The Trump administration opened an investigation Wednesday into whether an influx of foreign aluminum is damaging U.S. manufacturers severely enough to threaten national security, beginning a process that could lead to curbs on imports, Commerce Secretary Wilbur Ross said.
”Here’s why we did it,” Ross told reporters, “Imports have been flooding into the aluminum industry and the defense angle is that high-purity aluminum is used in the F-35” as well as other military aircraft and vehicles. In the event of a war, domestic manufacturers might be unable to meet the Pentagon’s needs, he said.
The investigation mirrors a probe the Commerce Department launched a week earlier focusing on the steel industry, also invoking a seldom-used legal provision: section 232 of the Trade Expansion Act. A CNBC report on plans for the investigation sent aluminum stocks surging, with Century Aluminum Co. closing up 8.74 percent and Constellium NV up 2.46 percent.
The benchmark global aluminum price has gained 16 percent this year after rising by 12 percent last year, helped by stable demand but also reports that China is stepping up efforts to curb excess aluminum capacity. China is the world’s biggest producer of the metal and has been a target of criticism for creating a glut of aluminum that previously was depressing global prices.
The probe Ross announced comes as the U.S. has a standing trade complaint with the World Trade Organization alleging Chinese subsidies to its domestic aluminum producers are hurting prices of the metal. The case, filed by the Obama administration in its final days, also was supported by Canada and Japan, among others.
When asked about the WTO complaint, Ross said that it was still in the “exploration” phase and that it may be “subsumed” by the new investigation.
Last summer, Century Aluminum chief executive officer Mike Bless said China was subsidizing its smelters to an extent that violates World Trade Organization rules, and that something had to give or else they may have to shut down a smelter in Hawesville, Kentucky, that mass produces high purity aluminum used in U.S. fighter jets.
Ross said the U.S. currently only has one company that can mass produce aluminum in that quality, although he didn’t identify the Hawesville smelter.
If the Commerce Department finds evidence of a national security threat from aluminum imports, the president is authorized to unilaterally “adjust imports.” Only two presidents — Richard Nixon and Gerald Ford — have ever granted relief under Section 232, citing national security concerns stemming from the global oil crisis of the 1970s.
Until the Trump administration opened the steel investigation last week, the U.S. had launched only two such investigations since the 1970s, and in each the Commerce Department’s Bureau of Industry and Security declined to recommend action.
The presidential memorandum initiating the steel probe also cited aluminum manufacturing as a core industry that is critical to the manufacturing and defense base, along with vehicles, aircraft, shipbuilding and semiconductors.