Above: On April 27, 2017, President Donald J. Trump signed an executive memorandum initiating an investigation exploring the implications of aluminum imports on U.S. national security. Commerce Secretary Wilbur Ross; staff and  members of the Aluminum Association; and members of the Congressional Aluminum Caucus attended the signing ceremony.

American aluminum producers take part in government probe of dumping and subsidies surrounding Chinese common alloy sheet

February 2018 - The U.S. International Trade Commission (ITC) determined Jan. 12 that there is a reasonable indication that Chinese imports of common alloy aluminum sheet—allegedly subsidized and sold in the U.S. at less than fair value— are harming domestic producers.

As a result of the commission’s vote, the Commerce Department will continue with its antidumping and countervailing duty investigations. Commerce’s preliminary countervailing duty determination was due Feb. 1, and its antidumping duty determinations are due April 17.

The Aluminum Association, Washington, D.C., and its members welcomed the determination that Chinese common alloy aluminum sheet “are a cause of injury to the domestic industry and its workers,” President and CEO Heidi Brock said in a statement.

“U.S. companies that make common alloy aluminum sheet have suffered extensive injury thanks to unfairly traded imports from China for many years. Our members are participating in the trade cases to return fair pricing to the U.S. market, and to allow the U.S. industry to make needed investments to further strengthen its competitiveness,” Brock said.

Imports of common alloy aluminum sheet from China rose by more than 90 percent between 2014 and 2017 (annualized), according to Census data. China was the largest exporter of common alloy sheet to the U.S. market in 2016, accounting for more than 36 percent of all U.S. imports. Complete 2017 data has yet to be processed.

Fairness doctrine

Lauren Wilk, vice president for policy and international trade at the Aluminum Association, says that one facet of the group’s activism is to persuade the U.S. government to enter dialogue with Chinese authorities so that they will address overcapacity at home.

“Really what we are looking for is a level playing field, a rules-based trading system. Getting a tangible and enforceable commitment from China to address overcapacity can change behavior long term,” she says.

There are ways to get there. “The U.S. government has, in the past, had bilateral forums and dialogue with China on various issues. It could create broad trade dialogue at the presidential level, at the U.S. Trade Representative’s Office, with the Commerce secretary, etc.,” Wilk says. “There is also increased awareness among trading partners and allies around the world.

“In the steel sector, that’s another model with the global forum (see Modern Metals’ January 2018 issue, page 20). There is no current mechanism for bilateral or multilateral talks but we are thinking about the most effective way to deliver results for aluminum sector.”

Initiation

John M. Herrmann III, partner at Kelley Drye & Warren, Washington, D.C., is legal counsel to the Aluminum Association and its members in the investigation. He was among those testifying Dec. 21 before the ITC and responding to commissioners’ questions.

“On Nov. 28, [Commerce Secretary] Wilbur Ross announced the department’s decision to self initiate antidumping and countervailing duty investigations on imports of common alloy all sheet from China,” he says. “This was significant because it was the first time in more than 26 years that Commerce initiated [a trade investigation] on its own. The Aluminum Association is grateful for his leadership in vigorously enforcing our trade laws.”

Now that the ITC voted in the affirmative, Commerce has two investigations: It will conduct an antidumping investigation to determine whether Chinese common alloy aluminum sheet is being sold in the U.S. at unfairly low prices, and it will conduct a subsidy investigation to determine the extent to which Chinese producers are receiving subsidies from the government.

Meanwhile, the domestic industry waits. The investigations will take about a year to complete, says Herrmann.

“The domestic industry faces low prices as a result of imports from China,” he says. In 2016, China was the largest source of import volume at 36 percent of the total. Since 2014, Chinese import volumes soared by 91 percent.

“These imports are coming in at very low prices and are resulting in lost sales for domestic producers, forcing them to reduce their own prices to maintain sales,” according to Herrmann. “That’s clearly having an injurious effect.”

In addition to facing price declines, domestic producers discussed another major point at the December hearing: The loss of sales volume. Lower revenues translate directly to declining productivity and mill efficiencies because U.S. mills must still pay their fixed costs across a lower volume of production, Herrmann says. “Several witnesses said their companies are not making significant investments to produce common alloy sheet, because they cannot justify it based on declining returns.

“Major manufacturing companies may go for awhile without significant investment, but once you start down that road, there is a limited period of time to catch up [when business rebounds]. It gets harder to maintain facilities that are world class competitive. It’s a dangerous precedent.”

Subsidizing excess

Commerce will look at 26 different subsidy programs in its investigation, Herrmann says. “There will be ample opportunities to determine how the government of China is providing actionable subsidies and determine the amount of duties to offset those subsidies.”

In addition to the testimony, he says, attorneys for the domestic industry included “a lot of information in our brief. Namely, that there is massive overcapacity in China, both excess production relative to domestic demand, and then excess unused capacity that could be brought online.

“Low-priced imports are injurious, but the International Trade Commission will also examine whether domestic industry is threatened by imports. And given the massive amounts of overcapacity currently, whether it is threatened with future injury.” Chinese producers could begin shipping even greater volumes of exports in the future.

Domestic investments

“We do have a positive demand story for aluminum and investments are happening,” comments Matthew Meenan, senior director of public affairs for the Aluminum Association. He cites the November 2017 groundbreaking at Aleris’ Lewisport, Kentucky, plant to launch a $400 million wide aluminum sheet mill that will supply automakers.

“We have an informal tally—domestic producers invested or committed to invest close to $2.5 billion in U.S. manufacturing capacity, driven by automotive.”

Herrmann notes that it’s “important to distinguish what’s driving investments universally in product lines other than common alloy sheet, and the lack of investment in capital equipment for common alloy.

“Increasing demand for common alloy and circumstances would lead to healthy prices and returns on investment,” he says, but due to unfairly priced Chinese products, those producers are fighting price deterioration and unfavorable returns.

Importers’ concerns

Kristin H. Mowry, a partner at Mowry & Grimson, Washington, D.C., represents the National Marine Manufacturers Association and the Recreational Vehicle Industry Association, whose members consume Chinese common alloy aluminum sheet.

Speaking at the December ITC hearing, Mowry decried the probe as a whole unfair, given the Commerce Secretary’s self initiation—that is, not waiting for industry to file trade complaints. At his confirmation hearing, said Mowry, Ross said a self initiated probe would have an “actual curative effect.”

She voiced concern that ITC and Commerce would “rubber stamp” Ross’s wishes and beseeched the commissioners to bring to bear their critical analysis skills and retain their independence in making a determination. Mowry also suggested that domestic producers enjoy rising demand, run profitable operations and increased headcount during the period under review. MM

Scope of investigation

The common alloy aluminum sheet subject to the unfair trade investigations is a flat-rolled aluminum product having a thickness of 6.3 mm or less, but greater than 0.2 mm, in coils or cut-to-length, regardless of width, and is manufactured from 1XXX-, 3XXX- or 5XXX-series alloys. The aluminum sheet subject to investigation includes both unclad aluminum sheet, as well as multi-alloy, clad aluminum sheet.

Common uses for the product under investigation include gutters and downspouts, building facades, street signs and license plates, electrical boxes, pontoon boats, and tractor trailers for trucks. Excluded from the scope of the investigations is aluminum can stock that is suitable for use in the manufacture of aluminum beverage cans, lids or tabs.

Representatives of the domestic industry that participated in the ITC hearing were: Aleris Corp., Arconic Inc., Constellium Rolled Products Ravenswood LLC, Jupiter Aluminum Corp., JW Aluminum Co., Novelis Corp. and the United Steelworkers International Union.