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Center Valley, Pennsylvania 14/07/2016 - US politicians and union representatives have burned off a lot of calories over the past several years arguing that low global aluminium prices have undercut American firms and cost jobs.
But I would argue just the opposite. We should be celebrating low aluminium prices and encourage affordable imports of primary ingot and billet because that's the fuel for the continuing renaissance in value-added fabrication in this country.
The truth is that the US primary aluminium smelting industry is no longer competitive due to high energy costs and a strong dollar. But we've actually known this since the late 1980s, well before China stepped onto centre stage.
Here's the simple reality: the US is a downstream aluminium producer and it has been for many years now.
According to the Aluminum Association, 161,000 workers are directly employed in the aluminium industry but only a small fraction of those work at the country's five remaining primary smelters. All of the gains in employment over the past decade have been on the value-added side of the business.
"The number of core production jobs is increasing, including those related to foundry operations, secondary smelting and alloying. Aluminium processing jobs are increasing in many areas, including the production of sheet, plate, foil and extruded products," the Aluminum Association said in a report.
And it's not just semi-fabricated products. The end-markets for aluminium are booming, especially since the launch of the aluminium-body Ford-150 pick-up truck, which - by the way - is an American innovation.
Ford has invested $6.2 billion and hired more than 15,000 workers since 2011. Last year, it added 1,550 new jobs in Kansas City solely for F-150 assembly.
NOT A NEW TREND
I first became fully aware of America's shift from the upstream to the downstream in a conference room in the Marriott Marquis in New York City in May 2010.
That's where Kaiser Aluminum chief executive Jack Hockema was holding meetings with members of the press. His message was clear, even if it did feel a little like I was being called into the principal's office.
"The media still writes about us like we're an upstream, smelting company but haven't been that for years. We're only in downstream fabricated mill products - that's the future of this industry. We want the press to understand exactly what we do as a company," Hockema said.
After emerging from bankruptcy in 2006, Kaiser divested all its upstream aluminium assets. For the past decade, it has only focused on products marketed to the aerospace, general automotive, engineering and custom industrial markets.
Kaiser's value-added revenue in 2015 hit a record $790 million, an eight-percent year-on-year increase. The results were driven largely by higher heat treat plate volume and continued growth in automotive extrusions, including the significant ramp-up in its Ford F-150 programme.
And then there is Alcoa, which will separate into two independent, publicly traded companies later this year. The upstream company, which will retain the Alcoa name, will comprise five business units that make up global primary products - bauxite, alumina, aluminium, casting and energy.
The downstream company will be called 'Arconic'. It will be a value-added venture that includes divisions for global rolled products, engineered products and transportation and construction. Current chairman and CEO Klaus Kleinfeld will head Arconic.
Alcoa and Kaiser along with other downstream producers such as Novelis and Constellium are success stories because they shifted further into value-added products - ones that benefit from healthy margins and strong demand from the automotive, building & construction and aerospace end-markets.
MIDGUIDED POLICY
This why it's so baffling that so much political capital is being spent on advocating for tariffs aimed at protecting what is left of America's primary smelting industry, even if doing so would damage the thriving downstream industry.
In 2001, there were 23 smelters in the US; currently, there are only five. The average cash cost to smelt primary aluminium in the US is $1,723 per tonne compared with a global average of $1,348, according to a report from consultancy UNO International Trade Strategy.
Primary aluminium smelting is never coming back to the US - it just isn't. The long-term economics don't make any sense.
Nevertheless, the United Steelworkers (USW) in April made a failed attempt to file a Section 201 petition on primary unwrought aluminum with the US International Trade Commission. This could have resulted in the imposition of a 50-percent tariff on all primary aluminium imported for the next four years.
Clearly, that measure was aimed at China - the USW claims that government there is "stepping in to expand capacity and encourage exports, placing the entire US aluminium smelting system at risk".
But using such a powerful tool was seen as overkill because it would apply to imports from around the world. Canada, the Middle East, Russia and Venezuela would also have to pay.
In announcing that it would withdraw the 201 petition, the USW restated that the case would have "resulted in immediate price increases that would have helped to maintain domestic production" but admitted that many in the industry declined to back the action.
It's mind-boggling that the USW would have such a fundamental misunderstanding of the US aluminium market. Sure, a couple of thousand jobs would be saved at a handful of smelters but a huge tariff on P1020 imports would cripple the domestic downstream industry and increase prices for consumers.
It would force extruders, auto sheet producers and other parts manufacturers to relocate to places such as Mexico. And I'm sure the Ford wouldn't be too happy to see its raw material costs skyrocket after committing billions of dollars to aluminium.
Aluminium smelting is an important part of America's past but using subsidies and trade barriers to protect this dying segment will only lead to the outsourcing of fabricating production, which is the real engine powering the domestic aluminium industry.
US policy needs to be geared towards supporting technology and innovation and away from ill-conceived attempts to artificially prop up the price of aluminium.
(Editing by Mark Shaw)