Trump tariffs and sanctions blamed for aluminium turmoil

Monday, May 14, 2018

  The combination of President Donald Trump’s aluminium tariffs and US sanctions against Rusal, the largest producer outside China, has created more turmoil in the aluminium market than at any time since the collapse of the Soviet Union, an industry leader has said.

  Marco Palmieri, president of Novelis North America, told the Financial Times in an interview: “There are very few times in the aluminium industry in modern times when you have had such big changes.”

  Novelis is one of the largest suppliers of aluminium-rolled products to the automotive and drinks can industries, and Mr Palmieri is a member of the board of the Aluminium Association of North America.

  “We have seen aluminium prices in the past higher than they are today,” he said, “but what we don’t like is the volatility, the uncertainty.”

  US users of the metal, which goes into everything from beer cans to cars and aircraft, were left scrambling to secure supplies after the administration imposed tariffs under Section 232 of the 1962 Trade Expansion Act, which is intended to protect national security.

  The US began collecting a 10 per cent tariff on aluminium imports on March 23 and the sanctions against Russia’s Rusal were announced two weeks later, causing the greatest instability in the market since the early 1990s, Mr Palmieri said. “The fact that the two things happened simultaneously  exacerbated the impact.”

  The metal’s price was rising even before the imposition of tariffs. International aluminium prices shot up 63 per cent from a trough of $1,434 a tonne late in 2015 to $2,331 a tonne last week, exerting pressure on profits for carmakers and other big users. 

  The announcement of tariffs sharply increased the premium over international prices for aluminium delivered to the US Midwest, as assessed by S&P Global Platts. The premium started the year at 9.5 cents per pound and was 22 cents late last week.

  The US is expected to remain a large aluminium importer, although the tariffs prompted Century Aluminum, a US company, to restart mothballed production — the goal of the Trump White House.

  “Even if all primary metal capacity in the US restarts, maximum production would be 2m tonnes a year,” Mr Palmieri said. “And we need more than 5m tonnes a year.”

  Mr Palmieri criticised the White House for its approach to tariffs. “The issue in the aluminium industry is excess capacity in China,” he said. “Anything done to stimulate the aluminium industry in US has to be targeted at China and not?.?.?.?countries that play by the rules.”

  The price of aluminium scrap in the US could fall if US exports of its scrap to China were hurt by tariffs imposed by Beijing, Mr Palmieri said.

  Novelis is considering boosting its use of scrap aluminium in its US production facilities, but Mr Palmieri said that most US exports are too low quality for his company to use.

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