Canadian aluminum miners rally to contain global glut
Canadian aluminum producers are pushing G20 leaders to form a global industry group to manage excess capacity of the metal amid ongoing turbulence in the industry due to U.S. import tariffs on China and sanctions on Russia’s United Company Rusal, the world’s second largest aluminum producer.
The Aluminum Association of Canada, along with similar organizations from Europe, the United States, Japan, Brazil and Mexico, sent a joint letter last week pressing foreign ministers to establish a forum similar to the one created for the steel industry at the G20 summit in Hangzhou, China in 2016.
The various associations will hold a preliminary gathering in Montreal on June 4 to develop a “road map” for the proposed Global Aluminum Forum ahead of the 2018 G20 summit in Argentina.
“We are concerned about the unsustainable and steady increase of overcapacity particularly in China,” the letter states.
China’s share of world aluminum output rose from 11 per cent in 2000 to 55 per cent in 2016, according to the Canadian association.
Though the country consumes the vast majority of what it produces, it exports 3.5 million tonnes of aluminum each year, more than Canada’s entire annual production of 3.2 million tonnes. And China has faced allegations that subsidies to its domestic producers have suppressed global pricing.
“China keeps adding capacity year after year and they are in a surplus,” said Jean Simard, chief executive of the Canadian association. “There has to be a way between nations to circumscribe that, to make China part of a level playing field.”
But even the Global Forum on Steel Excess Capacity has struggled to address a huge oversupply of the alloy — a key frustration for the Trump administration. The surplus has been identified as a key factor in the disruption of world trade relationships.
“I don’t think they’ve been successful at all and there are all kinds of problems with these forums,” said Charles Bradford of New Yorkbased Bradford Research. “For starters, there are huge issues with defining what is and isn’t a subsidy.”
And any forum is unlikely to be successful without China’s full engagement in developing measures to tackle the problem, said Bart Melek, global head of commodity strategy at TD Securities.
“I think it’s valid to say China doesn’t respond to the same market rules as we do,” Melek said.