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Red Metal Report: Copper in the Crosshairs

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The red metals world is now taking its place in the tariff wars. 

Ten high-performance copper-based alloys, including copper bars and rods, copper sheet and strip from 0.15 to 5 millimeters and copper nickel sheet and strip greater than .15 millimeters, have been proposed for ad velorem tariff relief to the USTR by Olin Brass, the domestic manufacturer, fabricator and converter of nonferrous products, including sheet, strip, foil, tube and fabricated components in North America.

According to a letter to Lighthizer, Olin Brass said the copper and copper alloy semi-fabricating sector “is coming under an increasing threat of to its continued existence due to declining domestic commercial markets aggravated by imports that are grabbing an ever-expanding share of these smaller markets.”

The company noted production of copper and copper alloys in the U.S. has declined from more than four billion pounds in 2016 to just over two billion pounds in 2016. “Because one of the major downstream markets for these products is the aircraft industry, it is likely that some of the reduction in domestic production has resulted from the EU’s subsidization of its aircraft industry for which the duties currently under construction are designed to counter,” the letter stated. “Many of the products produced by the industry are necessary to the national defense of the United States.”

The push for 100 percent ad velorem tariffs on the 10 products was challenged by several members of the copper supply chain. In early August, ABC Metals President Dan Kendall joined other industry leaders in testifying against the measure before the office of U.S. Trade Representative Robert Lighthizer. 

Kendall claimed the high-performance, copper-based alloys in the USTR list are critical to U.S. manufacturing in electronics, automotive, aerospace, agribusiness, defense and home appliance industries. According to data from the Bureau of Economic Analysis, these manufacturers represent approximately $1.7 trillion in U.S. output annually. 

In his response, Kendall noted the push for inclusion was made by Olin Brass shortly after the announcement that its parent company, Global Brass and Copper, was being acquired by Germany’s Weiland-Werke AG.  That acquisition was completed in July. 

“ABC and others like us provide access to these metals to downstream manufacturers who produce components for some of the largest companies in the world from Ford and GM to Siemens and Square D. Imposing high tariffs on these metals will cause OEMs to source their components from outside the U.S. to avoid the added costs, resulting in lost customers, lost jobs, plants closing,” Kendall told the USTR. 

“American manufacturers, like ABC are compelled to look globally to access these metals, which possess unique chemistries and mechanical properties. Because of inadequate domestic supply we source these metals in Europe. European mills are able to supply to the rigorous demand of our customers. The proposed increased tariffs on imports from Europe would force ABC to choose between reducing our offerings and losing our customers or becoming beholden to the virtual monopoly being created by Wieland Metals in the U.S. copper alloy industry.”

Kendall believes the possible imposition of the tariffs represent “one of the greatest threats to U.S. manufacturing since 2009.”

His presentation to the USTR includes supporting materials from a number of companies in the copper supply chain, including Eagle Metals, Heyco Metals, KME America and Christy Metals. 

David Klotz, president of the Precision Metalforming Association, also prepared testimony to the USTR opposing the tariffs on behalf of the organization of nearly 800 members. “Tariffs are taxes. Plain and simple. In this global environment, few of our members can easily pass along the increased costs to their customers even if they purchase domestically, as those prices have gone up along with delivery times,” Klotz said. 

“This situation is even worse in the case of copper-based alloys. The U.S. simply does not manufacture these critical inputs to the quality or specifications required by customers. Let me be clear, this is not an issue of price; it is one of availability, safety and necessity,” Klotz said. 

Olin argued the import flow has typically surged, then cut back before the application of trade measures could be taken. “Though it is clear the copper and brass industry is in a less viable state as a result of imports in general, no existing trade remedy appears capable of addressing harm that occurs over decades, and that slowly and silently puts U.S. producers out of business without any apparent recourse.”

The company cites CDA data showing imports now represent 23 percent of total shipments, up from 16.5 percent in 2013.   

Kendall said the result of the tariffs will create a monopolistic situation, with Wieland Metals becoming the sole source for many products that support leading manufacturers in the U.S. “Our firsthand experience has shown that we can expect that within a 6 to 18 months, global OEMs will offshore most of the electronic production that is reliant on raw material under these HTS classifications,” he said. 

A decision on the tariffs is expected this month. 

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