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Alcoa CEO says trade war is depressing aluminum prices

Louisville, Kentucky — Alcoa CEO Roy Harvey warned Tuesday that the escalating trade war between the US and China is having a depressing effect on global aluminum prices and could hurt the broader aluminum industry.

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"We just think tariffs don't make any sense," Harvey told the Bank of America Merrill Lynch Global Metals, Mining and Steel Conference in Barcelona, Spain.

"Quotas are almost unworkable. All of this uncertainty no doubt is having an effect on aluminum pricing. It's having an effect on the broader industry," he added. "For us, global growth is the right thing."

Harvey noted that aluminum prices have dipped this year to about $1,800/mt on the London Metal Exchange, although they were about $25 higher on Tuesday.

Pittsburgh-based Alcoa, trying to wrap up labor negotiations in the US with the United Steelworkers union before Wednesday's scheduled contract expiration, admits it has benefited somewhat financially from the Trump administration's imposition last year of the Section 232 tariffs on China and several other countries.

According to William Oplinger, Alcoa executive vice president and chief financial officer, the company is benefiting to the tune of about $100 million annually from the tariffs.

Harvey said, nevertheless, that "while we enjoy the benefits and have a good financial outcome, we're concerned about sheltering higher-cost capacity as China continues to grow its semi-fabricated and fabricated footprint." That, in turn, is having a negative impact on US producers, he added.

Harvey said Alcoa would like for its Canadian-produced metal to be shipped into the US without any tariffs. Alcoa operates several metal facilities in Canada, including three aluminum smelters in Quebec.

Turning to other areas, Harvey said aluminum demand growth remains strong globally with the metal remaining in deficit this year.

"In the immediate term, there certainly is some pressure on demand. I think we will see improvements. As we look forward, I think we will see China continue its trend of demand growth."

-- Bob Matyi, newsdesk@spglobal.com

-- Edited by Nick Jonson, newsdesk@spglobal.com