An Unwelcome Guest at Aluminum's Party
 
By Tim Triplett

The aluminum industry is celebrating record growth, but there's an unwelcome guest at the party. To paraphrase an old metaphor, China is the cigar in aluminum’s punch bowl.

Domestic demand for the versatile, lightweight metal has grown by 36 percent in the past six years and shipments are approaching the record levels of the mid-2000s. North American aluminum producers shipped nearly 26 billion pounds of aluminum in 2015, the most since 2007. Much of the boost has come from the auto sector as carmakers strive to make lighter, more fuel-efficient vehicles. Since 2013, producers have announced domestic plant expansions and planned investments totaling more than $2.6 billion to meet anticipated demand growth in automotive.

And yet, persistent overproduction of aluminum in China has done serious damage to the global market. Since the beginning of 2015, eight U.S.-based aluminum smelters, representing more than 60 percent of U.S. primary aluminum capacity, have curtailed operations or closed their doors. “Oversupply has depressed global markets to the point of making it impossible for many producers, including here in the United States, to operate and remain profitable,” said Heidi Brock, president and CEO of the Aluminum Association, in recent testimony before U.S. trade officials.

According to the Aluminum Association, Chinese aluminum production has grown at an unprecedented rate. In 2000, China produced about 11 percent of the world’s primary aluminum. Today, it produces more than half. Much of this expansion was driven by artificial incentives, subsidies and central planning by the Chinese government. Today, as China’s economy slows and absorbs less of the metal domestically, it has begun exporting its oversupply to the United States. U.S. imports of semi-fabricated aluminum from China grew 181 percent from 2012-2015.

This is not simply free trade at work, contend U.S. suppliers. It hurts the global market in several ways. It encourages illegal trade, trans-shipment and re-melting of fabricated aluminum products. It puts U.S. manufacturing jobs at risk. The U.S. aluminum industry alone supports nearly 678,000 jobs and generates $154 billion in economic impact. And it adds unnecessarily to global greenhouse gas emissions, as carbon-intensive producers in China supplant production by more efficient mills in North America.

To address these issues, the Aluminum Association has called on the U.S. government to use bilateral negotiations with China later this year to discuss subsidies and other policies that encourage overproduction, and to obtain commitments that China will allow antiquated aluminum facilities to close. Meanwhile, the Aluminum Association is among the many who opposed China’s desire for market economy status at the end of 2016.

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Friday, October 20, 2017