Sparks fly as the core of the blast furnace. (Photographer: Alex Kraus/Bloomberg)

No Major Impact Of U.S. Tariffs On Global Aluminium Industry: ICRA

The imposition of a 10 percent tariff on import of aluminium into the U.S. is unlikely to have any major impact on the current dynamics of the global aluminium industry.

That’s because the global market is currently in a deficit, following production cuts by China to curb pollution from its “illegal” aluminium smelters, Jayanta Roy, senior vice-president and head of corporate sector ratings at ICRA told BloombergQuint. The world can absorb the surplus aluminium redirected from the U.S., after the imposition of tariffs, to offset these deficits, he added.

Last year, the global aluminium industry was reeling under a deficit of 1.4 million tonne and ICRA expects it to widen to 2.5 million tonnes due to production cuts in China. “If the global deficit remains, absorbing any surplus from the U.S. should not be a problem,” Roy said. However, that does not take into account the impact of retaliatory trade measure that may be taken by affected countries against the U.S., he added.

That would hold true for the global steel industry as well. Imports into U.S. for calendar year 2017 was 34 to 35 million tonne, half of which comes from countries like Canada, Mexico, South Korea and Brazil which are exempt from the U.S. tariff, said Roy.

The balance 16-17 million tonnes of steel can be absorbed by the rest of the world where demand, excluding the U.S. is expected to grow by 25 million tonnes, he added.

JSW Steel And Tata Steel: Who Leads The Race?

JSW Steel Ltd. and Tata Steel Ltd. will have similar capacities over the next three to four years, if the bids submitted for stressed assets under the insolvency process are accepted. SAIL will be the third largest, thanks to expansion efforts the company has undertaken in recent years.

  • Tata Steel Ltd. has emerged as the front runner for Bhushan Steel Ltd. and Bhushan Power & Steel Ltd. If these two assets go to Tata Steel, its capacity will increase to 21 to 22 million tonnes from 13 million tonnes currently. Another 5 million tonne capacity will come from expansion in its Kalinganagar plant in Odisha.
  • JSW steel was the sole bidder for Monnet Ispat and Energy Ltd. The asset could raise JSW Steel's capacity to around 20 million tonne. Another 5 million tonne will come from brownfield expansion at Dolvi.
  • SAIL's capacity is also expected to be around 22 million tonne on the back of expansion efforts.

Stressed steel accounts in Reserve Bank of India's first list of likely defaulters, most of which are now undergoing resolution at different National Company Law Tribunals, together account for 21 million tonnes of steel capacity in India. Bhushan Steel, Bhushan Power, Monnet Ispat are part of the banking regulator’s first list.