Aluminum billets cut to various lengths move along the production line at the Alcoa Inc. Mt. Holly plant in Goose Creek, South Carolina, U.S., on Thursday, Jan. 19, 2012.Stephen Morton/Bloomberg
Canada is facing the threat of another major trade showdown with the United States – this time, over aluminum.
The United Steelworkers has asked the Obama administration to slap an emergency 50-per-cent tariff on all imports of aluminum, invoking a rarely used and controversial U.S. trade law.
Canada is the main target as the largest foreign supplier of the lightweight metal to the United States, accounting for nearly 66 per cent of imports and 2.2 million tonnes in 2015, worth nearly $4-billion (U.S.).
The union said the U.S. smelting industry is dying and only a steep tariff can save it, according to a petition filed this week under Section 201 of the 1974 Trade Act.
"The United States' primary aluminum industry is collapsing," according to the petition. "The industry is unable to survive in a market where primary aluminum prices have plummeted far below costs of production and imports have grown rapidly."
Canada is also threatened with a major trade case against imports of softwood lumber, and sparring continues over restrictions on U.S. dairy imports.
If successful, the challenge would have a catastrophic effect on the two main companies that produce aluminum in Canada – Rio Tinto Ltd. of Britain, and Alcoa, which is based in the United States. Rio Tinto has five major Canadian refineries (four in Quebec and one in B.C.) and minority stakes in two more Quebec refineries. It produces 1.9 million tonnes of aluminum in Canada.
A 50-per-cent tariff would penalize a wide array of other U.S. industries, which cannot survive without imports, said Bryan Tucker, a Rio Tinto spokesman. He said U.S. smelting industry cannot meet the demand alone.
"A 50-per-cent tariff significantly raises prices for U.S. manufacturers that use aluminum to produce cars, building material, packaging and medical equipment," he said. "Significant cost increases could jeopardize employment at these U.S. manufacturers and increase cost to U.S. consumers."
The tariff would add $700 (U.S.) a tonne to the current $1,700-a-tonne price of aluminum.
The last time the United States imposed Section 201 duties was in 2001, when president George W. Bush hit steel products with emergency duties.
The U.S. International Trade Commission has up to six months to make a recommendation to U.S. President Barack Obama. The domestic industry must show it has been "seriously injured" by imports, but does not have to prove products are being dumped or subsidized.
The other major sources of U.S. aluminum imports are China, Saudi Arabia and Iceland.