Aluminum producers in Canada cash in on U.S. tariff exemption – by Pratima Desai and Nichola Saminather (Reuters Canada – July 23, 2019)

LONDON/TORONTO (Reuters) – Canada’s exemption from U.S. tariffs on imports of aluminum metal has boosted earnings at the Canadian operations of companies such as Rio Tinto and Alcoa, but has not cut costs for U.S. consumers.

In May, the United States lifted the Section 232 tariff of 10% imposed on Canadian imports of aluminum, a vital ingredient for auto makers, drinks firms and military equipment companies.

Aluminum costs for U.S. consumers are the benchmark price on the London Metal Exchange at around $1,810 a tonne plus the physical market premium, around $400 a tonne. Analysts say $192 of the premium is the tariff non-exempt producers pay.

“About 70% of U.S. aluminum demand can be met without paying import duties, yet 100% is pegged to the duty payable,” said Citi analyst Oliver Nugent, adding the bank’s estimate for U.S. aluminum demand this year was 5.57 million tonnes.

“Canadian producers are making good margins on physical premiums. It’s a negotiated market and up to consumers to push the premiums down. The surprising thing is that there isn’t a two-tier structure. One tier for producers that pay duties and another for those that don’t.”

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