Novelis says aluminium tariffs will increase costs for consumers

Novelis, the biggest buyer of aluminium in the US, says President Donald Trump’s proposed tariffs on the metal don’t “get at the core issue” of Chinese overcapacity and will only increase costs for consumers.

The Atlanta-based company, which makes aluminium for the car and beverage can industries, said it customers are concerned about price inflation following Mr Trump’s announcement that he planned to set a 10 per cent tariff on all imports.

“At the end of the day what we’re doing is increasing the cost to end market consumers and customers,” said Steven Fisher, chief executive of Novelis. “We’re not really getting at the core issue.”

The US should instead work with its trading partners to resolve Chinese aluminium overcapacity and subsidies the industry receives, Mr Fisher said.

“It’s not easy but it’s got to be done by allies and trading partners,” Mr Fisher said.

China’s produces around half of the world’s aluminium, up from 18 per cent in 2003. That has weighed on prices of the lightweight metal over the past few years and led to the closures of US smelters.

But China ships only 10 per cent of its aluminium exports to the US, worth less than 1 per cent of its total primary production of the metal.

Mr Trump’s proposed blanket tariffs on steel and aluminium could add $1bn a year to the costs of aluminium can users, and $3bn to the car industry through higher steel and aluminium prices, Mr Fisher said.

“The majority of this will be passed on to the end consumer, that’s where ultimately people will suffer,” he said. “It’s a significant cost inflation borne by the US consumer.”

 The premium to buy aluminium in the US has jumped over 20 per cent since Trump said last week he would sign an order imposing global tariffs of 25 per cent on steel and 10 per cent on aluminium. It increased by over 60 per cent this year.

Novelis sells its aluminium to car and beverage can makers at the global London Metal Exchange price plus the additional regional premium, which is now at 17 cents a pound in the US.

Novelis is owned by India’s Hindalco Industries. Shares in Hindalco have fallen 17 per cent this year in India.