Alcoa's Becancour aluminum smelter is seen in Becancour, Que., on Feb. 10.Bernard Brault/Reuters
Alcoa Corp. chief executive William Oplinger is appealing to U.S. President Donald Trump to drop his aluminum tariffs on Canada, arguing the United States doesn’t have enough domestic capacity to fill its needs, and any attempt to meet that demand would put immense strain on the electricity grid.
Mr. Trump on March 12 levelled 25-per-cent tariffs on most international imports of aluminum and steel, including from Canada. The move was one of his first in a global trade war that has since mushroomed to incorporate many other sectors and inflame relations with other global superpowers, such as China.
While the U.S. is a major global producer of aluminum, it depends on millions of tonnes of imports to meet its needs for a vast array of industries, such as aerospace, construction and the automotive sector. Canada is by far the biggest foreign supplier to the U.S., accounting for 2.9 million tonnes a year, or about 70 per cent of its aluminum imports.
Pittsburgh-based Alcoa AA-N is a major player in Canadian aluminum, operating three smelters in Quebec and employing around 2,500 people in the province.
Quebec’s aluminum product producers are feeling the sting of Trump’s tariffs
In justifying his tariffs strategy, Mr. Trump has argued they are crucial to reinvigorate a declining American manufacturing sector and to bring back millions of jobs that have been lost to foreign competitors over the past few decades.
In a conference call with analysts on Wednesday evening, following the release of the company’s first-quarter earnings, Alcoa’s CEO said that even if U.S. aluminum capacity could be maxed out, the country would still face a shortfall of 3.6 million tonnes, a hole that would need to be filled by the construction of new smelters in the U.S.
“It takes many years to build a new smelter, and at least five to six smelters would be required to address the U.S. demand for primary aluminum. These new smelters would require additional energy production equivalent to almost seven new nuclear reactors, or more than 10 Hoover Dams,” Mr. Oplinger said.
“Until additional smelting capacity is built in the U.S., the most efficient aluminum supply chain is Canadian aluminum.”
Even though Alcoa only faced a few weeks of tariffs in the first quarter, it incurred US$20-million in costs as a result. For the second quarter, it expects to incur an additional US$90-million.
Mr. Oplinger said the company has actively engaged with U.S. and Canadian government officials, including direct reports to Mr. Trump, former Canadian prime minister Justin Trudeau and current Canadian Prime Minister Mark Carney.
To Mr. Trump’s representatives, he said, the message has been “fairly simple”: To support U.S. jobs, the administration needs to give Canada a break.
“In order to support the downstream processing jobs, we need to have economic upstream aluminum production that can come in preferably through Canada,” he said.
Mr. Oplinger also pointed out how difficult it is to make operational decisions in a highly uncertain, on-again, off-again tariff environment. While Mr. Trump has kept his aluminum tariffs in place, he backtracked on many of his other “reciprocal” tariffs that he arbitrarily imposed on dozens of countries a few weeks ago.
“We’ve seen the volatility of discussions around the tariffs over the last 60 days. So we just don’t know whether they will stick.”
Alcoa is a top 10 producer globally of aluminum and the chemical compound alumina. It is also one of the world’s biggest bauxite miners. Bauxite is the major raw material used in aluminum production.
Apart from Alcoa, the other major players in Canada in aluminum are Anglo-Australian miner Rio Tinto PLC and Aluminerie Alouette.