South32: Navigating US Aluminium Tariffs as a Negotiating Tactic

As the global aluminium market braces for the impact of US tariffs, South32, a diversified metals and mining company, is taking a strategic approach to the situation. The company's CEO, Graham Kerr, has stated that the tariffs are more likely to be a bargaining strategy than a long-term policy, suggesting that South32 is adopting a flexible and adaptable approach to the challenge.

South32's aluminium production and sales to the US market are significant components of its overall business. The company produces aluminium in Brazil, South Africa, and Mozambique, with a portion of its South African production destined for the US market. In the first half of 2025, South32's aluminium division posted an increase in underlying operating earnings of $160 million, driven by higher aluminium prices and strong demand.

The US tariffs on aluminium imports, which went into effect on March 12, 2025, pose a challenge to South32's exports to the US market. The 25% tariff on aluminium imports is likely to increase the cost of South32's aluminium products for US buyers, potentially reducing demand and impacting the company's financial performance.

However, South32 is not sitting idly by. The company is taking several specific actions to mitigate the potential negative effects of US aluminium tariffs and maintain its competitive advantage:

1. Diversify export markets: South32 is exploring alternative markets for its aluminium products, such as the ASEAN region and India, to reduce dependence on the US market. This diversification can help offset the impact of US tariffs and ensure continued demand for South32's products.
2. Invest in cost reduction and efficiency: South32 is focusing on reducing production costs and improving operational efficiency to maintain profitability despite the tariffs. This can be achieved by optimizing processes, reducing waste, and investing in technology.
3. Lobby for exemption or quota: South32 is working with the Australian government to lobby for an exemption or quota for its aluminium exports to the US, similar to the one secured in 2018. This can help South32 maintain its market share in the US and avoid the negative impact of tariffs.
4. Invest in clean energy and sustainability: South32 is investing in clean energy and sustainability initiatives to enhance its competitive advantage and attract environmentally conscious customers. This can also help South32 secure long-term contracts and maintain market share.
5. Expand aluminium production capacity: South32 is investing in expanding its aluminium production capacity, both in Australia and internationally, to meet growing demand and maintain market share. This can help South32 offset the impact of US tariffs by increasing exports to other markets.

By taking these actions, South32 can mitigate the potential negative effects of US aluminium tariffs and maintain its competitive advantage in the global aluminium market. The company's strategy of viewing the tariffs as a negotiating tactic allows it to adopt a flexible and adaptable approach to the situation, enabling it to navigate the challenges posed by US tariffs and maintain its market share.

In conclusion, South32's approach to US aluminium tariffs as a negotiating tactic is a strategic and proactive response to the challenges posed by the tariffs. By diversifying export markets, investing in cost reduction and efficiency, lobbying for exemption or quota, investing in clean energy and sustainability, and expanding aluminium production capacity, South32 is well-positioned to maintain its competitive advantage in the global aluminium market.