The Aluminium Association of Canada says the country should be exempt from any tariffs or quotas resulting from the US Section 232 investigation.
Shares of major US aluminum producer Alcoa (NYSE:AA) gained over 1 percent on Tuesday (February 20) after spiking this past Friday (February 16).
The increase came after Friday’s release of reports on the US government’s Section 232 investigations. Recommendations include tariffs or quotas on global imports of steel and aluminum, with those being higher for certain countries, including China.
The Aluminium Association of Canada notes in a Friday release that Alcoa, Alouette, and Rio Tinto (NYSE:RIO,LSE:RIO,ASX:RIO) operate 10 smelters in Canada. The organization believes the country should be exempt from any tariffs or quotas.
Jean Simard, the association’s president, said, “we are confident that working closely with the US administration over the coming weeks and months will help maintain and further the very integrated relationship in our North American industry which has been beneficial to hundreds of thousands of American workers.” Alcoa and Rio Tinto said they also see room for Canada’s exemption.
“The neighbouring countries are key allies and partners, with steel and aluminum industries that are highly integrated and supportive of North American jobs and manufacturing supply chains,” said Adam Austen, a spokesman for Canadian Foreign Affairs Minister Chrystia Freeland, in an emailed statement quoted by the Toronto Star.
Austen added that Canada will stress the importance of that relationship while awaiting US President Donald Trump’s final decision.
The US Department of Commerce has noted that its proposals are meant to raise US aluminum production from the current average capacity of 48 percent to 80 percent, ensuring “a level that would provide the industry with long-term viability.”
However, the aluminum report explains that Canada exported about 2.3 million MT of primary aluminum to the US in 2016, representing over 70 percent of US total production, and adds that “Canadian primary aluminum production is important to the US aluminum industry.”
US Department of Commerce Secretary Wilbur Ross said, “I am glad that we were able to provide this analysis and these recommendations to the President. I look forward to his decision on any potential course of action.”
Trump is required to make a decision on the steel recommendations by April 11, 2018, and on the aluminum recommendations by April 19, 2018.
His deadline to take action on the Section 232 report recommendations comes shortly after the end of the winter heating season in China on March 15. The Chinese government has taken measures to curb pollution during that time period, putting pressure on industry members to reduce smelter production. Market watchers have said China could ramp up aluminum production after the winter period ends.
“[The] new capacity additions and restarts could be a catalyst for a correction in the aluminium prices. But a correction — not a price collapse,” said Ami Shivkar, senior analyst at Wood Mackenzie. Aluminum is currently priced at $2,265 per tonne on the London Metal Exchange.
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Securities Disclosure: I, Melissa Shaw, hold no direct investment interest in any company mentioned in this article.