Aluminum Monthly Metals Index (MMI), which measures the volatility of aluminum prices, saw a decline of 4.67% from June to July.
Aluminum prices continue to fall, reaching their lowest level since mid-April and stabilizing by mid-June.
Aluminum market trends and price outlook
Prices of aluminum dropped 6.86% from June to the end of July, before reaching a low in mid-June. Prices began to move in a sideways direction, but the overall trend is still downward.
This decline is a part of a larger trend that has been influenced by macroeconomic factors as well as trade policies that affect the aluminum market.
Tariffs on Mexican Aluminum Imports
The White House announced on July 10 that certain Mexican aluminum imports would be subject to a 10% tariff in an attempt to stop Chinese dumping. The tariff is applicable to all aluminum products that are not “melted and pour” in the US or Canada.
The USMCA (US-Mexico Canada Agreement) was amended to close the loophole that allowed aluminum to be rerouted via Mexico and bypass US duties.
The impact of the new tariffs on US aluminum prices will be minimal. Department of Commerce data shows that since 2018, the average monthly aluminum imports to the US from Mexico has been only 1.29 percent.
This is a much lower share than China, which represents roughly 3.9% total US aluminum imports.
Preventing an import surge
US Trade Representative Katherine Tai referred to the tariff decision as “fixing an loophole” and not addressing a sudden surge in aluminum imports coming from Mexico.
According to estimates, the new tariffs are expected to affect only 6% aluminum imports from Mexico. The main goal seems to be to prevent a possible increase in imports which could undermine US Aluminum producers.
Mexico has become a major conduit for the US market after China began to explore alternatives routes due to the duties placed on Chinese aluminum.
In January 2024, the number of shipping containers exported from China to Mexico increased almost 60% compared to the previous year. This shows China’s increasing reliance on Mexico as a rerouting point for exports.
Mexican tariffs on Chinese investment
Mexico’s tariffs have been a response to the changing dynamics of trade. Mexico has imposed tariffs of 5-50% on a number of products imported from countries such as China that don’t have a Free Trade Agreement.
These measures are designed to protect Mexican industry from imports of low cost goods, but they also show the complexity of trade relations with China.
Chinese investments have soared in Mexico’s manufacturing and logistics despite these tariffs. According to Financial Times, at least 41 Chinese projects were announced for Mexico in March, which is the highest number of announcements since 2003.
Nearshoring is a trend that illustrates the difficulties of excluding China completely from North American supply chain amid ongoing trade tensions.
Chinese Aluminum Production and Global Impact
Overcapacity in China continues to be a major factor that influences global aluminum prices. China continues to increase aluminum production despite weak consumer spending, a struggling real estate sector and low consumer confidence.
The International Aluminum Institute reported that Chinese primary aluminium production reached a record high in May. This accounted for almost 60% of the global output.
Chinese aluminum producers enjoy a competitive edge on the global market thanks to their high production levels and subsidies.
These subsidies allow Chinese manufacturers to keep production costs low, which puts pressure on aluminum prices globally.
The countries that don’t impose tariffs against Chinese aluminum will face more competition as Chinese aluminum is cheaper and can flood the market.
Aluminum market navigates a complex environment influenced by global policies of trade, production dynamics and geopolitical issues.
The continued volatility and uncertainty on the market is reflected in the 4.67% drop in the Aluminum Monthly Metals Index between June and July.
Recent US tariffs on Mexican Aluminum Imports are intended to stop Chinese dumping but will not have a significant effect on prices because of the small volume affected.
As a result, the global aluminum price continues to fall.
Aluminum producers and consumers face a number of challenges in maintaining the market’s stability.
In order to maintain profitability and competitive position, stakeholders must carefully navigate the dynamics of the market as it evolves.
This post Aluminum Prices Fall as US Imposes 10% Tariff on Mexican Imports to Curb Chinese Dumping may be updated as new developments unfold.
