Daniel Hill: Good morning everyone.
My name is Dan Hill.
I’m the Acting Undersecretary for the Bureau
of Industry and Security.
And I’d like to welcome you to today’s
public hearing on the Bureau of Industry and
Security’s Section 232 Investigation on
the effect of aluminum imports on the US national
security.
While we wait for the secretary to join us
and to kick the session off, I’d like to
just review a few rules of the road for our
hearing today.
There are 31 speakers – 32 speakers altogether.
And we wish them to have the opportunity to
talk to us today about the issues facing the
industry from imports.
If there is anybody here today who wish to
testify but is unable to because of time or
others, I do want to tell you that the – we
are still accepting written comments, and
we will accept those through midnight tomorrow,
June 23, 2017.
Those who have elected to testify are sitting
down front here, and they will be called to
the podium by Matthew Borman, our assistant
secretary for Export Administration.
The order of speakers was provided to each
speaker when you checked in, and Matt will
be calling you in that order.
Speakers will be asked to limit their testimony
to five minutes.
A timekeeper here behind me will watch the
clock very closely, and he will hold up signs
when you’re getting to the end of your five
minutes.
Then he’ll hold up another sign when you’re
at your five minutes.
Then he holds up a demolition sign at
the end of that.
These proceedings are being recorded for us
professionally, and a transcript will be posted
on our website.
When you come to the podium please identify
yourself and the organization that you represent.
And remember again to watch the timekeeper.
We will not be taking questions from those
testifying or from the audience during the
hearing.
However the panel as we listen to the presentations
this morning may take clarifications on specific
points that you may raise.
In a few minutes after we hear from our secretary,
we will begin with our first speaker, State
Representative Jim Gooch from the Kentucky
House of Representatives.
The secretary is in the round, and we expect
him momentarily.
Just so you know, we’re whispering.
The first time will be the security officers
will show up so there’s no (unintelligible)
right now.
Matthew Borman: While we’re waiting for
the secretary I think we’ll have the panelists
introduce themselves so you know who’s listening
to you.
Can we start down at the far end?
Lee Bray: I’m Lee Bray, a mineral commodity
specialist with the US Geological Survey.
Robert Reed: I’m Bob Reed.
I’m the director of the Industrial Assessments
Office with the Department of Defense for
the Manufacturing and Industrial Base Policy
Office.
(Wyatt Lowe): (Wyatt Lowe) with the Defense
and Logistics Agency, Strategic Materials.
Gary Stanley: Good morning.
I am Gary Stanley.
I’m the Director of the Office of Materials
Industries and the International Trade Administration
here at the Department of Commerce.
Karen Swasey: I’m Karen Swasey.
I’m an industry analyst with the Bureau
of Industry and Security.
(Peter Clafen): I’m (Peter Clafen), Senior
Counsel on the Office of Chief Counsel for
Industry and Security here at Commerce.
Matthew Borman: And Matt Borman, the Assistant
Secretary for Export Administration here at
the Department of Commerce, Bureau of Industry
and Security.
Daniel Hill: Good morning again.
Welcome.
My name is Dan Hill.
I’m the Acting Undersecretary for the Bureau
of Industry and Security, and I’d like to
welcome everyone to today’s public hearing
on the Bureau of Industry and Security’s
232 Investigation on the effect of aluminum
imports on US national security.
It is my honor and pleasure this morning to
introduce our boss, Commerce Secretary Wilbur
Ross.
The president has asked Secretary Ross to
be the principle voice for business in his
administration.
Daily the secretary ensures that US entrepreneurs
and businesses have the tools they need to
create jobs and economic opportunity throughout
this great country of ours.
Secretary Ross is the former Chairman and
Chief Strategy Officer of the WL Ross and
Company, LLC, and has over 55 years of investment
banking and private equity experience.
Mr. Ross has restructured over $400 billion
of assets, and has been chairman or lead director
of more than 100 companies operating in more
than 20 countries.
Please join me now in giving a warm welcome
to our secretary, Secretary Wilbur Ross.
Wilbur Ross: Well thank you Dan for that very
kind invitation, and good morning to everyone.
I’d like also to thank our colleagues from
the Bureau of Industry and Security, from
the ITA, the Department of Defense, and the
US Geological Survey for being here today.
This forum will focus on whether imports of
aluminum threaten or impair our national security
and military and economic security.
Aluminum is critical for US national defense,
whether used in our Air Force jets, Navy warships
or Army ground vehicles.
US imports of aluminum increased 18% in 2016,
compared with those in 2015, while at the
same time US production decreased.
Eight US based smelters have either closed
or curbed production since 2015.
Only two US smelters remain fully operational
in the United States today.
And only one US smelter produces the aerospace
grade aluminum needed for many defense applications.
This investigation is being conducted in light
of the large volumes of excess aluminum capacity
and production.
Much of this excess aluminum results from
foreign government subsidies and other unfair
practices that in turn distort US and global
aluminum markets.
Our investigation will consider several factors
including the domestic production needed for
our projected national defense and critical
infrastructure requirements; second, the domestic
industry’s capacity to meet those requirements;
third, the related human and material resources
needed; fourth, the importation of goods in
terms of their quantities and use; fifth,
the close relationship of national economic
welfare to national security; sixth, the loss
of skills in investment, substantial unemployment
and a decrease in government revenue; seventh,
the impact of foreign competition on specific
domestic industry; and eight, the impact of
displacements of a domestic product by excess
imports.
This administration will stand up for the
security of American workers, American businesses,
and American families.
And we will conduct this investigation thoroughly
and expeditiously to determine if there is
a threat to our national security.
There are 32 panelists today, each giving
five minutes of testimony before taking questions
from the panel up here.
I trust you will find the testimony interesting
and informative.
We are streaming this hearing online, and
also are providing a transcript for later
review.
Thank you for joining us here at the Department
of Commerce.
I look forward to an informative hearing.
Matthew Borman: Thank you Mr. Secretary, and
we are now ready for our first witness, Representative
Gooch.
Please come on up.
Jim Gooch: Good morning.
I’m Representative Jim Gooch of the Kentucky
House of Representatives, where I chair the
standing Committee on Natural Resources and
Energy.
I want to thank President Trump and Secretary
Ross for their strong leadership on trade,
and for finally recognizing what is at stake
if we continue to allow imports to erode critical
American industries.
Since 1995 I’ve had the opportunity of representing
Kentucky’s 12th District, home to Century
Aluminum’s Sebree smelter and the skilled,
hard working men and women who make it run.
I like to call these men and women and others
like them the backbone of America.
They make the raw materials like aluminum
that we need to keep our economy and our communities
strong.
And they’re vital to our ability to fight
and win when our national security is at stake.
Unfortunately these hard working Americans,
the aluminum industry and American national
security are facing a dire threat because
of decisions that bureaucrats as far away
as China have made.
You’ll hear a lot today about how the Chinese
government has created a bloated industry
with no competitive advantage.
You will hear about how this bloated industry
has forced other countries to flood US markets
with their imports.
And you will hear about how aluminum is critical
for protecting American soldiers on the battle
field.
But I would like to focus on a different aspect
of your investigation.
Specifically it is impossible to overstate
how important these aluminum plants are to
our economy and our local communities.
I know this because I see it first hand, day
in and day out.
Speaking just for my district, Century Sebree
does a lot more than make aluminum for armor
and airplanes.
The smelter supports about 500 jobs that pays
$35 million in taxable wages.
Those wages generate almost $2 million in
state income tax.
The plant pays another 1.5 million in state
sales tax, making it a critical source of
revenue for our state and local budgets.
And this is just the direct economic impact
of the smelter.
The plant also purchases 41 million in goods
and services from regional vendors who employ
their own workers, pay their own taxes, and
so on.
And even as this industry struggles, Century
Sebree continues to make vital contributions
to local charities and schools in our community
that our community depends on.
I don’t know how we would replace them if
the smelter shuts down.
I know that other communities that still rely
on the few remaining US aluminum smelters
face the same uncertain future.
Once these facilities are shut down, they
are usually gone for good.
And the loss to local employment, tax revenue,
technology, skills and expertise are permanent.
Unfortunately we are already at the tipping
point for what’s left of this great industry.
I urge you to take action to allow our aluminum
producers to pull themselves back from the
brink, and to continue playing their important
roles in our national defense, our economy
and our communities.
Again I want to express my appreciation for
the efforts and attention of President Trump,
Secretary Ross and their staff for this vital
part of the American economy and America’s
national defense.
And I thank you for the opportunity to appear
before you this morning.
Thank you.
Wilbur Ross: Thank you very much Mr. Congressman.
Are there questions from the panel for the
congressman?
We thank you for your testimony.
Matthew Borman: Next the representative from
the People’s Republic of China.
Man: Good morning Secretary Ross and members
of the panel.
My name is (unintelligible) from the Ministry
of Commerce of China.
On behalf of my ministry and the Chinese industry,
I wish to express the following views.
First, US national security requirements for
aluminum are entirely and safely supplied
by US domestic (unintelligible).
Furthermore the amount of aluminum required
by national defense is small, a (unintelligible)
less than 2% of the US total domestic consumption
of aluminum.
Second, the US aluminum industry is strong
and enjoying a clear competitive advantage.
This insures a continued and reliable supply
of US domestic aluminum.
For many years the US industry has enhanced
its position by occurring significant and
high-quality boxes in Australia, Brazil and
other countries.
The US economy has shifted their primary aluminum
production to (unintelligible) region such
as (unintelligible) and the Middle East.
Furthermore US aluminum producers (unintelligible)
the most up to date technology and expertise.
They maintain a dominant position in manufacturing
high precision aluminum seats and plates used
for vehicles and aircraft.
Third, (unintelligible) the US domestic economy
and does not impair national security.
The United States exports a significant amount
of high value aluminum product in 2016.
The total value of US exports of aluminum
semi-products amounted to 6.8 billion US dollars,
creating 1.4 billion US dollars trade surplus.
In addition the US imports boxes, aluminum
and the primary aluminum (unintelligible)
common aluminum semi-products from many different
countries.
Aluminum products import from China, a general
product with civilian uses such as trailers,
packaging, roofing, road signs and consumer
durables.
None of these products implicate national
security.
Finally, the WTO legal framework does not
permit members to impose (unintelligible)
in locations of national security exemption.
Many members and interested parties have reasons
– have serious concerns that trade restriction
in this case may favor similar applications
by other members.
We believe that unilateral trade restrictions
are not conducive to solving the problem of
the US and global aluminum industry.
Global overcapacity is the result of manufacturers
including (unintelligible) in global economic
growth and sluggish demand.
The solutions to these challenges entail global
joint efforts.
The solution to this – the government of
China has proactively undertaken many (unintelligible)
to eliminate excess domestic aluminum production
capacity and to encourage broader application
of aluminum products.
We appeal today to all global stakeholders
to join hands in addressing the industry’s
challenges (unintelligible) and constructive
engagement.
In conclusion we believe that imported aluminum
products do not impair US national security
or the economy.
We hope that US Department of Commerce will
carry on this investigation cautiously and
(unintelligible) and refrain from taking inappropriate
(unintelligible) on imported aluminum products.
To this end, the US government is encouraged
to conduct these proceedings in a balanced
and transparent manner, and consider a broader
range of global stakeholders’ opinions,
including the Chinese Aluminum Industry Association
and the individual companies who were not
selected at this public hearing.
Thank you for your attention.
William Ross: Thank you very much for that
testimony.
Does anyone on the panel have questions for
the representative?
Matthew Borman: I do have a question.
You mentioned that the government of China
has proactively undertaken many measures to
eliminate excess domestic oil and production
capacity.
Could you give some examples of those proactive
steps the government has taken and what the
results of that action has been so far?
Man: Yes.
We will submit recommendations report to the
panel…
Matthew Borman: Okay.
Man: …after this hearing.
Matthew Borman: Thank you.
((Crosstalk))
William Ross: Are there any other questions?
Matthew Borman: Thank you.
We’re ready for our next speaker from the
United Arab Emeritus.
(Falavel Crasey): Secretary Ross, esteemed
panelists, good morning.
My name is (Falavel Crasey), and I am appearing
here today as part of the Trade and Commercial
Office of the Embassy of the United Arab Emirates
on behalf of the Ministry of Economy’s submission
recently.
I appreciate the opportunity to participate
in this hearing, and will use the few minutes
allotted to me today to emphasize several
points developed more fully in our written
submission.
The fundamental point I wish to convey today
is that the UAE’s exports of primary aluminum
to the United States are one part of a robust
dynamic and positive relationship between
our two countries.
The UAE exports only primary aluminum which
contributes significantly to the growing downstream
US aluminum sector.
From the UAE’s perspective, this trading
relationship enhances US economic and security
interests.
Please allow me to explain why.
First, due to its fair trade policies, economic
growth and history of economic partnership
with the US, the UAE is the largest export
market for US origined goods in the Middle
East and North Africa.
Over the past decade US exports to the UAE
grew by 118%, with the US enjoying a $19 billion
trade surplus with the UAE in 2016.
This bilateral trade surplus which benefits
many US manufacturing industries includes
growing US exports of aircraft, base systems,
satellites, electrical machinery and electronics,
as well as vehicles, nuclear energy technology
and many other higher value manufactured items.
According to the UN contract data – Comtrade
data, sorry, as detailed in our original submission,
US exports to the UAE are nine times higher
by value than UAE exports to the US.
Aluminum accounts for 27% of the UAE’s exports
to the United States, but only 3% of the value
of US exports to the UAE.
Moreover, some of the high value US exports
to the United States such as (unintelligible)
equipment are purchased by our aluminum industry.
The large US trade surplus with the UAE also
reflect the UAE’s purchases of US made military
hardware and technology.
And according to the Department’s International
Trade Administration, the UAE offers vast
potential for US exporters.
The UAE accounted for 6.4% of total US defense
exports in 2015, and has one of the largest
projected growth rates for US defense exports
in the world.
Second, this robust bilateral trade relationship
is accompanied by strong bilateral investment
size.
In fact over 1500 US firms have invested in
the UAE, many of whom employ the UAE as a
hub for their regional operations.
Conversely and according to data from Select
USA, the UAE investments in the US are around
$30 billion and support some of the most innovative
US manufacturing industries.
To cite just one major example, the UAE is
100% invested in GLOBALFOUNDRIES, a manufacturer
of advanced semiconductors in New York State.
And DOD is a customer of GLOBALFOUNDRIES as
well on avionics and satellite systems for
their semiconductors.
Looking at the full picture of the economic
ties between our two countries, the UAE has
a trade relationship which supports jobs in
every single US state.
Aluminum supplied by the UAE industry to the
US, a value-added manufacturer around the
country, is part of this robust and mutually
beneficial economic relationship.
Third, the bilateral trade and investment
size I just summarized are further bolstered
by US UAE corporation on a wide range of strategic
and security initiatives.
As categorized by the US Department of State,
the US and the UAE enjoy strong bilateral
cooperation on a full range of issues including
defense, non-proliferation, trade, law enforcement,
energy policy, cultural exchange while working
together to promote peace and security, support
economic growth, and improve educational opportunities
in the region and around the world.
In the security arena the UAE is one of the
US’s critical partners in the region, providing
essential support for US troops, aircraft
and vessels operating in the Middle East.
Indeed, Secretary of Defense Mattis was in
the UAE just last month to finalize and update
the Defense Cooperation Agreement.
During the past 25 years the US and the UAE’s
military forces have worked together on six
military coalition actions, including the
first Gulf War, Kosovo, Afghanistan, Libya
and recent operations with terror in Iraq.
US UAE strategic operation extends to many
other areas including counter terrorism, anti-money
laundering enforcement and non-nuclear and
nuclear nonproliferation.
This is the mutually beneficial context for
UAE aluminum exports to the United States.
Finally I want to briefly mention the connection
between this investigation and the rules based
International Trading System that the United
States has worked so hard to promote, which
has helped make – helped so much in spearing
global economic growth.
As the Department evaluates possible import
restrictive measures in this investigation,
I would respectfully ask it to consider compatibility
of such measures with the WTO mutually agreed
goals, rules on when, how and under what conditions
WTO members may lawfully restrict trade.
Again thank you for the opportunity to appear
before you today.
I hope my comments are useful as the Department
formulates its findings and recommendations
in this investigation.
Wilbur Ross: Well thank you for that thoughtful
presentation.
Are there any questions from the members of
the panel?
Thank you.
(Falavel Crasey): Thank you sir.
Matthew Borman: Our next speaker is a representative
from the Trade Mission at the Russian Federation.
(Uri Signi): Good morning.
My name is (Uri Signi).
I am Deputy (unintelligible) representative
for the trade representation of the Russian
Federation in (unintelligible).
The trade representation of the Russian Federation
in (unintelligible) on behalf of the Ministry
of Economic Development of the Russian Federation
expresses its gratitude to the US Department
of Commerce for the opportunity to take part
in this public hearing.
We would like to present briefly our comments
regarding Section 232 Investigation initiated
by the US Department of Commerce to the tentative
effect of aluminum imports on American national
security.
Based on the principle that through our broad
and narrow interpretation of the notion of
national security, we are of the position
that under either international interpretation
Russian imports do not and cannot threaten
to impair your national security.
We would like to know that Russian supplies
do not rely on fair trade practices.
Reliable and competitive supplies can operate
fairly in the US and global market in the
market condition.
In 2002 Russia was recognized as a market
economy country by the USA and the European
Union.
And since 2012 Russia has been a (unintelligible)
member.
Importantly Russian aluminum industry is completely
private owned.
The Russian government has never granted specific
export subsidies or provided unfair financial
contribution to Russian aluminum on a (unintelligible)
market expansion.
Aluminum is an exchange trade commodity, and
global market prices for aluminum (unintelligible)
by the London Market Exchange on the basis
of global supply and demand.
We believe that the Department of Commerce
should substantially narrow their approach
in this investigation and admit that the aluminum
imports from Russia cannot harm the US national
security.
Imports from Russia were not the cause of
smelter closures in the USA.
The main reason for such closures are high
energy costs, high labor costs, the growth
of secondary aluminum products production.
Any restrictive matters against foreign suppliers
of aluminum from market economies cannot be
justified and will only harm the America aluminum
industry.
I would like to emphasize that resulting (unintelligible).
There would be a massive shortage of aluminum
raw materials required in the US market by
all sectors of the aluminum industry.
Importantly it should be noted that the Russian
aluminum interests are not supplied directly
for any US military purposes.
So there is no any dependency of the American
national security on the supplies of aluminum
from Russia.
We are convinced that Russian imports do not
impair the capability of American industry.
This is despite the defense needs of the country.
The available (unintelligible) National Defense
requirements for aluminum products are relatively
low and can be (unintelligible) US domestic
industry.
On the contrary the availability of imports
and raw aluminum from Russia enables continues
further development of high value added aluminum
production in the USA which drives the American
economy development and allows the aluminum
industry contribute about 1% of the US gross
domestic product according to the Aluminum
Association data.
But there is no mention above.
We believe that there is no need for the position
of restraint of aluminum imports from Russia.
Moreover there is no threat of damage to the
national security from Russian aluminum imports,
and a restriction would cause injury to the
wide range of US direct and indirect consumers
bringing significant effect to the economy
development.
We believe that the trade in aluminum products
between US and Russia is mutually beneficial,
and it should be supported and developed.
Thank you for your attention.
Wilbur Ross: Thank you very much.
Are there any questions from the panel?
Matthew Borman: Does the government of Russia
have any specific proposals to address the
global oversupply, the overcapacity issue?
(Uri Signi): I’m sorry, I’m not (unintelligible)
answer this question.
Matthew Borman: Okay.
Thank you.
Wilbur Ross: Are there any other questions?
Thank you for your testimony.
Matthew Borman: The next speaker from the
European Aluminum Association.
(Gar Gurtz): Good morning.
Secretary, distinguished members of the panel,
I’m very honored to be invited to participate
in this very important meeting.
My name is (Gar Gurtz).
I’m representing the Director General of
the European Aluminum Industry from upstream
to downstream, recycling and reproduction
(unintelligible) with more than 80 members
with about 600 clients in 30 countries, a
considerable number for members of production
facilities (unintelligible).
European Aluminum shares the concerns of the
US government regarding the significant Chinese
aluminum overcapacity and its impact on the
US and European industries despite the healthy
demand for aluminum worldwide.
We, the European industry, believe that addressing
the root causes of this problem requires continued
joint efforts of the US, Canada and Europe.
Within the framework of the current investigation,
we urge the US administration to take into
account the following elements.
First, imports of aluminum products from Europe
in view of both the quantity and characteristics
do not constitute a threat to your national
security within the meaning of your statute.
Although the percentage of US imports of aluminum
has increased in the past years, the percentage
originating from Europe has remained stable
over the past decade.
Europe accounts for a relatively modest part
of US imports, and supplies specialty high
value-added products to US consumers.
The vast majorities of European imports have
little to no link to US national security,
but are largely used in commercial applications.
In other words, the US is not dependent on
European imports for its national security
requirements including national defense.
Further, the European Aluminum industry truly
functions on the market economy conditions,
and does not suffer from (unintelligible)
government ownership like (unintelligible).
Finally due to the long lasting military (unintelligible)
of the US and a fundamental player within
NATO tonight.
Under these circumstances it’s clear that
European imports do not threaten to impair
the capability of US domestic industry to
satisfy national security requirements.
We call your government to refrain from targeting
European imports with any potential measures
associated with this Section 232 Investigation.
My second point is that the American and European
aluminum industries are strongly interlinked.
We are truly united in our day to day business.
Demand for aluminum products is global, and
supply is more and more structured globally
not regionally.
Approximately 50 multinationals are members
of both European Aluminum and the Aluminum
Association, and supply daily a vast majority
of the entire aluminum value chain on both
sides of the Atlantic.
Together they own approximately 80 production
and manufacturing facilities in Europe and
75 in the US, employing a large number of
American workers.
These companies constitute trans-Atlantic
ecosystem.
Weakening the European side of that value
chain would affect the US (unintelligible).
This would also impact innovation and research
and development, which are essential for the
development of advanced aluminum manufacturing
and application.
Intercompany shipments are very commonplace
for these companies, and measures would also
not be in the interest of your consumers who
could suffer the first consequences in terms
of material use, product quality material
availability and increased pricing.
Third, let’s talk about the nature of the
major threat we are all facing.
You will understand what I mean when I say
that in our struggle too, we are united.
During my presentation to the USAPC on the
true underlying problem of Chinese overcapacity,
we testified together with many of the parties
in the room here today about the importance
of having a global solution to this unsustainable
global risk
The ongoing cooperation at G7 and G20 (unintelligible)
to address the root causes of the structural
(unintelligible).
This requires continued joint efforts between
the US, Europe and other likeminded governments.
Moreover we will continue to watch governments
globally to address the effects of excess
capacity on prices and quantities with traditional
trade instruments including through the WTO.
The conclusion is clear.
Continued joint efforts between the US and
Europe are necessary, detecting the root causes
of the global excess capacity and to secure
balance in the US and European aluminum markets.
We are concerned that restrictive actions
based on the current 232 Investigation will
not provide the lasting solution needed by
our markets, and may have unintended negative
consequences for integrated aluminum supply
chains.
In any event European aluminum should not
be the subject of proposed measures under
the Section 232 Investigation since they do
not represent a threat to US national security.
(Unintelligible) European aluminum remains
open to continue to cooperate in this investigation
for the interest of all of our members, with
particular interest in those that add value
to our economies and societies on both sides
of the Atlantic.
Thank you very much.
Wilbur Ross: Thank you for your testimony.
Does anyone on the panel have questions?
Matthew Borman: Does the European Aluminum
Association have specific proposals on how
to deal with the global overcapacity issue?
(Gar Gurtz): Yes.
We believe that the joint activities as mentioned
with regards to a global solution may be the
best solution for the whole industry.
We have an industry which is in growing demand,
and from that perspective we should be able
to develop this industry in a thoughtful manner,
playing with the same rules everywhere which
is today not the case.
Matthew Borman: Thank you.
We’re ready for our next speaker, Mr. (Scott).
Robert Scott: Good morning.
My name is Robert E. Scott.
I’m a senior economist with the Economic
Policy Institute.
Thanks for holding this hearing.
Imports threaten the entire domestic aluminum
industry, which is today hanging on only by
a thread.
The threat is driven by the growth of excessive
capacity and overproduction in China.
Chinese primary aluminum production capacity
has increased by nearly 1500% between 2000
and 2017.
And China is responsible for 82% of the total
increase in global aluminum capacity in this
period.
This growth has been fueled by massive government
subsidies and other market distorting practices.
Chinese over capacity has stressed global
aluminum prices, transmitting injury directly
to the domestic producers.
Aluminum is a global commodity, and prices
are primarily driven by total global supply
and demand, regardless of where aluminum is
produced, sold or stored.
The US aluminum market effectively imports
the adverse price and volume effects of China’s
excess capacity and production via changes
in the LME.
Collapsing prices have decimated US primary
aluminum production, capacity and employment.
The LME market price of aluminum fell 39%
between 2007 and 2016.
I would note anecdotally that over this time
the price of a six pack did not decline by
40% .
In an industry with high fixed costs and most
domestic aluminum producers have not survived
this prolonged steady price collapse.
Since 2000, 18 of 23 domestic smelters have
shut down, and more than 13,000 good domestic
production jobs have disappeared.
Despite a slight recovery in prices in early
2017, US primary aluminum producers are barely
surviving.
The threat to US national security posed by
aluminum imports is significant.
The domestic industry is losing its ability
to develop and supply products for US defense
and critical infrastructure applications.
Instead the downstream goes producers becoming
increasingly dependent on unreliable sources
of imports in the Middle East, Russia and
elsewhere.
If current trends persist, in time of war
or other national emergency, the US would
find itself dependent on unstable import supplies.
For these reasons it is critical that Section
232 relief is brought.
Specifically relief should be structured in
a manner that allows as much primary aluminum
production as possible to restart in order
to maintain critical aluminum capabilities
and prevent reliance on unstable supply.
Moreover relief must account for the fact
that because so much US production has been
shut down due to China’s market distorting
practices, some imports are needed in the
US market.
As such, a contiguous source of stable supply,
Canada should be excluded from relief while
(unintelligible) across the board restrictions
on imports of both primary and downstream
aluminum products.
According to market reports, the US consumed
approximately 5.3 million tons of primary
aluminum in 2016.
Nearly 80% of that consumption was serviced
by imports, much of that from Canada.
Less than a million tons were supplied by
US producers.
Because aluminum is a global commodity, excluding
Canada from relief would likely result in
virtually all of Canada’s available supply
serving the US market.
Market analysts estimate that Canada possesses
approximately 3.3 million tons of capacity.
The remaining available US capacity is approximately
1.8 million tons.
Consequently both Canada and US producers
could service virtually the entire US market.
Therefore if US production is to restart,
excluding any other import sources from the
relief would undermine Section 232 relief
to the point where US industry would see virtually
no benefits.
Consequently if the administration is contemplating
a tariff rate quota, the quota portion on
other import sources should be extremely small,
and can be phased down to a very small or
de minimus level over six to nine months as
US production restarts the need for non-Canadian
imports is eliminated.
Moreover, relief must be predicated on adjusting
for China’s attempt to capture control of
the entire value chain.
Chinese industrial policy promotes downstream
production in exports through the use of massive
production subsidies and an export tax on
primary aluminum designed to channel cheap
inputs into manufacturing downstream aluminum
products.
Chinese exports of downstream products have
soared, taking market share away from domestic
producers elsewhere and reducing demand for
primary aluminum outside of China.
Thus it is critical this Section 232 relief
is broad and also encompasses relief for downstream
from producers of aluminum products.
Downstream producers also manufacture products
for US military and critical infrastructure
application.
In conclusion, for these reasons I recommend
that the Commerce Department find that aluminum
imports are threatening to impair national
security and critical national infrastructure,
and recommend that the president authorize
trade relief in the form of tariffs covering
all aluminum imports and HDS Chapter 76 excluding
imports from Canada.
Thank you.
Matthew Borman: Thank you.
Any questions from the panel?
Thank you so much.
Robert Scott: Thank you.
Matthew Borman: Our next speaker, Mr. Bless.
Michael Bless: Good morning.
I’m Michael Bless, President and CEO of
Century Aluminum Company.
On behalf of my 1800 colleagues, I’d like
to thank you for the opportunity to be here
today with you.
Century is the largest remaining producer
of primary aluminum in the US.
We’ve got three smelters, two in Kentucky
and one in South Carolina.
Our smelters produce both standard purity
and high purity primary aluminum used in US
military and critical infrastructure applications.
We are strongly committed to producing the
highest quality aluminum products in the US
for the US market.
Our ability to continue to doing so is at
risk.
This investigation comes at a vital time.
The domestic industry is in danger of completely
disappearing, as you’ve heard.
In 2000 the US was one of the largest producers
of primary metal in the world.
There were 23 smelters in this country.
Today there are only five, and of these, as
you’ve heard, only two are running at full
capacity.
In just the last four years employment and
production have fallen nearly 60%.
This statistic alone highlights precisely
why it is a matter of national security to
maintain what is left of this industry.
Aluminum pricing is transparent and efficient,
reflecting total global supply and demand.
Since 2011 prices have crashed, and the US
industry has seen several of its remaining
smelters shuttered.
Neither a decline in demand nor higher costs
explain this drop.
In fact over this time demand has grown significantly
and energy costs in the United States have
declined.
This should have been a healthy period for
America’s smelters.
Instead prices have collapsed due to ever
expanding over production led by state owned
and state invested enterprises inside and
outside China.
Market principles simply do not apply in China.
China has no natural comparative advantage.
Its smelters are amongst the highest cost
producers in the world.
They lose money yet continue to expand.
Capacity in China has increased by nearly
1500% from 2000 to 2015.
During that same period smelters have closed
across the US from Washington State to West
Virginia.
China’s system incentivizes further downstream
over production.
Since 2000 Chinese exports of downstream products
to the US have increased by over 10,000%.
The surge in Chinese downstream exports further
displaces additional US primary aluminum production.
Thus it is vital in our opinion that broad,
comprehensive relief benefit the entire value
chain.
As China drove metal prices down, US production
collapsed, and imports from the rest of the
world have surged into the United States.
Since 2012 imports from non-Canadian sources
are up over 95% while US production is down
over 60% as you’ve heard.
Because our aluminum is priced on a global
exchange, the LME, these imports further transmit
the Chinese price affects to the US.
US producers cannot restart production with
these large volumes of low priced aluminum
imports from the rest of the world in the
market.
So much of our production is collapsed that
we are on the verge of losing the ability
to produce all aluminum, not just high purity.
And once a smelter shuts, it rarely reopens.
We will then be entirely dependent on imports
from outside the US, some from even unstable
and hostile sources.
We need relief in order to insure the US industry
is not lost forever.
Before I discuss how, I’d like to speak
briefly about high purity production.
High purity aluminum is used extensively in
the defense industry, from aircraft to armored
plate.
High purity metal can only be produced in
large commercial quantities at smelters like
ours in Hawesville, Kentucky.
There are other processes by which high purity
aluminum is refined further.
These methods cannot produce large commercial
quantities of high purity, and currently only
Japan and China employ these methods.
Consequently this is not a viable substitute
for high purity aluminum we produce.
Recently we suffered from a significant surge
in high purity aluminum from Dubai at prices
well below ours.
Some of our customers even testified in other
settings that they had switched sources due
to concerns over the US industry’s long-term
viability.
As a result earlier this year we were forced
to cease all high purity production.
Losing this volume jeopardizes our ability
to properly train our workers to continue
this production.
This production can be restarted, but only
if imports are adjusted.
It is vital however that we maintain the capacity
to product not just high purity in the US,
but all primary aluminum.
Primary aluminum is a core input for such
critical infrastructure as transportation,
urban centers, energy transmission and defense.
We at Century recognize that imports are a
necessary part of the US supply chain.
It is not our position that the US can or
should be totally self-sufficient.
However the status quo is unsustainable.
We believe that other than Canada, all imports
must be adjusted.
Canada is the largest exporter of prime metal
to the US and a stable source of supply.
Therefore to adjust prices to reasonable levels,
relief must be applied to all non-Canadian
import sources.
Excluding Canada from relief will cause virtually
all Canadian supply to shift to the US.
Along with remaining US capacity that can
be restarted quickly, there is enough stable
North American supply to service nearly all
North American demand.
We believe a significant tariff on all non-Canadian
import sources will cause the appropriate
adjustment.
These non-Canadian import sources have supplied
from long distances.
Excluding additional countries beyond Canada
from the relief would make any relief ineffective.
By adjusting imports through this investigation,
the administration could preserve what is
left of this industry while addressing the
root cause of the problem, China’s excess
production and capacity through the WTO process.
But without real relief in this proceeding,
the nation’s security including its critical
infrastructure is at risk.
And we thank you very much for your time.
Man: Thank you.
You stated that the surge in Chinese semi-finished
exports for this (unintelligible) additional
U.S. primary aluminum production.
Can you elaborate on that a little bit please?
Michael Bless: Yes certainly.
So that production would have otherwise been
served by you as primary production that would
have been producing.
I would like to note there is upwards of a
million tons we believe much of which that
could be restarted to service that downstream
demand if we had a rationally traded market.
Man: Thank you.
Another other questions for the panel?
Thank you.
Man: Thank you so much.
Man: Our next speaker, Mr. Lapides.
John Lapides: Good morning.
Mr. Secretary, members of the Commerce Department
and other distinguished panelists and guests.
My name is John Lapides and I am from United
Aluminum Corporation North Haven, Connecticut.
I am the President of fourth generation family
owned rolling mill in North Haven, Connecticut.
I have worked at United Aluminum since my
graduation from Stanford Business School in
1977 and I have served as president for 27
years.
United was founded by my great grandfather
in 1891 and Harris was an immigrant from Russia.
My grandfather Louis bought the first rolling
mill in 1915.
My father Robert returned to United after
serving as Captain of two destroyers in World
War II and later served at the Pentagon during
the Korean conflict.
My father became the company’s second president
on the death of my great grandfather Harris.
Originally named United Smelting and Aluminum
Company, Inc.
United began rolling over 100 years ago.
The company was a founding member of the aluminum
association in 1933 along with Alcoa and Reynolds
Aluminum.
My points are brief.
First, the North American supply chain is
tightly integrated and Canadian smelters are
critical to the supply of slabs used for rolling.
Second, Chinese overcapacity has caused low
world prices and has already significantly
impacted U.S. smelting capacity causing numerous
curtailments and closures.
United Aluminum is concerned about the supply
of high purity aluminum.
Third, Chinese overcapacity and subsidized
pricing in rolled products threatens the viability
of U.S. rolling mills.
In addition, the imbalance of tariff rates
between the U.S. and China and most other
major trading countries disadvantages U.S.
producers.
China imposes a 10% tariff on imports and
at the same time incentivizes export of roll
product with a 17% VAT rebate.
Europe and the U.K. impose a 7.5% tariff on
imports of coil including the freight cost
while the U.S. only imposes a 3% duty on imports.
Combined with the weak Euro, the benefit to
the Northern EU countries is significant.
Fourth, Chinese subsidized pricing of end
use products threaten the entire U.S. downstream
manufacturing base.
The loss of know-how, capability and capacity
and end use markets will continue to harm
our readiness and our national security.
When we need it will be able to build it?
And will we be able to build it in time?
China has unfairly exported not only their
products but also their unemployment, their
pollution and potential social unrest.
Fifth, the U.S. is uncompetitive on tax rates,
vocational training, competitive truck weights
and freight and commuter rail capability.
We need to address those issues as well.
Last, I would suggest the following remedies.
First, impose a tariff on Chinese (unintelligible)
coil but also in addition, impose a tariff
on Chinese aluminum content in any form to
provide a disincentive for Chinese dumping
and end use markets.
Second, police interference by sovereign states
and foreign exchange markets prevent currency
manipulation benefiting those countries.
Third, eliminate unbalanced tariffs and non-tariff
barriers which harm U.S. exports in China
and the Euro zone.
Europe I might note has a 7.5% duty on Chinese
imports of coil.
And very little coil is actually imported
into the Euro zone.
So it is effective.
In closing, with a trade situation of what
it is we can’t make America great again
by being totally dependent on other countries.
On behalf of American workers and companies
that can invest in the United States I thank
you.
Man: Thank you.
Any questions from the panel?
Thank you so much.
Man: Thank you.
Man: Our next speaker, Mr. Adams.
John Adams: Good morning Mr. Secretary and
distinguished panelists.
I am John Adams, President of Guardian Six
LLC and retired brigadier general of the United
States Army.
There is no doubt in my mind that aluminum
imports are a threat to U.S. national security
and that broad and immediate Section 232 remedies
are necessary to address the threat.
I am a proud Army veteran with over 30 years
of experience as an Army aviator, strategist
and intelligence officer.
My final post prior to retiring from the Army
in 2007 was as Deputy U.S. military representative
to the NATO military committee in Brussels.
In 2013, I authored a study on the military’s
growing and dangerous reliance on foreign
nations for the raw materials, parts and finished
products needed to defend the United States.
I concluded then that the United States drilling
reliance on imports of aluminum bauxite and
other materials places our U.S. national security
at risk.
This conclusion was true back in 2013 and
is especially so today as the domestic aluminum
industry’s financial and operational condition
has only worsened due to imports.
Aluminum is a raw material with critical U.S.
national security applications.
Primary aluminum and other aluminum products
are used in a variety of military applications
including F18 and F35 fighter aircraft, Navy
and Coast Guard vessels and Army and Marine
Corps tactical vehicles.
Aluminum’s high strength to weight ratio,
formability, rigidity and ballistic protection
are indispensable to our modern arsenal.
As an Army aviator myself during the 1980s
I saw firsthand the importance of aluminum
in providing the lightweight strength essential
to my aircraft’s wings for high stress flight
maneuvers.
Aluminum is also used in numerous critical
infrastructure applications including bridges
and highways, building and other construction.
Aluminum is widely used in utility grids.
In the event of war, natural disaster or any
other natural emergency, damage to our critical
infrastructure is likely which would only
increase our demand for aluminum and reinforced
importance of ensuring adequate domestic supply.
Therefore, as it has done in prior Section
232 investigations, the Commerce Department
should continue to broadly define national
security to include our critical infrastructure.
It is no secret that the Chinese government
provides massive subsidies to its aluminum
industry.
The result of China’s growing aluminum overcapacity
and production has been a complete collapse
in global aluminum pricing.
Because all aluminum is priced from the global
exchange, U.S. imports of aluminum simply
transfer the adverse price and volume effects
of Chinese excess capacity and production
to our market which has sent U.S. prices tumbling.
The collapse in U.S. pricing has resulted
in dramatic declines in U.S. production capacity
and revenue.
In 2010, the U.S. industry had 3.3 million
tons of capacity and produced 1.7 million
tons of primary aluminum.
Last year the industry had 1.9 million tons
of capacity and produced only 820,000 tons.
This year, these figures are expected to be
even worse.
Hundreds of highly skilled jobs have been
lost in the process.
The current state of the domestic aluminum
industry is simply unsustainable from a national
security standpoint.
Our national security relies on the U.S. industry’s
smelting capabilities.
However, given the dramatic declines in U.S.
primary aluminum capacity and production the
vast majority of primary aluminum is now produced
overseas.
This means that U.S. producers of finished
products that are directly used in our military
and critical infrastructure increasingly rely
on imports from Russia, the Middle East and
elsewhere for this critical input.
These are potentially (unintelligible) sources
of supply and at best unstable sources of
supply.
Qatar provides a good example of the dangers
of relying on imports.
Just two weeks ago, several of its Middle
East neighbors severed diplomatic ties with
Qatar.
Leaving the country without the logistical
capability to ship its aluminum outside of
the country and placing those relying on Qatar’s
aluminum exports in a vulnerable position.
Put simply, having to rely on aluminum imports
that travel over water during a conflict is
a risk to our national security.
It is also important to consider the industry’s
ability to supply national security products
in the context of the industry as a whole.
If the commercial market is unprofitable,
the defense production sector and with it
not only the smelters but also the R&D; cannot
survive.
With this mind, the immediate relief for the
aluminum industry is imperative including
one, recommending remedies that yield a meaningful
opportunity for the U.S. aluminum producers
to recapture lost market share and rebuild
broken supply chains.
Two, taking a broad view of the national security
importance of aluminum considering production
for military weapons and equipment as well
as homeland security and critical infrastructure.
Three, providing relief to the entire aluminum
supply chain.
The U.S. industry must remain healthy throughout
the production chain by incentivizing production
from smelting to the finished and fabricated
product.
Four, establishing enforceable mechanisms
for the elimination of global aluminum overcapacity.
And lastly, rigorously applying domestic sourcing
policies already existing in our government
procurement of aluminum.
Distinguished panelists I applaud the administration’s
initiation of this Section 232 investigation.
We cannot allow our American aluminum to pass
the R&D; and skilled workforce to disappear.
We need concerted action to address these
national security risks for domestic aluminum
capacity before we lose it.
Thank you.
Man: Thank you.
Questions from the panel?
Thank you so much.
Our next speaker, Mr. Hockema.
John Donnan: Hi good morning.
Actually John Donnan, Executive Vice President
of Kaiser Aluminum.
We welcome your leadership initiating this
investigation and are pleased to be able to
testify today.
The products we produce from high strength
aluminum alloys and the capacity to produce
those products in the U.S. are critical for
U.S. national security.
And we support measures that effectively target
unfair competition and address the needs of
the entire aluminum value chain including
downstream U.S. aluminum fabricators.
Commercial viability is a prerequisite to
national security availability.
Broad protective measures aimed at all suppliers
of primary aluminum will maturely increase
our cost and undermine our ability to effectively
compete in global markets against foreign
downstream fabricators that are not impacted.
Those unintended consequences would create
an advantage for those foreign downstream
fabricators including new government subsidized
Chinese rolling mills.
And for the downstream fabricators like Kaiser
aluminum at risk.
In addition, our competitiveness and the competitiveness
of our domestic customers will be substantially
and negatively impacted to an increased risk
of aluminum intensive finished products supplied
by unimpacted foreign downstream fabricators.
By way of background, Kaiser Aluminum is a
member of the Aluminum Association and a leading
producer of fabricated aluminum products for
defense, aerospace, general engineering, automotive
and custom industrial applications.
We operate 11 fabricating facilities in the
United States and one in Canada.
We employ over 2700 employees and ship more
than 600 million pounds of plate, sheet, extrusions
and other products to a global customer base.
Our facilities have long history of supplying
products to U.S. military dating back to World
War II.
Today our products are used in more than 50
military aircraft including the F18, F22 and
F35 Joint Strike Fighter.
We also produce material for armor and mine
blast kits for a variety of military platforms
including the Humvee and (unintelligible)
as well as extrusions for munitions, arms,
mortars and rockets.
As a downstream participant, the U.S. aluminum
industry we convert primary aluminum or secondary
aluminum purchase from third parties into
our products.
We purchase our primary aluminum through a
globally diversified supply base which supports
our globally competitive cost division and
an integral (unintelligible) supply.
The downstream sector of the U.S. aluminum
industry requires a significant investment
in recent years.
Kaiser Aluminum has invested over $630 million
since 2006 to increase capacity, lower cost
and improve quality.
Maintaining our ability to effectively compete
in global markets and invest in our facilities
and produce these products are in the U.S.
are important not just for jobs provided and
community supported across the country but
also for our long term national security.
Global market and balances in the aluminum
industry are unprecedented excess capacity
in China facilitated through decades of illegal
and subsidized investment in production.
After exponentially expanding its primary
aluminum production, China continues to create
downward pressure on world aluminum prices.
Negatively impacting U.S. producers of primary
aluminum and contributing to the shuttering
of U.S. aluminum smelters.
Similarly, China has been and continues to
engage in massive predatory government subsidized
expansion into the production of downstream
aluminum products whose stated intent to support
Chinese expansion in military aircraft, support
new Chinese competitors and export those products.
In addition, Chinese circumvention of U.S.
duties through misclassification and/or transshipment
through other countries and the theft of intellectual
property also continue to be major competitive
concerns.
Kaiser Aluminum supports effective solutions
that address Chinese overcapacity, government
subsidies and unfair trade practices.
A broadly implied measure that impacts all
foreign source primary aluminum with a far
more harm than good when it comes to U.S.
national security, maintaining and generating
secure domestic jobs, ensuring global competiveness
of U.S. manufacturers.
And maintaining a strong U.S. manufacturing
base for domestic downstream fabricators that
supply aluminum products for critical defense
applications.
To be clear, we support all measures that
effective target unfair competition.
We need a fair system.
If you put us on a level playing field, Kaiser
Aluminum and our employees can compete successfully
against anyone in the world.
We welcome and embrace that opportunity.
As noted on our brochure, we are proud to
serve those that proudly serve.
Thank you for your time.
Man: Thank you for your comments.
Any questions from the panel?
Thank you.
Man: Thank you.
Man: We are ready for our next speaker, Mr.
Smith.
Robert Smith: Mr.
Chairman thank you for allowing me to testify
today.
My name is Robert Smith and I am President
of the United Steelworkers Local 420A based
in (unintelligible).
I have over a decade of experience in the
aluminum industry and would like to share
with you my concerns over the future of an
industry that is critically important to the
national security of the United States.
In addition, I would like to make you aware
that the United Steelworkers Union will be
submitting a comprehensive statement in support
of the investigation before the close of the
comment period.
This investigation comes at a critical time
for the American aluminum industry.
Domestic aluminum production is an important
component of our nation’s defense, industrial
base and vital to our critical infrastructure.
The Department of Defense classifies aluminum
as a strategic material with uses ranging
from structural airframe material to electronic
components and armor plating.
Furthermore, aluminum is increasingly being
utilized throughout our nation’s critical
infrastructure.
Whether it is the development of solar panels
and extensive use in our electrical grid or
as a lightweight, high strength building material.
Aluminum will continue to serve a vital role
in the rebuilding and maintaining of our nation’s
infrastructure.
Ensuring that the nation and military have
a stable, reliable supply of this critical
material is a national security imperative.
Modern aluminum production especially of military
grade, high purity aluminum is a highly complex
and highly technical process that requires
a trained and skilled workforce.
The development of those skills takes years.
Once capacity is lost, bringing it back online
is not something that can be done overnight.
Today there is only one domestic producer
(unintelligible) that can produce high purity
aluminum and that represents the national
vulnerability.
If that producer is forced to shut down because
of predatory trade practices it raises the
real and unacceptable danger that the U.S.
would be forced to rely on foreign sources
in the event of an unforeseen future conflict
or natural disaster.
And this situation is becoming more of a potential
reality each day.
Last year American primary aluminum production
dropped below one million tons for the first
time since the 1950s.
And so many domestic smelters have either
closed or curbed production that only two
in the U.S. are considered fully operational.
This is being driven by a glut of aluminum
in the global market which is causing a drop
in global prices and making it uneconomical
for domestic producers to stay in business.
This glut of global aluminum has a sadly familiar
(unintelligible) China.
The Chinese government has been illegally
subsidizing its aluminum industry for years
driving a massive expansion of its production
and capacity far beyond its internal demand.
These days subsidized Chinese producers are
then dumping this excess production onto world
markets.
The proof is in the numbers.
Between 2006 and 2015 Chinese primary aluminum
production grew by over 225% and by the end
of 2015 it accounted for more than half of
all aluminum production in the world.
While as I mentioned earlier, U.S. production
reached its lowest point in more than 60 years.
This trend shows no sign of stopping.
Quick governmental action is critical if the
American aluminum industry is to survive and
continue to provide good jobs for American
workers, the highest quality products to the
American military and the critical infrastructure
that we need.
AS a government approaches this issue let
me emphasize that the driving force behind
our aluminum problems is Chinese overcapacity.
Unlike steel or dumped and subsidized products
have directly impacted our market, China’s
policies and practices have suppressed world
prices via the London metal exchange where
aluminum is priced.
Right now Canadian imports they are the largest
single source for consumption in our markets.
But Canadian production is not fueled by a
legal and predatory practices and the approach
in this 232 investigation must be the target
the production of those countries which are
engaging in unfair trade.
As our international President Leo Gerard
has said, Canada should be exempted from many
relief measures that might be implemented
as a result of the administration’s actions.
I and other workers in the aluminum sector
here in the United States support that approach.
Thank you very much for the opportunity to
share my views on this important topic.
Man: Thank you.
Are there any estimates that you are aware
of, of how long it takes to train skilled
workers to work in the aluminum industry?
Robert Smith: There is really not a lot of
science behind that because we have been continuously
going down.
So we haven’t ramped up production over
the years.
What I do know is that when – it is very
rare but if a plant decides to restart it
is very – it takes a long process.
It is very expensive and there is a lot of
unknowns with it.
There is a lot of safety concerns just because
there is not a lot of science behind restarts.
To put it in perspective, our plant started
in the late 70s and we haven’t had more
than a three hour shutdown since then.
So that it, you know, there is a lot of things.
This is a continuous operation and we just
don’t restart very often.
Man: And then what is sort of the average
level of experience of say eight members of
your local.
Robert Smith: From my experience it depends
on the job.
But to get the folks that we need up to speed
to run reliably probably half the jobs you
could train well in six months to a year.
And then the other half are what actually
take to run the potline and it is 10 to 12
years probably before somebody is that good
at knowing all of the things that can come
up and be able to react to those things.
Man: Thank you.
Any other questions?
Thank you.
Robert Smith: Thank you very much.
Man: Our next speaker.
Marco Palmeri: Good morning Mr. Secretary,
members of the panel.
My name is Marco Palmeri and I am the President
of Novelis North America.
And I am a member of the Aluminum Association.
I would like to thank you for the opportunity
to speak on this important topic today.
Novelis believes that the department investigation
is timely and vital to the future of the domestic
aluminum industry.
Novelis is the world’s largest producer
of flat rolled aluminum product used to make
beverage cans, cars and trucks, and other
diverse products.
Novelis a $10 billion company operates 24
facilities in 10 countries and it is the global
leader in aluminum recycling.
While we are a global company?
We are deeply committed to our North American
operations and had made significant investments
in our U.S. facilities in recent years.
More than $500 million with additional 500
jobs.
Novelis employees are on 4000 people in the
U.S.
We discovered in regional headquarters and
global research and technology center in Georgia.
Seven production sites in Georgia, Indiana,
Kentucky, New York, Ohio and (unintelligible)
and the sales and (unintelligible) in Michigan.
Today I would like to have three main points
for the final consideration.
First, Novelis believes it is important for
the department to recognize that the aluminum
industries of the U.S. and Canada are intertwined
with Canada playing a vital role in supporting
of U.S. aluminum manufacturing efforts.
U.S. is not operations cannot meet the domestic
demand for primary aluminum.
At Novelis, we do (unintelligible) primary
and recycled metal from the U.S. but because
it is not possible for us to retain all of
the primary aluminum that we needed through
our U.S. purchases we also rely on primary
aluminum imported from Canada.
Additionally, our facility in Canada works
in tandem with our U.S. based facilities to
manufacture products as part of a complex
(unintelligible).
For example, when making certain automotive
products, aluminum may cross the border at
least four times before it is fully finished
and ready to ship to customers throughout
the U.S. and Canada and Mexico.
Therefore, to ensure the viability of the
U.S. aluminum industry the department should
exclude Canada from any remedy recommendation
made in its final report.
Second, Novelis believes in free and fair
trade.
But there must be a level playing field.
Importers originating from accounts like China
with excessive overcapacity driven by government
subsidiaries have significantly affected the
aluminum industry putting Novelis U.S. manufacturing
facilities at risk.
In fact, unfairly priced aluminum from China
has already forced us to accept (unintelligible)
product lines.
In 2008, we left the (unintelligible) business
and shut the facility in Kentucky.
Only a few years ago we sold our household
(unintelligible) business.
And in April 2014, we were forced to idle
some equipment and lay off workers, experienced
workers at our facility in Indiana.
To date, Novelis has maintained profitability
by migrating product portfolio to emphasize
markets that have not yet been affected by
imports from China.
Those imports however have been (unintelligible)
new product market segment in the U.S.
Novelis sales people regularly report hitting
about (unintelligible) products at extremely
low prices.
We also have a strong reason to believe that
the Chinese producers will increase the production
of automotive aluminum capacity within the
next two years.
(Unintelligible) they needed to be exported
to the U.S. and subsidized (unintelligible)
Novelis could be forced to slash production,
lay off employees and shut the entire facilities
(unintelligible) are not able to deliver reasonable
rates of return.
Third, the same equipment used to process
and roll out the sheet can be used to make
product (unintelligible) application.
But those applications make up a small portion
of the entire U.S. downstream aluminum marketing.
Therefore, if trade measures under this investigation
only were enacted to protect the aluminum
use directly in defense related products.
Such remedies would not secure the (unintelligible)
of the entire (unintelligible) aluminum industry
nor its associated hundreds of thousands of
U.S jobs.
In conclusion, Novelis respects and requests
the department to recognize that one, Canada
should be excluded for any remedy or recommendation
made (unintelligible) final report.
Two, unfair prices and subsidized imports
originates from outside North America.
Negativity affects in U.S. (unintelligible).
And three, relief is needed for the entire
aluminum supply chain including downstream
rolled product to ensure a healthy aluminum
industry in the United States.
Thank you very much.
Man: Thank you.
When you talk about the entire aluminum supply
chain is there sort of industry accepted definition
or group of HS codes that would objectively
identify what those products are?
Marco Palmeri: Well we talk about the entire
supply chain it comes from the bauxite mining
to the smelting, the semi-application which
is rolling.
Its extrusion product and that is the definition.
Then we supply this product to the end markers.
Like something planned and things like that.
Man: I see thank you.
Any other questions from the panel?
Marco Palmeri: Thank you.
Marco Palmeri: Thank you very much.
Man: Ready for our next speaker.
Man: Hi good morning ladies and gentlemen
and thank you for the opportunity to testify
today.
I am (unintelligible) CEO of (unintelligible)
based in Baltimore, Maryland and a member
of the Aluminum Association as well.
(Unintelligible) aluminum leader listed on
the New York Stock Exchange we have 12,000
employees, generate $5 billion in revenue
and the U.S. is about 40% of our business.
We have a large industrial presence with plants
in West Virginia, Alabama, Michigan, Kentucky,
Georgia and R&D; in Michigan.
Our main clients include Boeing, Airbus, Lockheed
Martin, SpaceX, (unintelligible), (unintelligible),
(unintelligible), General Motors, BMW to name
a few.
In the different markets we have been (unintelligible)
U.S. defense industry for decades working
with U.S. defense companies such as Lockheed
Martin.
We also partner with the U.S. Army to develop
new aluminum solutions for armored vehicles.
In our plant in (unintelligible) West Virginia
we are manufacturing advanced alloys for military
aircraft and armored vehicles which supply
plates for military aircraft and jet fighters
such as Boeing C-17 Globemaster, the F16 or
the new F35 Joint Strike Fighter.
We consider the U.S. to be one of our key
markets.
This is why we have invested in last five
years over $1.8 billion in our U.S. plants
and (unintelligible) $170 million.
Our current position as global leader is a
direct result of the significant investment
program.
However, our business is threatened today
by China’s long term practice of market
distorting policies.
The risk that we are facing today are directly
linked to the costs and due cost advantage
to change aluminum converters are benefiting
from.
In particular, (unintelligible) in the access
to low cost raw material puts us at a great
disadvantage.
Primary aluminum traded on the Shanghai Futures
Exchange as regularly a price advantage over
the price paid by U.S. players which is based
on the London metal exchange price.
But none Chinese players cannot access that
raw material as there is a 15% export duty
on primary metal and aluminum scrap out of
China.
This cost advantage has driven greater for
the Chinese aluminum conversion industry as
Chinese rollers and extruders in addition
to benefiting from lower production costs
and lower raw material costs also profiting
from (unintelligible) exports of 13% to 17%.
So (unintelligible) this means that for a
product that sells for say $3000, China would
have the $500 and more advantage from tariff
and duty structure which represents more than
half of our value add.
So this unfair pricing is already impacted
our business even though we believe the worst
is still to come.
Already we have witnessed a significant increase
in for instance, China’s U.S. imports of
plates from 5000 tons in 2012 to almost 70,000
plates in 2015 in the span of three years.
And that represents more than 25% of the market
and more than our (unintelligible) shipments
of our mill in Ravenswood.
This obviously resulted in missed revenue
for our U.S. business, missed profits and
fewer jobs.
This situation threatens our (unintelligible)
business which relies on both high valuated
products and larger volume standard products
because of the fixed costs incurred by our
facilities large installed capacity and equipment.
Furthermore as China’s interest and skills
in aluminum valuated products are rising,
our industry is at even greater risk.
In the coming years China is expected to acquire
the technical knowledge to produce also higher
end products and is already pushing to the
global aerospace and automotive markets.
The (unintelligible) more fronts with us having
little ability to fight back.
Such a situation is obviously not sustainable
in the long term.
And as a direct impact (unintelligible) invest
in our plants and in our assets.
What actions are needed to address excess
capacity and unfair pricing from China I would
like to express our strong support of fair
rules based trade of aluminum among the United
States, Canada and Europe.
Industries interlinked by a global supply
chain and it is quicker for our success.
For these reasons I respectfully request that
a Commerce Department and the administration
permit actions to address China’s unfair
trading practices.
Remedies should consider the whole value chain
and should target all Chinese originated products
without exclusions.
They should be tailored to address China’s
(unintelligible) subsidies while protecting
existing relationships between U.S., Canada
and Europe.
Thank you again for your time.
And we appreciate the leadership and foresight
that the administration is showing in addressing
this issue earlier.
Thank you.
Man: Thank you for your comments.
Questions?
And we are ready for our next speaker.
Bob Prusak: Good morning.
My name is Bob Prusak.
I am the CEO of Magnitude 7 Metals.
Magnitude 7 Metals recently purchased and
idle smelter located in New Madrid, Missouri
which had previously been operated by Noranda
Aluminum prior to the bankruptcy in 2016.
Thank you for this opportunity to testify
today and explain why Section 232 relief is
necessary for the domestic aluminum industry.
Domestic primary aluminum production is in
the midst of a crisis driven by Chinese overproduction.
This Chinese overproduction has led directly
to declining global prices.
Put simply, our industry is at a critical
turning point and at risk of disappearing
absent much needed relief.
The number of domestic aluminum smelters in
the United States has gone from 23 in 2000
to 5 today.
With only two running at capacity.
I would like to talk to you about 2 of these
smelters today.
The Ormet Smelter in Hannibal, Ohio and our
facility in New Madrid, Missouri.
I have a personal connection to both.
I serve on the board of Ormet Corporation,
a domestic producer of primary aluminum from
2007 to its closure in 2014.
In early 2013, Ormet announced it was curtailing
the operations of its 272,000 ton smelter
in Hannibal, Ohio which is located along the
West Virginia border south of Wheeling.
Ormet started producing aluminum at its production
plant in 1956.
Like other U.S. smelters, in the years leading
up to its closure, Ormet’s production suffered
from falling aluminum prices and rising imports
largely driven by global and principally Chinese
overproduction.
Ormet laid off roughly 1000 workers in 2013
most of them unionized steel workers.
With market conditions continuing to deteriorate
at the end of July 2014, Ormet can no longer
withstand the onslaught and announced the
permanent closure of its smelter, firing the
last 20 workers and dashing any hope that
its operations would be revived.
Not only did Ormet’s closure deal a heavy
blow to the workers and their families relying
on the company for a decent wage.
It also sent shock waves throughout the Ohio
River communities.
Ormet was effectively the sole employer to
both Clarington and Hannibal, Ohio and was
the largest employer in New Martinsville,
West Virginia.
When Ormet closed these towns were decimated.
Unfortunately this story has been repeated
in communities throughout the United States.
Just last October my company purchased Noranda’s
distressed smelting (unintelligible) bankruptcy.
As with Ormet, the New Madrid smelter was
forced to strip down after more than 45 years
in operation.
The New Madrid facility produced primary aluminum
and some semi-finished aluminum products used
in both U.S. military and critical infrastructure
applications that are vital to U.S. national
security.
Roughly 900 high paying, high skilled jobs
were lost when Noranda closed.
Many of these workers are still out of work
today more than a year later.
When the smelter was operational, the company
and its employees spread roughly $45 million
throughout Southeast Missouri.
With this money gone everyone from local restaurants
and businesses to local school districts felt
the pain.
New Madrid County where the smelter is located
also took a big hit losing millions of dollars
in tax revenue annually.
As a result, the local government was forced
to delay projects, institute hiring freezes,
less infrastructure spending and postpone
wage increases.
Community programs are negatively impacted
as well as the local police and ambulance
services.
Because the revenue from Noranda comprised
nearly 17% of the entire budget for the school
district a budget deficit resulted leading
to layoffs, staff reductions and program cuts.
Six months after Noranda’s closure the unemployment
rate in the county more than doubled.
For Magnitude 7 are only two among a number
of (unintelligible) smelters.
We are not yet operational.
We are currently negotiating a new power contract
and hope to restart operations soon.
However, without comprehensive Section 232
relief, our ability to fully restart operations
is far from certain.
Relief is nothing short of critical to get
us up and running and bring Southeast Missouri
back to life.
This leads me to my final point.
Section 232 relief must be broadly granted
to the domestic aluminum industry.
Relief on high purity alone is insufficient
to bring aluminum production back to the United
States.
If we continue to allow imports to erode our
market share of primary aluminum we will lose
the ability to produce primary aluminum of
any grade.
High purity or otherwise.
High purity aluminum will only ever be a small
portion of the output at even the most efficient
aluminum smelters in the world.
Our basic primary aluminum production must
therefore be viable in order to allow high
purity production domestically.
Finally, I would like to stress that excluding
any import sources other than Canada in Section
232 relief would undermine any relief granted
to the point where the U.S. industry would
see virtually no benefits.
If the United States is going to maintain
its ability to produce the aluminum that is
vital to our national security we cannot allow
the relief to go undermined.
Thank you for your time and consideration.
Man: Thank you for your comments.
Questions?
Thank you sir.
We are ready for our next speaker.
Thomas Robb: Good morning.
My name is Thomas Robb, Chief Operating Officer
of New Day Aluminum and its Noranda Alumina
subsidiaries.
I welcome this opportunity to offer my company’s
unique perspective on the Commerce Department’s
Section 232 investigation into imports of
aluminum.
Our perspective is unique because we operate
through Noranda Alumina.
The only smelter grade aluminum refinery remaining
in the United States.
Alumina is the critical raw material in the
production of aluminum tracing aluminum back
to its source.
The aluminum process begins with bauxite which
is refined to produce alumina.
Which is then converted to aluminum through
an electrolytic process.
It takes approximately two pounds of bauxite
to produce one pound of alumina.
And two pounds of alumina to produce one pound
of aluminum.
Our alumina refinery is located along the
Mississippi River in Gramercy, Louisiana.
It currently produces more than 1.1 million
metric tons of alumina annually and employs
440 people.
Through our Noranda bauxite subsidiary we
also operate a bauxite mining operation in
(unintelligible) Jamaica that supplies our
alumina refinery.
Noranda Alumina is the principle source of
alumina supply to Century Aluminum, the largest
remaining U.S. based producer of primary aluminum
for two of its three operating smelters in
the U.S.
Century is a significant U.S. based producer
of high purity aluminum which is necessary
for a number of national defense and military
applications.
We are proud of that partnership and its service
to our nation.
We respectfully recommend that any trade policies
considered in this investigation should include
protections to ensure the continuation of
a U.S. based supply of alumina.
We further recommend that any review of the
national security effects of imports of aluminum
must also include a review of the U.S. supply
and access to bauxite ore from which aluminum
and alumina itself is derived.
As the department may be aware, there are
no longer any bauxite mining operations in
the U.S.
The closest sustainable foreign source of
bauxite is in Jamaica where Noranda bauxite
is strategically position.
The other three major mining facilities in
Jamaica are wholly or majority owned by Chinese,
Russian and Hong Kong interests.
And none are permitted to export bauxite out
of Jamaica.
Rebuilding the U.S. stockpile of bauxite ore
which began in the 1930s and which was reinvigorated
by President Reagan during his administration
would be one way for the U.S. to alleviate
the risks associated with sourcing this raw
material exclusively from foreign countries
and/or foreign interests.
We therefore suggest that this administration
give strong consideration to creating a U.S.
stockpile of bauxite and we would be willing
to work with the government on building up
and managing that strategic research.
As for the importation of aluminum itself,
we understand the department’s need to review
a variety of trade policies related to this
issue.
However, and we share this with great deference.
We believe trade policies that might significantly
restrict or eliminate foreign imports of aluminum
may have unintended but significant negative
consequences.
For example, in 2016 the U.S. produced approximately
60% less primary aluminum than it produced
in 2012.
Over the same period, U.S. demand for raw
and semi manufactured aluminum increased by
more than 40%.
This tells us that the importation of primary
aluminum is necessary and must continue especially
in the near term.
I am a businessman and not an economist.
But I believe that the current Chinese dominance
and the production of both alumina and aluminum
creates an ability for China to manipulate
the aluminum value chain for its benefit.
If such manipulation puts U.S. and other allied
countries alumina and aluminum production
facilities out of business, we and our allies
will become dependent on foreign sources of
these critical raw materials.
We recognize that may be the worst of all
possible scenarios but merely suggests that
all eventualities be considered in your investigation.
In conclusion, we recommend that the department
consider creating a strategic reserve of bauxite
in the U.S.
We also recommend that the various unintended
consequences of severe tariffs or trade regulations
on foreign imports of aluminum only one of
which would postulate here.
Be examined in robust detail in considering
whether and how such restrictions should be
imposed.
Thank you for the opportunity offer our comments.
I welcome any questions you may have.
Man: Thank you.
On the issue of no bauxite mining in the United
States.
Is that because there are no bauxite deposits
left?
Or is it for other reasons (unintelligible).
Thomas Robb: There is no economically extractable
bauxite from a quality perspective.
Man: So that is not kind of a trade issue
it is just a natural resources issue.
Thank you.
Thomas Robb: Other questions?
Man: Thank you sir.
We are ready for our next speaker.
Paul Henry Chevalier: Good morning Mr. Secretary
and members of the panel.
Thank you for the opportunity to share Jupiter
Aluminum and its employees view here today.
My name is Paul Henry Chevalier.
I am the President of Jupiter Aluminum Corporation
an American quality health aluminum producer
based in Des Plaines, Illinois.
I’m here today because we need to preserve
our industry and manufacturing jobs by establishing
a level playing field with honest and fair
competition the market (disgusting behavior
sees).
Jupiter Aluminum is turning 25 this year and
since 1992 grew from a (unintelligible) silver
and (unintelligible).
We are about 400 people working with three
plants two in Indiana and one in West Virginia.
24/7 we transform aluminum scraps (unintelligible)
domestically into (unintelligible) (sold)
in the construction with (unintelligible)
distribution and (government) markets.
(Unintelligible) was probably had a license
but cashing out mill one day.
Over 95% of our products are sold in the US
and Canada.
While we electively (unintelligible) compared
to many other even producers to (particular)
impact on their local and domestic economies
is much larger than its own size when you
factor in the various vendors and partners
operations require and there’s no need to
remind everyone that manufacturing and manufacturing
related jobs they’re very well with excellent
benefits.
Today I will focus on three specific damaging
consequences over the Chinese trade practices.
The first damaging consequences directly related
to fair trade.
The aluminum markets started attracting the
Chinese in 2003.
The (administration) organized a meeting with
a (unintelligible) assistance to the Secretary
of Commerce in December 2003 to raise the
issue with the Chinese trade practices that
allowed them to sell below market price.
Not much resulted from this meeting.
Since then Chinese aluminum production sold
from 11% of (worldwide) supply to 55% today.
Twenty-One American smelters closed in the
same period.
China developed this extraordinary capacity
during one of the world’s worst recessions.
Jupiter Aluminum adapted to the new economy
environments of patented high temperature
of (unintelligible) technologies said 70%
of our natural gas consumption.
The technology by the way also reduces CO2
emissions by 70%.
However innovation did not suffice.
We also (unintelligible) costs investments
and growth.
Competition is good and it forces you to continuously
improve.
That however only worth when standard economy
rules apply to everyone.
In China financial liability doesn’t seem
as important as providing jobs and maintaining
social stability.
Once American aluminum production is gone
nothing would (let) Chinese companies from
moving downstream and directly sell finished
goods to our customer’s customers.
Today China is still increasing production
resulting in (unintelligible) service supply.
That’s all job creation in China versus
financial performance in the US is unfair.
The second damaging consequence is related
to a (chiseled) future.
The second consequence is global as it affects
human health.
ETA regulations are good for a reason.
However its standards only affect to American
industries.
(The Administration) has found that each Chinese
aluminum producers energize by coal fire power
plants from city to country that country would
be the 16th largest (unintelligible) of greenhouse
gases in the world.
North American production by comparison is
cleaner because it’s regulated.
Replacing clean production by dirty production
is unfair.
The third damaging consequences in our country’s
future.
Jupiter’s mills are based in the heart of
the city industry over the last 30 years the
region has seen the steel mills bankrupting
and downsizing.
During that time demand did not really disappear
only production moved to China.
The same is happening to aluminum.
It has become increasingly difficult to attract
the next generation in our industry as it
has seen its parents lose their jobs and beyond
their jobs they are faced in the future.
The questions are can our countries fly without
an industry?
Should our country become completely dependent
on China for its manufactured goods.
It’s clear today that we must work with
China on an agreed upon fast forward.
That said the fast forward has to be fair
and honest without market disgusting behaviors.
Thank you Mr. Secretary and thanks to the
members of the panel for this opportunity
to address the industry’s concerns today.
Matthew Borman: Thank you for your comments.
Any questions from the panel?
All right thank you.
We will now take a 15 minute break so we will
reconvene at 10:55.
Thank you.