U.S. tariffs on Canada's aluminum industry will raise costs for U.S. manufacturers

Author: Paul Ploumis

June 05,2018 08:29 AM

FinancialPost - On Friday morning, a truck hauled out of a shipping yard at Sotrem-Maltech in Saguenay, Que. packed with specialty aluminum ingots bound for a foundry in the Midwestern United States. There, they were slated to be transformed into complex parts used in the manufacture of U.S. military vehicles, including four-wheel drive trucks and carriers.

It was a typical order for the company, but one that happened to take place less than 24 hours after the United States imposed sweeping tariffs of 10 per cent on Canadian aluminum — all on grounds of national security.

“Nothing much has changed for us, no,” said Patrick Dube, commercial director for Sotrem-Maltech, which also makes aluminum granules for coatings on U.S. aircraft carriers.  “There are very few companies who do what we do and they are all at full capacity. The only change is that it will cost 10 per cent more. And we don’t know who will pay for that, the customers or us.”

Following decades of specialization and a steep decline in U.S. smelting capacity, analysts say the U.S. tariffs are unlikely to deliver a blow to Canadian aluminum producers, who supply 47 per cent of the aluminum consumed in the United States. However, the levies have raised concerns about rising costs for U.S. manufacturers and downstream producers — the foundries and rolling facilities that now account for 97 per cent of employment in the U.S. Industry.

“There’s no way the U.S. is or can be self-sufficient in aluminum,” said John Tumazos a New Jersey based steel and aluminum industry analyst. “That day is gone. The U.S. needs Canadian product there.”

Though the United States consumes 5.5 million tonnes of aluminum each year, its smelters produce just 700,000 tonnes. That shortfall is largely covered by Canada, which ships 2.8 million tonnes of the metal – or 87 per cent of its annual domestic production — from facilities located primarily in Quebec and British Columbia.

Courtesy : www.financialpost.com