US aluminum producers
Previously, we looked at how Section 232 tariffs have lifted US steel production and also looked at steel companies’ investment plans after the tariffs. In this article, we’ll see how the US aluminum industry has responded to the tariffs.
US aluminum production rose 21.0% last year. Production rose a whopping 47.7% in January as well according to the Aluminum Association. Rising production could be attributed to the restart of Alcoa’s (AA) Warrick smelter and Century Aluminum’s (CENX) Hawesville smelter. However, we should remember that the Warrick restart was announced before the Section 232 tariffs were announced. Furthermore, the sharp rise in US aluminum production is coming from a very low base and despite the increase in production, the United States (SPY) still imports the majority of its aluminum requirements as the domestic smelting capacity is woefully short of demand. We haven’t seen investments in new aluminum plants after the tariffs.
While the tariffs lifted US steel companies’ earnings, aluminum is a different story. Aluminum prices fell sharply last year, and the rise in US physical delivery premiums wasn’t enough to offset that. Furthermore, alumina prices (AWC) skyrocketed last year, which hurt Century Aluminum’s earnings. Century Aluminum posted an adjusted net loss of $13.0 million last year. While Alcoa benefited from higher alumina prices in 2018, it could miss the windfall this year, as alumina prices have fallen sharply from their 2018 highs.
Read Should You Expect More Gains from Alcoa in 2019? for more information.