AEC China Fair Trade Case. Platt s Aluminum Symposium 2015 Scottsdale, AZ 01/19/15

Transcription

1 AEC China Fair Trade Case Platt s Aluminum Symposium 2015 Scottsdale, AZ 01/19/15

2 Our agenda Overview of 2014 Key Challenges 2015 Quick Review of Ducker Study The Way Forward

3 AEC China Fair Trade Year in Review Key Challenge/Opportunity Funding Maintain Tariff Rates Scope Issues 5xxx Series Alloy MacLean Fogg Circumvention Issues Puerto Rico Case So-Called Balco case Concerns in SW U.S. Lobbying Efforts Washington D.C. office AEC Lobbying Team Outcome Raised $1 MM + 2 nd Admin Review = 42% Clearer definition of finished product 5XXX decision expected in December There will be work to follow Legislative Fix Expect Sentencing in Puerto Rico ; an extruders working with AEC on other reports of circumvention Office is secured; Lobbying team assembled

4 AEC China Fair Trade 2015 Preview Key Challenge/Opportunity Maintain Tariff Rates Scope Issues Event/Issue 3rd Admin Review underway Fight for Thailand as Surrogate LME Benchmark Issue Tariff Impact Lobby efforts on Scope Issues 5xxx Series Alloy Circumvention Issues Puerto Rico Case Concerns in SW U.S. Lobbying Efforts Washington D.C. office AEC Lobbying Team 5xxx Series follow up Expect more rumors Stepped Up area for AEC in Objectives AEC members routinely visit D.C. CSUSTL ITAC China 16 Issue driven

5 Advancing Growth Executive Summary November 17, 2014 This report is solely for the use of client personnel. No part of it may be circulated, quoted, or reproduced for distribution outside the client organization without prior written approval from Ducker Worldwide LLC.

6 Introduction & Methodology Methodology A wide variety of information sources and respondents have been utilized to triangulate and validate information Nearly 25 interviews have been conducted with aluminum extruders, end users, industry experts (law firms specializing in trade) and other key industry participants Although the information and data presented within this report is accurate as of October 2014, the extrusion industry is in a dynamic state, new applications and suppliers are being uncovered and the information is likely to change in a short period of time Respondent Type Total Number of Interviews Conducted Aluminum Extruders 13 End Users 7 Associations 1 Industry Experts 3+ Total Interviews 24 6

7 Situation Assessment China imports as a share of estimated total US consumption grew from less than 1 percent in 2002/2003 to ~5 percent in 2006/2007, then spiked to percent In 2009/2010 China market share peaked at over 20 percent in Q The imposition of tariffs led to an immediate drop back to less than 1 percent since ,000,000 Domestic Shipments vs. China Extrusion Share 16.0% 5,000,000 4,000,000 3,000, % 12.0% 10.0% 8.0% 2,000,000 1,000, % 4.0% 2.0% 0.0% Domestic Shipments Plus Imports (000 lbs) China market share % *China data reflects 7604 & 7608 codes, while U.S. includes all extrusions Source: Ducker Analysis, Aluminum Association, UN Comtrade, US Census 7

8 Documenting the Trading Case When comparing the price of China imports to all other imports, the level of the China price discount is reflected in the China market share Price discount of ~20% with market share of ~5% Price discount of ~30% with market share of ~12% 14.0% China market share % China price discount vs All Other Imports 40% 12.0% 30% China market share 10.0% 8.0% 6.0% 4.0% 2.0% 20% 10% 0% -10% China price discount 0.0% Source: Ducker Analysis, Aluminum Association, UN Comtrade, US Census -20% 8

9 Impact of Chinese Extrusions While industry participants agree that Chinese imports have a dynamic impact on the US, there is mixed reviews regarding the perceived value the AEC offers the industry to mitigate the full impact of the Chinese extrusions This is primarily driven by the company size and product segments a company offers Typically, companies that offer commodity or simple extruded products are more likely to recognize the AEC as being extremely instrumental to their success AEC is Not Beneficial at All to my Business AEC is Extremely Beneficial to my Business Company Similarities Manufacture products in specialized markets (Aerospace, Military, and automotive) Typically are smaller size companies. Generally generate less than $20 - $25 Million in revenue a year Products produced are highly engineered, complex designs, or a combination of various alloy series Requires localized access to engineering and production design to ensure extrusion quality and dimensional tolerances We were members of the AEC up until a few months ago. It wasn t because we didn t see value in their efforts, it s just that they didn t directly benefit our company. We extrude complex products designed for the companies in very niche markets. China imports didn t have any affect on our business. We are fully aware of the negative impact China had on our industry. The companies that are going to benefit the most from the AEC efforts are those that extrude basic and simple design products that can be produced in bulk quantity. Company Similarities Manufacture products in saturated markets (building and construction, industrial) Typically are medium to large size companies. Generate over $50 Million in revenue a year Products produced are typically commodity products that are basic in design, simple in manufacturing, and are low cost, high volume products Customers expect easy access to materials via extruder and / or distribution centers 9

10 Tariff Scenario Analysis Scenario A: If imports from China had continued at their 2009 level of 12.4 percent of estimated total US consumption, an additional 1,400 million lbs. would have been imported from China between 2010 and 2013 Scenario B: If imports from China had continued at their peak level of 20 percent of estimated total US consumption, an additional 2,500 million lbs. would have been imported from China between 2010 and Total Total US Consumption (000 lbs.) 3,191,165 3,540,367 3,465,096 3,745,606 3,970,889 14,721,958 Actual China imports (000 lbs.) 394, ,036 9,554 12,758 20, ,029 Actual China % 12.4% 11.2% 0.3% 0.3% 0.5% 3.0% A China 12.4% (000 lbs.) 439, , , ,390 1,825,523 B Difference (000 lbs.) 43, , , ,709 1,387,493 China 20% (000 lbs.) 708, , , ,178 2,944,392 Difference (000 lbs.) 313, , , ,496 2,506,362 Source: Ducker Analysis, Aluminum Association, UN Comtrade, US Census 10

11 Tariff Scenario Analysis While participants of the transportation and Building and Construction industry have indicated positive growth, primary discussions suggest that the domestic health of the industry depends on consistent tariff policies Past Pre 2010 Present ( ) Future (If Tariffs are Reduced) Future (If Tariffs Remain at Current Level) High Low High Low B&C During the economic down term, extrusions from foreign extruders penetrated the U.S. market at an all time high Companies within the building and construction segment agree that business has increase over the last 3 years, yet are not a pre recession levels Foreign extrusions will saturate the U.S. market as Chinese production surpasses global demand To compete, U.S. customers will switch to low cost extrusions from foreign companies Continued high tariffs will secure current state of domestic industry. However, alternative methods of competing should be established as contingency plans Low Low Medium Low Automotive As OEMs demand engineered solutions, short terms threats are limited; however, low prices have led OEMs to look to China: e.g. Aluminum Cast Wheels While many automotive industry participants indicated little impact from Chinese extrusions, they agree that the automotive industry is in healthy condition As OEMs look for other avenues to reduce costs, China and other low cost country extruders will become more attractive suppliers Continued high tariffs will secure current state of domestic industry. Unlikely that OEMs will consider using foreign extruders as quality, collaboration and lead time are of high importance High = High level of vulnerability to low cost country imports; high percentage loss of sales (>20%) Medium = Medium level of vulnerability to low cost country imports; mild percentage loss of sales (10 19%) Low = Minimum level of vulnerability to low cost country imports; minimum potential loss of sales (<10%) 11

12 Tariff Scenario Analysis Should China be granted full market status and recognized by U.S. as meeting all standards, the market share for Chinese extrusions will increase Depicted below are scenarios which identify the magnitude of penetration Chinese extrusions may have on the U.S. market 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% China Market Share in US - Scenarios Status Quo - China market share % Senario 1 -China market share % Scenario 2 - China market share % If China is granted full market status and is recognized by the U.S. and tariffs reduce significantly Prices of imported extrusions will be decrease to *$1.48 by 2018 If China is granted full market status and but is not fully recognized by U.S., yet some tariffs are minimally reduced Prices of imported extrusions will be decrease to *$1.68 by 2018 If China is not granted full market status nor recognized by U.S. Prices of imported extrusions will remain fairly consistent, however some tariffs may slightly reduce Source: Ducker Analysis, Aluminum Association, UN Comtrade, US Census *Assumes fixed metal price per pound from 2013 data 12

13 AEC China Trade Case Our Path Forward Communication Webinar (Ducker Report, 5000 series, Circumvention) Maintain Monthly Blog /Trade Alert Financial Management Monthly Reconciliation Board Chair reviews Lobbying Leverage D.C. office Focus on DOC Scope and Administrative Reviews Focus on Legislature Political Pressure and China 16 CSUSTL Broaden our message/work with other industry ITAC Non-Ferrous and B&C committee Legal Agenda Scope Requests LME Benchmark Admin Reviews, Other Issues