In light of reports that negotiators from the United States government are pushing for quotas to replace the Section 232 tariffs on aluminium and steel on imports from Mexico and Canada, Alcoa’s top man echoed sentiments made by negotiators in opposition to a quota system late last week.
In an earnings call last week, Alcoa CEO Roy Harvey said that a quota system would do little but deepen the negative impact made upon the North American market by tariffs.
“Tariffs have not solved the industry’s challenges, which stemmed from highly subsidized smelting capacity in China that has resulted in surplus production,” Harvey opined. “And quotas are also likely to disrupt the North American market and hurt aluminum consumers already paying more for their aluminum inputs than their global competitors.”
According to Harvey, the Section 232 tariffs have only made the situation worse for producers and consumers.
“From our standpoint, tariffs are not having the desired impact and they are hurting the downstream industry […] Depending on the quota regime put into place, what you can see is the rush of metal coming in and then running up against the hard quota depending on what percentage of prior year’s production is considered.”
Harvey went on to say that such a quota would severely limit the supply of aluminium beverage cans, which would ultimately result in changing the field to favor suppliers that are already taking advantage of American consumers. Upon Canadian and Mexican producers meeting the yearly quota, Harvey says that the balance will be filled by importers from China and elsewhere. Such a rush to the market would necessarily have a lag, hammering supply and spiking prices.
“What we really need is a level playing field, where we can all compete, where we can all work to make our plants better and make the right products for the right customers and see an orderly business where that competition is really level and fair,” Harvey explained.