CRU Aluminum: Measuring the Effects of Section 232

With the latest announcement between India and the US easing Section 232 duties, it is clear the duties, initiated in 2018, are under review. Now that five years have passed, a good amount of data has been gathered to analyze the effects of the policy. Judging from each scheduled review of the economic effects of the policy resulting in its continuation, it is clear that it has had a positive impact on parts of the industry. However, there are also a handful of knock-on effects that have become apparent.

The US Midwest premium was the first to feel effects from the new tariffs as it captures the cost of importing metal into the US. The result was a level increase that added on 15% to the premium overnight. While that was expected, other spillover effects have become apparent. For example, the standard deviation of the premium, which is a measure of volatility, increased from just over $0.04 to close to $0.14/lb. Some of this can be attributed to the multitude of once-in-a-lifetime type events such as the pandemic and the war in Ukraine, but there is a strong likelihood that the duty also had an effect.