The imposition of 10 per cent import tariff by the US government is expected to have a limited impact on the global primary aluminium industry in the near-term, a report said.
"The US has recently imposed a 10 per cent tariff on aluminium imported from all countries except Canada and Mexico. The imposition of the recommended tariff is unlikely to have any major impact on the current dynamics of the global aluminium industry as the global market is currently in a deficit, following key regulatory steps taken by the Chinese government to curb production from its polluting and "illegal" aluminium smelters," Icra said in its report here.
Post announcement of the higher tariffs by the US government, aluminium premiums have risen sharply by 21 per cent in the US and by 10 per cent in Asia, reflecting the expectation of the commodity market that the above move is unlikely to have any significantly adverse impact on the global aluminium industry, the report said.
The rating agency pointed out that the world, outside the US, can absorb the aluminium metal, which is currently being exported from the countries that are going to be impacted by the tariff. The expectation, however, does not take into account the impact of retaliatory trade measure, if any that may be taken by affected countries against the USA.
"Production cutbacks in China resulted in a deficit of 1.4 mmt of aluminium in the global market in CY2017, which is likely to widen further to over 2.5 mmt in CY2018," Icra Ratings senior vice president Jayanta Roy said.
"The trade restrictions will only alter the global aluminium material supply chain as there are markets around the world which can absorb the excess metal if there is any reduction in import in the USA," he added.
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As per the data released by the Aluminium Association in the investigation report, the USA was a net importer of 3.96 mmt of primary aluminium in CY2016. Out of this, 2.30 mmt was imported from Canada, and the balance 1.66 mmt originated from countries like Russia, Qatar, the United Arab Emirates and Argentina, on which the revised tariffs will be applicable.
However, in ICRA's opinion, this can be absorbed in rest of the world, going forward, because of an anticipated deficit in the primary aluminium market in CY2018.
In CY2017, the global aluminium demand-supply balance was hit by new regulations in China that resulted in a shutdown of 4.5 mmt of operating capacities in the country, and the scrapping of additional 6 mmt of upcoming capacities.
While capacities were curtailed, resulting in muted global aluminium production growth, aluminium consumption expanded by 6.6 per cent in CY2017 leading to a 1.4 mmt deficit, Icra said.