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Aluminum's Tussle Over 232 Mirrors Steel

Written by Tim Triplett

June 25, 2017

The Department of Commerce hearing Thursday on the proposed Section 232 for aluminum revealed the same big rift between supporters and opponents as in the steel industry. And for many of the same reasons, notably the effect on prices for downstream manufacturers and consumers and possible retaliation by global trading partners. Commenting on the proceedings, financial services firm Cowen & Co. reported a general lack of support in the testimony due to the potential adverse consequences of sharply restricting aluminum imports on national security grounds. 

The Section 232 hearing had a diverse mix of speakers, the majority of whom questioned whether Section 232 was the correct approach to the current problem, which is largely overproduction and dumping of aluminum by China. In terms of national security, the U.S. military sources almost all of its aluminum domestically, they testified, and U.S. aluminum production is 3-4 times larger than is necessary to meet the military’s needs.

Supporters of Section 232 noted that the number of smelters in the United States has fallen to five, down from 23 in 2000. Losing all of the domestic production could make the U.S. dependent on vital aluminum production from potentially hostile sources, such as China. The U.S. needs to take action not only to stem the flow of unfairly traded imports, but to restart up to 1 million tons of currently idled capacity, and the jobs that would create, they argued.

Cowen & Co. said the current WTO trade case targeting the subsidizing and distortion of the market by China offers a more long-term resolution. “We view the WTO case against Chinese aluminum subsidies as the best way to hopefully curb Chinese production and eliminate the capacity surplus globally.”

Tim Triplett

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