Trump's aluminium tariff pushes metal's price down in Asia | Eurasia Diary - ednews.net

10 December, Monday


Trump's aluminium tariff pushes metal's price down in Asia

Supply-demand balance eases in region while Americans feel sting of trade war

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The aluminum sector has undergone significant change as the U.S.-triggered trade war shakes global markets, easing Asia's supply-demand balance and sending prices for the metal lower in the region.

U.S. imports of the metal decreased 10% in the January-August period from a year earlier due to sanctions imposed by President Donald Trump, driving U.S. aluminum prices up.

With global production topping 60 million tons per year, aluminum is now the leading nonferrous metal of commerce. Demand for aluminum has been growing in recent years due in part to increased use by automakers competing to produce lighter cars.

The U.S. -- the world's second-largest consumer of the metal after China -- imposed a 10% tariff on aluminum imports from Canada and other suppliers from March till June on the grounds of national security. Moreover, the Trump administration in April slapped sanctions on Russia's aluminum giant Rusal, which accounts for about 10% of global aluminum production.

Although the sanctions were lifted, an official at a Japanese trading house said, "We do business based on the assumption that there is no Russian [aluminum]."

U.S. aluminum imports have continued to slump. According to the U.S. Geological Survey, imports of aluminum materials in the first eight months of 2018 -- excluding scraps -- totaled 3.85 million tons, a year-on-year decrease of 440,000 tons.

Reflecting the shortage, prices in the U.S. have risen considerably. In late October, spot prices for aluminum ingots on an ex-works basis stood at around $2,400 per ton, up roughly 3% from a year earlier.

Aluminum producers are reaping the benefits. Leading U.S. aluminum producer Alcoa logged a 14% year-on-year revenue gain in the July-September quarter. But heavy users of aluminum, such as Coca-Cola, have had to raise prices to cover the increased cost of the metal.

America's sources of aluminum have also changed. Procurement from Canada, America's biggest supplier, decreased 13% to 1.66 million tons, while purchases from the second- and third-largest suppliers -- the United Arab Emirates and Russia -- declined 15% and 40% to 410,000 and 280,000 tons, respectively.

The shortage has forced the U.S. to look for other suppliers. India, for example, moved up from eighth place to fifth, boosting its exports by more than 50% to 160,000 tons. Although France and Japan are still only minor suppliers, they posted gains of 70% and 40%, respectively.

The U.S. appears to be increasing imports of finished and half-finished products with high added-value items from countries not subject to tariffs.

In Asia, meanwhile, the supply-demand balance for aluminum ingots has loosened, pushing prices down in Japan. Premiums for aluminum shipments to Japan in the October-December period dropped 22% from the previous quarter to a one-year low. In late October, spot prices for aluminum ingots came to around $2,050 per ton, nearly 10% lower than in the U.S.

Aluminum tends to remain mainly in Asia's emerging economies as a result of the U.S.-China trade war. With price competitiveness reinforced by depreciating currencies, exporters are turning to Japan, which is geographically closer than the U.S. and has solid demand for aluminum from makers of autos and home appliances.

Japan's imports of aluminum ingots in the January-September period was nearly unchanged from a year earlier, according to data released by the Finance Ministry. While imports from Russia slipped 20%, those from India and Indonesia soared more than twofold and 1.5 times, respectively.

Aluminum exports from China to the U.S. decreased due to the trade war but those to other markets increased. In the first 10 months of 2018, China boosted exports of aluminum materials by 20% thanks partly to the yuan's depreciation.

 

NIKKEI Asian Review

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