Economically absurd tariffs have cost the EU downstream aluminium sector up to €18 billion, putting its future at risk.
The Federation of Aluminium Consumers in Europe (FACE) launches today a campaign to request European authorities to lift import tariffs on primary, and more generally unwrought aluminium, the industry's raw material. Though Europe is a growing net importer of unwrought aluminium, fulfilling over 74% of its demand through imports, the import tariffs range between 3 and 6%.
In support of this campaign, FACE published a study commissioned to the LUISS University in Rome, 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.
FACE was established in 1999 by various leading EU independent transformers as a voice dedicated to the European downstream aluminium industry. Based in Brussels, FACE advocates for the liberalisation of raw materials, protecting the EU's manufacturing base, supporting a rules-based and fair international system with the WTO at its core, and for the global transformation towards a low-carbon economy with aluminium as the ideal material for attaining sustainability goals.