THE ALUMINUM PERSPECTIVE:

U.S. MARKET & TRADE

POLICIES

February 1, 2019

Heidi BrockPresident & CEO

The Aluminum Association

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The Aluminum Association

• Represent $71B U.S. Aluminum Industry

• Promote AL as Most Sustainable Material

• 115+ Member Companies

• Grow Markets and Achieve Policy Outcomes

WHO WE ARE

N.A. DEMAND GROWTH CONTINUES

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•2017 demand up an estimated 2.7 % y/y•Surpassing mid-2000s record levels

•Demand is up 45% since 2009

•YTD (Oct. 2018), demand up an estimated 3.4%

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THE MARKET FOR ALUMINUM

• Transportation market up 3.4% Y/Y and 123% since 2009

• Containers & Packaging down 1% Y/Y, and off 3% since 2009

•Building & Construction up 4.1% Y/Y and 30% since 2009

US/INDIA ALUMINUM TRADE FLOWS

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INCREASING SCRAP EXPORTS TO INDIA

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TRADE CONFLICT:DISRUPTING THE GLOBAL

MARKET

CHINA’S UNPRECEDENTED GROWTH

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• Capacity continues to outpace consumption in China.

•↑ to nearly 11mmt in 2017

• That’s roughly 6x total U.S. capacity.

• Capacity in excess of consumption in 2017 was equivalent to roughly 33% of capacity in RoW.

• China’s utilization rate ≈ 75% YTD

CONTINUED CAPACITY GROWTH IN CHINA

Data: CRU

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DOWNSTREAM CAPACITY BUILD CONTINUESHuge Investment in Aluminum Downstream Capacity in China

Source: Antaike

GROWTH IN CHINESE IMPORTS

Antidumping/Countervailing Duties imposed on Chinese imports of extruded products

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Decline from 2015 to 2016 due to the suspension of irregular and nontransparent trade practices (i.e. fake-semis). In this case, primary aluminum disguised as aluminum plate.

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SUPPORT FOR ACTION ON OVERCAPACITY

• Republicans and Democrats in the United States agree that there needs to be action on aluminum overcapacity.

• Aluminum overcapacity included in G-7 Communique (June 2018) and overcapacity and industrial subsidies highlighted in G20 Communique (November 2018).

• New OECD report on industrial subsidies in the aluminum sector published January 2019.

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ADVANCING A MULTILATERAL APPROACH • Bipartisan recognition of overcapacity in China.

• Joint Aluminum Association leaders calling for a global forum on aluminum overcapacity and coordinating a meeting in advance of G-7 meeting in Quebec. Overcapacity included in G-7 Communique.

• Global Forum on Steel Excess Capacity making progresson principles and commitments for data sharing (OECD, G20).

• Ongoing “trilateral initiative” between United States,EU and Japan to find shared principles related to State-Owned Enterprises (SOEs), industrial subsidies, forcedtechnology transfer and other practices not adequately covered by WTO rules/agreements.

www.aluminum.org/timeforaction

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TRADE POLICIES AND ENFORCEMENT

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WHY THE TRADE CONFLICT?Major goal of the Administration’s trade policy is to reduce trade deficit (balance of imports/exports)

Most recent Census Bureau data (October 2018) show U.S. trade deficit with China hit record high.• Import surge with looming tariffs• Strong U.S. economy fueling

consumption/imports.• Exports declining (e.g., soybeans)• Strong dollar

TRADE POLICY UNDER THE TRUMP ADMINISTRATION

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“7 Point Plan To Rebuild the American Economy by Fighting for Free Trade” Status

1. Withdraw from the TPP. Done (January 2017). The TPP-11 continues without the U.S. as a party.

2. Appoint tough, smart trade negotiators. USTR has a team in place actively negotiating with China, EU, others.

3. Direct the Secretary of Commerce to identify every violation of trade agreements and all appropriate agencies to use every tool under American and international law to end these abuses.

Done/In progress

4. Tell NAFTA partners that we intend to immediately renegotiate the terms of that agreement.

USMCA announced and signed late 2018; Now must be ratified by legislatures in all three countries

5. Instruct the Treasury Secretary to label China a currency manipulator. The U.S. Treasury Department declined (October 2018) to name China as a currency manipulator in its semi-annual report.

6. Instruct the USTR to bring trade cases against China, both in US and at the WTO –China's unfair subsidy behavior is prohibited by the WTO.

Done. Anti-dumping and countervailing duty investigations are in progress, including completed cases on aluminum foil and common alloy.

7. Use every lawful presidential power to remedy trade disputes if China does not stop its illegal activities - including the application of tariffs consistent with Sec.201 and 301 of the Trade Act of 1974 and Sec. 232 of the Trade Expansion Act of 1962.

Done. A 232 investigation on steel and aluminum imports is finalized, a 232 investigation on auto and uranium initiated, and a 301 investigation was finalized – with remedies (tariffs/quotas) applied.

SECTION 232 IMPLEMENTATIONTwo “off ramp” paths for importers: • Product exclusions (procedures, review and decision by Commerce Department) • Country exemptions (negotiations by USTR but President Trump makes the final decision).

Many countries have imposed rebalancing/retaliatory tariffs on a range of U.S. exports or initiated WTO disputes about national security rationale for tariffs.

Proclamation says scope can change "pending discussions of satisfactory long-term alternative means to address the threatened impairment to U.S. national security.” Current country exemptions:• Aluminum: Argentina (subject to an absolute quota) and Australia (fully exempt)• Steel: Argentina, Brazil and South Korea (subject to absolute quotas)

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IMPACT OF AD/CVD DETERMINATIONFOIL

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Preliminary Subsidy Margins

Preliminary Dumping Margins

Final AD/CVD Orders

IMPACT OF COMMON ALLOY DETERMINATIONCOMMON ALLOY

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Preliminary Subsidy Margins

Preliminary Dumping Margins

*Final AD/CVD Decision Announced in December

INCREASING CHINESE EXPORTS TO INDIA

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> Implementation of final orders on Foil and Common Alloy AD/CVD cases, monitoring ongoing cases.> Work with CBP on education about aluminum products/industry.> Move forward on recommended USHTS changes to better align trade data with industry practice.

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Section 232> Advocate for quota-free exemptions for “market economy” countries to be reinstated (expired May 30). > Pursue improvements to DOC exclusion process. Changes announced Sept. 11.> Maintain members-only “tracker” spreadsheet.> New monthly reports to track trade flows, monitoring impacts.

Enforcement FTA Negotiations> Congress to pass USMCA implementing bill, after pushing for country exemptions.> Ensure new negotiations with Japan, EU and eventually UK reflect aluminum industry priorities. Negotiations can begin in early 2019, with input from Congress.

Multilateral Institutions

> Political leaders recognize Chinese subsidies and overcapacity as a “must-do” problem to tackle – G7, G20, WTO discussions ongoing.> U.S.-EU-Japan “Trilateral Initiative” building momentum for new WTO disciplines on industrial subsidies.> Amplify OECD report on industrial subsidies in the aluminum sector

China Talks> Advocate for aluminum overcapacity to be addressed in U.S.-China bilateral talks. Major negotiations led by USTR January 2019. Deadline for a deal is is March 1> Monitor Section 301 tariffs.> Support U.S. government designation of China’s NME status, highlighting WTO compliance issues.

ALUMINUM ASSOCIATION TRADE PRIORITIES

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