposition of a lower volume tariff-free quota as preferable to the 25% tariff established for the sector.

"The Brazilian government regrets that the negotiations were interrupted, and it remains open to building reasonable solutions to both parties,” the ministries said.

The government added that it “expects the USA will not move forward to apply the restrictions, preserving current bilateral trade flows in the steel and aluminium sectors.”

Sources in Brazil’s aluminium industry see little chance of talks being reestablished or a different outcome being achieved.

Given continuing domestic production issues in Brazil, such as Hydro’s Albras smelter operating at 50% capacity, the expectation was for Brazil-origin shipments to the US to decline even before the imposition of the US’ tariffs, industry sources said.

Supply concerns – both domestically and globally, in respect to the US sanctions on Russian aluminium producer UC Rusal – were behind a surge in Brazilian aluminium premiums over the past month.

Metal Bulletin’s delivered São Paulo P1020 premium averaged $381.25 per tonne in April, up from an average of $307.50 per tonne in March and much higher than January’s average of $239 per tonne.

Meanwhile, Metal Bulletin’s cif main Brazilian ports premium averaged $246.88 per tonne in April compared with $192.50 per tonne in March. April’s average was also significantly higher than the $167-per-tonne average recorded in January.