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FEATURE: Tariffs, trade policy pose biggest variable for North American aluminum market in 2021: poll

Highlights

Trade policies present either biggest risk or opportunity

Tariffs hit downstream producers with uncertainty

Aluminum prices expected to rise this year

Pittsburgh — US tariffs and trade policy represent the most influential factors affecting the North American aluminum market this year, industry respondents said in an S&P Global Platts poll.

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Out of 47 poll respondents, an 83% majority chose tariffs and trade policy as potentially offering either the greatest risks or opportunities for the domestic aluminum industry in 2021.

Regarding other factors that may have the biggest impact, 8.5% pointed to changing consumer preferences, 6.4% to emerging technologies, and 2.1% to regulatory issues.

The US' 10% tariff on aluminum imports, now enforced under Section 232 and paired with 25% steel tariffs, has been met with mixed reactions since its implementation under former President Donald Trump in 2018.

The tariff has had a particularly negative impact on downstream aluminum producers and users in the US to date, according to Michael Belwood, vice president of government affairs for Arconic.

"Section 232 has created substantial uncertainty for domestic producers, but also for people who import products into the US," Belwood told attendees during the S&P Global Platts Aluminum Virtual Symposium in February.

"Its stated objective was to really protect the primary aluminum production in the US as a way to support national security, but actually what it did for downstream producers like us was raise the cost of our material input which then had to be passed on to our customer base and has been controversial within that customer base."

Platts polled a variety of aluminum industry participants including those representing producers along the supply chain, traders, scrap dealers, consultants and end users.

Industry expects slow tariff changes under Biden

In the same poll, 61.1% of 54 respondents predicted that President Joe Biden will slowly repeal the Section 232 aluminum tariff during his presidency in favor of specific trade deals arranged with individual countries.

The expectation for the phased replacement of the tariff compares with 22.2% of respondents who felt the tariff would be unchanged, 9.3% who said they expected a full repeal of the tariff on only market economy countries and 7.4% who projected the tariff to be removed for all countries.

Julia Mendoza, partner at Morris, Manning & Martin, said Biden may face pressure from establishments such as the World Trade Organization to drop the tariff and reach another solution.

"We don't think President Biden will continue the 232 tariffs and quotas after his team evaluates them, but there is going to have to be a focus on prioritizing actions that help the aluminum industry and its workers in an alternative manner," Mendoza said at the Platts aluminum conference.

The Aluminum Association plans to provide the Biden administration with input for possible changes to the Section 232 tariff program that address imports specifically on a country-by-country basis, association CEO Tom Dobbins said in a recent statement.

"Changes to the program should be considered carefully to allow the market to adjust as a comprehensive trade policy is implemented to support the US aluminum value chain," Dobbins said. "Ultimately, we favor a multilateral approach to encourage market-based economies to keep unfairly traded aluminum out and minimize market distortions."

Considering risks and opportunities, a 73.8% majority of 42 Platts poll respondents projected primary aluminum prices to move up during 2021 while 21.4% expected no substantial change.

The Platts US aluminum Transaction premium was assessed Feb. 19 at 15.7 cents/lb plus London Metal Exchange cash, delivered Midwest. The premium rose from 14.7 cents/lb on Jan. 4, the first assessment of the year.