Metals Markets Prepare for New Global Disorder

Donald Trump's attempts to rebalance global trade have already plunged the metals world into chaos. As countries react to US tariffs and sanctions, unrest will escalate. The next steps may be more dramatic, as the US and China are engaged in a trade battle that could involve hundreds of billions in tariffs on everything from cars to soybeans.

The confrontation is part of an upsurge in geoeconomics, a mix of politics and economics that will squeeze out or help certain metals companies and goods.

While high metal prices in the US are high for local producers, producers have to pick up the bill, undermining their competitiveness. CRU chief analyst Josh Spores said bluntly, "We're going to see a lot more offshoring."

Original equipment manufacturers can relocate to Mexico or Canada where they can import tariff-free aluminum and turn it into finished goods that can be shipped to the US tax-free.

Unintended Consequences

While China is the main focus of the Trump trend, other countries are looking to prevent dumping. The European Union has said it will impose restrictions on cast iron steel to prevent flooding by shipments shipped from the US, it is said to have similar plans.

Tariffs also force many countries to create barriers. Rusalov's sanctions, combined with violations in Brazil, are driving up the price of alumina, a major component of aluminum. This pushes costs upward in smelters that buy alumina and gives the likes of Alcoa Corp. to sell more in the market and use less of their own smelting capacity - not what Trump would want to hear when he tries to revive American factories. ...