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The EU and US are contemplating new, “first-of-its-kind” climate-based tariffs on Chinese aluminum and steel, according to Bloomberg. The proposed tariffs are an attempt to combat carbon emissions from China’s aluminum and steel industries. Both governments have also accused China of creating “overcapacity” that hampers the EU’s and US’s steel and aluminum industries, according to Reuters. However, the tariffs are currently just an “idea,” and not formally proposed by the EU or US. Moreover, an agreement with the EU isn't likely until late 2023 “at the earliest,” according to Reuters’ sources. |
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The US currently imports little steel and aluminum from China, so these tariffs, if implemented, would likely have little impact on US steel prices or aluminum import premiums. However, the tariffs could also target “large polluting nations,” according to Bloomberg. (Sources: Bloomberg, Reuters) As we discussed in yesterday’s First Look, the global aluminum market could be in surplus next year, largely due to rising production in China. As any agreement with the EU isn't likely until late 2023, AEGIS notes that any new import tariffs on Chinese aluminum and steel are likely to have no impact on 2023 prices. Aluminum producers that are concerned about decreasing prices could consider selling swaps or buying put options. Such positions are standard for producer hedging; however, they can result in opportunity costs or cash costs if metal prices increase. Please contact AEGIS for specific strategies that fit your operations. (12/7/2022) |
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Note: Clients with AEGIS Platform access can see this and other research, plus hedge portfolio reporting and tools here. |
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AEGIS Insights |
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12/06/2022: Does the Copper Rally Have Legs? 12/01/2022: What's Been Driving Aluminum Prices Lately? 11/30/2022: AEGIS Factor Matrices: Most important variables affecting metals prices 11/17/2022: Do Chinese Aluminum Import and Export Flows Affect LME Prices? 11/07/2022: AEGIS Primer on LME Aluminum Price History |
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12/7/2022: Nyrstar's Auby zinc plant on care and maintenance until further notice 12/6/2022: Glencore 2023 production outlook disappoints, shares fall 12/5/2022: US, EU weigh climate-based tariffs on Chinese steel, aluminium -Bloomberg News 12/5/2022: Volkswagen resumes production at China plants 12/2/2022: HSBC resigns as LME member after exiting industrial metals |
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Important Disclosure: Indicative prices are provided for information purposes only, and do not represent a commitment from AEGIS Hedging Solutions LLC ("Aegis") to assist any client to transact at those prices, or at any price, in the future. Aegis makes no guarantee to the accuracy or completeness of such information. Aegis and/or its trading principals do not offer a trading program to clients, nor do they propose guiding or directing a commodity interest account for any client based on any such trading program. Certain information in this presentation may constitute forward-looking statements, which can be identified by the use of forward-looking terminology such as “edge,” “advantage,” “opportunity,” “believe” or other variations thereon or comparable terminology. Such statements are not guarantees of future performance or activities.
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