New York 04/10/2016 - By Grace Lavigne
The US International Trade Commission was “receptive” to delegates’ concerns of aluminium overcapacity and global competitiveness, a top O’Neal Industries Inc executive said, indicating that steps to return the industry to a healthy balance would need to be gradual.
The September 29 hearing made it clear that “there is a significant amount of [aluminium] overcapacity, and it continues to grow,” Holman Head, president and chief operating officer of the service centre, told Metal Bulletin sister title AMM.
“The Chinese government continues to subsidise that industry with various methods [including subsidies for] environmental or energy costs,” he added. “The growth [of Chinese aluminium output] has just been phenomenal over the last 10 to 15 years, and I don’t think that’s really in dispute. [However, the Chinese] would dispute the economic impact and the subsidies.”
Domestic aluminium production and smelting capacity is vital for a healthy US manufacturing base and service centres such as O’Neal, Head said.
“We buy imports just like we do domestic, but for us to buy imports it requires a lot more capital because inventory requirements are much greater [due to] lead times,” he said. “[Dumping] has not necessarily impacted our margins, but it is continuing to lower the price unfairly.”
Service centres’ customers might benefit from these lower prices in the short term, but in the long term it could lead to US mill shutdowns, Head warned.
Indeed, US national defence systems could become reliant on offshore producers of primary aluminium due to the decline in North American output in the wake of Chinese overproduction, industry executives cautioned during the hearing.
“On the other hand, if we impose a lot of tariffs [...] that is going to hurt our manufacturing base,” Head added. “The answer is to negotiate and try to reduce that [global] capacity over time so that there’s a better balance in the global economy.”
With regard to steel imports, those mills “have been a lot more aggressive in filing trade suits than the aluminium mills,” he said. “The amount of imports coming in has just been so much greater in steel relative to the market, even though [global] aluminium [capacity] has grown mightily over time.”
Aluminium products represent roughly 10-15 percent of Birmingham, Alabama-based O’Neal Industries’ revenue, Head said, noting that this is why he testified on behalf of the Metals Service Center Institute.
US aluminium mills, extruders and trade associations, as well as foreign stakeholders, testified before the commission over the course of three separate panel sessions.
“There was great dialogue,” Head said. “The commissioners did a very good job of asking questions to get to the heart of the matter.”
This article was first published by AMM. Metal Bulletin, the global metals and mining price reporting agency that also owns AMM, recently acquired 100 percent of the shares of FastMarkets Ltd.