Russian-owned US aluminium plant a victory for Donald Trump

When Donald Trump faces American voters again in just over 18 months from now, he will be seeking to provide evidence of how his policies have benefited them.

One example will be his tax cuts last year which, unexpectedly, generated big pay rises for millions of US workers.

Another, perhaps, will be today’s announcement from Rusal, the Russian aluminium giant, that it is investing $200m (£153m) in what is expected to be America’s largest new aluminium plant in 37 years.

Rusal, whose chief executive for many years was the billionaire Russian oligarch Oleg Deripaska, will take a 40% stake in the mill, being constructed in Ashland, Kentucky, by Braidy Industries.

Mr Trump will point to the opening as an example of how the tariffs he has been slapping on imported goods are, just as he claimed they would, bringing back to America manufacturing jobs that had previously been outsourced overseas.

Some 1,500 jobs will be created in the construction of the plant, which is due to open in 2021, while 650 people will work there permanently once it is up and running.

Steel and aluminium were one of the key battlefronts opened by Mr Trump when, in January last year, he began imposing tariffs on a range of imported goods ranging from solar panels to washing machines.

His levies of 25% on imported steel and 10% on imported aluminium – first imposed in March last year on Chinese imports and later extended to imports from the EU, Canada and Mexico – provoked fury in those countries but were widely praised in the US by trade unions and even by some Democrat politicians representing blue-collar communities.

Those tariffs pushed up the cost of imported steel and aluminium and increased demand for locally-produced aluminium from US car makers which, increasingly, are switching from steel because aluminium is a lighter material.

The opening of this plant, whose location was selected due to its close proximity to America’s biggest car manufacturers, is aimed at meeting that demand.

The mill will be within a day’s drive of half of all American car production.

However, as a result of the plant opening, more imported aluminium will, ironically, be entering the US.

The mill, which will be producing flat-rolled aluminium, will be supplied exclusively with raw aluminium from Rusal’s operations in Siberia.

Braidy Industries is banking on the fact that, even with the tariffs, it will still be the cheapest producer in the US because it will be using more efficient production methods than some of its older competitors.

It expects to hold that price advantage for at least five years – the amount of time it believes any rival would take to get a similar project up and running.

Braidy is also hoping that a further competitive edge will come from the fact that the mill will be America’s first producer of low-carbon flat-rolled aluminium.

Rusal’s smelters produce 3.7 metric tonnes of carbon for every metric tonne of aluminium produced whereas smelters in China, the world’s biggest aluminium producer, generate 22 metric tonnes on average for every metric tonne of aluminium.

Lord Barker, the executive chairman of Rusal’s parent company EN+, told Platts Commodity News: “We are marrying lowest cost with lowest carbon, meaning that being environmentally responsible is no longer the preserve of those who can afford to pay for it, but actually becomes the right of every consumer.”

The investment also marks a significant milestone for Russian-US relations.

Mr Trump imposed sanctions on a number of Russian oligarchs – including Mr Deripaska – and companies in April last year in retaliation for alleged Russian interference in the 2016 presidential election.

That hit both Rusal and the London-listed EN+.

But under a deal thrashed out between the US Treasury Department and Lord Barker, a former energy and climate change minister, Mr Deripaska’s influence over both EN+ and Rusal was deemed to have been reduced – enabling sanctions to be lifted in January this year.

This is the first big investment in the US since then by Rusal which, with a 7% market share, is the world’s largest aluminium producer outside China.

Tariffs are, in general, bad for trade and bad for prosperity.

A report published last month by the New York Federal Reserve Bank and researchers at Columbia and Princeton universities suggested Mr Trump’s tariffs were costing American consumers $1.4bn (£1.1bn) every month.

But it is doubtful that the Americans who find work at this new mill will be bothered by that and especially if, as hoped, it helps trigger growth in the Appalachian region.

Nor, if it helps him win re-election, will Mr Trump.

Source: Read Full Article