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IndustryNet Blog

How U.S. aluminum buyers are tackling tariffs

Posted by IndustryNet on Thursday, August 23, 2018

100000265Al_extrusion_blanksGlobal tariffs on aluminum will affect U.S. production and jobs across a multitude of industries. The United States Trade Representative has released a massive list of tariffs. In addition to raw materials, thousands of products are affected.

They include equipment such as metal tool rollers, which are vital to the aluminum drawing and rolling sector. As aluminum prices rise, manufacturers may be struggling to find new domestic suppliers.

The state of the U.S. aluminum industry

IndustryNet has gathered data from 940 companies in the U.S. aluminum industry. The statistics cover the primary production of aluminum; aluminum die castings, aluminum foundries, sheet aluminum, aluminum extrusions and aluminum rolling and drawing.

These businesses report providing 65,066 jobs in the past year, a slight decline of 0.58 percent from 65,447 workers employed one year ago. Average sales increased over the same period 0.23 percent from $47.7 billion to $47.8 billion.

The most substantial number of aluminum companies is in the Midwest where there are 421, representing 45 percent of the total. The South is served by 247 firms or 26 percent. The West is home to 144 or 15 percent of businesses in the aluminum sector.

The Northwest is supplied by 128 firms or 14 percent of the aluminum industry companies. With growing transportation costs, location is of increasing logistical importance as companies reimagine their supply chains.

Aluminum buyers look ahead

As businesses utilizing aluminum are attempting to forecast the effects of the tariffs on their bottom lines, a number of them have expressed expectations and possible strategies for dealing with the impacts on their procurement expenses.

As a result of the tariffs, Harley-Davidson predicts that their costs will increase by $45 million to $55 million. It plans to absorb much of that rise by making disciplined changes in the management of its business. Nevertheless, to allow for unplanned expenses, they are adjusting guidance for their margins for 2018. As of the end of May, its shares had fallen by 2 percent.

The Coca-Cola Co. is raising prices on its products and placing partial blame on the tariffs. Many factors, which includes the cost of metal, freight and labor, have prompted the company to make this decision. The price of a can of Coke® is expected to increase at most retail outlets, passing some impact of the tariffs on to consumers.

Honeywell has also seen rises in both the cost of transportation and metals. It is working to minimize the effects on its profits. The company expects minimal impacts on its earnings in 2018 but is maintaining its focus on the situation.

Genuine Parts is engaging in ongoing conversations with its suppliers. It has set up a team to handle raw materials issues. The company is using data on global sourcing to negotiate with its suppliers, to manage pricing. Genuine does expect to pass on cost increases to its customers.

UTX is keeping a watch on the impacts of the tariffs on the cost of its products. Its present prediction is an effect of $0.05 per share of stock, which UTX considers relatively modest. It has revised the guidance given in its official documents.

Intuitive Surgical does not, at present, expect to pass on the increased cost of some of its components. It is negotiating with suppliers and anticipates the impact of the tariffs to be small at this time.Aluminum_Plant_001

Black and Decker projects that the impact of the tariffs on their business in 2018 to be worth approximately $35 million. This prediction reflects tariffs on both aluminum and steel, as well as some components. It has already initiated some price increases, which it estimates may lessen the sting to $25 million.

TE Connectivity is examining some possible actions to minimize the effects of the tariffs including working with its customers and identifying ways to optimize its supply chain further. In some cases, its customers may find themselves paying surcharges.

The business model of the Illinois Tool Works is to "source where they sell." It expects this approach to mitigate the impact of the tariffs on its costs significantly. With headquarters and many facilities in the Midwest, where many aluminum companies are located, this strategy may serve them well.

Growing alarm

While jobs in the aluminum industry represent less than 1 percent of U.S. employment, the Aluminum Association is concerned that the tariffs will result in foreign retaliation, widely damaging American business.

Al_extrusion_machine_with_diesThe result will be a net loss of jobs in as prices for foreign-sourced metal rises and U.S. manufacturers reduce their workforces to decrease expenses. Canada has already announced a 10-percent tariff on aluminum, which will also impact employment at domestic aluminum producers.

The European Union has identified products, which includes Harley-Davidson motorcycles, as targets of its tariffs. This action may force the company to cut wore workers from its roster.

Facing the challenge

If U.S. companies that utilize aluminum in their products follow the lead of Illinois Tool Works by seeking local suppliers, they can reduce the adverse effects of aluminum tariffs for both themselves and the consumers who buy their goods.

The information maintained by IndustryNet on the domestic aluminum industry is both comprehensive and up-to-date. A free online search o will yield a comprehensive list of aluminum companies by both capabilities and location. The industrial marketplace provides straightforward tools to request quotes and contact suppliers.



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