EU aluminium levy ‘outdated’
London – A 6 percent duty levied on imports of primary aluminium into the European Union (EU) is outdated, unfair on consumers and should be disposed of as soon as possible for the industry to move on, analysts say.
Angus MacMillan, a minerals strategist at Prudential Bache International, says the duty is “a bit of an anachronism, a throw-back to a bygone age”.
It seems ridiculous that independent smelters should be penalised by this import duty, to the advantage of European integrated producers, he says.
The duty is meant to protect European aluminium producers. MacMillan says that given the way the aluminium industry has moved in recent years, “it does seem ridiculous that one can import from South Africa duty-free but not from the Middle East.
“The quicker this anomaly is gone the better.”
The Federation of Aluminium Consumers in Europe, a lobby group, has long argued that the import duty distorted competition and penalised non-integrated independent manufacturers.
The federation, which represents 44 aluminium consumers across the EU, blames lost revenues amounting to hundreds of millions of euros a year on the duty.
Roger Bertozzi, the spokesperson on EU and World Trade Organisation affairs at the federation, says:
“If there was no tariff, aluminium would cost the same as elsewhere in the world and it would be a fair, level playing field.”
“But instead we’re competing against integrated producers and there’s a massive distortion of competition.”
Robin Bhar, a base metals analyst at Standard Bank London, agrees.
“The sooner [the duty] is abolished, the sooner there will be a more level playing field to allow global trends to reassert themselves. The duty does skew the market place.”
“In this era of World Trade Organisation and tariff reduction, it stands as an anachronism.”
Moves to amend the duty have gained the backing of 12 EU member states, but have consistently run into opposition from the French authorities, which have vetoed the proposal.
But with Alcan takeover of French rival Pechiney set to go ahead, France would no longer have the grounds to maintain its veto, the federation said.
It said in a recent press release:
“There has never been any sound economic argument to justify France’s abusive veto to the request of the suspension of the EU 6 percent duty. Now there is also no more political reason to do so, against EU interests, policies and principles.”
It asked the French government “to remove immediately its illegitimate veto”.
Bhar says those resisting the abolition of the duty will have to face up to reality.
“There is some resistance from the likes of Pechiney, but most people would agree it does stand out, and hopefully it’s on its way out.”
The federation said that with the purchase of Pechiney by Alcan, the EU would become a totally captive market whose entire production of primary aluminium was consumed by the three major integrated groups: Alcan, Alcoa and Norsk Hydro.
Europe’s dependence on imports of primary aluminium will grow from 60 percent to 70 percent with the accession of 10 candidate countries from eastern Europe.
The EU independent transformers and consumers of aluminium depended totally on imports for their needs, which amounted to about 2.7 million tons a year of primary metal, the group added.
Bertozzi says his group’s legal views are well known and the federation is still prepared to fight if the unthinkable happens and France maintains its veto.
“The tariff is like a state policy. Nobody likes to go to court, but we can’t just sit down and watch companies collapse,” he says.
Stephen Briggs, a metals analyst at Socgen, says the elimination of the aluminium import duty is inevitable at some point.
“In effect, it’s a tariff barrier which subsidises the European smelting industry,” Briggs says, but adds that the duty is unlikely to disappear overnight.
“I think it will happen, but it will be slow.”
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