Monday, June 13, 2016

Gathering Storm for the Chinese Aluminum Extrusion Industry

As reported last month, the U.S. aluminum extrusion industry is awaiting the International Trade Commission’s decision on whether to hold a full or expedited review of our five-year-long trade case against the People’s Republic of China (PRC).  In the meantime, aluminum interests across the free world are developing plans and actions to confront the impending request from China to be granted market economy status (MES) by the World Trade Organization (WTO).  Within that debate are issues particularly alarming to aluminum extruders across the globe.


Global trade data continues to confirm that the Chinese continue to push their over-production into their export businesses, which are flooding the world with unwanted aluminum.  One semi-fabricated form in which we see this aluminum is extrusion.  From warehouses in Southern California to the deserts of Mexico, billions of pounds of aluminum extrusions sit, unsold, and apparently are headed for a re-melt facility.  It continues to be a curious thing to understand how a company can continue to chortle about fantastic profits in their earnings reports when they have shipped billions of pounds of unsold extrusions out of their country without customers.  What then becomes mind-numbing is to learn that this activity has been duplicated in Europe, Australia, and Vietnam (so far).  Well, it appears the global community has seen enough.  Of course, other forms of aluminum are being dumped in markets worldwide as well, but only in extrusion does it appear to be as unsold product.

Three new organizations have formed in recent months that will focus on the aluminum glut being created by China’s over-production.  They are the Manufacturers for Trade Enforcement (MTE), China Trade Task Force (CTTF), and the International Free Trade Alliance (IFTA).  Each has a slightly different agenda, but all believe China must develop production schedules in tune with demand.

According to its website, www.tradeenforcement.org, “Manufacturers for Trade Enforcement is a coalition of leading U.S. industry groups opposed to the automatic granting of market economy status for China at the end of 2016.”  It currently boasts 17 members, including the Aluminum Extruders Council. Its membership extends beyond aluminum and includes many other manufacturing interests including steel, concrete, wire, and textiles.  This is a similar strategy that was taken in Europe where the European Aluminium Association joined AEGIS Europe.  From the  website, “AEGIS is an alliance of manufacturers from more than 30 sectors, including steel, ceramics, solar panels, car parts, train builders, textiles, bicycles and many others.”  Both the MTE and AEGIS were born out of concern that our respective Federal Governments may not see the economic risk associated with granting MES to China and only focus on perceived political benefits from appeasing the PRC.

For very similar reasons, the CTTF was formed by Century Aluminum late in 2015.  Their site includes a documentary and captures news items that address the topic.  Unlike the MTE, this group consists primarily of aluminum interests and appears to be focused on the WTO/MES issue.  The AEC plans to join this effort in the coming weeks.

IFTA is a group just now being formed, by yours truly, consisting of aluminum extruders, suppliers, and aluminum extrusion associations across the globe.  So far, voices from Canada, the U.S., Australia, Israel, the Gulf States, Columbia, Mexico, Argentina, El Salvador, and many others have expressed interest in forming this alliance to trade field intelligence, data and documentation, support each other as we can in various country-level trade cases, and form our own voice at the WTO as needed.  The AEC also plans to join this group.  AEC members will hear more about this and its agenda over the course of 2016.  During our Annual Meeting in San Antonio this past March, AEC membership expressed deep concerns over China’s ambitions in the aluminum industry.  Taking on a worldwide fight is well beyond the Council’s current capacity or calling.  However, supporting a group like IFTA can be the vehicle interested AEC members may choose to support to help us win this international fight.

In summary, it is clear the worldwide aluminum industry is looking for a solution.  Whether or not that comes in the form of negotiations and a Memorandum of Understanding like we saw in the ‘90s with the Russians, or through the court system of the WTO, is anyone’s guess.  What we do know is the industry is aligning itself in enough ways that prepares us to win that battle when it comes.