01.12.17

After Push By Schumer, Feds Crackdown Against China For Distorting Global Markets With Subsidized Aluminum; Senator Calls Move A Victory For Alcoa In Massena

Schumer Previously Called On Feds To Investigate China’s Practices And Take Up Case Against China’s Aluminum Subsidies

Schumer Successfully Pushed Feds To Address China’s Subsidies, Which Have Damaged Alcoa

U.S. Senator Charles E. Schumer today announced the federal government has finally forced a case at the World Trade Organization (WTO) to address China’s potential cheating practices in its aluminum industry. Schumer said this announcement is a major victory for Alcoa in Massena and could help to protect hundreds of jobs in Upstate New York.

“New York is home to Alcoa Massena, one of America’s few remaining aluminum smelters, so as New Yorkers we understand the value of a thriving aluminum industry – from soda cans to raw materials for our military infrastructure;  protecting this vital industry is essential to not only maintaining but growing the  Upstate economy,” said Senator Schumer. “Today’s announcement to finally crackdown on China is promising news for Alcoa. We have all seen first-hand the impact of China’s subsidized expansion on our communities and workers. My message to the incoming Administration is clear: you must continue this push and aggressively press China on their predatory trade practices.”

“USTR’s request for consultations is intended to eliminate the devastating effects China’s actions to dominate world aluminum production have created for its competitors,” said USW International President Leo W. Gerard. “Success in this case would give hope to the thousands of aluminum sector workers across the country that have either lost their jobs or are in fear of losing them in this distorted market. We worked with allies in Congress and partners in the American aluminum industry to bring the severity of the problem to USTR’s attention and especially want to thank Senators Wyden, Schumer, Brown and Portman for their leadership."

Schumer explained that China’s government is providing massive subsidies to its aluminum and steel sectors, which are primarily state-owned, in order to export high volumes of aluminum and steel. These products are sold at artificially low prices in the U.S.  and global markets, crippling the U.S. industry China has gone from producing less than 4 million tons of primary aluminum per year in 2001, to producing more than 30 million tons per year in 2015, around half of total global supply, according International Aluminum Institute data. Global prices have fallen in tandem with the growth in Chinese oversupply damaging the U.S. aluminum industry which has gone from 23 aluminum smelters employing nearly 16,000 Americans in 2000, to five smelters employing approximately 2,500 Americans in 2016.  Alcoa’s Massena operation is one of the last five smelters. Smelters like Alcoa’s provide good paying middle-class jobs, that support their local communities. They also provide needed production capacity for producing military-grade aluminum used in armor plated vehicles and planes.

The aluminum industry in New York directly employs 4,600 employees and indirectly helps employ another 16,200 employees with a total economic impact of $6.6 billion. Alcoa alone employs 600 workers in Massena, New York, and Novelis employs around 1,100 workers in Oswego, New York. Schumer explained that the Massena operation contributes $340 million annually to the local economy in payroll, local purchases and tax payments. Novelis’s operation in Oswego also produces over 1 billion pounds of high-quality aluminum sheet each year.

 A copy of the letter Schumer sent with members of the Senate Finance Committee to the USTR appears below:

Ambassador Michael Froman

United States Trade Representative

Office of the United States Trade Representative

600 17th Street, N.W.

Washington, D.C. 20508

Dear Ambassador Froman:

We write to express our concern about China’s persistent unfair trade practices that have led to significant excess capacity in the global aluminum sector and are undermining the entire U.S. aluminum value chain, including producers of primary aluminum and extruded aluminum products.  We urge the Administration to bring swift and formal action against China’s unfair trade practices at the World Trade Organization (WTO) before U.S. manufacturers and their workers incur further irreparable harm.

Exponential growth in China’s aluminum sector, fueled by heavily subsidized, government-directed lending, has had significant implications for the U.S. aluminum industry.  China now produces more than half of the world’s aluminum, a significant increase since 2007 when it accounted for only 30 percent of production worldwide.  Each year since 2008, China has increased capacity and production beyond what its domestic market demands, leading to a 35 percent drop in global aluminum prices.  At the same time, these price declines have led U.S. producers to take nine aluminum smelters offline since 2008, leaving only five currently operating in the U.S. and causing massive layoffs.  Fifteen thousand workers in aluminum production have lost their jobs in the last decade, including 1,500 this year alone.

U.S. manufacturers of semi-finished aluminum products have also faced significant market distortions as a result of China’s excess capacity.   In 2010, aluminum extruders filed trade cases in response to the flood of Chinese imports.   Final determinations by the Commerce Department and the International Trade Commission resulted in antidumping and countervailing duties levied against Chinese aluminum extrusion products as high as 374 percent.  While the trade cases helped domestic producers recover from China’s unfair trade practices, concerted circumvention efforts by Chinese producers continue to disadvantage and harm U.S. companies.   By collapsing the U.S. primary aluminum industry, China has also made downstream producers like the U.S. extruders less competitive by forcing them to pay more to import primary aluminum.

China’s extensive subsidization of its aluminum sector has contributed significantly to global excess capacity and export surges in its aluminum sector.   With significant government support, Chinese companies are allowed to operate at losses or otherwise independent from market considerations.  The Commerce Department identified more than 20 government programs that subsidize Chinese aluminum extruders.  News reports have identified government reductions of energy bills and tens of millions of dollars in cash infusions to help Chinese primary aluminum producers.   And despite continued price drops in the global market, Chinese capacity is expected to increase in the next several years. 

China’s subsidies appear to be in violation of China’s WTO obligations and threaten the entire U.S. aluminum sector.  They have caused significant price suppression worldwide and have adversely affected U.S. interests.   A strong aluminum sector is critical to U.S. manufacturing and to our national security.  We urge you to quickly bring a WTO case against these subsidies before they further harm U.S. companies and their workers. 

Sincerely,

Charles E. Schumer
United States Senator

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