For the love of metal: Trump team now fighting for US aluminum

Steel last week. Aluminum this week. President Trump sure is showing plenty of affection for U.S.-made industrial metals. But, to paraphrase Beyoncé, if he likes them is he going to “put a ring on it”?

The Department of Commerce launched a Section 232 investigation on the impact of aluminum product imports on national security, less than one week after initiating a similar investigation on steel imports, and President Trump signed the executive memorandum Thursday.

To be clear: Import restrictions of steel and aluminum on the grounds of national security have not yet been ordered by the U.S. What has been ordered are two investigations to assess the respective situations. This could turn out to be the whispering of sweet nothings, or it could turn out to be a heady romance.

{mosads}Since 1964, there have been 26 investigations conducted under Section 232 of the Trade Expansion Act of 1962. In 19 of those (73 percent of the time), either the report or the president determined that no action was necessary to adjust imports.

Over the same period, there were four occasions when imports were restricted. These included metal-cutting machine tools (President Ronald Reagan), Libyan crude oil (also President Reagan) and Iranian oil (President Jimmy Carter). In 1973, President Nixon suspended tariffs on oil imports and moved to a quota system of variable import-licensing fees.

There were three times under Section 232 that essentially ended in a draw. In 1981, the Washington-based Ferroalloys Association filed a petition to investigate chromium, manganese and silicon ferroalloys. President Reagan decided that these imports did not threaten national security, but he did accept the Commerce Department recommendation to begin a 10-year program to upgrade the National Defense Stockpile of such ores.

There is no doubt that both Commerce Secretary Wilbur Ross and President Trump are indicating strongly they are sympathetic to the plight of steel and aluminum producers, but whether or not the flirtation is consummated remains to be seen.

On Wednesday, Ross certainly had already schooled himself on aluminum. He explained that the U.S. military has precise requirements for aluminum in defense applications. Ross said the U.S. military requires high-purity aluminum to produce the F-35 Joint Strike Fighter plane, F-18 aircraft and armor plating for vessels and missiles.

There is only one company left in the U.S. that can produce the kind of high-purity aluminum required for aerospace applications, Ross added.

That company is Century Aluminum, the only U.S. producer of commercial-grade, high-purity aluminum. The United States’ primary aluminum production has declined to a level comparable to 1952 production, Ross said. Eight smelters have closed or curbed production since 2015, with only two fully-operational smelters left, he added.

“The question is, what happens if we have to mobilize, if we have to get into a different environment?,” Ross asked. 

Shoe-horning aluminum into an “America First” agenda could prove difficult. Canada’s primary aluminum production through March of this year has totaled 797,208 metric tons; U.S. smelters output was 181,763 mt, according to Aluminum Association statistics. In the global market for aluminum, the U.S. and Canada are effectively joined at the hip.

What’s more, last week at the steel briefing, Secretary Ross responded to a question by emphasizing that no concrete action has been taken: “But the net effect of the tariff…won’t be to prohibit foreign imports, it just will be to change the price.”

But a change in prices can be a slippery slope. Even if justified from a national security and defense standpoint, there are bound to be ripple effects to other consumer products, resulting in higher prices on “Main Street USA”.

With that in mind, it’s important to remember that steel and aluminum are globally-traded commodities. In an ideal world, their prices are determined by natural market forces. But whenever governments intervene with duties and tariffs things get very complicated.

Joe Innace is the content director of Metals/Americas for S&P Global Platts. He’s also an award-winning business writer, recognized as Steel Journalist of 2015 by the World Steel Association. 

The views expressed by contributors are their own and not the views of The Hill.