LUISS Study (all documents): The European Union Aluminium Industry, the impact of the EU trade measures on the competitiveness of downstream activities

The study conducted by researchers from Rome’s prestigious LUISS University is a landmark in understanding the needs and competitiveness of Europe’s downstream aluminium sector.

With a specific focus on EU trade policies on unwrought aluminium and their impact on manufacturers of semi-finished products, the study concludes that current import duties on raw aluminium have saddled European SMEs with extra costs of up to €18 billion. The findings suggest that import tariffs should be abolished as they artificially raise downstream costs without offering any appreciable results in protecting upstream production.

https://face-aluminium.com/wp-content/uploads/2019/06/2019-LUISS-Study.pdf

FACE commissioned the LUISS University in Rome to conduct this study, which calculates that maintaining the import tariffs on unwrought aluminium has resulted in an extra-cost of up to €18 billion to the EU’s downstream aluminium sector between 2000 and 2017.

The downstream sector accounts for 92% of the jobs and 70% of the turnover of the EU aluminium industry. The import tariff is devastating for a low-margin industry where unwrought aluminium accounts for over 50% of manufacturing costs. The thousands of SMEs making up the sector are already suffering from fierce, and too often unfair competition, notably from China.

While the 6% import tariff structure on unwrought aluminium was put in place to protect EU producers, the LUISS study shows that it has not prevented the structural decline of the continent’s smelting base through closures and disinvestments by big producing groups. Since 2008, Europe has lost 30% of its primary aluminium production capacity, now reduced to 2 million tons annually, and large producers have not kept promises to keep jobs and invest in R&D centres.

At the same time, EU demand for aluminium products has grown by around 3% annually and is now over 12 million tons per year. As the LUISS study explains, the import tariffs have prevented the downstream to grow commensurately; its output is currently at pre-2008 levels.

“There is no duty-free priced unwrought aluminium available to EU users and consumers. Through a non-transparent market mechanism, the equivalent of the value of the highest level of the tariffs structure, or 6%, is included in the market premium for all the unwrought aluminium sold in the EU, irrespective of origin”, said Roger Bertozzi, EU and Multilateral affairs at FACE.

When unwrought aluminium is imported in the EU from dutiable sources, the duty-paid price includes the import duty, and is collected by customs officials. But when unwrought aluminium is produced in the EU or is imported from duty-free origins, a market premium reflecting the value of the 6% import tariff level is embedded in the price. That difference is cashed by producers. This phenomenon is denounced by FACE as a de facto “hidden subsidy mechanism”.

Mario Conserva, Secretary-General of FACE, stresses: “not only do EU aluminium consumers pay more than they should for their raw material, but they also unwillingly “subsidise” EU and extra-EU producers who benefit from artificially higher prices. This situation is unfair, destructive and cannot continue unchecked”.

FACE calls on the European Commission and the Council of the European Union to decide on the total suspension (zeroing) of the import tariffs on unwrought aluminium. It is an immediate policy tool available to end the abnormal overpricing of aluminium in Europe and to support the competitiveness and the survival of the industry.

Download the full study here.

Download the executive summary here.

Download the LUISS’s PowerPoint presentation here.