- Simcoa, Australia’s only silicon producer, could be the first victim of the beginning of a trade war.
- It uncertain how Australian exporters will be impacted by Donald Trump’s new steel and aluminium tariffs.
- The US Department of Commerce has imposed a 51.28% extra import tariff on the company.
- The company employs 180 and indirectly supports another 600 within the region.
The jobs of 180 people and the future of Australia’s only silicon producer have suddenly been caught up in US moves toward protectionism of local industry.
Simcoa, a resources production company in Western Australia, could be the first victim of the beginning of a trade war and US President Donald Trump’s plans for tariffs — 25% on steel and 10% on aluminium — which the administration argues would support American businesses.
The US Department of Commerce has imposed a 51.28% extra import tariff on Simcoa Operations Pty Ltd because of alleged dumping.
The US is reportedly concerned that government tax breaks in Australia for research and development have artificially lowered the price of Simcoa’s silicon metals which can be used as an additive for alloy wheels on motor vehicles.
Simcoa, based in Bunbury in the South West, employs 180 and indirectly supports another 600 within the region. The company says it produces 50,000 tonnes of silicon and 11,000 tonnes of silica fume a year. Business Insider has sought comment from the company.
The Australian Financial Review reports that Globe Specialty Metals, a US-based competitor to Simcoa, has argued fewer cheap foreign imports would help it reopen a manufacturing plant in the US state of Alabama.
Bluescope Steel and Rio Tinto will also be potentially affected by the tariffs but the extent of that won’t be known until full detail of the US plans are revealed.
Steve Ciobo, Australia’s trade minister, spoke to US Commerce Secretary Wilbur Ross at the weekend but it is still not clear whether or not Australia will be included on the coming steel and aluminium tariffs.
“The US is still working through some of the detail with respect to this announcement, so the extent to which Australia may be captured is still yet to be determined,” the minister told Sky News.
“The very bad outcome would be to see an ongoing, continuation escalation of tariffs across multiple products across multiple economies, that will lead to a slow-down in growth and that of course, is problematic.”
AMP Capital Senior Economist Diana Mousina says Australia isn’t a significant exporter of steel or aluminium to the US but there may be second-round impacts on iron ore and coking coal prices if there is a major change in global steel production.
“Australian resources (iron ore and coking coal markets) will only be significantly affected if stronger US steel production occurs at the expense of production elsewhere,” she says.
This is because US steel production is mainly done via the electric-arc furnace process which is less intensive in its use of iron ore and coking coal than the basic oxygen furnace process which is the process used around the rest of the world in 75% of global steel production.
She says the extreme concentration of Australian resources to China, with about 34% of exports, means the largest risks for Australian resources are around how Chinese demand progresses.