Trump’s tariffs on aluminium imports may backfire on him

Rusal, which produced 1.87-million tons of aluminium in the first half, is a major supplier not only to the US, but also to other countries around the world.

It is reportedly concerned that it will have to halt production or stockpile output if an agreement on US sanctions against it cannot be reached.

The Trump administration has given Rusal’s US customers until October 23 to end their business with the Russian company.

If no deal is reached to extend, or amend, that deadline, the aluminium market is likely to face severe disruptions as Rusal’s output is blocked from world markets.

The Trump tariffs are also hurting the US aluminium producers they are designed to help, with Alcoa asking for an exemption from the tariffs because it imports essential aluminium products from its facilities in Canada.

Alcoa said in July it would incur as much as $14m a month in extra expenses, mainly from tariffs levied on aluminium imported from Canada, its biggest supplier.

If Rusal is largely blocked from the global aluminium market, and if strikes do translate into supply disruptions, there are very few producers currently able to take advantage.

Is China best-placed?

China’s aluminium producers do have spare capacity, and assuming they can work their way around some of the pollution measures, they are able to make more of the lightweight metal, used in products such as beverage cans and motor cars.

Global aluminium output was 5.321-million tons in June, down 2.2% from the previous month, according to figures released on July 20 by the International Aluminium Institute.

However, China’s aluminium output, which is more than half of the global total, ramped up in June to 2.83-million tons, up 1.6% from the prior month, according to official figures.

Daily production in June was about 94,000 tons, the second-highest on record, according to Reuters calculations based on data available from the National Bureau of Statistics.

China’s smelters are responding to a rising domestic prices, with benchmark Shanghai futures up 5% from the recent low in mid-July to the close of 14,520 yuan ($2,110) a ton on August 10.

While the US tariffs on aluminium imports have only been in effect since the start of June, they do not appear to be hurting Chinese exports as yet.