Although a great deal of ink has been slung over the trials and travails of Russia’s U.C. Rusal in recent months, what has been largely overlooked is the pain and suffering experienced by a myriad of other firms around the world due to the Trump administration’s blanket tariffs on aluminium and sanctions upon Rusal and its founder, Oleg Deripaska.
The market for ingots traded on the LME has largely recovered from the late economic malaise, with prices and supplies effectively matching up with demand at present. However, the same cannot be said of the specialty aluminium market, as the supply of bars, rods, and other semi-finished materials that are facing crippling shortfalls. And, as semi-formed aluminium tends to be traded on long-term contracts the remedy is not likely to be an instant one. Rusal is one of the biggest producers of semi-finished products (nearly half of the aluminium sold last year was value-added metal) but issues with logistics and payments have crippled the company’s ability to supply its customers.
Meanwhile, in a recent hearing held in Washington, D.C. on the issue of steel and aluminium tariffs, many American companies took to the rostrum to chastise and plead with congressmen over the plight they now face. With over 16,000 applications for a carve-out to the Trump aluminium tariffs pending at the U.S. Commerce Department, scores of manufacturers of all sizes are feeling the squeeze due to the chronic shortages.
“We are penalising American businesses for making their products here at home rather than importing finished goods that in most cases would not face steel or aluminium tariffs,” explained Rep. Dave Reichert, Republican committee chair. “The last thing we need is an unnecessary, cumbersome process that acts as a new bureaucracy.”
While legislators and business representatives took time out to look for ways forward in the face of tariffs, the same urgency was not in evidence from the Commerce Department.
“I’m sure Mr Navarro [the administration’s director of trade and industrial policy] and I should not be in the same room together, but nonetheless this is not going unnoticed,” Lamented Rep. Bill Pascrell (D-NJ), noting the absence of any representative from the Department.
Small- and medium-sized companies in the US haven’t been the only ones to feel the sting of the Trump aluminium tariffs. Ford Motor Company said earlier this week that it was forced to cut its earnings forecast for the year due to the tariffs, indicating that such tariffs will likely increase its overall input price by up to US$600 million than initially projected. The pioneering automaker’s announcement came on the heels of similar announcements from Fiat Chrysler and General Motors, the latter suffering a seven-year-worst stock drop of 7 percent immediately after advising investors that tariffs on aluminium and steel have punished its bottom line.
In the EU, which imports over 20% of its aluminium supply from Russia, downstream firms are nervous about their future ability to obtain the metal if US sanctions are not lifted. Tom Jones, the CEO of the UK Aluminium Federation, representing over 110 British firms, has underlined that the price of aluminium made goods would certainly be rising. He says that while “manufacturers will try and spare those rises, eventually everything gets passed along to the consumer”. For European industry, the sanctions have send shocks through the aluminium supply chain, with producers of anything from cars to airplane parts to beverage cans feeling the heat.
If a solution for Rusal is not found by the October deadline, US and European manufactures are bound to pay the price of higher aluminium costs.
However, hope may be on the way. Per a report from Bloomberg on Thursday, U.S. Treasury Secretary Steven Mnuchin has had productive discussions with the aluminium giant.
“I’ve had a lot of conversations on Rusal,” he is reported as telling reporters. “The intent was to change the behavior” of Oleg Deripaska, he explained.
Mnuchin continued by saying that the Department’s intent was not strictly to sanction aluminium companies. Rusal, Deripaska, and En+ Group were all named in the list of several Russian businessmen and firms the Treasury Department says were involved in activities to destabilize governments around the globe.
“I think we’re in productive discussions with the company to resolve those issues,” Mnuchin opined.