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By Stuart Burns
The EU has announced an end to the temporary suspension of anti-dumping duties on rolled aluminum products into the block. The suspension was set to expire in July. The news comes hot on the heels of last week's announcement that the UK would establish provisional duties for six months while it carries out an anti-dumping investigation into imports of aluminum extrusions from China.
The European Commission performed a similar investigation last year with regards to Chinese aluminum plate, sheet, strip, and foil products. On October 11, they released findings stating that the dumping margin was between 14.3%-24.6%. Though the Commission implemented anti-dumping measures, they suspended the ruling for nine months due to the tight market in the wake of the pandemic bounce back.
Come March, the EC consulted with the involved parties to decide whether it was necessary to continue to extend the suspension period. They concluded there was sufficient spare capacity in the European market. On average, utilization was found to be running at about 80%. This proved more than satisfactory for the measures to be reintroduced.
That brings us to this week. As stated, the European Commission has officially announced it will re-implement anti-dumping duties after the extension expires on July 12. During the investigation period (July 1, 2019 - June 30, 2020), the EU imported around 170,000 mt of products involved in the case from China. For scale, this is more than the entire annual flat-rolled aluminum consumption of the UK.
The products involved included coils or coiled strips, sheets, or circular plates with a thickness of 0.2 mm-6 mm. It also included aluminum plates with a thickness of over 6 mm, and aluminum sheets and coils with a thickness of 0.03 mm-0.2 mm. That said, the case excludes related aluminum products used in manufacturing cans, cars, and aircraft parts. It's likely this is the result of effective consumer lobbying.
The decision is set against a backdrop of soaring Chinese aluminum exports. The surge stems, in part, from a lower SHFE primary price relative to the LME and increased VAT rebates for exporters. There has also been a boost in domestic aluminum production in China thanks to relaxed energy restrictions and COVID lockdowns, which slowed consumption.
It's true that the EU's move may not stem the flow of Chinese metal on its own. However, the original investigation found that duties set at or around the range of under-pricing (14-25%) may result in the market simply paying the cost. This might not apply to standard commercial product. However, for higher alloys, European availability remains tight despite what the EC may believe.
For example, when the UK applied 35% duties to Russian material last month, the market largely just paid it. Of course, the material in question was already in transit, and there were no ready alternatives. Still, it's indicative of the fact that when countries impose import duties, it often fails to penalize the producer. Instead, it leaves the burden with the importer or, more likely, the consumer.
Duties can dissuade further purchases in the longer term, assuming the market is sufficiently well served with alternative supply options. But while markets remain tight, they can end up lifting the market price consumers are forced to pay from all suppliers. This even includes those suppliers not impacted by the duties. In their case, they can simply take advantage of scarcity, inflating prices to just below the anti-dumping level.
That was certainly the case under 232 in the USA. It's likely to be the case in the EU and UK. That is, until such time as the market softens and metal becomes so readily available that suppliers have to fight for business.
Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.
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