Washington, D.C. (June 28, 2023)— Today, the SAFE Center for Strategic Industrial Materials (C-SIM) released a report outlining the impact high energy costs have on preventing the U.S. from developing a robust domestic primary aluminum industry and how to create a more effective trade policy framework.
The new report, “Political Tailwinds: Examining Trade Policy for the U.S. Aluminum Industry,” examines how aluminum trade has been disputed, tariffed, monitored, traced, capped, and greened over the last decade. The most recent three presidential administrations have dealt with these issues multilaterally, bilaterally, and independently.
“Aluminum production is vital to U.S. reindustrialization, our national defense, and our broader energy transition. Yet, we remain dangerously dependent on imports from countries like China,” said SAFE CEO Robbie Diamond. “While we have tried to use trade policy alone to reinvigorate our domestic industries, the high cost of energy here remains a key impediment. It is only with abundant, affordable, clean, and reliable energy that we will be able to crush, smelt, and process the materials we need for the future.”
While trade policy related to aluminum has focused on competition from China’s overcapacity—and resulting price suppression in the global markets—these policies have failed to address a more pressing problem on our own shores: the affordability of electricity in the United States.
- The Obama administration’s multilateral approach led to little response from China on excess capacity. During his second term, domestic primary production sank to 64%.
- The Trump administration set an explicit benchmark of the Section 232 tariffs of getting primary capacity to 80%, but capacity reached only 66 percent during his term.
- The Biden administration’s results are yet to be seen, but so far during his first term two smelters curtailed and one is moving towards complete shutdown, adding to the pressure for the administration’s policies to respond to smelter needs.
“It’s clear from the last decade that trade policy alone can’t stem the declining aluminum manufacturing industry in the U.S., and that protectionist policies alone risk alienating important allies,” said Joe Quinn, Director of the Center for Strategic Industrial Materials at SAFE. “As decarbonization policy in the U.S. increases aluminum demand, this paper looks at how that demand can be met domestically and from allies, instead of from foreign entities of concern.”
To revitalize the essential aluminum industry in the U.S. and allied countries, this report recommends policymakers:
- Confront the overproducing elephant in the room by continuing to incorporate provisions into the Global Arrangement on Sustainable Steel and Aluminum (GASSA) market to counter unfair trade practices by China.
- Support domestic industry while avoiding retaliatory policies that are too broad and hurt allied countries.
- Create transparency and certainty in the aluminum market to draw in private capital.
- Incorporate like-minded countries and promote technology transfer within the GASSA market.
- Provide affordable, abundant, and reliable energy sources for smelters. GASSA can go a step further by incentivizing aluminum sourced with clean energy sources. Power from renewable energy is less volatile and increasingly more cost competitive for smelters.
These policies will be essential to ensuring that the U.S. and its allies do not become overly dependent on sourcing vital aluminum from foreign countries of concern.
“The U.S. can lead the world on developing trade policies where clean aluminum is prioritized and supported by this and future administrations. This would not only benefit the U.S. economy but is necessary to reach decarbonization goals in the energy sector,” Quinn said. “The choice is with policymakers.”
In February, C-SIM released “The U.S. Aluminum Industry’s Energy Problem and Energy Solution,” a report examining the cruel irony of rising demand for aluminum’s energy-saving benefits versus the declining production due to its energy intensity in the production phase. Released in May, the “Legislative Analysis for the U.S. Aluminum Industry” report examined how federal incentives to produce more clean energy transition products do not address the main obstacle to production—access to energy. C-SIM will publish another report in the coming months looking at global best practices for aluminum production.
###
About SAFE’s Center for Strategic Industrial Materials (C-SIM)
C-SIM is a policy initiative dedicated to advancing more secure, reliable, and sustainable supply chains for aluminum and other industrial materials critical to America’s national and economic security. The Center is exploring new federal government purchasing regulations that prioritize domestic aluminum and developing policy recommendations designed to reduce carbon emissions to net zero by 2035.
About SAFE
SAFE is a non-partisan, non-profit policy thought leadership organization dedicated to accelerating the real-world deployment of secure, resilient, and sustainable transportation and energy solutions of the United States, and its partners and allies, by shaping policies, perceptions and practices that create opportunity for all. Visit secureenergy.org to learn more.
Media Contact
Jason Islas | jislas@secureenergy.org | Phone: +1-310-977-0645
