At Least One Company Is Cheering Renewed Aluminum Tariff on Canada
By Bob Tita
The Trump administration's decision to reinstate tariffs on
Canadian aluminum is a victory for one small U.S. company that
out-lobbied competitors wary of imposing new barriers on a key
Canada was included in the 10% tariff when it was imposed on
foreign-made aluminum in March 2018. The Trump administration
exempted the country about 14 months ago, as it sought to advance
negotiations on a new trade agreement with Canada and Mexico. The
administration reimposed the duty on Canadian aluminum starting
Chicago-based Century Aluminum Co., which had pushed hard for
the original 10% tariff, lobbied for the restart of duties on
Canada as a way to boost slumping U.S. aluminum prices.
Reinstating the tariff on Canada attracted opposition from more
than a dozen other aluminum companies including Alcoa Corp.,
Novelis Inc. and Arconic Corp. They urged the Trump administration
to instead pressure China to stop what they say are unfair
government subsidies that encourage excess aluminum production and
drag down prices.
The tariff on Canada, those companies say, also won't address
higher electricity costs that put the U.S. at a disadvantage
against other aluminum-producing countries.
The administration said the tariff was reinstated because
Canada's exports of raw aluminum had climbed above the volumes
permitted as a condition for the exemption.
"The surge has intensified in recent months, despite a
contraction in U.S. demand," said a spokesman for the U.S. Trade
The U.S. aluminum industry has been divided over the tariff's
effectiveness at reviving domestic production since the start in
2018. While some idle production capacity at existing smelters
reopened in the aftermath as prices rose, the increase in domestic
prices was short-lived as global aluminum prices fell.
No new plants have been constructed in the U.S. in the past two
years, and another smelter has closed.
"When the tariff is effective again, we're confident the
industry will go back to growing," Century Chief Executive Michael
Bless said in an interview.
Century was spun out of Switzerland-based mining and commodities
conglomerate Glencore PLC in the mid-1990s. Glencore is Century's
largest shareholder, holding 42% of the shares with a subsidiary.
Century has reported losses for nine straight quarters and hasn't
posted an annual profit since 2017, a year before the tariff. The
company has been buffeted by a combination of volatile prices for
alumina feedstock that squeezed its margins and costs for
restarting and expanding lines at its Kentucky smelters.
Century also is engaged in a yearslong standoff with an
electricity supplier to its South Carolina smelter. Century says it
can't operate the plant at more than half capacity without losing
money because of a contract requiring Century to buy expensive
power from a state-owned utility company.
Electricity costs remain a critical hurdle for domestic
producers. Smelters require massive amounts of electricity. Aging
smelters in the U.S. face tough competition from foreign rivals
with access to abundant, cheap power.
Alcoa, the largest U.S.-based aluminum producer, opposed the 10%
duty since its inception as well as the resumption of the tariff on
Canada, where it operates three smelters. Alcoa is idling its
Intalco Works smelter in Ferndale, Wash., this summer, resulting in
the loss of 700 jobs. The company cited uncompetitive costs for its
decision to cease production.
Alcoa has another Washington smelter where production has been
curtailed since 2015. A spokesman for the company said there are no
plans to resume production at idle plants because of the tariff on
The tariffs have been unpopular with U.S. manufacturers that
consider the duties a windfall for the U.S. aluminum industry. The
tariffs drove up costs for beverage cans, car parts, window frames
and other products. The effect of the tariff on the cost of
aluminum had dissipated in recent months, as more duty-free metal
from Canada infiltrated the U.S. aluminum supply, analysts say.
Century has been at odds over the tariff with Alcoa and the
Aluminum Association, the aluminum industry's trade group that
represents producers and manufacturers that have opposed the 10%
tariff, especially for Canada.
"All of our efforts should be geared toward restarting the
economy, not erecting new tariffs against a key ally that U.S.
manufacturers have traded with successfully for decades," said Tom
Dobbins, the association's president.
Century set up its own trade association in 2015 to push for the
10% tariff enacted in 2018. That group evolved into the American
Primary Aluminum Association with startup Magnitude 7 Metals as an
alternative to the Aluminum Association's positions on tariffs. Mr.
Bless has become a key ally in the aluminum industry for the
administration's trade policies.
"The U.S. is competitive as long as the playing field is level,"
Mr. Bless said.
Write to Bob Tita at firstname.lastname@example.org
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August 24, 2020 08:12 ET (12:12 GMT)
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