US aluminum production is at a historic low. Is this the result of anti-competitive practices by foreign suppliers, or an uncompetitive US industry?
What’s Killing US Aluminum?
With the opening of investigations into alleged dumping of aluminum now underway, much ado has been made of China, which has dramatically increased its share of global production. Critics have accused the Chinese government of unfairly subsidizing Chinese producers and driving US smelters out of business.
It may not be that simple. In November 2016, Bloomberg’s David Fickling argued that "It's not [Chinese] protectionism that's killing U.S. aluminum. It's free markets." Fickling points out that US smelters, across the board, utilize outdated technologies that are far less power efficient than modern plants. According to industry groups, electricity accounts for 20%-40% of the cost of primary aluminum production, so this is a pretty big deal.
Missing Part of the Story
With all of the focus on China the discussion has missed some valuable context that can help answer these questions. While US producers are shutting down, smelters in Canada – a country with a developed, market-oriented economy – continue to operate successfully. For example, Rio Tinto spent $4.8 billion dollars to upgrade its smelter in Kitimat, British Colombia, adding 138,000 metric tons of capacity to the plant in 2015. Further, Canada continues to dominate US imports of unwrought aluminum. All of this lends credibility to the case that the US industry is suffering more from a lack of modern facilities than from unfair competition.
Want to Learn More?
Don’t worry, we have you covered! For additional information and analysis of US market trends, see Aluminum: United States, a report published by the Freedonia Focus Reports division of The Freedonia Group. The report also includes numbers and analysis covering US aluminum demand by market and production by type for 2006-2016 with projections to 2021. Demand by market segments include:
- containers and packaging
- building and construction
- other markets.
Production by type segments include:
While you’re there, check out some of our related reports, which include Beverage Containers: United States, Civil Aircraft: United States, and Motor Vehicles: United States.
About the Author
Steven Richmond is a Market Research Analyst for Freedonia Focus Reports. He holds a dual degree in economics and international affairs, with experience as an analyst covering multiple industries.