Since the US Section 232 tariffs have taken effect, some aluminium manufacturers have faced extra financial burdens as a result of those increased costs - and are stretching their credit lines as a result.
Some of the most significant impacts have been felt by small and medium-sized manufacturing firms and the entrepreneurs who run them, according to Sunwest Bank.
“In many cases, the cost of importing aluminium foil [a major component for many manufacturers] has at least doubled in the past 90 days,” Carson Lappetito, president of Sunwest, said in a statement. In addition to the 232 tariffs, Lappetito also cited the anti-dumping and countervailing duties set by the US Commerce Department against aluminium foil imports from China for driving costs higher.
The bank has introduced a "tariff line of credit" to assist certain manufacturers with these strenuous expenses.
American Metal Market assessed the US Midwest P1020 premium at 20.75-21.25 cents per lb on Tuesday August 28. That assessment averaged 19.88-20.52 cents per lb in July, compared with an average 17.77-18.57 cents per lb in March - when the tariffs were first announced.
“In a rising aluminium price environment, cash can become tied up in working capital. For companies in need of cash, Sunwest Bank’s line of credit could be of use,” Jeremy Kliewer, an equity research analyst in metals and mining for Deutsche Bank, said. “However, additional interest expense and payment terms could further drain capital from users of the line of credit.”
Kliewer noted that companies such as Alcoa, Constellium, Kaiser, Reliance Steel & Aluminum and Ryerson usually pass the underlying metal price on to their clients.
“Thus, each of our companies tends to recognize higher imported metal costs due to Section 232 tariffs, but - after passing these on to their clients - also recognizes higher revenues,” Kliewer said when asked about how the trade duties affected smaller aluminium manufacturers.
Lappetito also argued that many manufacturers are facing a substantial cost increase on common inputs that most had not anticipated, and as a result must pass that cost on to their customer, accept lower margins or change the supply chain.
President Donald Trump also authorized higher Section 232 tariffs on US imports from Turkey, imposing a 20% duty on aluminium and 50% duty on steel, effective August 13.