How Australian aluminium can rebound

Australia’s aluminium sector faces fresh challenges following the US Government’s 25 per cent tariff on steel and aluminium imports. How can the sector respond?

The tariffs took affect on March 12 and come as part of the US Government’s global trade imposition in an effort to bolster local industries.

Australia, despite its strong alliance with the US, was denied an exemption, sparking uncertainty among local producers and investors.

The decision has also triggered a political debate at home, with opposition leader Peter Dutton criticising Prime Minister Anthony Albanese for failing to secure an exemption and vowed to renegotiate the deal if elected.

A Coalition government previously negotiated an exemption on US tariffs during Trump’s first term, though the process took about a year.

Despite the political murmurings, market experts say policies are not the be all and end all.

UNSW senior lecturer in economics Scott French cautioned against high trade barriers, warning they could discourage foreign investment and limit long-term competitiveness.

“We don’t want to go back to the experience from earlier decades where local manufacturing was very highly protected and very uncompetitive,” French said.

Instead, Australia’s aluminium sector should focus on attracting investment through strategic market shifts.

UNSW business school Professor Maggie Dong pointed to flexible contracting, nearshoring, and financial hedging as crucial tools for businesses to navigate volatility.

“(A) flexible contract usually includes a clause allowing for quick renegotiation in the event of some unpredicted situations, like tariffs or supply shocks,” Dong said.

“So, I would say, especially for this Trump tariff, I think the short-term adjustments that focus on flexible contracting would be the first step.”

From an investor standpoint, Australia’s ability to pivot towards Indo-Pacific trade partners presents a significant opportunity. The US currently accounts for 10 per cent of Australia’s aluminium exports, while South Korea (34 per cent) and Japan (23 per cent) lead as top buyers.

French said market forces could naturally redirect Australian exports, strengthening investor confidence in the sector’s resilience.

“When you get a tariff in one place, you have what you call trade diversion,” he said. “So I would expect trade to pick up between Australia and these other countries automatically.”

“If China, say, retaliates on the US tariffs by increasing tariffs on US products, then that opens doors for Australian producers as the Chinese substitute away from the US products to others in the area.”