Quick development in trade, accompanied by political tensions and sanctions preparations against Russian oligarchs helped the U.S. aluminum industry to regain strength pretty quickly in 2018.

The actual policies of the incumbent U.S. President Donald Trump are bringing worries to number of nations and traders, however, not to the aluminum sector. Firstly the aluminum import tariffs, imposed already in February, added to the competitiveness of the U.S. producers, but the subsequent sanctions against Russian oligarchs and owners of commodity industries at the same time helped the U.S. producers, including the aluminum ones, to gain advantage against their rivals.

One of the companies, cheering this development, is the U.S. aluminum producer Alcoa Corp., followed by the second top aluminum producer in the U.S. – Century Aluminum Co. The news about sanctions having adverse impact on Rusal and some companies of the well-known Russian oligarch Oleg Deripaska brought optimism to their investors.

Shares of Alcoa rose 6.87%, following the news, reaching the price of $54.10 a share, while Century Aluminum Co. jumped 5.84% to trade at $19.92 per share, both on the back of proposed sanctions against their Russian competitors.

After the years of struggling with Chinese competition and shutdowns in South Carolina and Kentucky, 2018 started optimistically for both companies. On the back of political enforcing, Alcoa and Century found support in Trump’s policies.

In general, Alcoa produced approximately 360K metric tons of the commodity in 2017. Under these conditions, the company plans to open a smelter in Indiana to lift the production along with around 650,000 tons of aluminum in Canada, focused on exports to the United States.

Century is expecting to increase the production by 150,000 tons per year again, focusing on the restart of its plant in Hawesville, Kentucky, where the full production is estimated to run next year.

As Harbor Intelligence informed, Rusal was sending around 700,000 tons of aluminum to the U.S, but now there is a space prepared for the two U.S. companies in political way. U.S. producers (along with their plants outside) will have to commission their idle plants again to meet the national demand for the commodity.

First support for the U.S. producers came in February, when Trump’s administration decided on the imposition of import tariffs on steel (25%) and aluminum (10%), thus making the prices of cheap importers less attractive. These tariffs were mainly oriented on China.

However, the latest proposal of sanctions against Russian companies, including Rusal, one of the global top aluminum producers, restricted the company from entering the U.S. market in an alternative, non-free trade manner. Thus, the U.S. companies acquired certain protection from the government, bringing the market back to the eras of protectionism, full of political measures. Trump’s administration used the Russian involvement in the election, as well as Crimean and Syria as the top arguments.

 

The question is if this approach is also sustainable from a long-term perspective. Trump’s policies are bringing the country back to Cold War, justifying the trade advantages for U.S. companies by political conflicts or disputes.

Top image: Adobe Stock

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About Author

Marek Bocanek

After finishing law and economic studies, Marek launched his career in Brno, Czech Republic in the financial sector, specializing in capital markets and related legal issues. After 6 years of experience in the industry he moved back to Bratislava, Slovakia, where he worked as an analyst in the forex market for another 3 years. Simultaneously he was a trader focused on the major forex pairs and oil futures.

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