With demand from the auto, aerospace, and other industries on the rise, many U.S. aluminum manufacturers are anticipating a renaissance in the industry. After years of depressed prices stemming from surplus global primary production, capacity rationalizations upstream, and growing demand downstream, have combined to restore a delicate balance. Firms like Alcoa and Novelis are restructuring operations and investing heavily to capitalize on these trends. A new article in Aluminum International Today, however, asks whether they will be the ones to reap the benefits.
The cause of the depressed market was simple—soaring primary aluminum production in China, which now accounts for approximately half of total global output, thanks to generous government support. The solution, though, has been capacity rationalization just about everywhere else. Some major North American producers appear to be all but abandoning their primary operations in pursuit of higher margins in value-added downstream products.
However, manufacturers in China are moving in the same direction, with half of the world’s primary aluminum at their disposal. China is, in fact, a net importer of primary aluminum. An export duty of 15 percent and other industrial policy measures channel this supply at semi-finished downstream products like plates, sheet, and strip, foil, extrusions, and other finished products. U.S. imports of some of these products are on the rise, and some firms are showing signs of pressure from heightened import competition. The Chinese government’s push to upgrade the country’s manufacturing base will likely move the industry into even higher value-added products in search of global market share, especially as Chinese demand continues to soften.
Despite these trends, U.S. trade remedy orders are in place against only one Chinese aluminum product: extrusions. These orders have been remarkably effective in improving the health of U.S. extrusions producers. With measures in place to address unfair trade practices, Chinese extrusions have largely exited the U.S. market, where manufacturers can once again compete on a level playing field. Manufacturers of other aluminum products can look to this experience as evidence of the tools at their disposal to help ensure that they benefit from their investments.