Trump’s tariff move a major cause for concern in Kitimat
B.C.’s lone aluminum smelter depends heavily on exports to U.S. customers
Residents of B.C.’s northwest can only watch and hope as the U.S. targets aluminum, one of the region’s anchor industries, with punitive tariffs.
On Thursday, U.S. Commerce Secretary Wilbur Ross extended tariffs of 25 per cent on imported steel and 10 per cent on aluminum from Canada, Mexico and the European Union, in part because of the slow pace of NAFTA negotiations.
“It’s unfortunate (because) you’re basically helpless,” said Phil Germuth, the mayor of Kitimat, which is home to B.C.’s lone aluminum smelter and is an economic anchor for the entire region, employing 1,000 people.
“It’s not just Kitimat,” Germuth said. “(Smelter owner) Rio Tinto employs several hundred people from Terrace.”
If there is a saving grace, the mayor said, it is that Rio Tinto recently spent $4.8 billion rebuilding the smelter to make it the lowestcost-per-tonne facility among its operations.
“So, we’re hoping if there has to be cutbacks, it might not be here,” Germuth said.
The tariffs, however, come just as the U.S. has become a bigger market for B.C.-produced aluminum, provincial trade statistics show.
Rio Tinto spokeswoman Claudine Gagnon said in an email that company officials aren’t responding to requests for interviews while they review the potential impacts of tariffs and continue focusing on being a “reliable supplier” to its customers.
Generally, however, Gagnon said 75 per cent of the 1.8 million tonnes of aluminum Rio Tinto produces in Canada each year is shipped to the U.S.
B.C. is a small part of that, but Rio Tinto’s modernization of Kitimat expanded its production to 472,000 tonnes annually, almost half of which is shipped to the U.S.
By value, trade figures for 2017 pegged B.C.’s exports of unwrought aluminum at $1.14 billion, which was 2.6 per cent of all provincial exports. Some $543 million, or 47 per cent of that, went to the U.S.
However, 10 years ago, at the start of the economic meltdown, the U.S. was the destination for just 11 per cent of B.C.’s aluminum exports, some $81 million in 2008. Then, Japan was the biggest customer for B.C.’s then-smaller smelter, taking 66 per cent of its production, worth $490 million at the time.
“We’re really distressed at the decision by the U.S. administration (on Thursday),” said Bruce Ralston, B.C.’s minister of jobs, trade and technology.
Ralston said he agrees with federal International Trade Minister Chrystia Freeland’s assessment of the U.S. grounds for tariffs — that they are in defence of national security — “is just preposterous.”
As far as specific actions B.C. can take, Ralston said the province will continue to back the federal position on NAFTA negotiations and support Canada’s dollar-for-dollar tariff retaliation against the U.S.
However, Canada’s aluminum sector will feel the bite from U.S. tariff action, said international trade expert Keith Head, which appears to have a strategic element to it.
“We’re getting hit hard,” considering the country as a whole exported $8 billion worth of aluminum to the U.S. last year, said Head, a professor of international business in the Sauder School of Business at the University of B.C.
As a commodity business, Head said aluminum buyers are looking for the cheapest aluminum they can get, and if tariffs raise prices, “that is going to cause people to substitute to cheaper sources.”
That favours U.S. domestic producers, Head said, which have slack to increase production.
Head counted recently closed aluminum smelters in West Virginia, Missouri, Ohio and Kentucky — Trump-supporting states. If any of those are restarted, the administration could claim credit during future elections.