Nov 2016
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China's No Free Market, Aluminum Execs Testify

By Tim Triplett

With the WTO decision on China’s market economy status coming to a head by the end of the year, there was a heightened sense of urgency behind comments from U.S. aluminum executives at an ITC hearing Sept. 29 in Washington. China’s aluminum producers, abetted by the Chinese government, are guilty of innumerable unfair and illegal trade practices that threaten the very viability of the U.S. aluminum industry, testified representatives of the Aluminum Association and the Metals Service Center Institute. The ITC is investigating the global aluminum market and will release its findings in June.

Over the past decade, Chinese aluminum production has grown at an alarming rate, driven by artificial incentives, subsidies and central planning by the Chinese government. In 2000, China produced about 11 percent of the world’s primary aluminum. Today, it produces more than half. With their home market so oversupplied, Chinese mills are driven to export the excess to the United States and other parts of the world. U.S. imports of semi-fabricated aluminum products from China grew 183 percent from 2012-2015. As Chinese aluminum production and exports have expanded, U.S. production has contracted. Eight U.S.-based smelters have either closed or curtailed operations since 2015. Only two smelters remain fully operational in the U.S., reports the Aluminum Association.

Testifying for MSCI, R. Holman Head of O’Neal Industries echoed the concerns of the aluminum trade group, calling for tougher government action to address dumping, predatory pricing and currency manipulation by the Chinese and other foreign governments. “MSCI data shows that U.S. shipments of aluminum in 2015 were down nearly 20 percent from the pre-recession peak in 2006. Unfair trading practices by certain foreign governments, particularly China, are largely to blame for that,” he said.

While service centers are buyers of foreign aluminum, they still need strong trading partners close to home. “A healthy service center sector is generally indicative of a healthy aluminum industry and a healthy U.S. economy,” added MSCI CEO Bob Weidner. “So it’s imperative that service centers have both a strong source of domestic supply and a vibrant North American customer base.”

MSCI and the Aluminum Association support a similar call for negotiations between the U.S. and Chinese to address the overcapacity issue and the unfair trade practices; to end subsidies and other market-distorting behavior; to crack down on misclassification and transshipment of products to evade duties; to increase market transparency on aluminum production and shipments; and—importantly—to maintain China’s status as a non-market economy. China contends it is entitled to automatic market economy status at the end of 2016. If the WTO agrees, the U.S. stands to lose a lot of the leverage it hopes to employ in future trade negotiations.

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Sunday, June 25, 2017