USMCA could boost demand for US Al alloys

Some US cast aluminum alloy producers expect an uptick in demand for ingot after President Donald Trump's administration clarified in June that unwrought aluminum used in automotive manufacturing will need to be proven North American in origin to count toward the US-Mexico-Canada Agreement's (USMCA) local content requirements.

In a document released on 3 June, the US Trade Representative included harmonized tariff system code 76.01, unwrought aluminum, as covered under USMCA content requirements. Unwrought aluminum alloys fall under this heading, bearing the code 76.012. The document also included 76.02, the code for aluminum scrap.

This means that Mexico-based manufacturers may need to shift more of their alloy imports to North American sources if they want to remain in compliance with the treaty, which requires that 70pc of all vehicle components be made from North American parts and materials.

The USMCA treaty comes into effect starting in July but there will be a 90-day grace period before enforcement kicks in.

In the first four months of the year, only 44pc of Mexico's unwrought aluminum alloy imports came from North American sources, with 30pc from the US and 14pc from Canada. The percentages were almost exactly the same during the first four months of 2019.

The UAE supplied Mexico with 20pc of its unwrought alloy imports through April, Russia supplied 11pc, India 7pc, and Vietnam and Bahrain each 4pc.

"We do anticipate more volume demand as some of the casters eliminate Asian/Indian import ingot" because of USMCA requirements, one Midwest secondary smelter said.

Several US projects are in the works that may benefit from Mexico's likely pivot to more North American alloy, including Audubon's planned secondary smelter in Corsicana, Texas, targeting an early 2021 opening, and Alliance Metals' Alabama smelter aiming to open in August.

"Seeing Audubon and [Alliance's] secondary smelters in Texas and Alabama, I can only assume the vast majority of that metal will go to Mexico," a second US smelter said.

Another project that may benefit is Levitated Metals' New Caney, Texas, heavy media plant. Still in the construction phase, the plant will buy zorba to produce twitch for third-party smelters. A penalty for importing non-North American alloy could push Mexico to expand its domestic smelting capacity, but the country remains highly reliant on US scrap.