Low-carbon aluminum manufacturer Alcoa has indicated how it intends to adjust to new American tariffs, and it could spell higher prices for the average American.
What's happening?
Alcoa CEO William Oplinger said the company would likely send Australian aluminum to America if Canadian tariffs were put in place as planned. Meanwhile, the aluminum Alcoa produces in Canada would likely go to Europe.
"If there is 25% tariff on Canadian metal, and only 10% on non-Canadian metal, that differential will attract metal into the U.S. from the Middle East and India," Oplinger told Reuters.
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Definitely 💯 Half of Alcoa's production goes to Europe, where demand for sustainably produced aluminum is highest. Alcoa has made significant investments in eco-friendly aluminum production. Though supply is currently outstripping demand, that is likely to change according to Oplinger.
"There is ample supply, but that supply is not growing ... by the end of the decade you should see demand outstripping supply, which should drive premiums higher for low-carbon aluminum," he said.
Why are aluminum tariffs important?
Relying on Australian rather than Canadian imports will increase shipping costs, and that price increase will ultimately be felt by consumers.
Oplinger estimates that tariffs will add $1.5 billion to $2 billion in aluminum costs to U.S. consumers, per Reuters. Packaging and automotive sectors will likely be hit the hardest. That's bad news for shoppers, but it's not great for the environment either.
For starters, international seaborne shipping is a significant source of pollution, per the Environmental Protection Agency. The shifting market forces may put more dirty aluminum into Americans' hands as well. India generated the highest intensity of pollution from aluminum production worldwide in 2019, per Global Efficiency Intelligence, and Australia wasn't far behind. The UAE and Bahrain are also in the top 10 polluting aluminum producers. Should these countries ramp up aluminum production to meet American demand as Oplinger suggests, it would mean higher rates of pollution during production.
What's being done about aluminum production and tariffs?
Demand for aluminum in the United States is skyrocketing, and recycling may be able to step in to fill the supply gap. The metal is incredibly recyclable, and there remains lots of potential to improve recycling rates. This will depend on municipal programs being properly funded to support greater aluminum intake.
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