While the government seeks to play up its Trump Whispering in maintaining the status quo on steel and aluminum (as the Americans call it) tariffs, and insists it has given nothing by way of the “security deal” Trump has mentioned, there’s a small regional West Australian company that has been forgotten in all the back-slapping.
Simcoa is a WA company based in Bunbury, south of Perth and employs 180 people. The company says it produces 50,000 tonnes of silicon and 11,000 tonnes of silica fume a year — enough to meet Australia’s total demand and then export the remainder — most of its production — to the rest of the world. Some of its exports go to the United States — not a huge amount, but at just under US$34 million, it’s an important source of revenue for Simcoa and its workers.
At the start of the month, Donald Trump’s billionaire protectionist Secretary of Commerce Wilbur Ross slapped tariffs on silicon imports from a variety of countries, including Simcoa’s, claiming silicon was being dumped in the US. Simcoa copped duties of 52.51%, double the steel tariff and five times the aluminum tariff, and higher than tariffs proposed in a preliminary report last October.
Australia, of course, hates dumping. We hate it so much we slap our own massive tariffs on everything from steel to tomatoes to punish foreign companies for the crime of selling cheap products to Australians consumers and businesses. Our industry ministers are constantly issuing media releases crowing over new anti-dumping tariffs being imposed. Labor and the government are even having a brawl at the moment over who has the bragging rights for setting up the Anti-Dumping Commission (it was Labor in 2013, but Michaelia Cash wants to claim the credit).
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Doesn’t feel quite so good when our own companies get accused of dumping, does it? Whatever effort the government put into preserving the status quo on steel and aluminium, Simcoa and its regional workforce is going to get smashed by Trump.
The tariffs are ostensibly about protecting US jobs but are really about keeping the US branch of global giant Ferroglobe profitable. Ferroglobe’s Globe Speciality Metals has production facilities located in Alabama, New York, Ohio, and West Virginia, and describes itself as being among the world’s largest producers of silicon metal, silicon-based specialty alloys and silicon fume. It has, however, been hammered by weak global prices for silicon metal and associated products — mainly due to competition from China and Brazil.
It has claimed that cutting imports would help it re-open a plant in Alabama. But as Moody’s ratings report last week made clear, the point of removing competition from the US market is about revenue and profits for Ferroglobe. Moody’s made its comments in replacing provisional with definitive ratings in the B class (speculative and risky):
In 2017 revenues and adjusted EBITDA increased by 10% and 120% yoy to $1.7 billion and $174 million respectively, driven by price recovery across all Ferroglobe’s products as market conditions gradually improved and unfair competition from cheaper imports was addressed in the US with the introduction of preliminary anti-dumping duties in October 2017…
The stable outlook reflects Moody’s expectation that the company’s liquidity will remain adequate and its financial profile will improve further to a level that would more comfortably position Ferroglobe in the B1 rating category. The stable outlook also assumes market conditions to remain favourable over the next 12 to 18 months and that tariffs discouraging cheap imports of silicon metal into the US are confirmed.
In other words, the US and the Trump administration are more interested in helping a sickly global giant with significant US operations combat competition from smaller competitors, including a bee sting of competition from a tiny Australian company. One wonders what efforts Julie Bishop put in on their behalf, if any.