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China Subsidy Exchange

October 11, 2016

USITC To Study the U.S. Aluminum Industry

The U.S. International Trade Commission recently heard testimony that global markets for aluminum and aluminum products are being distorted by Chinese subsidies. On September 29, 2016, the Commission held a public hearing in connection with a fact-finding investigation addressing the U.S. aluminum industry and global aluminum trade. The investigation was requested by the House Committee on Ways and Means in February 2016. Its purpose is for the Commission to provide Congress with a report on competitive conditions affecting the U.S. aluminum industry.

The Commissions hearing was organized around three witness panels. The first panel consisted of witnesses from the domestic aluminum industry, and included representatives of Alcoa, Century Aluminum, and Novelis. The second panel featured testimony from interested organizations, such as the Aluminum Association and the United Steelworkers. The third panel consisted of firms and associations from outside the United States, including representatives from aluminum producers in Russia, Canada, the European Union, and China.

Much of the testimony at the hearing focused on allegations that unfairly-traded imports of aluminum and aluminum products are distorting market conditions in the United States. For example, Michael Bless, President & CEO of Century Aluminum, stated that Chinese government planners made a strategic decision to develop an aluminum industry. The result has been an extraordinary buildup of capacity, far greater than demand in China or even in the rest of the world. Similarly, Mike Adams, Senior Vice President for Brazeway Inc., testified that Due to low-priced Chinese imports, we were starting to lose business, not in small increments but entire platforms, hundreds of thousands of units at a time, and millions of dollars in sales.

Several domestic witnesses specifically testified that the Chinese government is subsidizing its domestic aluminum industry. For example, Tim Reyes, President of Alcoa Cast Products, stated that we believe that unfair subsidies for Chinese smelters persist, possibly in the form of tax breaks, loans, or lack of enforcement of policies on the books. He encouraged the ITC to thoroughly research both state and provincial subsidies from China. Holman Head, Vice Chair of the Metal Service Center Institute, testified that China has increased its production capacity through massive, state-sponsored, and non-WTO compliant subsidies. Heidi Brock, President and CEO of the Aluminum Association, reported that [m]uch of Chinas aluminum expansion is being driven by misguided government policies such as artificial incentives, subsidies, and provincial and local government employment programs, all of which encourage the steady buildup in excess capacity and oversupply.

In response, representatives of the China Nonferrous Metals Industry testified that the development of the aluminum industry in China has been mainly driven by the sharp increase in domestic demand, and that China has actively encouraged the elimination of inefficient capacity.

The Commissions investigation is ongoing. At the hearing, Commission Staff asked interested parties to provide additional information regarding foreign government policies including policies of countries other than China that affect the U.S. market for aluminum. Written submissions must be filed by February 21, 2017. The Commission is expected to issue its report on June 26, 2017.