Column: U.S. anti-dumping duties escalate aluminium trade friction

    Trade barriers in the aluminium semi-manufactured products (semis) sector have proliferated over the last few years but this marks a major escalation.

    While earlier U.S. duties targeted low-priced Chinese imports, the latest move encompasses many of the country’s top product suppliers, including South Korea, Germany and Turkey.

    Imports from these countries have been rising as their own markets are penetrated by diverted Chinese product flows.

    The European Union is now fast building its own aluminium trade wall in the form of preliminary anti-dumping duties on Chinese extruded products.

    This is classic “whack-a-mole” territory as governments try to stem a globally fluid products market. With Chinese exports rising again, more duties will follow unless Western nations find a way of tackling China head-on about its massive exports.

    BUILDING THE ALUMINIUM WALL

    Alloy sheet is a flat-rolled product with a multitude of uses from building facades to truck trailer bodies to street signs and the United States imports a lot of it.

    Imports of sheet, plate and strip were 1.3 million tonnes in 2019, representing about 62% of total aluminium product imports that year, according to figures from the U.S. Census Bureau.

    Volumes shrunk sharply to 836,000 tonnes last year. That was of course in part a reflection of broader COVID-19 disruption to the U.S. manufacturing sector.

    But total semis imports last year were down by 20%, while domestic shipments, a proxy for end-use demand, were down by “only” 13% through November, according to the Aluminum Association.

    The non-market part of the import drop reflects the imposition of preliminary duties on the 18 supplier countries in October last year. These charges, remember, are over and above the 10% aluminium tariff imposed under Section 232 of national security provisions.

    The new duties hit seven of last year’s top 10 product suppliers to the U.S. market and imports from all seven fell year-on-year, a taste of what is to come now the duties have been confirmed.

    It’s noticeable that none of the three big suppliers that increased U.S. market share last year were caught up in the trade action.

    Semis imports from Canada grew by 17%, complementing a 10% increase in imports of primary metal.

    Russia registered products volume growth of 13% even as primary metal imports fell, which testifies to producer Rusal’s strategy of increasing sales of value-added products relative to commodity-grade metal.

    Saudi Arabian exports to the U.S. have grown from zero to 84,000 tonnes in the last five years and were up 10% again in 2020, reflecting the ramp-up of the new Ma’aden smelter and rolling mill.

    Just about every other big-volume supplier to the U.S. market is now facing a high duty barrier, up to 242.8% in the case of previous top sheet shipper Germany.

    Oman and Turkey have also been hit since February by preliminary anti-dumping duties on foil imports under a separate Commerce Department investigation.

    EUROPE FOLLOWS SUIT

    Those hit by the new duties are themselves reacting to continued export flows of Chinese aluminium semis.

    The Aluminum Association, which filed the alloy sheet charges, concedes that U.S. duties imposed on Chinese material in 2018 “have prompted Chinese producers to shift exports of common alloy sheet to other foreign markets”.

    This in turn “has resulted in producers in those countries exporting their own production to the United States, the only market in the world where market conditions are not distorted by large volumes of low-priced imports from China”.

    The United States has steadily closed the door on Chinese product imports with anti-dumping duties imposed on extrusions in 2011 and both foil and alloy sheet in 2018.

    Chinese semis imports have fallen from 620,000 tonnes in 2017 to 170,000 tonnes last year.

    Shipments have been heading to Asian and European markets instead and Europe is now building its own aluminium duties wall.

    The European Union imposed preliminary duties of up to 48% on imports of aluminium extrusions from China last October. If confirmed, the block could apply the charges for five years.

    The EU has additional investigations underway on Chinese imports of both foil and flat rolled products, including precisely the type of alloy sheet just targeted by the United States.

    CHINESE EXPORTS JUMP

    The common thread behind these accumulating trade barriers is China. It’s not just the United States and Europe. Australia, Canada and India have all also used duties to stem the flood of Chinese product in recent years.

    Chinese semis exports fell by an unprecedented 10% in 2020 as output was channeled into the country’s industrial recovery and export markets remained suppressed by lockdowns.

    However, that still left 4.6 million tonnes of aluminium product heading overseas.

    Moreover, exports appear to have started accelerating sharply again.

    China exported 842,000 tonnes of aluminium in all forms in the first two months of this year, a 26% jump on the same period of 2020.

    Export flows of primary aluminium and alloy averaged around 20,000 per tonne per month in the fourth quarter of 2020, meaning that the bulk of the extra January-February shipments was in the form of products.

    This year is likely to see a flip of last year’s geographical growth dynamic with China applying the brakes on its stimulus while the rest of the world picks up recovery momentum.

    The potential is there for a new wave of Chinese product exports after two years of relative calm.

    So too is the potential for a further proliferation of trade measures as governments look to protect domestic markets.

    An alternative would be to kick-start a coordinated World Trade Organization case against China, a measure initiated by the Obama administration but left to gather dust by his successor.

    How high aluminium ranks on the Biden administration’s ambitious agenda is uncertain. But lacking a political alternative, the aluminium products market is going to become ever more fractured.