U.S. Tariffs On Canadian Aluminum Industry Will Increase Costs – For U.S. Manufacturers


“It is impossible that the United States is or can be self-sufficient in aluminum. That day is over. The United States needs Canadian products there ‘

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On Friday morning, a truck pulled out of a shipping yard at Sotrem-Maltech in Saguenay, Quebec. packaged with specialty aluminum ingots destined for a smelter in the Midwestern United States. There they were to be made into complex parts used in the manufacture of US military vehicles, including four-wheel-drive trucks and transporters.

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This was a typical order for the company, but it took place less than 24 hours after the United States imposed a 10% tariff on Canadian aluminum, all for reasons of national security.

“Nothing has changed much for us, no,” said Patrick Dube, commercial director of Sotrem-Maltech, which also manufactures aluminum pellets for coatings on US aircraft carriers. “There are very few companies doing what we do and they are all at full capacity. The only change is that it will cost 10%. 100 more. And we don’t know who will pay for it, the customers or us.

After decades of specialization and a sharp decline in smelting capacity in the United States, analysts say U.S. tariffs are unlikely to deal a blow to Canadian aluminum producers, which supply 47% of the aluminum consumed to the states. -United. However, the levies have raised concerns about rising costs for US manufacturers and downstream producers – smelters and rolling plants which now account for 97 percent of jobs in the US industry.

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“There is no way the United States is or can be self-sufficient in aluminum,” said John Tumazos, New Jersey-based steel and aluminum industry analyst. “That day is over. The United States needs Canadian products there.

Although the United States consumes 5.5 million tonnes of aluminum each year, its smelters produce only 700,000 tonnes. This shortfall is largely covered by Canada, which ships 2.8 million tonnes of metal – or 87% of its annual national production – from facilities located primarily in Quebec and British Columbia.

And although US President Donald Trump has cited tariffs as a way to boost jobs, analysts say decades of downsizing among primary aluminum producers has left the country with limited ability to resuscitate.

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Since 2007, the number of operational smelters in the United States has increased from 18 to 5, according to the American Aluminum Association, which represents most of the American producers. This is partly explained by the high operating cost in US dollars and the difficulties in competing with Quebec producers, who benefit from access to cheap hydroelectricity.

  1. The US levies of 10 percent on aluminum and 25 percent on steel, which are based on national security considerations, have rocked Canadian producers on everything from oil to farm equipment.

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  2. While the federal government has said it is assessing the impact of U.S. tax cuts on the Canadian economy, Prime Minister Justin Trudeau maintains that the economy remains competitive.

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Relaunching unused smelters to full production in the United States would be a costly exercise, one that would take years to accomplish, analysts said. And even then, production would reach a maximum of 2 million tonnes, far from satisfying the country’s appetite for aluminum.

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“They’ve lost so much capacity and reboot that it’s not profitable,” said Benjamin Reitzes, Canadian rates and macro-strategy strategist at Bank of Montreal. “The likely impact will be on prices as much as anything else.”

Concerned about the impact on aluminum costs which have already reached record levels this year, the American Aluminum Association called for quota-free, tariff-free trade with all market economies.

“We’re concerned that we don’t have much of a foundry base in the United States anymore,” said Matt Meenan, senior director of public affairs for the association. “It’s a problem. We’re just not sure tariffs are the way to solve this problem.”

Since the United States has already imposed tariffs on Middle Eastern suppliers and is expected to impose sanctions on Russia’s largest aluminum producer, United Company Rusal, Trump’s tariffs could create a supply shortage. which would paradoxically make Chinese imports more competitive in the United States, the American association warned.

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China has been accused of flooding world markets with excess steel and aluminum and has faced allegations that subsidies to its domestic producers suppressed world prices.

Days after the United States imposed tariffs on Canadian steel and aluminum, raising fears of a trade war, aluminum associations from Europe, the United States, Japan, Brazil and Mexico gathered in Montreal on Monday to establish a “road map” for a Chinese overcapacity forum similar to the one created for the steel industry at the G20 summit in Hangzhou, China, in 2016.

Meanwhile, Sotrem-Maltech’s Dube wonders exactly how the tariffs will be imposed and who will be responsible.

The Quebec government said Monday that it would financially support small aluminum producers if they were reduced by tariffs.

“Does my client pay? Do I? Who collects it? There is no clarity and I’m afraid that without clarity someone will take advantage of it.

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