Dive Brief:
- Major coal and aluminum producer Alcoa submitted five requests to the U.S. Commerce Department requesting waivers on the tariffs placed on aluminum imports from Canada, according to the Wall Street Journal.
- The majority of Alcoa's smelters are in Canada. The company processes raw aluminum into sheets in Canada that are then imported to the U.S. to be rolled into cans for soft drinks and other products.
- The Commerce Department has 90 days to respond to the exemption requests.
Dive Insight:
Though a few U.S. companies, whose smelting operations are largely U.S.-based, have increased their capacity in light of the tariffs, those like Alcoa, with entrenched global supply chains are unlikely to change despite the tariffs, according to analysts speaking to the Toronto Star.
"Due to the unavailability of U.S. production of the exact slabs, or an acceptable substitute, meeting Alcoa's alloy and dimensional specifications, Alcoa must import these slabs in order to satisfy its U.S. manufacturing demands," Alcoa said in a statement on its website.
The company added that tariffs have made it less competitive both domestically and internationally. Resultant operational changes have cost the company $15 million in June alone, Alcoa said on its Q2 earnings call.
About half of U.S. aluminum comes from Canadian smelters, which is part of the reason tariffs on all imported aluminum elicited head-scratches from the aluminum industry, whose main concern was Chinese dumping. China has grown from producing 10% to more than 50% of global aluminum in the last 20 years, according to Reuters.
Downward pressure on aluminum prices was already a concern since China ramped up production creating a global glut. And in April, prices were headed down, but rebounded after temporary exemptions expired on June 1. The Aluminum Association has been calling for exemptions for certain countries — including Canada — since before the temporary exemptions expired to no avail.
The price increases are not just reverberating through the aluminum supply chain. The Beer Institute, a trade organization for the beer industry, called out the unpredictability of prices going forward as a major hindrance to growth. The institute went as far as calling the tariffs a "tax on beer" on its website.
The U.S. Chamber of Commerce has expressed similar opposition: "Tariffs imposed by the United States are nothing more than a tax increase on American consumers and businesses — including manufacturers, farmers, and technology companies — who will all pay more for commonly used products and materials," said the organization in a statement on its website.
