Trump’s Metal Supply Machinations – Creating Chaos in Our Sector
As a popular, respected UK metal supplier, we like to keep our eyes open for important news that might affect us and our customers. This week sees a flurry of metal supply related chaos emanating from the USA, as US President Donald Trump has the world’s metal manufacturers and suppliers in a tizz thanks to his plans to impose a 10% tariff on aluminium imports and a 25% tariff on steel imports.
The final decision is due by 11th April 2018, at which point he’s set to slap heavy tariffs on imports of both metals, an act that’s likely to usher in South East Asia as the next new market for global exporters. And that could set in motion a glut that drives the metals’ prices plummeting, with some producers predicted to close their doors for good. But that’s just the tip of a massive iceberg of confusion affecting the US metals markets right now.
A move that could cost Ford and GM $1 billion each
Trump’s actions are widely expected to let more steel from China find its way into developing countries, in fierce competition with producers from Russia, Ukraine and Turkey. Ford Motors makes the F150 pick up truck, whose body is 100% aluminium. If it goes ahead the tariffs are predicted to cost Ford and General Motors $1 billion a year each, and the White House economic adviser Gary Cohn, a Wall Street banker who opposed them, has just resigned over the matter. Worse still, Trump’s plans have worried some Republicans to such an extent they’re thinking about taking legal action to reduce his level of control over his country’s trade policies.
A move that won’t actually protect American metal sector jobs
India’s Tata Steel is worried, asking for “appropriate measures against a negative influence on the European market” and confirming their support for “fair, free trade.” At the same time Bank of America Merrill Lynch has given US steel shares a lower ‘neutral’ rating, citing a potential global trade war, and oil industry experts are warning the president that steel tariffs won’t help achieve so-called ‘American energy dominance’.
The house construction sector has added its voice to the fray, saying steel and aluminium tariffs will increase the cost of building new homes. It’s likely the tariffs will also push up the price of soda and beer, both of which come in aluminium cans. And while Trump says the move will protect American jobs, most experts disagree.
The US will still need to import aluminium
January to October 2017 saw the USA import not far short of 6 million tonnes of aluminium, 18% more than the same period in 2016. In contrast they produced just 840,000 tonnes of aluminium at home during 2016. Whatever happens, the USA will still need to import at least some aluminium.
US producers only have around 600,000 tonnes’ worth of re-startable closed capacity and can’t build any more, simply because they don’t have access to cheap enough power. This matters when an impressive 30-40% of the cost of smelting aluminium is spent on electricity. Chinese producers, on the other hand, have access to plenty of cheap, easily accessible energy, so are set to enjoy a long term advantage.
Consumers will have to pay more
Ultimately Trump’s plans will mean consumers will have to pay more for a wide variety of goods, which will in turn damage home-grown manufacturing. Will Trump go ahead with his metal import taxes? Let’s hope he sees sense before 11th April.
On the other hand whatever happens over there, we will keep on supplying the best value, best quality metals to our customers over here. Whether it’s aluminium extrusion suppliers or aluminium sheet suppliers you need, steel supply or something else altogether, unlike Trump we are neither orange nor crazy, and we’ll treat you right!