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American Shipper

Foiled

U.S. aluminum industry files historic case against China producers

   The U.S. aluminum industry filed antidumping and countervailing duty petitions with the Commerce Department and International Trade Commission last week, alleging that unfairly priced imports of Chinese-made aluminum foil are harming domestic producers of this product.
   “This unprecedented action reflects the intensive injury being suffered by U.S. aluminum foil producers and also our commitment to ensuring that trade laws are enforced to create a level playing field for domestic producers,” Heidi Brock, president and chief executive officer of the Aluminum Association, said in a statement.
   The petitions—the first of their kind in the association’s 85-year history—allege that dumping margins on Chinese aluminum foil imports range from 38 percent to more than 134 percent. Dumping occurs when an imported product is sold in the U.S. market at less than fair value.
   Similarly, the association’s members allege that Chinese aluminum foil producers benefit from 27 different Chinese government subsidies. These subsidies are provided by foreign governments to domestic industries as incentives to reduce their use of imports and often are contingent on their level of exports.
   The Aluminum Association’s petitions cover all imports of Chinese aluminum foil that are less than 0.0078 inches (0.2 millimeters) thick on reels weighing more than 25 pounds each. Aluminum foil is used for a variety of products and applications, including household foil, flexible and semi-rigid cookware, product packaging, and automotive and HVAC heat exchangers.
   The Commerce Department will determine whether to initiate the investigations within 20 days and the ITC will reach its preliminary determination of material injury within 45 days. The investigation will take about a year, with final determinations of dumping and subsidization, as well as injury, likely to occur during the first quarter of 2018.
   According to the Aluminum Association, 12 years ago U.S.-produced aluminum foil accounted for about 84 percent of all domestic foil demand, but today has dropped to 69 percent. Meanwhile, Chinese aluminum foil imports in the United States have grown from nothing in 2004 to covering as much as 22 percent of demand today. The association noted that these imports from China have increased by 40 percent since 2014 and last year represented 71 percent of all U.S. aluminum foil imports.
   “Chinese foil imports have accounted for all of the import growth over the past three years, meaning that in addition to capturing market share from U.S. producers, imports from China also captured market share from third country producers,” the Aluminum Association said. “As a result of this unfair competition, the domestic industry has suffered declines in production, sales, hours worked by employees, prices, revenues, and profits—and also has been forced to either close facilities or take actions to redo capacity.”
   U.S. producers generated 1.4 billion pounds of aluminum foil in 2015. According to the Commerce Department’s Census Bureau, the United States exported 130.4 million pounds of aluminum foil in 2016. The top two importers of U.S. aluminum are, by far, Mexico and Canada, at 78.2 million pounds and 31.8 million pounds, respectively. China imported about 1.9 million pounds of U.S. aluminum foil in 2016.

In September 2016, the United States secured China’s assurance that it would address its aluminum overcapacity. However, China so far does not appear to be applying the manufacturing brakes.

   Aluminum Association members involved in the manufacture of foil include Aleris Inc., Golden Aluminum, Granges Americas, JW Aluminum Co., Novelis Corp., Reynolds Consumer Products and United Aluminum Corp. However, Winston-Salem, N.C.-based Alpha Aluminum exited foil manufacturing in the summer of 2016, blaming availability of the cheaper Chinese foil.
   In addition to the antidumping and countervailing duty investigation petitions, the Aluminum Association has “pursued a broad trade agenda aimed at reducing the impact of overcapacity in aluminum production in China throughout the value chain,” said Charles Johnson, the association’s vice president of policy.
   For example, the trade group is participating in an International Trade Commission fact-finding investigation of the aluminum industry both in the United States and worldwide. The investigation, Aluminum: Competitive Conditions Affecting the U.S. Industry, was requested by the House Ways and Means Committee in February 2016. The ITC is examining industry characteristics, recent trade trends and developments, competitive strengths and weakness, factors driving unwrought-production capacity increases, and government policies that affect aluminum production and exports. The report is expected to be completed by June 24.
   The Aluminum Association has also worked with the World Customs Organization in recent years to reduce misclassifications of aluminum product imports through various classification determinations.
   “We have successfully escalated the aluminum capacity issue in [U.S.] bilateral discussions with China in the Joint Commission of Commerce and Trade, and the Strategy and Economic Dialogue,” Johnson said.
   In September 2016, the United States secured China’s assurance that it would address its aluminum overcapacity. However, China so far does not appear to be applying the manufacturing brakes. China operates 180 aluminum smelters and plans to construct more. Chinese aluminum manufacturers have also been accused of trying to beat U.S. antidumping and countervailing duties by routing these shipments through third countries or shipping so-called “semi-manufactured” aluminum products that are ultimately melted down at destination and turned into other products.
   In early January, the Office of the U.S. Trade Representative in the outgoing Obama administration filed a trade enforcement complaint with the World Trade Organization concerning China’s continued subsidization of its aluminum producers.
   “Overcapacity is damaging to all segments of the domestic aluminum industry – upstream, midstream and downstream – and it is critical to assess the potential impact of any trade action on all aluminum producers,” Brock said.
   She added that the Aluminum Association looks forward to working with the Trump administration to “create a level playing field for the entire industry.”