Century Aluminum targets China as U.S. smelters fight for survival

(Repeats story published Wednesday to widen distribution)

By Luc Cohen

NEW YORK, Nov 5 (Reuters) - At least one U.S (Other OTC: UBGXF - news) . aluminum producer may be hunkering down for a trade dispute with top-producer China, as the beleaguered aluminum industry fights for survival amid high labor and energy costs and prices at a six-year low.

Century Aluminum Co (NasdaqGS: CENX - news) , controlled by Swiss trader and miner Glencore Plc (Xetra: A1JAGV - news) , is leading an aggressive campaign to fight China's aluminum exports that it says threatens the U.S. industry.

Century faces high stakes as last week its share price plunged as much as 26 percent after the company reported a bigger-than-expected loss. It (Other OTC: ITGL - news) has also announced plans to close capacity and shutter one plant.

Alcoa Inc (NYSE: AA - news) also said it will close three of its four smelters in the country, which would leave just four U.S. plants operating, although Alcoa has smelters in lower-cost regions like the Middle East.

"The United States is going to lose the aluminum smelting business in just a matter of time if this continues," Century spokesman Kenny Barkley said. "We cannot sustain low aluminum prices like this for very long."

Some U.S. aluminum producers say they cannot compete because some Chinese aluminum shipments are avoiding export taxes.

Century and Alcoa have complained that Chinese "fake semis" are labeled as semi-fabricated products to avoid an export tax on primary aluminum only to be re-melted into primary by the end user.

Chinese exports are not the only reason for higher shipments into the United States. The strong U.S. dollar, demand from the automotive industry and record high U.S. physical prices, called premiums, have also attracted imports.

Still, the aggressive tone of the campaign marks a distinct shift from the more cordial approach taken by the U.S. aluminum industry over the issue this year.

The Aluminum Association has asked the U.S. Trade Representative and the U.S. International Trade Commission to investigate allegations of misclassification of Chinese aluminum exports.

Last month, the association's head met with her Chinese counterparts in October to discuss the issue.

In February, the United States initiated a dispute about China's export subsidy program including textiles, agriculture and metals with the World Trade Organisation.

U.S. aluminum extruders have accused Zhongwang Group, the world's second-largest producer of aluminum extrusions, of evading U.S. import duties. The company has denied it.

STEEL VS ALUMINUM

In fact, Century's rhetoric and strategy is more familiar to the steel industry, which has long cast China as a villain and fought multiple lawsuits against the world's top producer for dumping anything from coated sheet to cold-rolled steel products.

"They're taking a big page out of the steel books," Daniel Dimicco, former chairman and chief executive officer of U.S. steelmaker Nucor Corp and the industry's front man for complaints for trade disputes.

"The aluminum industry has been very different than other industries, like the steel industry, and has always resisted individual country actions against aluminum imports," said Gregory Spak, an international trade lawyer with White & Case in Washington.

Century is the sole member of a newly created pressure group, the China Trade Taskforce, that accuses China of circumventing duties, illegally subsidizing its industry and killing thousands of American jobs.

On the group's website, chinatradetaskforce.com, a video depicts marching Chinese soldiers against foreboding music, alongside footage of Century workers in Kentucky who may lose their jobs due to production cuts.

One voice over claims that "everyone in the United States is at risk right now."

"We're trying to demonstrate to the U.S. Trade Representative that this is an issue that deserves their attention," said Will Dempster of Washington lobbying firm McBee Strategic Consulting, which is spearheading the campaign.

The Aluminum Association has distanced itself from the campaign, saying Century does not represent the U.S. aluminum industry. Many of its members have operations in China and may fear retaliation from a major dispute, lawyers say.

Century may be able to seek trade action against China on its own, trade law experts said.

Any party that represents 25 percent or more of a U.S. industry has standing to petition the ITC (BSE: ITC4.BO - news) for a trade case. If all the currently planned curtailments and closures go through, Century's planned production of around 237,600 tonnes would represent more than 30 percent of U.S. output.

(Reporting by Luc Cohen; Editing by Josephine Mason and Lisa Shumaker)