COVID-19, Aluminum, and National Security: Will China Destroy a Critical US Industry?

A sign for the London Metal Exchange (LME) on a wall by the new Ring, the open trading floor of the LME following its relocation in central London on Feb. 18, 2016. (Leon Neal/AFP via Getty Images)

Commentary

The COVID-19 pandemic and subsequent global economic shutdown have had dramatic consequences for numerous industries.

The shutdown has forced London Metal Exchange (LME) prices for aluminum below sustainable levels for U.S.-based producers.

Two U.S. aluminum smelters were considered for closure because of low LME prices prior to the virus outbreak, primarily due to Chinese overproduction and energy subsidies.

With the COVID-19 crisis, the remaining U.S. production capacity can’t economically compete, placing access to an essential metal for U.S. industry, and U.S. sovereignty, at risk.

As the People’s Republic of China (PRC) dominates world aluminum production, U.S. domestic aluminum capacity is in peril. The United States has seven aluminum smelters—the PRC has more than 140. The U.S. facilities are financially at risk without significant assistance. A loss of U.S. aluminum manufacturing would be a direct threat to U.S. national security and economic independence.

According to United States Geological Survey (USGS) estimates in January, total U.S. capacity is less than 1.8 million tons annually. U.S. industry used 3.4 million tons in 2019. The USGS estimates the PRC capacity at 44 million tons, 20 times U.S. capacity. China produced over 2.8 million tons in February alone, the International Aluminum Institute estimates.

Aluminum is used in almost every aspect of economic production and national defense infrastructure. New aircraft, missiles, armored vehicles, electronics, radars, and ships depend on the lightweight, strong, and recyclable metal. F-18 and F-35 fighters use high-quality aluminum made at a single U.S. smelter in Kentucky, now operating at 40 percent capacity. Aluminum is also a critical civil infrastructure commodity used in bridges, railways, buildings, machinery, and transportation. It’s prevalent in almost all health care equipment, from ventilators to hospital beds.

The PRC dominates global aluminum production, with as much as 60 percent of the world’s capacity. China has subsidized the rapid expansion and saturation of the industry. The highest cost in aluminum processing is energy. The Chinese Communist Party’s (CCP) economic hybrid system subsidizes power for producers.

Cheap, subsidized PRC aluminum has flooded global and U.S. markets since the PRC joined the World Trade Organization (WTO) in 2001. As a result, the number of aluminum smelters in the United States has fallen from 23 to seven since 2001. The outcome has forced U.S.-based facilities to close, and put countless Americans out of work.

The shutdown or curtailment of the remaining U.S. aluminum smelters would force American industry to depend on foreign imports for a critical defense and economic resource. In a perilous moment in history, the United States’ and the global future would be dependent on the CCP’s market manipulations for one of the most critical defense-related materials.

In the president’s National Security Strategy, maintaining the U.S. defense industrial base is essential. American industry depends on aluminum, the most recyclable metal on the planet. It’s essential for future economic growth, and defense.

The United States can’t allow CCP “authoritarian capitalists” to dominate this critical industry.

My recommendations are:

1. Designate the industry as a critical national defense priority, and create a national reserve stockpile of aluminum—the price is low, buy and hold. Purchasing a National Aluminum Reserve would provide immediate demand to reduce inventories, and allow for a bridge through the COVID-19 pandemic.
2. In this time of crisis, establish “Buy American Aluminum” policies for all U.S. defense and stockpile purchases.
3. Provide loans and grants to U.S. facilities in the proposed phase IV economic stimulus infrastructure legislation for upgrades that will improve competitiveness and environmental efficiencies to compete with the PRC.

The CCP virus, more commonly known as the novel coronavirus, is causing significant damage to countless industries. Many need help, but some are core industries that the United States can’t afford to lose and still maintain sovereignty. U.S. aluminum is one of those industries, and it’s teetering due to this pandemic. In a geostrategic quest for power, the CCP could not have planned it better.

Lt. Col. James McKinney is a retired U.S. Army foreign area officer with more than 30 years of service in strategic, tactical, and special operations assignments around the globe. He served as a senior defense official and defense attaché, the deputy chief of combating terrorism for U.S. Pacific Command, the security assistance officer for U.S. embassies in Albania and the Republic of Georgia, and a political-military adviser to the commander of U.S. Army Central in the Middle East. He’s now a consultant, and serves on the board of Saturna Capital.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.