Why Chinese aluminium firms will find it tough to sell 15pc of output after US tariffs foil imports

US to counter “market distorting effects caused by injurious dumping and subsidisation of imports” with 106 per cent duty

PUBLISHED : Wednesday, 28 February, 2018, 9:30pm
UPDATED : Friday, 23 March, 2018, 12:05pm

Chinese producers of aluminium foil will need to find alternative markets for up to 15 per cent of their export after the Trump Administration said it will slap duties of up to 106 per cent on exports of the packaging material to the United States.

In the first of potentially more impending trade barriers designed to revive the falling domestic production of the commodity, the US International Trade Commission said on Tuesday it would impose import duties on Chinese exporters to relieve the “market distorting effects caused by injurious dumping and subsidisation of imports”. 

All but one Chinese foil exporters were slapped with tariffs of 84.9 per cent to 106 per cent as anti-dumping duties, which are designed to punish exporters deemed to have sold at less than a product’s “fair value”. 

All except two will also pay so-called countervailing duties of 17.1 per cent to 20 per cent on exported products deemed to have enjoyed “financial assistance” from the Chinese government. 

“Some Chinese aluminium downstream product suppliers had already started looking for potential alternative markets late last year, ahead of US aluminium tariff determinations,” said Mok Yuen Cheng, senior managing editor on metals at commodities market information provider S&P Global Platts. 

“It is too early to say exactly where the affected supply will go, but it looks like Europe and Southeast Asia are potential destinations, based on our talks with Chinese producers.” 

She estimated that the affected volume amounted to 10 per cent to 15 per cent of China’s total foil export, which will exert some downward pressure on prices outside the US. 

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Beijing on Wednesday lambasted the trade action, saying the US had disregarded World Trade Organisation rules by imposing unreasonable and excessive duties, which would undermine the welfare of US consumers.  

The foil duties on China are only the first in a latest round of trade action against downstream aluminium products from China, as the US Commerce Department two weeks ago recommended imposing heavy tariffs and quotas on foreign producers of steel and aluminium in the interest of national security after investigation of imports. 

A tariff of 23.5 per cent on aluminium products from China, Hong Kong, Russia, Venezuela and Vietnam, as well as 7.7 per cent from elsewhere was recommended. 

President Donald Trump has until mid April to respond to the recommendations on the so-called Section 232 investigation.   

Uncertainty over policy outcomes means it is tough for Chinese exporters to respond at this stage, said Uday Patel, a London-based senior research manager of aluminium markets at commodities consultancy Wood Mackenzie. 

It is too early to say exactly where the affected supply will go, but it looks like Europe and Southeast Asia are potential destinations
Mok Yuen Cheng, senior managing editor, S&P Global Platts

“The Chinese foil exporters can try to export from a third country. The trouble is, all downstream aluminium products [from various regions] would also be affected by trade actions as a decision on Section 232 will also be coming along,” he said. 

Some of the foil originally destined for the US is likely to end up in the domestic China market, which would add to an already oversupplied market, he added. 

According to Arlington, Virginia-based industry body The Aluminum Association, imports accounted for 27 per cent of North America’s aluminium product supply. 

China exported 137,582 tonnes of aluminium foil worth US$389 million to the US in 2016, according to the US International Trade Commission. 

The Trump Administration imposed a 30 per cent import duty on Chinese solar panel and washing machine exports to the US last month, in a bid to support domestic manufacturing and job creation as part of President Trump’s “America First” policy.