Alcoa Requests Exemption from Aluminum Tariff

Date : 08/06/2018 @ 5:02PM
Source : Dow Jones News
Stock : Alcoa Corp. (AA)
Quote : 41.39  -2.74 (-6.21%) @ 10:59AM

Alcoa Requests Exemption from Aluminum Tariff

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By Bob Tita 

The largest U.S. aluminum maker wants an exemption from tariffs designed to bolster domestic metal production.

Alcoa Corp. on Monday asked the Trump administration for an exemption from tariffs on aluminum imported from Canada, where the company makes a raw form of the metal that it rolls into sheet for beverage cans at a U.S. plant.

Some smelting lines have since restarted in the U.S. since the Trump administration imposed a 10% duty on imported aluminum in March. But Pittsburgh-based Alcoa said it can't find enough specialty aluminum alloys for beverage cans in the U.S.

"Even if all the curtailed smelting capacity in the U.S. was back online and producing metal, the United States would still need to import the majority of its aluminum," said Tim Reyes, president of Alcoa's aluminum business.

Alcoa operates three smelting plants in Canada that supply Alcoa operations and customers in the U.S.

U.S. companies have filed thousands of tariff-exclusion requests since the tariffs on steel and aluminum began this spring. Most use specialized metals or components that aren't readily available in the U.S. The aluminum tariff has snarled production of aluminum parts and products in recent months because most of the aluminum consumed by U.S. manufacturers is imported or remelted scrap.

Raw aluminum production in the U.S. has fallen for years as rising electricity costs and aging equipment made U.S.-based smelters less competitive with new smelters in other countries.

Aluminum prices have risen as buyers began to anticipate the implementation of tariffs. Aloca said it still can't justify the investment that would be necessary to restart some of its idle smelters in the U.S.

Alcoa is the largest producer of raw aluminum in the U.S., but the U.S. accounted for only 14% of the aluminum Alcoa produced globally last year. The company wants the Commerce Department to grant tariff relief on 40,000 metric tons a year of specialized alloys that Alcoa uses to make aluminum sheet for cans.

The alloys are cast in 2-foot thick slabs at an Alcoa smelting plant in Baie-Comeau, Quebec, and rolled into aluminum sheet for cans at an Alcoa plant in Warrick, Ind. Alcoa's problem stems from a shortage of casting capacity at Warrick and Alcoa's other U.S. plants. In its exemption application, Alcoa said it had tried unsuccessfully to buy more aluminum slabs from Century Aluminum Co., the only other smelter operator in the U.S.

"Century Aluminum has indicated that it does not have the molds to produce 24-inch thick slabs," Alcoa said. "There are no other U.S. manufacturers currently capable of supplying the exact slabs meeting Alcoa's specifications or an acceptable substitute."

The Commerce Department has 90 days to respond to have Alcoa's exclusion request.

Alcoa said the tariff is increasing its costs, even as it benefits from higher aluminum prices. The company predicted last month that the tariff will increase its monthly costs by $12 million to $14 million for as long as the duty remains in place. The company reported that the tariffs helped to raise its average realized price on raw aluminum by 19% during the second quarter from the year before.

Alcoa in July cut its profit outlook for the year, citing increased expenses caused by the tariff. Alcoa CEO Roy Harvey said overproduction of aluminum in China had created a global glut that drove down prices. Mr. Harvey has urged the Trump administration to negotiate with China to curb production as an alternative to a U.S. tariff on all imported aluminum.

Write to Bob Tita at robert.tita@wsj.com

 

(END) Dow Jones Newswires

August 06, 2018 16:47 ET (20:47 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.

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