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The US has had another change of heart about how to deal with aluminium imports from its largest supplier Canada.
The 10 per cent tariff that was re-imposed on unalloyed primary metal last month will now be lifted. But there’s a catch.
The US has made its peace gesture conditional on how much metal flows over the border till December this year. Too much and the tariffs come back. This is part of a broader trend of protectionist politics reaching ever deeper into the global aluminium supply chain.
Border clash
The US-Canadian aluminium drama has been playing out ever since March 2018, when the Trump administration first imposed tariffs on all imports of aluminium.
Canada was initially exempted. Last month the tariffs were back on after a much-disputed statistical “surge” of Canadian imports earlier this year. Now they’re off again. The indexed CME contract has been a roller-coaster over recent months as the market tries to second-guess politics and the volatility isn’t going to abate. The the US Trade Representative has made tariff exemptions contingent on Canadian imports not exceeding 83,000 tonnes in September and November and 70,000 tonnes in October and December.
Aluminium trade borders are proliferating as a failure to achieve a consensus on how to tackle Chinese exports translates into the erection of national barriers. Anti-dumping steps have been imposed or are under consideration in the US, Canada, Europe, Australia and Argentina.
Even India is considering placing aluminium and copper on a list of restricted imports.
Europe already has an aluminium trade wall in the form of import duties ranging 3-6 per cent, but carbon borders are also coming.
Political premiums
As US aluminium buyers have found out, political turbulence can quickly translate into pricing turbulence. The battle-ground is not the LME, which reflects the global price, but the North American premium.
Turnover on the Midwest US premium exceeded two million tonnes in the first eight months of this year, reflecting the political effect on prices.
But premiums feed into the price paid by consumers and the relationship with the underlying LME price has proved far from straightforward in the past.
There is the potential for another such realignment of aluminium’s pricing as ever more countries erect trade barriers.
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