July 10, 2017

U.S. House Ways And Means Committee Releases Report On Domestic Aluminum Industry

The U.S. House Ways and Means Committee released a report last week that examined production, consumption, trade, investment, and competitiveness factors that affected domestic aluminum industry between 2011 to 2015. Ways and Means Committee Chairman Kevin Brady (R-TX) requested the study, which was conducted by the U.S. International Trade Commission (ITC), last year. In a statement released alongside its report, the ITC said its study shows “The U.S. primary unwrought aluminum segment shrank significantly during 2011-2015, while facing declining prices, relatively high production costs (i.e., electricity), and limited investments in smelting technologies.”

The ITC report is not to be confused with the Trump Administration’s Section 232 investigation into the national security implications of aluminum imports into the United States. The Metals Service Center Institute expects that report to be issued later this summer, after the U.S. Department of Commerce releases its findings in a similar investigation into steel imports.

The purpose of this ITC study was “to provide information on factors affecting the global competitiveness of the U.S. aluminum industry.” It includes cross-country comparisons between the United States and other major aluminum producing countries including Canada and China. The ITC’s major conclusions were:

  • The global aluminum industry is widely affected by government intervention through policies and programs that principally impact primary aluminum production costs.
  • The chief determinants of competitiveness vary among industry segments. For primary aluminum, it is electricity costs; for secondary aluminum, it is access to cheap and reliable scrap supplies; and for wrought aluminum, it is proximity to end markets.
  • As of 2015, China was the world’s largest aluminum producer and consumer, accounting for over half the world’s production and consumption of both primary unwrought and wrought aluminum. It also ranked second (after the United States) among all secondary unwrought producers.
  • The competitiveness of the U.S. industry varied across segments. The primary unwrought sector was disadvantaged in 2011-2015 by relatively high electricity costs and limited investments in smelting technologies during a period of declining prices. In contrast, the secondary and wrought industries remained very competitive. Secondary aluminum benefited from abundant low-cost scrap; wrought aluminum, from proximity to and close collaboration with consumers in the large U.S. market.
  • The global aluminum market experienced price declines of roughly 30 percent during 2011-2015 due to oversupply—as measured by growing global inventories, or stocks, of primary aluminum—and falling production costs. The declining price of aluminum during this time impacted primary producers differently.

In a statement, Chairman Brady called the report “detailed and sophisticated” and said it “will be tremendously valuable as lawmakers, industry participants, and Trump Administration officials work together to find targeted, effective, and appropriate solutions to the problem of Chinese overcapacity and other distortions in global aluminum markets.”