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While the extrusions industry has welcomed trade actions against China, the domestic market has not been supportive of the Section 232 tariffs. (Photo courtesy Aluminum Extruders Council).

Aluminum Extrusions Outlook 2019

Cruisin’ for Extrusions

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The marketplace for aluminum extrusions is expanding, and much of that growth is due to increased use of the versatile product in a variety of automotive applications. The need to lightweight vehicles is the driving force behind this trend, which experts agree will continue for at least the foreseeable future.

According to automotive research firm Ducker Worldwide, the total amount of extruded product, including shapes, tube, rod and bar, will increase from 36 pounds per vehicle in 2015 to about 49 pounds per vehicle in 2020. 

Jeff Henderson, president of the Aluminum Extruders Council, Wauconda, Ill., says that prediction is well on its way to being fully realized. “For several years now, there’s been a great pull from the automotive industry to bring aluminum extrusions into their applications and new models, and it just continues to grow,” he says. “There’s always been a place for extrusions in the automotive space but never to the degree that we’re seeing now.”

Within the automotive segment, manufacturers use extrusions for everything from seat tracks and roof rails to crash management systems and bumpers. Ducker estimates the use of aluminum extrusions for crash management parts is expected to increase 65 percent, or nearly six pounds per vehicle, between 2015 and 2020. Similarly, extruded body-in-white components are expected to increase by 4.4 pounds in that same time frame, while bumper beam penetration will grow from 33 percent in 2015 to 54 percent in 2020.

“There is a real renaissance going on in the auto industry, and it’s been a real boon to extruders in the last five years or so,” Henderson explains. “It’s a trend that we believe will definitely continue in the near term, and we like where we sit in the long term as well.”

And while lightweighting requirements may have precipitated increased demand for aluminum extrusions in the automotive sector, Henderson says growth would not have been possible if not for successful trade actions taken against Chinese imports. Before trade enforcement, Chinese market share was roughly 25 percent of the U.S. extrusions market. Since then, China’s market share has dropped to below 1 percent, according to Henderson.

“There would have been no renaissance in the domestic [extrusions] industry with regards to automotive, because nobody would have invested in the capital equipment and invested in the people they needed to supply the automotive market if China was out there stealing all of our customers,” he says. “It just would not have happened. The Chinese trade case created the atmosphere for us to be able to go to work with the automotive industry and design these new cars.”

But while extruders have benefited from past targeted trade cases, the industry is now suffering under Section 232, which placed a 15 percent tariff on aluminum imports. Because aluminum extrusions require the use of primary aluminum (as well as aluminum scrap) and because domestic aluminum production falls well short of U.S. aluminum demand, Henderson says extruders have no choice but to import primary aluminum.

“We think Section 232 is the wrong policy, and it’s actually had a negative effect on the industry,” he explains. “It is just a tax, pure and simple, and it is adding to our uncompetitiveness, not making American manufacturers more competitive.”

A Service Center’s View

At Eastern Metal Supply, business in 2018 was very strong – a testament to the industry’s healthy demand picture. And despite a slow start to 2019, the Lake Worth, Fla.-based distributor of aluminum extrusions isn’t too concerned.

Greg Weekes, president of Eastern Metal Supply, says business is beginning to pick up just in time for the industry’s busy season. “The first quarter was a little soft, but we’re seeing a little bit of a pickup here in April, which is typical for our business,” he says. “We’re expecting a very good year for 2019. It may not be as robust as last year, but all indications are that things are going to be picking up in the second quarter and third quarter.”

One positive sign, according to Weekes, is continued strong demand from the majority of his company’s primary end markets. “I would say out of our top 10 markets maybe three are flat or down, and all the rest are doing extremely well year over year.”

Henderson is also optimistic that future demand for aluminum extrusions will grow.

“Usage continues to move in the right direction,” he says. “When you look at some of the big discussions we’ve had as a country and how we move forward in a new economy, especially as it pertains to energy, the future looks good. You talk about high-speed rail, the further lightweighting of things, more of the new electrical grid, and a more electric-based economy, as opposed to fossil fuel-based economy, all of those are just stocked full of opportunities for aluminum extrusions.”

Beyond Extrusions – Tariffs and Trade

The Aluminum Association restated its opposition to the Trump administration’s Section 232 trade law during a press roundtable during the association’s spring meeting last month in Charleston, S.C.

Jean-Marc Germain, CEO at aluminum manufacturer Constellium, addressed the media on issues of trade and Chinese overcapacity.  Germain opened his comments by thanking the administration for its efforts to promote and protect the domestic aluminum industry, but said Section 232 is not the answer to the industry’s problems.

“The administration has supported and initiated anti-dumping and countervailing duty cases, which have proven to be extremely effective against unfairly subsidized imports of Chinese aluminum,” Germain said. “Despite the progress of targeted anti-dumping and countervailing duty measures, we cannot point to a similar record of success from the Section 232 tariffs.” 

According to Constellium’s CEO, the tariffs have been ineffective at stopping China’s trade distorting behaviors in the market, while simultaneously raising the cost of domestic aluminum products. Gerain said the U.S. industry is becoming less competitive on the world stage as a result.

Despite Section 232 tariffs and declining domestic demand in China, Chinese primary aluminum capacity grew by nearly 6 percent in 2018. Germain articulated a solution that includes targeted trade enforcement and aggressive negotiations with China on overcapacity.

In the meantime, the Aluminum Association would like to see tariffs on vital trading partners lifted.

“We continue to call for action to resolve structural aluminum overcapacity,” Germain said. “But right now, our other leading priority is the removal of Section 232 tariffs and quotas on our market-economy trading partners, starting with Canada and Mexico.”

Germain also addressed proposals to replace the tariff with quotas, which is another action the Aluminum Association strongly opposes.

“Quotas will make it harder, if not impossible, for US aluminum companies to grow and invest by restraining metal supply,” he said. “Even at full capacity, the U.S. can only produce about one-third of the primary aluminum it needs to meet record and growing demand.”