By Mrinalika Roy and Seher Dareen
(Reuters) – Alcoa will likely send its Australian output to the U.S. if the United States imposes tariff on Canadian imports, the aluminum producer’s CEO William Oplinger said on Thursday.
U.S. President Donald Trump has threatened tariffs on numerous countries including close allies such as Canada and Mexico, and Oplinger’s comments show how shipping flows could be upended by such levies – adding potential costs to consumers worldwide.
“We would be optimizing our global system based on any new tariff structures … there is a potential for metal to come out of Australia and go into U.S. if there is a massive tariff dislocation,” Oplinger told Reuters.
The company produces 2.2 million metric tons of aluminum per year, of which 900,000 metric tons are manufactured in Canada. A majority of the Canadian output goes to the United States.
Earlier this week, Trump said he was thinking about imposing 25% duties on imports from Canada and Mexico on Feb. 1.
Alcoa would likely reroute its Canada-made aluminum to Europe to avoid any potential tariff, Oplinger said.
“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.”
Any potential tariff will add about $1.5 billion to $2 billion in costs for aluminum consumers in the United States, Oplinger said, adding that industries such as packaging and automotive will likely see the most impact.
GREEN ALUMINUM DEMAND
Alcoa’s biggest market for low-carbon aluminum remains Europe, where the company ships nearly half of the material it produces.
Using clean energy such as hydropower to make the metal allows the producers to charge a premium as manufacturers using green aluminum in their processes can generate more carbon credits, which can be used to offset an entity’s emissions.
Alcoa charges a 1% premium, coming up to between $20 and $40 per ton, since there is more supply than demand for low-carbon aluminum.
“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,” Oplinger said.
(Reporting by Mrinalika Roy and Seher Dareen in Bengaluru; Editing by Shounak Dasgupta)
