Declines in the U.S. primary aluminum industry aren’t entirely the fault of China, James Breeden with UNO International Trade Strategy argues in a recent white paper. He adds that more trade barriers will hurt the situation rather than help it.

According to the report, “The Aluminum Industry and the ‘China Problem’: A Convenient and Misleading Explanation,” Breeden says the idea that China is solely behind the decline in primary aluminum production in the U.S. “ignores the complexities of a global industry and the strategic missteps of large-scale producers in response to the development of the Chinese aluminum industry.” Instead, he argues that the rise of the Chinese aluminum industry has “exposed existing disadvantages and vulnerabilities experienced by U.S. producers.”

UNO’s analysis notes that primary aluminum production in the U.S. peaked in the 1980s and has been trending lower since that time. In contrast, China’s aluminum expansion began around 2000.

UNO’s report finds that U.S. upstream producers today are dealing with higher energy costs and less efficient technology than producers in China, Canada, Russia and the Middle East. Because of that, U.S. smelters are struggling to compete. In the U.S., it costs $1,732 per ton to produce primary aluminum, the report finds. The global average cost per ton is $1,348. In China, it’s $1,374; in Canada, it’s $1,212; and in Russia it’s $1,268.

Additionally, the U.S. aluminum market has shifted over the past 20 years from upstream production to the downstream markets.

“While the upstream producers of primary aluminum in the United States are facing significant challenges, the downstream industry – consisting of producers specializing in value-added aluminum products – is experiencing robust growth and profitability,” according to the report. “The increased demand for downstream products has offset the struggles of the U.S. primary aluminum sector such that in recent years the entire value chain of the U.S. aluminum industry has posted positive gains in demand and revenue.”

In 2014, U.S. aluminum shipments were up 36 percent compared to 2009, the report said.

Finally, Breeden argues that more tariffs and trade restrictions against Chinese aluminum won’t resurrect the U.S. industry.

“U.S. policymakers are faced with a dilemma: succumb to the popular, politically convenient anti-China argument and develop policies – such as trade barriers – to protect a declining and unprofitable sector of the industry at the expense of industry’s downstream business or take this opportunity to implement policies that incentivize aluminum producers to undertake the strategic shift to the growing and more profitable value added market,” the report concludes.

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