https://crsreports.congress.gov
March 11, 2021
U.S. Aluminum Manufacturing: National Security and Tariffs
Aluminum—a lightweight, ductile, malleable, and
corrosion-resistant metal—is increasingly used in many
industrial and technological applications, including in
products used for national defense and lower emission
vehicles. In Congress, views on the aluminum industry
generally diverge between those who support policies to
increase domestic production for national security and
economic reasons and others who argue that such policies
may raise aluminum prices and harm aluminum-consuming
sectors (e.g., transportation equipment, containers and
packaging, and construction).
Domestic Aluminum Manufacturing
Aluminum is manufactured through two distinct processes
(see Figure 1). Primary aluminum production consists of
mining bauxite, refining it to produce alumina, then
smelting it to yield aluminum. Secondary aluminum derives
from recycled scrap metal. Sources of the scrap are (1) old
scrap, recovered from finished products such as used
aluminum cans, auto parts, and aircraft; and (2) new scrap,
material left over from processing aluminum into consumer
or industrial products.
Figure 1. Aluminum Sources and Uses
Source: Figure adapted by CRS from NERA Economic Consulting,
Impacts of Potential Aluminum Tariffs on the U.S. Economy, June 2017.
Secondary aluminum can be substituted for primary
aluminum in most uses; however, primary aluminum is
favored in applications with high quality and consistency
requirements, such as electronics and aerospace
manufacturing. A few smelters worldwide produce primary
aluminum of sufficient purity for use in military aircraft, as
well as in lightweight armor plating found in many defense
ground and weapon systems. According to the Department
of Defense (DOD), military requirements for aluminum
represent about 3% of total U.S. consumption of aluminum.
In 2020, U.S. production of primary aluminum totaled 1.0
million metric tons, reports the U.S. Geological Survey
(USGS), well below peak domestic production of 4.7
million metric tons in 1980. The United States was the
world’s top producer through 2000. By 2020, the United
States accounted for 1.5% of the world’s primary aluminum
production. Global overcapacity, driven by certain foreign
government subsidies—particularly by China—has reduced
the global price of aluminum. After China, the world’s
largest producers of primary aluminum in 2020 were India,
Russia, Canada, and the United Arab Emirates, ranked in
order. The United States was ninth.
At year-end 2020, three companies—Alcoa, Century
Aluminum, and Magnitude 7 Metals—operated six primary
aluminum smelters in the United States, compared to five
companies operating nine primary smelters domestically in
2010. Primary smelters operated at about 49% capacity in
2020, down from 60% in 2019. U.S. secondary aluminum
production was 3.2 million metric tons in 2020, over three
times U.S. primary aluminum production. China was the
world’s largest producer of secondary aluminum in 2019,
followed by the United States and Japan.
Factors Affecting U.S. Production
In addition to imports and global overcapacity, high
domestic costs depress U.S. production of primary
aluminum. Comparatively high electricity costs in the
United States, where electricity can account for up to 40%
of the cost of primary aluminum production, encourages
firms to locate smelters in countries such as Canada and
Iceland with lower electricity costs. Exchange rates and
labor costs may also adversely affect U.S. smelter
production.
U.S. primary smelters also use older, less energy-efficient
technologies than newer plants in the Middle East and Asia.
The newest U.S. primary smelter opened in 1980. Primary
smelting also involves large capital investments: a new
smelter may represent at least a $2 billion investment. In
recent years, several U.S. primary aluminum production
facilities have reduced production or closed partly due to
industry consolidation. CRS is not aware of any aluminum
producers having announced plans to build new primary
smelters in the United States.
Production of secondary aluminum is usually more
economically attractive, as the capital cost of a secondary
smelter is much lower than for a primary aluminum smelter.
The Energy Information Administration estimates
secondary smelters use 6% of the energy required by
primary smelters. One company reportedly plans to build a
new rolling mill in the United States for secondary
aluminum.
U.S. Demand for Aluminum Products
The economic downturn in 2020 caused by the COVID-19
pandemic contributed to shut downs or reduced production
at the facilities of U.S. aluminum-consuming industries,
reducing U.S. consumption of aluminum to 2.9 million
metric tons, down 41% from 2018, according to USGS.
Likewise, imports of primary aluminum shrank to 3.2
million metric tons in 2020, a drop of 42% from 2018.
More than two-thirds of U.S. primary aluminum imports in
2020 were from Canada, where Alcoa operates three
primary aluminum smelters, followed by the United Arab
Emirates, Argentina, and Russia. The United States imports
