(The Canadian Press)

Politics, pandemics and Russian aluminum: why Canada faces fresh U.S. tariffs

Head of Aluminum Association of Canada, is at a loss to understand why his industry is being targeted

Why the United States chose to taint the debut of North America’s celebrated new trade deal by threatening fresh tariffs against Canadian aluminum, only President Donald Trump and trade emissary Robert Lighthizer can say for sure.

But industry insiders point to a convergence of disparate factors: COVID-19, international metals arbitrage, presidential politics and $16.3-billion worth of the stuff from Russia, the world’s second-largest producer.

Aluminum is one of the elemental components of the Canada-U.S. trade relationship, a bond forged in the blast furnace of the American war effort. Experts say smelters on both sides of the border stand to benefit from the U.S.-Mexico-Canada Agreement, which took effect Wednesday and imposes new requirements for regionally sourced metals.

Jean Simard, president and CEO of the Aluminum Association of Canada, is at a loss to understand why his industry is being targeted by the White House for the second time in two years. The U.S. has nowhere near the capacity to meet growing demand.

“It doesn’t make sense,” Simard said. ”It’s like an oxymoron. It’s so contradictory to the spirit of USMCA.”

The answer may lie in how aluminum production works around the world, and how traders and marketers profit from it.

Because they traffic in white-hot liquid metal, aluminum smelters can’t simply shut down when demand for the product dries up, which is what happened to Canadian producers — who provide the bulk of the metal to U.S. markets — when the pandemic forced auto manufacturers to idle their assembly lines.

Smelters pivoted away from the specialized premium products demanded by the auto sector and instead produced the more generic primary aluminum known as P1020, shipping it to the only storage warehouses that are cost-effective, Simard said: facilities in the U.S., which is where the lion’s share of the North American aluminum market is located.

The ensuing “surge” in Canadian imports caught the attention of the U.S. trade representative’s office — or more specifically, the two U.S. producers that raised a red flag: Century Aluminum and Magnitude 7 Metals, which together comprise a Trump-friendly lobbying effort known as the American Primary Aluminum Association.

“The surge of Canadian metal has a caused the price to collapse and is endangering the future viability of the U.S. primary industry,” the association wrote to Lighthizer in May.

“Action — real action, not mere monitoring, and endless discussions in multinational fora — is needed now if the United States is to save what is left of its primary aluminum industry.”

A separate group — the Aluminum Association, which represents dozens of U.S. and international producers — disagrees, calling Canadian suppliers an integral element of the North American supply chain and a key component of the industry’s success.

Politics is undoubtedly a factor: two of Century’s four smelters are in Kentucky, while Magnitude 7 operates in Missouri, two states vital to Trump’s electoral fortunes.

“These are the states that keep campaign managers up at night,” said Gerald McDermott, an international business professor at the University of South Carolina.

A spokesman for the American Primary Aluminum Association did not immediately respond to a request for comment Friday.

Glencore Plc, a metals trader and producer based in Switzerland, holds a 47 per cent stake in Century. Magnitude 7, founded by a former Glencore aluminum trader, operates a single Missouri plant that won a new lease on life after Trump’s first round of tariffs in 2018, but which warned in February it was on the verge of shutting down.

And Glencore holds the exclusive rights to sell Russian-made aluminum in the U.S., having agreed in April to spend $16.3 billion over the next five years on up to 6.9 million tonnes of the metal from Rusal, the second-largest aluminum producer in the world.

Glencore is also a major player in the world of metals arbitrage — buying commodities at the lowest price possible, then shipping and storing them before selling on a futures contract in hopes of a higher price. The pandemic has fuelled a global collapse in the price of aluminum, Simard said, while the threat of tariffs has had the opposite effect.

“What do the traders do? They buy the metal at a very low price because the crisis is what brought you to pivot to this position, and they warehouse it when interest rates are very low because it’s a crisis,” Simard said.

“The key player over and above everybody else is Glencore.”

Rusal, once controlled by the Russian billionaire oligarch Oleg Deripaska, was subject to U.S. sanctions since Moscow’s annexation of Crimea in 2014 — sanctions that were lifted in January 2019 as part of an extensive restructuring that saw Deripaska relinquish control of the company. Glencore was involved, too, swapping shares in Rusal for a direct stake in its parent company, En+.

The USTR and the Trump administration ”cannot be unaware of the corporate structure around Rusal and Glencore. I would doubt it very much,” said Simard.

A spokesman for Glencore declined to comment Friday.

The Canadian aluminum industry, the bulk of which is located in Quebec, owes its origins to soaring American demand for the metal in the months prior to the U.S. entry into the Second World War — a partnership that cemented Canada’s role in the continental military industrial base. Is the Trump administration trying to end that relationship?

“It’s worth raising the question,” Simard said.

Trump’s disdain for Canada and Prime Minister Justin Trudeau has long been an open secret — “Trudeau’s a ‘behind-your-back’ guy,” former national security adviser John Bolton’s explosive new book quotes the president saying — and with an uphill battle for re-election looming, he may be looking to score political points, McDermott said.

“Why is the Trump administration doing what it’s doing? The short answer is it’s in a free fall,” he said.

“It’s got to show that it’s doing something for these Midwestern manufacturing states, and that means getting tough with non-U.S. people. What better thing, then, to piss off the Canadians?”

James McCarten, The Canadian Press

Like us on Facebook and follow us on Twitter.

Want to support local journalism? Make a donation here.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Black bear cubs Athena and Jordan look on from their enclosure at the North Island Wildlife Recovery Association in Errington, B.C., on July 8, 2015. Conservation Officer Bryce Casavant won the hearts of animal lovers when he opted not to shoot the baby bears in July after their mother was destroyed for repeatedly raiding homes near Port Hardy, B.C. THE CANADIAN PRESS/Chad Hipolito
Supreme Court quashes review of North Island conservation officer who refused to euthanize bears

Bryce Casavant was dismissed from his job for choosing not to shoot the cubs in 2015

Homalco First Nation said that it will intervene in the judicial review sought by aquaculture companies with regards to federal decision to phase out 19 Discovery Island fish farms by 2022. In this picture from Sept. 24, a demonstrator wears representations of sea lice outside the Fisheries and Oceans Canada offices in downtown Vancouver.(Quinn Bender photo)
Aquaculture companies’ judicial review challenges reconciliation and Aboriginal Rights: First Nations

Homalco First Nation chief reacts to Mowi and Cermaq intervention in Discovery Island decision

Oyster River Fire Rescue members were called out to a suspicious fire in Black Creek. Two vehicles parked at a private residence were destroyed by fire. Photo courtesy Oyster River Fire Rescue
Suspicious fire destroys two vehicles at Black Creek residence

Oyster River Fire Rescue personnel were dispatched to a fire at a… Continue reading

CSWM will be closing the landfill in Campbell River and opening the organics composting facility in 2022. In the meantime, the City of Campbell River was hoping for a break on yard waste drop-off for residents. Black Press file photo
Comox Strathcona waste board upholds yard waste drop-off fee

Campbell River had hoped for waiver until new organics facility opens

An Atlantic salmon is seen during a Department of Fisheries and Oceans fish health audit at a fish farm near Campbell River, B.C. in 2018. Mowi Canada has applied to the Federal Court of Canada for a judicial review of the decision by Fisheries Minister Bernadette Jordan to phase out salmon farming in the Discovery Islands by June, 2022. (Canadian Press/Jonathan Hayward photo)
UPDATE: B.C.’s major salmon farms seek court intervention in Discovery Islands ban

All three producers now confirm they’ve filed separately with the Federal Court

Maj.-Gen. Dany Fortin, vice-president of logistics and operations at the Public Health Agency of Canada, speaks at a news conference on the COVID-19 pandemic in Ottawa, on Friday, Jan. 15, 2021. THE CANADIAN PRESS/Justin Tang
B.C. records 500 new COVID-19 cases Wednesday, 14 deaths

Outbreak at Surrey Pretrial jail, two more in health care

Is it time to start thinking about greener ways to package cannabis?

Packaging suppliers are still figuring eco-friendly and affordable packaging options that fit the mandates of Cannabis Regulations

Grounded WestJet Boeing 737 Max aircraft are shown at the airline’s facilities in Calgary, Alta., Tuesday, May 7, 2019. WestJet will operate the first commercial Boeing 737 Max flight in Canada today since the aircraft was grounded in 2019 following two deadly crashes. THE CANADIAN PRESS/Jeff McIntosh
Passengers unfazed as WestJet returns Boeing 737 Max to service on Vancouver flight

After a lengthy review process, Transport Canada cleared the plane to return to Canadian airspace

The top part of the fossil burrow, seen from the side, with feathery lines from the disturbance of the soil – thought to be caused by the worm pulling prey into the burrow. (Paleoenvironntal Sediment Laboratory/National Taiwan University)
PHOTOS: SFU researchers find evidence of ‘giant’ predatory worms on ocean floor

Fossils found the prove the existence of an ancient Taiwanese worm as long as two metres

RCMP officers provide policing for 63 B.C. municipalities under a provincial formula based on population. (Black Press file photo)
B.C. communities warned of upcoming RCMP unionization costs

Starting salaries for city police officers are 30% higher

(Pxhere)
B.C. nurse suspended after using Tensor bandage to trap long-term care patient in room

Susan Malloch voluntarily agreed to a three-day suspension of her certificate of registration

Abbotsford’s Skully White (left), who donated his kidney in December, has started a campaign to find other recipients and donors. The first candidate is retired police officer Gavin Quon. White owns and operates a hotdog stand, Lullys Food Experience, out of the Abbotsford Canadian Tire parking lot. (Facebook photo)
After donating his kidney, Abbotsford hotdog king starts donor campaign

Skully White donated his kidney to customer Tim Hiscock in December

Toronto-based director Michelle Latimer was recently scrutinized after years of claiming she was of Algonquin and Metis descent. (CANADIAN PRESS/Chris Young)
Haida activist calls for hefty fines, jail time against those who claim to be Indigenous

Filmmaker Tamara Bell proposing the Indigenous Identity Act – to dissuade ‘Indigenous identity theft’

Most Read