“As a commodity, aluminium like water seeks the path of least resistance to access the highest net back regional market”- Jean Simard, President and CEO of the Aluminium Association of Canada

The Aluminium Association of Canada (AAC) is a non-profit organisation that brings together Canada’s three primary producers - Alcoa, Aluminerie Alouette, and Rio Tinto. It represents the Canadian primary aluminium industry towards population, public authorities, current and future aluminium users, as well as key environmental and economic stakeholders. Jean Simard, being the President and CEO of the Association, has shared his comprehension on the potential performance of the aluminium market in Canada in 2020, how the LME price movement in the year last can drift the Candian market this year, and also how USMCA trade deal can help in a sustainable development in North American aluminium industry in 2020. Besides, if you want to know how the increase in semi-finished import by the US can impact the domestic market in Canada or how the Canadian government is planning to develop its downstream sector, then stay tuned to this interview.

AlCircle: It is a win for the Canadian aluminium industry that the U.S. tariffs on aluminium and steel have been lifted in 2019 without any quota and restrictions. How do you think it would improve the aluminium industry outlook for Canada in 2020?

Jean Simard: It certainly is a good thing for Canada in a low LME price environment, and although we are already using most of our capacity, it makes Canada the only significant primary producer in the world with unfettered access to the U.S. market.

AlCircle: USMCA trade deal has been signed unleashing a new era for trade relations between the U.S., Canada and Mexico. How do you think it will help in sustainable growth of the North American aluminium industry?

Jean Simard: Sustainable growth will be nurtured by the value created through our integrated North American value chain, as we follow market demand for more efficient use of a responsibly produced metal, such as our Canadian aluminium. But the countries will need to ensure a level playing field for all, avoiding situations of third countries taking undue advantage of this world-class market through transhipment. For example, each USMCA country should be held responsible for avoiding transhipped metal facing safeguard measures from one of the 2 other countries going through its jurisdiction.

AlCircle: What could be the possible implication of not including the aluminium rules of origin for automotive products in the USMCA?

Jean Simard: While aluminium is covered within the ROO, the lack of a “Smelted and Poured” definition enables metal from anywhere in the world to enter the automotive value chain and conform to the ROO, as long as it is processed towards being integrated into parts and components. Therefore, 70% of regional content strictly ensures the domestic processing of metal.

AlCircle: What is your view on China’s aluminium overcapacity and its impact on the global and North American aluminium value chain?

Jean Simard: China encourages the production and export of semi-fabricated and fully-fabricated products through a host of subsidies as reported in the OECD Trade Policy Paper of January 2019. This government assistance has led to a massive increase in semi-fabricated capacity with a 65% utilization rate for flat-rolled products, representing two-thirds of the entire global demand for flat-rolled products. We stand to see more and more of this subsidized high carbon capacity seeping into world markets through downstream products replacing responsibly produced aluminium, without the necessary traceability and consumer awareness.

AlCircle: How do you think, trade monitoring and enforcement can prevent dumping of subsidized aluminium in Canada and the U.S.?

Jean Simard: As a commodity, aluminium like water seeks the path of least resistance to access the highest net back regional market. North America has been that market since the imposition of tariffs. While the U.S. has made safeguard measures its priority over the recent years and has been successful at it and Canada has put in place a robust and transparent aluminium imports monitoring system, Mexico has not put in place monitoring measures to avoid such market disruptive situations, and therefore, becomes the preferred point of entry into the USMCA trading space for dumped subsidized aluminium.

AlCircle: Does increasing semi-finished import by the U.S. impact the primary aluminium industry in Canada?

Jean Simard: As it impacts the U.S. semi-finished product producers, some of which are our clients, it does impact us. Again the problem here is not fairly traded products made out of fairly traded metal, but the substitution of fairly traded metal by subsidized metal conferring an undue advantage to the semi-finished product.

AlCircle: Canada is a global aluminium supplier with 90% of its aluminium shipped outside. How does the Canadian government plan to develop the downstream sector in the country?

Jean Simard: Our national and provincial jurisdictions always act according to WTO rules when shaping policies regarding industrial development across the country. Our natural competitive advantage has always been the vast amounts of low-cost renewable hydropower available both in Quebec and British Columbia, where our smelters are located. Being a large resource-based country with a relatively small population has brought us to focus historically more on world-class low carbon footprint transformation of resources. The Canadian government is supportive of innovation and research and development. For their part, the industry and the Québec government put in place AluQuébec, the aluminium industrial cluster bringing together Quebec’s global aluminium ecosystem with a high priority to increase the downstream processing of the metal. AluQuebec, now a mature organization, is highly successful and has become the centrepiece of the government’s aluminium industrial development strategy now entering its second 3-year cycle.

AlCircle: Brief us on Green Aluminium and how Canada is promoting and supporting its usage.

Jean Simard: The Association and its members contributed early on to the development of the ASI certification process. With emissions at below 2 tonnes of gas against one tonne of aluminium production, we are at the technological threshold of emissions and the lowest level in the world. The next step will be to go from Low CO2 to No CO2 and we are already working on it.

Our responsibly produced low CO2 aluminium is a poster child of Canada’s contribution to the planet’s decarbonization. Our governments along with industry are looking into integrating modern decision-making tools into their procurement process to factor in low CO2 materials and products and get more for their dollar through choices that contribute to GHG reduction and climate change adaptation, we score on both counts!