Aluminum ingots are stacked at a depot in Wuxi, in China’s Jiangsu province. PHOTO: ALY SONG/REUTERS
Mar 10, 2016
The U.S. aluminum industry is doubling down on efforts to persuade the Obama administration to challenge China on trade practices that it says violate international rules and are fueling a flood of cheap Chinese aluminum imports.
A group backed by the United Steelworkers union, which includes aluminum workers, and Century Aluminum Co., the second-largest producer of raw aluminum in the U.S., sent a team of researchers to China last year to investigate evidence of government subsidies for aluminum makers, Century says.
The group says it expects to provide evidence showing the Chinese government has been providing billions of dollars in subsidies to some aluminum companies, including access to low-interest loans. It plans to present its findings to U.S. trade officials in the next few months as part of a growing push to take the grievance to the World Trade Organization, which regulates global trade and of which China is a member.
A separate group called the Aluminum Association, backed by aluminum giant Alcoa Inc.,the top raw-aluminum producer in the U.S., has made similar claims. It says it is also lobbying U.S. authorities to seek Chinese government commitments to rein in subsidized production. A spokeswoman for Alcoa says the association “represents our view on this issue.”
Zhu Haiquan, a spokesman for the Chinese embassy in Washington, said he didn’t have details on the aluminum case but that WTO members “should strictly abide by the WTO rules, and use trade remedy measures in a prudent, restrained and rules-compliant way.”
The moves show how U.S. producers are seeking to push back as Chinese aluminum exports, which reached a value of $23.8 billion in 2015 from $6.2 billion a decade ago, hammer rivals around the world.
“We’re convinced the administration gets it,” Century Chief Executive Mike Bless said in an interview.
Industry calls for U.S. government intervention have so far fallen flat. A group of U.S. aluminum companies in October petitioned the U.S. Commerce Department, claiming a big Chinese aluminum manufacturer was engaging in deceptive practices to avoid export duties.
The Commerce Department, which was expected to rule on the claim earlier this year, instead delayed its decision. A bipartisan group of congressional representatives in February sent a letter to the House Ways and Means Committee, which has jurisdiction over certain trade issues, urging the committee to push for a Commerce Department probe into “factors affecting the global competitiveness of the U.S. aluminum industry.”
Separately, Ways and Means in February asked the Commerce Department to investigate the state of the U.S. aluminum industry and the effects of government policies on output in major foreign aluminum-producing countries, such as China.
A spokesman for the Commerce Department declined to comment. A spokesman for Ways and Means didn’t respond to a request for comment.
U.S. aluminum producers have been sharply cutting back their output amid falling prices, which are down more than 10% in the past year on the strengthening dollar and mounting competition from China, which in 2015 accounted for more than 50% of global aluminum production, according to preliminary estimates by the U.S. Geological Survey, up from nearly 25% a decade ago.
By the end of this year, only four aluminum smelters are expected to remain operational in the U.S., down from 23 in 2000, according to CRU Group, a London commodity research firm. That would leave annual U.S. aluminum output at 565,000 metric tons, down from 2.1 million tons five years ago and 3.7 million tons in 2000, CRU says.
The U.S. is the biggest buyer of Chinese aluminum. Overall, imports last year accounted for an estimated 40% of U.S. consumption, compared with 14% in 2010, according to the USGS.
China’s growing global market share and its effect on prices were key factors in leading Alcoa, America’s iconic aluminum maker and the company that invented the modern aluminum industry, to decided to split in two. It plans to spin off more profitable divisions that make aerospace and automotive parts during the second half of 2016.
Meanwhile, production in China has surged, gaining 31% in 2015 from the previous year to 32 million tons, according to USGS estimates.
The torrid growth has come from emerging giants such as Hong Kong-listed China Hongqiao Group Ltd., which in a few short years has emerged as the biggest aluminum producer in the world, surpassing Russian behemoth United Co. Rusal PLC. China Hongqiao, whose billionaire founder Zhang Shiping a decade ago was better known as a maker of jeans and other textiles, says it has production capacity of five million tons, up from two million tons in 2012.
A spokeswoman for China Hongqiao declined to comment.
Source: THE WALL STREET JOURNAL