Author: wpengine

HAWESVILLE, Ky. – America’s aluminum industry is imperiled by foreign competition, but Gov. Matt Bevin indicated Thursday he believes President Donald Trump can help save — and even boost — jobs for Kentuckians in that sector.

Trump’s administration launched an investigation last year into the effect aluminum imports have on national security. The results could prompt the president to order protectionist measures in an attempt to support domestic companies like Century Aluminum Co. in Hawesville.

“This is about real families,” Bevin said of the workers employed at Century Aluminum, which operates two aluminum smelters in Kentucky. “It isn’t just a company. It isn’t just a smokestack.”

High-strength aluminum alloys are used in making military aircraft, and aluminum armor plate can help protect against explosives, U.S. Commerce Secretary Wilbur Ross said in April, when the administration initiated its aluminum investigation.

However, America’s ability to produce this metal is shrinking. Aluminum imports to the U.S. rose 18 percent (and domestic production declined) in 2016 compared to 2015, while employment in America’s aluminum industry dropped nearly 13 percent, according to a federal fact sheet.

The U.S. Commerce Department must deliver a report on its aluminum investigation to Trump by Jan. 22, after which the president has 90 days to determine what, if any, actions to take.

Bevin expressed confidence Thursday in Trump’s willingness to intervene and help the nation’s struggling aluminum producers, which he said would have “an immediate and powerful impact” on communities like Hawesville in terms of job creation.

“The president genuinely cares about American workers,” he said, noting that he thinks Trump’s forthcoming decision could determine the survival of the industry.

The administration said last April that the U.S. aluminum industry’s profits are suppressed by artificially low prices, which have been caused by unfairly traded imports and excess capacity internationally.

Only five aluminum smelters are still operating in the U.S., Century Aluminum CEO Mike Bless said. If Trump takes action to protect the industry, his company plans to quickly increase production and hire dozens of new workers.

“There’s not many jobs out here like this,” Coy Zuelly, 46, who has worked for Century Aluminum for over a decade, told the governor Thursday. “If you don’t have these jobs, your community suffers tremendously.”

Several other employees who were part of a roundtable chat with the governor have family serving in the military, and they told him they’d feel safer knowing their loved ones are being protected by high-quality, American-made equipment overseas.

The Aluminum Association in Washington, D.C., considers Chinese overcapacity as the aluminum market’s fundamental problem, said Matt Meenan, senior director of public affairs.

The association would like to see Trump enact a remedy that focuses on China, Meenan said, and would support establishing a federal monitoring system that tracks the route aluminum imports take to the U.S.

A panel of advocates for the aluminum production industry on Wednesday urged President Donald Trump to expedite action around a U.S. Commerce Department investigation that began in April.

Results of the investigation are due as early as next week as the U.S. aluminum industry wrestles with a steep downturn in capacity instigated by what it calls unfair subsidies of producers in China, Russia, India and the Middle East.

“I’ll put this bluntly,” Century Aluminum CEO Mike Bless said at a press conference in Washington, D.C. organized by the China Trade Taskforce. “We cannot survive much longer if we don’t act.”

Century is the only U.S. maker of high purity aluminum, which is used extensively in military fighter jets, vehicles and vessels.

Bless noted that whereas there were once 23 primary aluminum smelters in the U.S., only five remain, and only two are operating at full capacity. Bless and other speakers said the degradation of U.S. production is due to rapid and extreme overcapacity by state-owned enterprises abroad. Those subsidized producers use predatory pricing to drive down rates for aluminum, which is a global commodity subject to extreme volatility.

The so-called Section 232 investigation, part of the 1962 Trade Expansion Act, has been carried out by the Commerce Department, which will consider overcapacity, dumping, illegal subsidies, and other factors to determine whether aluminum imports threaten American economic security and military preparedness.

If threats to national security are found during the investigation, Section 232 gives the president broad powers to adjust aluminum imports, including through the use of tariffs.

Bless said foreign producers receive subsidies on energy (the highest input cost in the production of aluminum) and financing, while private U.S. producers receive no similar benefits.

Tom Conway, vice president of the United Steelworkers Union, said time is of the essence in terms of the need for action to be taken by the Trump administration. He said 8,000 of his members have lost jobs related to aluminum production due to subsidies that foreign producers receive.

“We’ve been on the frontline of trade battles for a long time,” Conway said. “We’ve participated in more trade cases than any other entity. And we’ve felt the brunt of trade cases through lost jobs. By the time a trade case makes its way through the process, we’ve lost already. The current process we have doesn’t work. The deck is stacked against us. Our companies aren’t competing against other companies, they’re competing against other countries.”

Conway pointed to comments from Commerce Secretary Wilbur Ross that the aluminum issue was a pressing issue when the 232 investigation was instigated.

“The administration promised a reaction and that it’d be quick,” he said. “It’s nine months on, and our members can’t understand why this has dragged on if it’s a crisis. They were told to wait for health care and the tax bill.”

(Ret.) Brigadier Gen. John Adams, now a defense consultant, and former U.S. Speaker of the House Newt Gingrich (who participated in the conference via video from Rome), hammered home the importance of retaining domestic production of high-grade aluminum for U.S. defense.

Adams said the military needs to have unfettered access to the production of a critical component, and that relying on supply chains that touch potential adversaries like China and Russia is dangerous.

“We must not abet China by not remaining complacent in meeting this challenge,” he said.

Gingrich focused on the idea that the aluminum case could serve as a bulwark for a broader redefinition of the protection of the U.S. military industrial base, suggesting that government enact trade policies that take into account these critical sectors. He said decisions around dumping and countervailing duties, or when trading partners are not acting in good faith, need to be made in a more agile manner.

Every speaker spoke to the fragility of the industry, with Bless putting a fine point on its vulnerability.
“In the fall of 2015, there was a time when all U.S. production was going to end for primary aluminum production due to price reduction on global market,” he said. “We’re talking about this industry ending in a matter of months.”

None of the speakers advocated for a ban on imports, but most suggested targeted actions that would raise the price of aluminum imports and help the industry recover its footing.

There is some pushback domestically against any import actions, primarily from downstream industries that rely on aluminum as an input, and are wary of seeing those costs rise.

As a brigadier general with a 30-year career in the U.S. Army, national security is my number one concern. On 9/11, while serving at the Pentagon as deputy director for european policy in the Office of the Secretary of Defense, I participated in immediate disaster recovery operations at ground zero and saw firsthand the threats posed to U.S. national security interests by countries that don’t share American values.

In recent years, I authored a study on the military’s growing and dangerous reliance on foreign nations for the raw materials, parts and finished products needed to defend the United States. Among the materials that I studied were alumina and bauxite, concluding that America’s growing reliance on imports of these and other materials is a threat to U.S. national security. I also participated in the U.S. Department of Commerce’s Section 232 investigation into aluminum imports and the need to ensure that the U.S. aluminum industry remains viable to support the nation’s national security needs.

Today, the 50th Speaker of the U.S. House of Representatives, Newt Gingrich, members of Congress, union leaders and I gathered to discuss this clear and present danger to U.S. national security. The current state of the domestic primary aluminum industry is simply unsustainable from a national security perspective. In the Middle East, Russia, and Asian countries both inside and outside of China, the governments have stepped in to illegally subsidize their own domestic aluminum producers.
Since 2009, during a period in which global aluminum prices have come under pressure, state-owned smelters outside of China in the Middle East, Russia and Asia added 17 million metric tons of new capacity. During that same period time, our aluminum industry has played by the rules and that has resulted in a nearly 60 percent reduction in U.S. primary aluminum capacity and in the loss of more than 4,000 American jobs.

Aside from the significant numbers of jobs lost, U.S. producers of finished products that are directly used in U.S. military and critical infrastructure are becoming increasingly dependent on imports. High-purity, American-made aluminum is used in defense platforms including F-35, F-18 and F-16 fighter jets and other military aircraft, littoral combat ships, armor for the light tactical vehicle program, tank hulls, missile structures and more. Yet, this vital material is only produced in one remaining smelter in the United States, producing at only 40 percent capacity and under great economic pressure to compete with Chinese dumping. U.S. primary aluminum producers have lost nearly 100 percent of their high-purity sales to suppliers in Russia and the Middle East.

In April 2017, President Trump and his administration announced the Section 232 investigation, leaving hope for impactful policy change. This little-known provision, carried out under Section 232 of the 1962 Trade Expansion Act, would allow President Trump to “adjust imports” that threaten to undermine national security. The U.S. Department of Commerce is soon expected to take the next steps forward as part of the long-awaited Section 232 investigation into the national security threat of aluminum imports. Following on from this, President Trump will have 90 days to decide a course of action based on Secretary Wilbur Ross’s recommendations, a decision that could save the jobs of thousands of aluminum workers.

I urge President Trump to take immediate action on this issue and impose meaningful relief for America’s aluminum industry. Global overcapacity threatens America’s ability to protect the homeland and develop weapons and military technology that keeps us safe. We can no longer delay safeguarding these critical industries and we must act now. America’s industry will not survive the time it takes to coordinate and develop a multinational response. Significant comprehensive relief across all aluminum imports is needed to restart idled production for the approximately 70 percent of U.S. smelters that have been forced to close their doors in the past decade.

It’s an issue that transcends party lines. Illegally-subsidized foreign aluminum is distorting global pricing and flooding American marketplaces, driving down domestic prices, depleting production, and forcing manufacturing facilities across the nation to close their doors. Relief is needed and needed soon to ensure that this historic and vital American industry can stay afloat. Relief against China alone won’t revitalize the industry.

The collapse in the price of primary aluminum is due to rampant global overcapacity inside and outside of China driven principally by government subsidization of state-owned-enterprises. State-owned smelters outside of China are equally distortive as the highly-distorted Chinese smelters. Market-based players in the United States are forced to bear the brunt of these government interventions in the market.

Imagine a world where we are 100 percent dependent on China, the United Arab Emirates and Russia to equip our armed forces and build critical infrastructure. We need broad and effective relief to protect thousands of American jobs and ensure that the U.S. primary aluminum industry will continue to play a vital role in U.S. national security. Now is the time for decisive action. The U.S. military, along with communities across the country, are anxiously awaiting President Trump’s Section 232 decision on aluminum as we work together to keep America safe.

Brigadier General John Adams retired from the U.S. Army in 2007. His final assignment was as deputy U.S. military representative to the North Atlantic Treaty Organization military committee. He is the author of “Remaking American Security” and the president of Guardian Six Consulting.

Cheap Chinese steel has upset U.S. steel producers for years, as Chinese manufacturers have unloaded excess capacity on world markets at unbeatably low prices. The Trump administration has even invoked the supposed threat to national security from cheap imports to threaten trade restrictions on steel imports.

But the United States has plenty of steel-manufacturing capacity to meet its defense needs. What’s genuinely threatened, however, is another sector altogether: Aluminum. A glut of cheap Chinese aluminum has done more than hollow out that industry; it may also actually be jeopardizing national security.

Since China joined the World Trade Organization (WTO) in 2001, cheap Chinese aluminum has flooded American markets, closing factories and putting people out of work. The number of aluminum smelters in the United States has fallen from 23 to five in that time. Eight smelters have either shut down or scaled back operations since 2015, and about 3,500 aluminum jobs have disappeared in the last 18 months alone.

A bigger worry, however, is national security. High purity aluminum is used to make certain kinds of jets, such as Boeing’s F-18 and Lockheed Martin’s F-35, as well as armored vehicles. But the United States now has just one domestic manufacturer of high purity aluminum left — Century Aluminum’s Hawesville, Ky. plant, which is currently operating at 40 percent capacity amid dropping prices.

The prospects for importing high purity aluminum, from a geopolitical risk standpoint, aren’t friendly; only a few smelters in the world produce it, and those are located mostly in Russia, the Middle East, and China.

The situation prompted the Trump administration to launch a probe into aluminum imports on April 26, after launching a similar probe on steel earlier in the month. “It’s very, very dangerous, obviously, from a national defense point of view, to only have one supplier of an absolutely critical material,” said Secretary of Commerce Wilbur Ross at an April 26 press briefing. The probe invokes a portion of a Cold War-era law, known as section 232, which permits special protections for smelting in industries key to national security. The investigation would determine whether or not the United States produces enough high purity aluminum to meet its needs during wartime.

“You’re really left with just a kernel of the industry,” Jesse Gary, executive vice president and general counsel for Century Aluminum, told Foreign Policy. “Century Aluminum is only running at 40 percent capacity. As Secretary Ross mentioned, we truly are on the precipice of losing that smelter.”

Punitive tariffs of more than 370 percent have previously been levied on aluminum imports from China. In the past year, the Departments of Justice, Commerce, and Homeland Security have coordinated multiple investigations into U.S. companies suspected of illegally dodging tariffs on aluminum.

Relief under section 232 could be broader than tariffs, possibly including quotas or some other kind of remedy. But it still wouldn’t address the source of the problem — Chinese overcapacity. In fact, Chinese supply-side growth has continued unabated; it manufactured a new record of 2.95 million tons of aluminum in February.

That overcapacity results from Chinese subsidies to major industries, including not just aluminum but also steel, cement, solar, and glass. As the Chinese export-based manufacturing model of economic development has run out of steam over the past decade, the government has feared the loss of jobs and potential unrest that might result if major industries fail. As a result, it has provided subsidies to keep factories in production and workers at their jobs.

Many Chinese aluminum companies could not continue to operate at the size and scale they do without these subsidies. In fact, that China has an aluminum industry of such gargantuan size in the first place — it currently produces more than half the world’s supply — is something of an anomaly. Aluminum production is hugely energy intensive, and so is heavily dependent on access to cheap electricity. Iceland, for example, with its abundant geothermal energy, is one of the world’s leading producers of aluminum. But the market price for electricity in China is significantly higher than in the United States or Europe; big state-owned smelters in China benefit from subsidized electricity.

Aluminum producing countries have been slow to mobilize. Steel production is spread out around the world, as many countries have their own steel industries, so a glut of Chinese steel affects a larger number of countries. But aluminum production is concentrated in just a few countries, those with cheap sources of electricity.

“Steel has been much more vocal on this issue. We’ve been a step behind,” said Gary. “But the decline of the U.S. aluminum industry has been more steep than anything you’ve seen in steel. The expansion of the Chinese industry and the decline of the U.S. aluminum industry has been much more rapid.”

But the U.S. seems to finally be getting serious about addressing the problem. In addition to Trump’s recent probe, in January the Obama administration launched a complaint to the World Trade Organization against Chinese aluminum subsidies. It’s the first such complaint filed to the WTO that addresses the root cause of Chinese overcapacity, rather than aiming to apply a band-aid like anti-dumping duties. Other aluminum-producing countries, including, Russia, Canada, Japan, and the European Union, have all asked to join that WTO request for consultation.

On March 9, the Aluminum Association submitted a complaint to the World Trade Organization (WTO), requesting that anti-dumping duties be levied on aluminum foil imported from China. Representatives from the China Trade Taskforce, founded in 2015 with members including Aluminum Extruders Council, United Steelworkers Union, and Century Aluminum, traveled to London last week to lobby Britain and the EU for their support.

“It does go to show that this problem is affecting all aluminum producing nations,” said Gary.

On Wednesday, May 3 2017, China Trade Task Force (CTTF), a multinational campaign group, visited London to rally transnational support to call for an end to Chinese illegal aluminium subsidies that are leading to job losses across Europe and the United States.

CTTF is urging more European and UK stakeholders to join the fight and are calling on the European Union and the UK government to press the World Trade Organisation (WTO) to take urgent and decisive action.

Since China’s entry to the WTO, the number of primary aluminium smelters in the EU has declined by over 38% and more than 9,000 European aluminium workers have lost their jobs, not to mention the 1,640 British primary aluminium jobs that have been lost in UK as a result of China’s illegal aluminium subsidies that violate its WTO obligations. The U.S. has also been particularly hard hit with over 3,500 aluminium workers losing their jobs in the last 18 months alone.

Mike Bless, CEO of Century Aluminum Company, noted that, ‘China has egregiously violated WTO rules by giving its own aluminium industry ultra-low interest loans, grants and illegal energy subsidies. Only through these illegal actions has China been able to build and maintain an uneconomical aluminium industry at the expense of workers across the European Union, United Kingdom and the United States.’ Mr. Bless remarked ‘the WTO and US and European leaders must act quickly to ensure a fair playing field for the US and EU aluminium industries to compete.’

At the time of its entry to the WTO China represented just over 10% of worldwide aluminium production, and now through its illegal subsidisation represents over 55% of global aluminium production. Recent UK Minister of Trade for State Lord Digby Jones expressed his support for the WTO case moving forward at the CTTF press conference in Westminster noting that, ‘China is breaking the rules and its illegal aluminium subsidies are hurting European industry. China’s cheating has resulted in the loss of more than 1,600 well paid British jobs.’ Lord Jones went onto note that ‘The WTO case gets at the heart of how China uses government directed capital to unfairly seize market share at the expense of European workers and their families. And for a post-Brexit Britain that will be forging new trade deals around the world, it’s vital that the WTO is seen to act when nations such as China cheat’.

The CTTF has published an open letter to the UK government, a copy of which they are delivering to 10 Downing St, setting out the scale of the crisis and calling for the UK government and leaders in Brussels to stand up for European aluminium workers.

Representatives of the U.S. aluminum industry are speaking to EU counterparts and have written to British Prime Minister Theresa May urging action against what they says are “massive illegal subsidies” in China that threaten Western jobs.

Trade lawyers and some governments accuse China of unfairly subsidizing major industries in breach of the rules of the World Trade Organization (WTO), which it joined in 2001.

Following European and U.S. action to protect their steel industries from China, the U.S. this year has shifted the focus to aluminum.

It has lodged a complaint with the WTO and launched an investigation into whether Chinese imports compromise national security.

“The WTO and U.S. and European leaders must act quickly to ensure a fair playing field,” Michael Bless, CEO of Century Aluminum Company (CENX.O), told a news conference in London on Wednesday.

China says it supports the work of the WTO.

The aluminum industry, represented by the China Trade Taskforce, has written to May urging her “to actively engage with the WTO on this matter and press for action”.

Representatives of the U.S. aluminum industry are speaking to EU counterparts and have written to British Prime Minister Theresa May urging action against what they says are “massive illegal subsidies” in China that threaten Western jobs.

Trade lawyers and some governments accuse China of unfairly subsidizing major industries in breach of the rules of the World Trade Organization (WTO), which it joined in 2001.

Following European and U.S. action to protect their steel industries from China, the U.S. this year has shifted the focus to aluminum.

It has lodged a complaint with the WTO and launched an investigation into whether Chinese imports compromise national security.

“The WTO and U.S. and European leaders must act quickly to ensure a fair playing field,” Michael Bless, CEO of Century Aluminum Company (CENX.O), told a news conference in London on Wednesday.

China says it supports the work of the WTO.

The aluminum industry, represented by the China Trade Taskforce, has written to May urging her “to actively engage with the WTO on this matter and press for action”.

“A strong WTO that acts swiftly in situations such as this will be a vital part of securing Britain’s post-Brexit future,” the letter seen by Reuters said.

The prime minister’s office had no immediate comment.

The industry leaders said they were also speaking to Brussels officials and to the Russian sector, which has floated the idea of an OPEC-style body for the aluminum industry.

Bless said he could not endorse that, but it was an “acknowledgement of the severity of the issue”.

When China, the biggest aluminum consumer, joined the WTO it represented just over 10 percent of aluminum production worldwide, the China Trade Taskforce said.

Now it is the world leader, accounting for more than 50 percent of global output and China’s Hongqiao (1378.HK) has overtaken Russia’s Rusal (0486.HK) as the biggest producer, while the U.S. and European sectors have shrunk.

Industry body European Aluminium said the number of primary European aluminum smelters fell by nearly 40 percent between 2002 and 2015.

Trade lawyers say the ascendancy of China’s aluminum sector defies commercial logic as it faces higher bills for energy – the biggest input cost – than the U.S. and Europe.

“China has no natural advantages other than illegal state support,” Alan Price of Washington law firm Wiley Rein said.

Century Aluminum, which is majority-owned by Glencore (GLEN.L), reported a first-quarter net loss.Part of the justification for the U.S. investigation into whether Chinese aluminum is a threat is that Century’s smelter in Kentucky is the only producer of high-purity aluminum required for U.S. combat aircraft.

In Europe, the main concern is how to maintain smelting capacity as part of a strong value chain, creating thousands of indirect jobs, rather than security, European Aluminium said in an email.

EU trade ministers, meeting in Brussels next week, are expected to discuss new rules on dealing with anti-dumping, which are likely to have most impact on Chinese imports.

(additional reporting by Philip Blenkinsop in Brussels; editing by Susan Thomas)