This morning in metals news, Bosnia’s only aluminum smelter is closing, President Donald Trump comments on U.S.-China trade talks and the United States Trade Representative (USTR) is pursuing competition-related concerns with respect to the U.S.-Korea Free Trade Agreement (KORUS).
According to the report, the closure could impact a total of 10,000 jobs.
Trump Criticizes China on Agriculture
With U.S.-China trade talks underway again this week, Trump commented on Twitter this morning on the proceedings to say China is “letting us down” with respect to promises to purchase U.S. agricultural goods.
Trump and Chinese President Xi Jinping recently met during the G20 Summit in Japan, on the heels of the two countries’ trading of tariffs during a rocky May.
“The United States is calling for actions by Korea to improve procedures in competition hearings held by the Korea Fair Trade Commission (KFTC),” the USTR said in a release. “These shortcomings have denied U.S. parties certain rights, including the opportunity to review and rebut the evidence against them.”
The Aluminum Monthly Metals Index (MMI) held steady at 86 this month based on mixed price movements. While prices in China dropped in the 1% to 2% range, all other prices in the Aluminum MMI basket rose slightly.
LME aluminum prices continued to fall into June, but recovered toward the end of the month. LME prices are currently moving sideways at around $1,800/mt, with the present price slightly higher at $1,807/mt.
Source: MetalMiner analysis of London Metal Exchange (LME) and FastMarkets
Due to lower LME prices, a recent forecast for Indian production projects a slowdown in output growth. Domestic production costs increased by around 25% during the past three to five years, putting break-even costs above the current LME price, which was at $1,777/mt in late June.
According to Reuters, Japanese aluminum premiums increased 3% to $108/ton for Q3 due to tighter aluminum supplies in Asia. Japanese producers initially sought increases to the $115-$120 per ton range. Weakness in the semiconductors market and trade worries capped gains.
Chinese Aluminum Prices
SHFE aluminum prices weakened during the past month, reversing the upward trend evident since around February 2019. Demand appears seasonally weaker at this time; therefore, market observers will want to watch prices carefully during the next month or two to see if the downtrend continues.
Source: MetalMiner analysis of Fastmarkets
In a normal cycle, prices might rise again as China moves away from seasonally hot and rainy weather.
According to a recent Reuters report, China’s aluminum production increased by 2.4% in May compared with May 2018 because of smelter restarts in response to higher prices, which could also contribute to the recent weakness.
Price weakness appears to be temporary. If prices do not increase, this will indicate a weaker-than-expected Chinese economy and/or that output continues to increase, with increased supply capping price gains.
Increased Aluminum Use on the Horizon Across Sectors
Aluminum prices may also receive future support from innovations beyond just the automotive sector, based on the metal’s flexibility and lightweight profile.
The Indian government announced that railway coach cars will transition to aluminum, while older conventional stock will begin a phaseout.
Coca-Cola announced its AQUAFINA® water brand will see an aluminum can package in U.S. food service outlets. The announcement comes as part of the company’s greater move to reduce the use of plastic packaging.
U.S. Aluminum Premiums
The U.S. Midwest Premium finally dropped, but only slightly, to $0.18/lb. With aluminum prices rising in most countries, supply tightness may continue to support the premium. The U.S. Midwest Premium still remains stubbornly high since the the U.S. removed its aluminum tariffs on Canadian and Mexican aluminum in May.
What This Means for Industrial Buyers
Price signals were mixed this month, with weaker Chinese prices contrasting with higher prices in the rest of the world. Global production increased, but not enough to offset overall tightness in terms of supply.
Chinese prices dropped again this month, in the range of 1-2%. The Chinese primary cash price dropped 1.6% to $2,013/mt, while Chinese aluminum scrap fell 1.7% to $1,835/mt. Billet and bar prices dropped by 1.6% and 1.5%, respectively, to $2,080/mt and $2,177/mt.
This month, European prices increased. European commercial 1050 sheet increased by 2.3% to $2,553/mt, while the 5083 plate price increased by 2% to $3,011/mt.
Korean commercial 1050 sheet, 5052 coil premium over 1050, and 1050 all increased by around 2% to $3.1, $3.14 and $3.27 per kilogram, respectively.
India’s primary cash price increased 1% to $2.09 per kilogram.
By region, China led the way with 3.09 million metric tons produced, about flat compared with May 2018 production.
Elsewhere, Asian production ex-China reached 374,000 metric tons. Production in Gulf Cooperation Council (GCC) countries reached 464,000 metric tons.
In North America, production reached 326,000 tons, while South American production hit 86,000 metric tons.
Production in western Europe reached 293,000 metric tons, while production in east and central Europe reached 353,000 metric tons.
Production in Africa totaled 142,000 metric tons, while Oceania’s production reached 163,000 metric tons.
As for prices, LME aluminum has been trending downward since March.
The LME aluminum price reached a 2019 high of $1,922 per ton March 20. In the ensuing three months, however, the price has been sliding, hitting $1,764.50 per ton June 24.
LME aluminum price in 2019. Source: LME
U.S., Canada Aluminum Demand and Production
According to the Aluminum Association’s monthly Aluminum Situation report, aluminum demand in the U.S. and Canada increased an estimated 0.4% over the first four months of the year.
Demand reached an estimated 9,547 million pounds for the year through April, according to the Aluminum Association.
Demand for semi-fabricated products reached 6,914 million pounds, marking a 2.6% increase, while apparent consumption in domestic markets reached an estimated 8,505 million pounds, marking a 1.8% increase on a year-over-year basis.
In terms of production, the Aluminum Association reported primary production in the U.S. and Canada reached an annual rate of 4.01 million tons in May, marking a 0.4% decline from the April rate.
Scrap Recovery Drops 6.4% in Q1
In other aluminum news, U.S. recovery of aluminum and aluminum alloys (i.e., scrap) fell 6.4% in Q1 2019 compared with Q1 2018.
The Aluminum Situation report cites data from the U.S. Geological Survey (USGS), which said the U.S. aluminum industry purchased 1,882 million pounds of aluminum scrap in Q1 2019.
Quite a bit has happened since late November, when the leaders of the U.S., Canada and Mexico signed the United States-Mexico-Canada Agreement (USMCA), the intended successor to the North American Free Trade Agreement (NAFTA) and sometimes dubbed “NAFTA 2.0.”
More recently, President Donald Trump threatened to impose an escalating tariff, beginning at 5%, on all imports from Mexico as of June 10 if the countries could not reach an agreement on immigration enforcement. Days before the deadline, the U.S. announced it would back away from the tariffs amid a deal reached with Mexico.
The U.S. also recently lifted its Section 232 steel and aluminum tariffs with respect to imports from Canada and Mexico, one high-profile sticking point in the USMCA approval process.
The legislatures of all three countries must ratify the USMCA before it can go into effect; as such, the deal has been in a sort of limbo since the countries’ executive leaders signed the deal during the G20 Summit in Buenos Aires.
Until recently, none of the countries’ legislatures had approved the USMCA. That changed this week, however, as the Mexican Senate became the first to ratify the USMCA.
In a press conference Thursday, Mexican President Andrés Manuel López Obrador lauded the USMCA’s passage, saying the approval conveys confidence to national and foreign investors and is good for the Mexican economy.
In the U.S., President Donald Trump in public statements has continued to put pressure on the Democrat-majority House of Representatives to pass the USMCA.
“The USMCA is the strongest and most advanced trade agreement ever negotiated,” USTR Robert Lighthizer said in a prepared statement. “It is good for the United States, Mexico, and Canada in a way that truly benefits our workers, farmers, and businesses. The USMCA’s ratification by Mexico is a crucial step forward, and I congratulate President López Obrador and the Mexican Senate on this historic achievement.”
In his opening statement during a Senate Finance Committee hearing Tuesday, Lighthizer called the USMCA the “gold standard.”
“It is the gold standard for rules on the digital economy, financial services, intellectual property, etc.,” he said. “It will help stop the outflow of manufacturing jobs and return many to the United States. Its labor and environmental provisions are the most far-reaching ever in a trade agreement. The agricultural chapter will lead to increased market access and eliminate unfair trading practices by our trading partners.”
Among other clauses, the USMCA includes language on labor practices (aimed particularly at lifting labor conditions in Mexico), automotive regional content rules (increasing to 75%, up from 62.5% under NAFTA) and activities of or dealings with state-owned enterprises.
“The president campaigned on ripping up existing trade deals, but the new NAFTA sure resembles the old one,” Wyden said. “That said, there are areas of meaningful progress. It goes further than before on digital trade and state owned enterprises. It takes a modernized approach to customs and duty-evasion. I commend Ambassador Lighthizer for obtaining some strong outcomes in the labor and environment chapters.
“But particularly when it comes to enforcement, there’s some hard work left to be done. Commitments from other countries aren’t any good if there’s no way of holding those countries to them. The new NAFTA retains a weak enforcement system from the old NAFTA, which was too easy on trade cheats. That’s a bad deal for American workers, particularly the enforcement of labor obligations.”
Senate Finance Committee Chairman Chuck Grassley (R-Iowa), meanwhile, touted the USMCA’s potential positive impact for U.S. farmers.
“American farmers, workers and businesses stand to benefit greatly from USMCA,” Grassley said. “More market access for agriculture, new commitments in critical areas such as customs, digital trade, intellectual property, labor, environment, currency, and the lowering of non-tariff barriers will translate into higher wages, greater productivity, and more jobs.
“In fact, the U.S. International Trade Commission’s economic analysis found that USMCA will create 176,000 new American jobs. We shouldn’t squander this opportunity to update NAFTA, which is now a quarter century old but has been critical to the success of American farmers and businesses.”
So when the United States removed tariffs on imported steel and aluminum from Canada and Mexico last month, you would have expected the resulting flood of lower-priced aluminum would have driven down the Midwest Premium.
No such luck.
Despite a minor blip, it has remained stubbornly elevated at over USD $400 per ton, raising howls of protest from consumers (particularly in the beverage can market).
But before we accuse primary mills of gouging the market, let’s consider some points made by Andy Home in a Reuters article this week.
First, some context supporting the consumers’ position. Canada accounted for some 51% of aluminum supply to the U.S. market in 2018, with Australia, Argentina (who were exempted from the start) and now Mexico making up another 8%, so that nearly 60% of supply is now duty-exempt.
Yet prices have not really shifted despite jumping from $0.10/lb before the tariffs were announced to over $0.22/lb now – well above the 10% (about $0.08-$0.09/lb) that could reasonably be attributed to the tariff.
That raises the question as to what is really going on: if elevated Midwest Premiums are not really reflecting the 232 10% import tariff as many have maintained, then why do they remain elevated? Does their persistence after the tariff removal mean they may be a long-term feature of the market?
Technically the Midwest Premium has generally been explained as the cost of delivery to a U.S. consumer, largely reflecting haulage costs.
But while it is a reflection of that, it is also much more, Home suggests.
The CME contract traded volumes equivalent to almost 2.5 million tons last year, not just from trade hedging but as a market in its own right. The U.S. market remains incredibly tight. Prices aside, the loss of some 350,000 tons of supply from the Becancour smelter in Canada due to a lockout has not even begun to be replaced by domestic U.S. restarts amounting to only some 90,000 tons.
The market has continued to grow, but supply is constrained – surely that should be reflected in the LME price, you may ask?
Yes, in a fully functioning market it should be. The U.S. isn’t a market isolated from the rest of the world — so what are premiums doing elsewhere?
Rotterdam P1020 duty-unpaid premiums rose to about U.S. $100 per metric ton this month, up from $90-$95 per metric ton late last month. However, duty-paid premiums in less-traded and lower-volume Mediterranean markets, like Spain, eased slightly to U.S. $350-$360 per metric ton from a shade higher last month (not far off Midwest Premium levels, according to AluminiumInsider).
Premiums in South America are even higher, reaching U.S. $500 per ton in Brazil. The premiums are not reflecting the scarcity of metal, per se, so much as the scarcity of metal in a particular location.
But if some justification for the premium can be made, what about the elevated prices being paid by consumers despite a declining LME? Home has some thoughts for us on that, pointing to the revenue earned by suppliers in this elevated market, noting the U.S. government collected only around $50 million in tariffs.
Some of the difference, an estimated $27 million, went to U.S. primary aluminum smelters. The bigger part, $173 million, went to U.S. rolling mills. The latter, according to the article, have been pricing their can stock to include the 10% tariff, even though primary metal only accounts for around 30% of the input (the rest is scrap).
The beverage market is far from alone in this. For those consumers who do not break down the raw material, delivery premium and value-add elements of their pricing, mills have managed to push through price increases in excess of 10% on the back of less than 10% cost increases.
What they do about it in the face of a still tight market for many grades is tough, but breaking out base metal, premium and gaining as much transparency as possible into the value-add is a big first step. It provides data for negotiation and a structure for analyzing price changes with greater power in the hands of the buyer.
In a difficult market, consumers need all the tools they can lay their hands on.
This month the Aluminum Monthly Metals Index (MMI) decreased, with weakness coming from all the prices tracked globally. The index value dropped back two points to 86, back to February levels after holding at 88 for three months.
LME aluminum prices occasionally spiked in May. Prices showed some sideways price movement, yet continued to trend down overall. In early June, the closing price hit a new low for the year at $1,773/mt.
Source: MetalMiner analysis of FastMarkets
Source: MetalMiner analysis of FastMarkets
Looking at the past six months on the chart above, it’s a little easier to see that prices recently also dropped below January 2019 levels, signaling further price weakness could be on the horizon should relevant industries continue to slow at major growth engine points.
Aluminum Supply Deficit Forecast for 2019
According to a recent investor presentation prepared by Alcoa, the primary aluminum deficit will be between 1.5 million and 1.9 million metric tons. The Chinese market will remain supplied or slightly in surplus at 0.2 million mt of overage, with the deficit projected for the world ex-China.
Global inventory days continue to trend downward overall. After topping out at 119 days in 2009, they now hold at a projected 59 days of global consumption for the 2019 (down from a 70-day average last year).
Source: MetalMiner analysis of FastMarkets data
In the chart above we can see LME-held aluminum stocks have oscillated just above 1 million metric tons for roughly a year and a half. LME worldwide stocks measured at roughly 1.1 million metric tons in early June. These levels are drastically lower than stocks held between 2009-2015.
Automotive Innovation Continues to Tighten Aluminum Supplies
The automotive pull on aluminum supplies will continue to impact aluminum prices over the longer term. This impact will continue to increase as more automotive companies innovate with the metal and push for lighter overall vehicle weight.
Novelis, the producer of aluminum automotive body sheet for the popular Toyota RAV4 and NIO ES6, recently announced its first aluminum sheet battery enclosure solution, which it calls “a more sustainable mobility solution in battery electric vehicles, a market that is expected to more than triple globally by 2025,” it said in a recent company statement.
An industry chief from Constellium Bowling Green, the company’s automotive unit, cites the automotive market as the biggest growth opportunity for the aluminum industry in years. The company expects demand for automotive aluminum to hit 1.4 million tons annually by 2025.
The company also features aluminum battery enclosures for vehicles and makes crash management systems, side impact beams, decorative trims and emblems in aluminum, according to the company’s website. According to the company balance sheet, revenue from sales of packaging rolled and automotive rolled products increased by 12% in Q1 2019 compared with Q1 2018.
Braidy Industries‘ Atlas Mill, the first greenfield aluminum rolling mill in the U.S. in 37 years, according to the company, will open around 2021. According to its company chief, the next five years will be the best in the past five decades. Russian aluminum giant Rusal plans to take ownership of 40% of the project, but the deal presently faces congressional scrutiny.
On the other hand, some automotive lines may never end up making the shift over to aluminum if presented with other options, given the costs of white body production line conversion.
Nippon Steel, of Japan, understands the business threat and opportunity, responding recently by developing a new lightweight car body of steel with a 30% weight reduction.
In Japan, benchmark aluminum premiums increased to $115-$120 mt for Q3. According to press reports, the 10-14% increase follow tighter supply.
Chinese Aluminum Prices
SHFE aluminum prices continued to maintain upward momentum overall so far this year.
Source: MetalMiner analysis of Fastmarkets
Constrained capacity growth could support prices.
On the other hand, some capacity expansion plans for primary ingot are being reported independently by region, according to press reports. This includes the Guangxi Zhuang Autonomous Region’s plan to boost production of aluminum to 4.8 million metric tons by 2025, from the present annual amount of around 2.25 million metric tons in 2018 and an estimated 2.6 million tons for 2019, according to its Ministry of Industry and Information Technology.
Shortage of scrap material also constrains China’s domestic production due to China’s tightening of its scrap import policy.
U.S. Aluminum Premiums
The U.S. Midwest Premium finally dropped slightly but still rounded to $0.19/lb in early June.
The higher premium indicates supply shortfalls remain.
As indicated by a recent Reuters report, suppliers may be holding the premium higher to cover the 10% import costs on materials. With Canadian and Mexican tariffs now removed, we might expect some drop in the premium.
Source: MetalMiner data from MetalMiner IndX(™)
However, looking at the chart above, the premium already increased a great deal in the year prior to the implementation of the tariffs, with the premium then sticking at that higher level.
U.S. imports of aluminum totaled $24.3 billion dollars, a drastic increase of 41.7% since 2014. Import growth leveled off after 2017, with domestic production already largely shut down due to poor margins.
What This Means for Industrial Buyers
With industrial metal markets still down, including aluminum, on an uncertain economic outlook, and as the U.S. Midwest Premium remains high, buying organizations need to watch the market carefully.
Chinese aluminum prices dropped in the 1.7% to 3% range. Chinese aluminum scrap dropped 1.7% to $1,868/mt, while the primary cash price dropped 3% to $2,042/mt. Billet and bar prices decreased by 2.5% to $2,113/mt and $2,210/mt, respectively.
European prices showed the largest decrease in the index, with commercial 1050 sheet prices down 4.6% to $2,497/mt, while 5083 plate dropped 4.4% to $2,953/mt.
India’s primary cash price dropped 3.7% to $2.07/kilogram.
Other price drops in the index registered at less than 2%, including the LME primary 3-month aluminum price hitting $1789/mt following last month’s larger drop of 5%.
This morning in metals news, Australian Prime Minister Scott Morrison said the country’s aluminum exports to the U.S. are fair, China’s Baowu Steel is acquiring a majority stake in rival Magang and the USTR announced an extension related to duties imposed on Chinese goods.
Australian Prime Minister Scott Morrison said his country is sticking to its deal with the U.S. over aluminum exports, Reuters reported. The assurance comes on the heels of a report by The New York Times stating President Donald Trump considered imposing new tariffs on Australia.
Australia received exemptions from the U.S.’s Section 232 steel and aluminum tariffs imposed last year.
Baowu to Buy Majority Stake in Rival
Chinese steel giant Baowu Steel Group is buying a majority stake in rival steelmaker Magang Group Holding Co Ltd, Reuters reported.
Baowu ranked as the world’s second-largest steelmaker in 2017, according to World Steel Association data cited in the report.
Section 301 Notice
The United States Trade Representative released a notice Friday that it would release a notice on the Federal Register related to an extension for the time Chinese goods have to enter the U.S. before they are subject to a tariff rate increase (from 10% to 25%).
“Covered products that were exported from China to the United States prior to May 10, 2019 will remain subject to an additional 10 percent tariff if they enter into the U.S. before June 15, 2019, the USTR said in the release. “Originally, the deadline to enter the U.S. before the goods would be subject to an additional 25 percent tariff was June 1, 2019.
The restart is a boost for Hydro, whose Brazilian operations, which form bauxite for primary aluminum, have had a slow go of things for the last year. The firm has been forced to run its 6.3 million ton refinery at half its normal capacity following a 2018 dam tailings spillage.
The Financial Times reports production at Alunorte would hit 75-85% of its 6.3 million ton capacity within two months, adding some 2 million tons per annum to the market.
“Production at Hydro’s Paragominas bauxite mine will be increased in line with the ramp-up speed at Alunorte,” the company is quoted as saying. “A decision to increase production at Hydro’s part-owned Albras primary aluminium plant is also expected shortly.”
Alumina prices had been supported by Alunorte’s slowdown and further buoyed by environmental pressure on refineries in China. However, this month authorities ordered the closure of a major refinery in Shanxi province following spillage of red mud waste tailings.
But overall, China’s exports have been at a record high and new alumina refineries are coming on stream.
AluminiumInsider reports Emirates Global Aluminium’s Al Taweelah refinery will, at full capacity, produce 2 million tons per year, with output for 2019 expected to be around 0.7 million tons.
Other projects expected to restart or increase production in 2019 include: the Alpart Alumina refinery in Jamaica, India Vedanta’s Lanjigarh refinery and Friguia refinery in Guinea, the article notes.
Global alumina production (excluding China) is expected to increase by nearly 4 million tons this year compared to 2018, with further capacity coming on stream in 2020. All this new supply will undermine price support for spot alumina and, in turn, the primary aluminum price.
Many aluminum smelters caught between relatively high spot alumina prices and an already weak aluminum price have had their margins squeezed.
After fielding hundreds of calls from metal-buying organizations this past year, we here at MetalMiner can definitely say that metal-buying organizations have felt “tariff pain.”
But at the same time — and there is a big but — many companies mitigated much, if not all, of that price risk by deploying effective sourcing strategies.
The recent press attention given to the alleged “harmful effects” of Section 232 tariffs on aluminum and steel on consumers and businesses appears to be ill-informed.
Before we dive into the details, let’s set the record straight on where steel and aluminum prices appear today, where they were when tariffs went into effect and where they were before tariffs.
Let’s start with hot-rolled coil (HRC):
Source: MetalMiner IndX(SM)
Wait a Second, Rewind…
Two points if you said “wow, it looks like steel prices reached similar highs in 2011.”
To be fair, tariffs did lift steel prices in 2018 to 10-year highs, but prices have declined steadily since last July (four months after tariffs went into effect).
Today’s price levels now appear within the same range in which they traded back in 2011-2015. It’s hard to see how the consumer faces a hefty bill for HRC prices due to tariffs now or for any prior extended length of time.
A similar price dynamic applies to cold-rolled coil (CRC), with a little twist:
The tariffs had remained in place since June 1, 2018, when temporary exemptions for Canada, Mexico and the E.U. were allowed to expire.
Trade officials from the three countries had expressed optimism earlier this week that a deal was near to remove the 25% steel tariff and 10% aluminum tariff.
The move marks a major step toward approval of the United States-Mexico-Canada Agreement (USMCA), meant as the successor to NAFTA.
“I’m pleased to announce that we’ve just reached an agreement with Canada and Mexico and we’ll be selling our products into those countries without the imposition of tariffs, or major tariffs,” Trump told the National Association of Realtors, as reported by USA Today. “Big difference.”
President Donald Trump, Canadian Prime Minister Justin Trudeau and then-Mexican President Enrique Peña Nieto signed the USMCA during the G20 Summit in Buenos Aires late last year. However the three countries’ legislatures must ratify the deal before it can go into effect.
As such, both Mexico and Canada in recent months have indicated that they would be unlikely to approve a deal without removal of the tariffs. Likewise, members of the U.S. Congress, both Republicans and Democrats, also indicated a deal would not be approved unless the tariffs are removed vis-a-vis imports of steel and aluminum from Canada and Mexico.
U.S. Rep. Kevin Brady, the top Republican on the House Ways and Means Committee, lauded the move.
“Canada and Mexico are strong allies and have taken significant steps to assure that trade-distorting and subsidized steel and aluminum from third countries will not surge into the U.S. market,” Brady said.
“With this crucial issue resolved, now is the time for Congress to advance USMCA – delay means the United States continues to lose out on more jobs, more customers for Made-in-America goods, and a stronger economy. Congress should take up this updated and modernized agreement, which will produce strong wins for America.”
David MacNaughton, Canada’s ambassador to the U.S., hailed the agreement to remove the tariffs.
“This is a victory for both our countries and our highly integrated steel and aluminum industries,” he said in a tweet Friday.
According to a joint statement issued by Canada and the United States, in addition to removal of the tariffs the countries will implement measures to “prevent the importation of aluminum and steel that is unfairly subsidized and/or sold at dumped prices” and “prevent the transshipment of aluminum and steel made outside of Canada or the United States to the other country.”
The joint statement also addresses situations in which imports levels surge.: “In the event that imports of aluminum or steel products surge meaningfully beyond historic volumes of trade over a period of time, with consideration of market share, the importing country may request consultations with the exporting country. After such consultations, the importing party may impose duties of 25 percent for steel and 10 percent for aluminum in respect to the individual product(s) where the surge took place (on the basis of the individual product categories set forth in the attached chart). If the importing party takes such action, the exporting country agrees to retaliate only in the affected sector (i.e., aluminum and aluminum-containing products or steel).”
Canada will also rescind retaliatory tariffs on U.S. products imposed last summer. In addition to a variety of steel and aluminum products, the list of items targeted for retaliatory duties included coffee, yogurt and orange juice.
From the Analysts: Price Impacts of Removal of Section 232 Steel and Aluminum Tariffs for Canada and Mexico
With the removal of tariffs on imports of aluminum from Canada and Mexico, announced today by the U.S. government, MetalMiner anticipates the aluminum U.S. Midwest Premium may finally drop from the current level of around $0.19 per pound due to the easing of restrictions on the flow of prime material cross-border.
Source: MetalMiner data from MetalMiner IndX(™)
As of now, the LME aluminum price does not appear to show any impact from the news, with the price still sitting close to yesterday’s closing value.
Given the lack of major producers of semi-finished materials in both Mexico and Canada, MetalMiner does not anticipate a flood of materials to hit the U.S. market; therefore, buying organizations can continue to expect tightness for semi-finished aluminum commercial grade sheet and coil. Buying organizations will likely not see large price drops for semi-finished sheet and coil products.
On the other hand, given that the 25% tariff on steel effectively deterred imports of that metal to the U.S., MetalMiner does expect to see an impact on steel prices as imports of steel increase.
Canada serves as the largest exporter of flat rolled steel products, as well as long products, with Mexico taking the No. 3 position. For tubular products, Canada and Mexico take the No. 2 and 3 positions. For stainless steel, Mexico serves as the fourth-largest exporter to the U.S. and Canada does not export stainless to the U.S. in a major way.