February 1, 2019 THE ALUMINUM PERSPECTIVE: U.S. MARKET & TRADE POLICIES Heidi Brock President & CEO The Aluminum Association
WHO WE ARE The Aluminum Association Represent $71B U.S. Aluminum Industry Promote AL as Most Sustainable Material 115+ Member Companies Grow Markets and Achieve Policy Outcomes 2
N.A. DEMAND GROWTH CONTINUES 2017 demand up an estimated 2.7 % y/y Surpassing mid-2000s record levels Demand is up 45% since 2009 YTD (Oct. 2018), demand up an estimated 3.4% 4
THE MARKET FOR ALUMINUM Containers & Packaging down 1% Y/Y, and off 3% since 2009 Transportation market up 3.4% Y/Y and 123% since 2009 Building & Construction up 4.1% Y/Y and 30% since 2009 4
US/INDIA ALUMINUM TRADE FLOWS 5
INCREASING SCRAP EXPORTS TO INDIA 6
TRADE CONFLICT: DISRUPTING THE GLOBAL MARKET 7
CHINA S UNPRECEDENTED GROWTH 8
CONTINUED CAPACITY GROWTH IN CHINA Capacity continues to outpace consumption in China. to nearly 11mmt in 2017 That s roughly 6x total U.S. capacity. Capacity in excess of consumption in 2017 was equivalent to roughly 33% of capacity in RoW. China s utilization rate 75% YTD Data: CRU 9
DOWNSTREAM CAPACITY BUILD CONTINUES Huge Investment in Aluminum Downstream Capacity in China Source: Antaike 10
GROWTH IN CHINESE IMPORTS Decline from 2015 to 2016 due to the suspension of irregular and nontransparent trade practices (i.e. fake-semis). In this case, primary aluminum disguised as aluminum plate. Antidumping/Countervailing Duties imposed on Chinese imports of extruded products 11
SUPPORT FOR ACTION ON OVERCAPACITY Republicans and Democrats in the United States agree that there needs to be action on aluminum overcapacity. Aluminum overcapacity included in G-7 Communique (June 2018) and overcapacity and industrial subsidies highlighted in G20 Communique (November 2018). New OECD report on industrial subsidies in the aluminum sector published January 2019. 12
ADVANCING A MULTILATERAL APPROACH Bipartisan recognition of overcapacity in China. Joint Aluminum Association leaders calling for a global forum on aluminum overcapacity and coordinating a meeting in advance of G-7 meeting in Quebec. Overcapacity included in G-7 Communique. Global Forum on Steel Excess Capacity making progress on principles and commitments for data sharing (OECD, G20). Ongoing trilateral initiative between United States, EU and Japan to find shared principles related to State- Owned Enterprises (SOEs), industrial subsidies, forced technology transfer and other practices not adequately covered by WTO rules/agreements. www.aluminum.org/timeforaction 13
TRADE POLICIES AND ENFORCEMENT 14
WHY THE TRADE CONFLICT? Major goal of the Administration s trade policy is to reduce trade deficit (balance of imports/exports) Most recent Census Bureau data (October 2018) show U.S. trade deficit with China hit record high. Import surge with looming tariffs Strong U.S. economy fueling consumption/imports. Exports declining (e.g., soybeans) Strong dollar 15
TRADE POLICY UNDER THE TRUMP ADMINISTRATION 7 Point Plan To Rebuild the American Economy by Fighting for Free Trade Status 1. Withdraw from the TPP. Done (January 2017). The TPP-11 continues without the U.S. as a party. 2. Appoint tough, smart trade negotiators. USTR has a team in place actively negotiating with China, EU, others. 3. Direct the Secretary of Commerce to identify every violation of trade agreements and all appropriate agencies to use every tool under American and international law to end these abuses. 4. Tell NAFTA partners that we intend to immediately renegotiate the terms of that agreement. Done/In progress USMCA announced and signed late 2018; Now must be ratified by legislatures in all three countries 5. Instruct the Treasury Secretary to label China a currency manipulator. The U.S. Treasury Department declined (October 2018) to name China as a currency manipulator in its semi-annual report. 6. Instruct the USTR to bring trade cases against China, both in US and at the WTO China's unfair subsidy behavior is prohibited by the WTO. 7. Use every lawful presidential power to remedy trade disputes if China does not stop its illegal activities - including the application of tariffs consistent with Sec.201 and 301 of the Trade Act of 1974 and Sec. 232 of the Trade Expansion Act of 1962. Done. Anti-dumping and countervailing duty investigations are in progress, including completed cases on aluminum foil and common alloy. Done. A 232 investigation on steel and aluminum imports is finalized, a 232 investigation on auto and uranium initiated, and a 301 investigation was finalized with remedies (tariffs/quotas) applied. 16
SECTION 232 IMPLEMENTATION Two off ramp paths for importers: Product exclusions (procedures, review and decision by Commerce Department) Country exemptions (negotiations by USTR but President Trump makes the final decision). Many countries have imposed rebalancing/retaliatory tariffs on a range of U.S. exports or initiated WTO disputes about national security rationale for tariffs. Proclamation says scope can change "pending discussions of satisfactory long-term alternative means to address the threatened impairment to U.S. national security. Current country exemptions: Aluminum: Argentina (subject to an absolute quota) and Australia (fully exempt) Steel: Argentina, Brazil and South Korea (subject to absolute quotas) 17
IMPACT OF AD/CVD DETERMINATION FOIL Preliminary Subsidy Margins Preliminary Dumping Margins Final AD/CVD Orders 18
IMPACT OF COMMON ALLOY DETERMINATION COMMON ALLOY Preliminary Subsidy Margins Preliminary Dumping Margins *Final AD/CVD Decision Announced in December 19
INCREASING CHINESE EXPORTS TO INDIA 20
ALUMINUM ASSOCIATION TRADE PRIORITIES Section 232 > Advocate for quota-free exemptions for market economy countries to be reinstated (expired May 30). > Pursue improvements to DOC exclusion process. Changes announced Sept. 11. > Maintain members-only tracker spreadsheet. > New monthly reports to track trade flows, monitoring impacts. Enforcement > Implementation of final orders on Foil and Common Alloy AD/CVD cases, monitoring ongoing cases. > Work with CBP on education about aluminum products/industry. > Move forward on recommended USHTS changes to better align trade data with industry practice. FTA Negotiations > Congress to pass USMCA implementing bill, after pushing for country exemptions. > Ensure new negotiations with Japan, EU and eventually UK reflect aluminum industry priorities. Negotiations can begin in early 2019, with input from Congress. Multilateral Institutions > Political leaders recognize Chinese subsidies and overcapacity as a must-do problem to tackle G7, G20, WTO discussions ongoing. > U.S.-EU-Japan Trilateral Initiative building momentum for new WTO disciplines on industrial subsidies. > Amplify OECD report on industrial subsidies in the aluminum sector China Talks > Advocate for aluminum overcapacity to be addressed in U.S.-China bilateral talks. Major negotiations led by USTR January 2019. Deadline for a deal is is March 1 > Monitor Section 301 tariffs. > Support U.S. government designation of China s NME status, highlighting WTO compliance issues. 21
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