Two words are dominating the U.S. aluminum industry’s focus as it awaits the Department of Commerce’s Section 232 investigation findings relating to aluminum (and steel) imports: Chinese overcapacity.
Cheap Chinese imports, subsidized by the Chinese government, U.S. producers argue, have adversely affected U.S. producers — leading to job losses and closures of smelters.
Of course, Chinese overcapacity is not a new target — former President Barack Obama filed a complaint to the World Trade Organization in January regarding “artificially cheap loans” propping up Chinese producers and, consequently, undercutting U.S. producers.
Ahead of tomorrow morning’s scheduled Department of Commerce hearing (9 a.m., Eastern Time) on the ongoing Section 232 investigation into aluminum imports, senior-level executives in the U.S. aluminum industry on Wednesday offered a preview of the testimony they will deliver in Washington D.C.
Speaking at the conference Wednesday were: Garney B. Scott, president of Scepter, Inc. and chairman of The Aluminum Association; Marco Palmieri, president of Novelis North America, Heidi Brock, president and CEO, of The Aluminum Association; and John Herrmann, partner at Kelley Drye & Warren.
“The past two or three years have been among the most challenging in the industry’s history,” Scott told reporters. Scott said U.S. producers have competed on the global marketplace for decades, but cannot compete with China and “more than a decade of government subsidies that have led to irrational, non-market incentives for companies to produce metal the world does not need,” adding eight U.S. smelters have closed since 2014 as a result.
The executives were united in their expressed hopes for the outcome of the Section 232 investigation.
“What we want is a negotiated government-to-government agreement that has a concrete and enforceable plan to address Chinese aluminum overcapacity,” Brock said.
Brock added that China is the sole focus of the U.S. aluminum industry’s overcapacity concerns. Furthermore, she said it is important that any trade policy readjustments do not adversely affect countries, like Canada and those in the European Union, who are “playing by the rules.”
“Canada and countries that play by the rules and have not contributed to overcapacity … we want to make sure there are not unintended consequences on the supply chain,” she said.
In a show of solidarity, The Aluminum Association, the Aluminum Association of Canada and European Aluminium released a joint statement Tuesday, urging governments of the G20 to tackle global aluminum overcapacity.
“We acknowledge the issue of Chinese aluminum excess capacity as the root cause of the challenges faced by the aluminium industries in North America and in Europe,” the release said. “Overcapacity encourages unfair trading practices and displacement of domestic production, which cause global imbalances in the aluminium industry and distort international trade flows.”
In terms of aluminum rolling, Palmieri told reporters Chinese capacity amounts to 15 million tons per year, while its consumption is approximately 9 million tons per year, leaving an excess of 6 million tons — greater than the 5 million ton capacity of the U.S. and Canadian markets.
Prepared statements provided and intended to be delivered as testimony during tomorrow’s hearing further drove home the focus on Chinese overcapacity.
Palmieri, the president of Novelis North America, wrote the investigation is “timely and vital to the future of the domestic aluminum industry,” adding that unfairly priced Chinese aluminum has already forced the company to “exit some product lines.”
“We also have reason to believe that Chinese producers will increase production of automotive aluminum capacity within the next few years,” Palmieri writes. “If this increased capacity of aluminum were permitted to be exported to the U.S. at subsidized and unfair prices, Novelis could be forced to slash production, lay off employees, and shutter entire facilities if those facilities are not able to deliver reasonable rates of return.”
Commerce Department Hearing Gives Aluminum Industry Chance to Express Concerns
What ultimately comes out of the investigation remains to be seen (including which policy recommendations Secretary of Commerce Wilbur Ross provides at the investigation’s conclusion will be accepted as given to President Donald Trump, which is in accordance with his authority under Section 232 of the Trade Expansion Act).
Under Section 232, the Secretary of Commerce must conclude the investigation and deliver findings within 270 days of the investigation’s commencement. The investigations into the national-security threats posed by aluminum and steel imports were announced in April.
Whatever happens, U.S. aluminum industry figures across the supply chain will have the chance to make their concerns heard.
By Fouad Egbaria