SMU Community Chat: UK trade deal could set template for others

Wittbecker noted one component of the UK agreement is a 100,000-unit-quota on autos. Anything over that and they revert to the full 25% duty.

“Those quotas set a precedent for the EU manufacturers, and I think you people will be looking for that to be embedded in any kind of subsequent deal,” he said.

In addition, people will also watch to see if the exemption on aluminum will turn up in other trade deals.

The Middle East

President Trump is expected to travel to the United Arab Emirates, the home of Emirates Global Aluminum and a significant exporter to the United States of about 600,000 metric tons a year.

“They recently floated the idea that, as part of a $1.4-trillion investment plan for the United States, they might build a primary smelter,” Wittbecker said. “I would expect this trip might provide us a little bit more color around how serious is that deal.”

He suggested the UAE could ask for a Section 232 exemption to bridge the period until the smelter would be built.

China

Once the tariffs on China were reduced from 145% to 30%, the market moved to resume shipments across the Pacific.

“The container lines that serve that market have certainly taken note of that and have already announced a host of price increases,” Wittbecker said, noting that this week, most of the carriers announced a surcharge to their base rates of $1,000-$2,000 per 40-foot container. That’s in addition to general rate increases of $1,000-$3,000.

“Exporters from China, be they aluminum extruders or sheet or any type of general consumer products, are looking at a pretty hefty freight cost increase here as we move into the peak shipping season from China to the US west coast, which is normally July through September in advance of the of the holiday season.”

Shipping

Wittbecker said container companies have been very agile in adjusting capacity and rates to meet demand, with a surge of capacity bookings to compensate for the lull in shipments.

“Now there’s going to be a bit of a scramble by people to try to refill the pipeline, again, on top of the fact that July to September is the peak shipping period for the US market. So the container lines have been very quick to opportunistically put in the surcharges.

“Evidently, there’s another general rate increase coming on June 1,” he said. “Not only are your rates going up, but I imagine there’ll be a scramble for capacity, and you may see people finding capacity will be taxed.”

Trucking companies likely will boost rates as well.

“This is definitely going to lead to some some freight inflation,” Wittbecker said.