U.S. aluminium tariffs yet to show impact on major foreign aluminium producers; consumers get the blow

European aluminium industry was reeling under pressure when Trump decided to place strict tariffs on imported steel and aluminium in March. However, a Wall Street Journal report says, European aluminium companies have not yet felt much pain over the tariffs.  Imports still account for majority of aluminium consumed in the U.S., according to the U.S. Geological Survey.

Norway’s Norsk Hydro ASA, one of the world’s largest aluminium producers, with U.S. operating revenue of NOK 13.2 billion in 2017, said they could pass the tariff through to their U.S. customers. According to company spokesperson Halvor Molland the company hasn’t seen much impact from the tariff.

Christian Wellner, executive board member of Germany’s GDA association of aluminium companies said German aluminium companies are not affected by the tariffs.

Alimex GmbH, a Germany-based cast-aluminium product maker reported rise in U.S. sales. The reason according to them is most of its U.S. rivals used the tariffs as an excuse to raise prices followed by non-U.S. companies, sometimes more than offsetting the 10% duty set by the U.S. government.

“Trump has managed to increase the price level in the U.S. locally, and that amid increasing demand. We have managed to increase prices beyond the 10% [levy] for some special products,” said Philip Grothe, chief executive of Alimex.

Aluminium Premiums added to that base aluminium price for market-specific expenses has more than doubled in the U.S. from a year ago to about $433 per metric ton, offsetting the decline in the base prices from the peak in April. According to S&P Global Platts, the U.S. delivery premium is typically among the highest in the world. 

According to the U.S. government, imports of raw aluminium fell 14% from January through the end of August. Aluminum Association reports 13% rise in primary production through September. Still the gap between import and domestic production remains huge with total imports of 4.9 million tonnes in the same period. The U.S. accounts for 9% of the world’s consumption of raw aluminum but just 1% of the production.

Constellium, the Dutch firm, with manufacturing sites in Europe and North America has said that its products remain attractive to U.S. customers despite higher prices.

According to Constellium CEO Jean-Marc Germain,  the U.S. tariff doesn’t address the problem of massive Chinese aluminium overcapacity and unfair pricing, and tariffs have made U.S. aluminium companies less competitive globally.

The total volume of aluminium products exported from the EU to the U.S. rose 8% to 353 thousand tonnes in 2017, with a value of €1.2 billion, according to Eurostat. Exports to the U.S. fell slightly in the second quarter after the tariffs kicked in.

According to GDA, in 2017, about 82,000 tons of high quality aluminium products were exported to the U.S. by Germany, representing just 2% of total German output, and producers had to buy the same despite the tariffs because of the specific demand.

Profits for U.S. aluminium manufacturers have risen from the tariffs, however, higher electricity costs continue to put pressure on restarting of capacity in the country. However, higher aluminium prices and tariffs have encouraged foreign groups to expand their U.S. capacity, bringing investments and jobs.

It was the downstream consumers in the U.S. who were hit maximum by the tariffs.  Alcoa chief Roy Harvey warned that rising costs could encourage more buyers to source metal elsewhere and also encourage more remelting operations.