Just a few days ago Alcoa took its latest stand in terms of the closure of all three Spanish smelters owned by the American multinational, a decision motivated by a series of structural issues, such as high energy costs and Chinese overproduction.
Alcoa’s move adds pressure on the European Commission to radically adapt its out-dated trade and industrial policies. Saddled with deep disadvantages, the EU has lost more than a third of its total primary aluminium output between 2002 and 2016 – in just fourteen years, more than 13 smelters have closed up shop.
Even before Alcoa’s announcement, domestic production of primary aluminium only satisfied around 30% of total consumption.To put that into numbers, the EU’s primary aluminium production in 2017 was 2.1 million tonnes, down from over 3 million in 2002, leaving the EU market over 70% dependent on imports, and following the latest provisions announced by Alcoa it is clear that things will go from bad to worse.
To be fair, the EC could have done little to prevent their closure, when asked by the European Parliament about the Alcoa smelters, the Commission replied that companies are free to make decisions in the common market, and state aid is severely restricted.
With such limited policy options, it should be clear for the EC that the only way forward should be a new raw material access policy that can save the downstream aluminium sector. But thus far, EU policymakers have fallen woefully short of that objective. For the past 20 years, the Federation of Aluminium Consumers in Europe FACE has been warning the EC that the current road will lead to the inexorable decline of a sector that sustains over 1 million indirect jobs.
According to studies conducted by the LUISS University of Rome on FACE’s behalf, the competitiveness of European SMEs in the aluminium downstream sector is weighed down by the EU’s import tariffs on unwrought aluminium. As FACE has repeatedly advocated, the 6% tariff on imports has only made aluminium products more expensive; ostensibly introduced to protect European smelters from international competition, the tariff has translated into artificial costs for downstream SMEs of up to €1 billion annually, while doing nothing to stave off the decline of primary production.
It is therefore of paramount importance that European governments and the EC do everything in their power to secure the survival and foster the growth of the aluminium downstream value chain. Eliminating the import tariff on unwrought aluminium is a first step that will lower the cost of raw materials and boost the competitiveness of the downstream sector.
The unfortunate Alcoa closures should be the final wake-up call for European governments and the EC to act quickly and swiftly or risk seeing the entire industry progressively shutting down.
This article was originally published in Aluminium and Alloys.
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