Madam Chair, members of the Committee, good afternoon.
I am Denis Mazerolle, president of Nature Alu.
Thank you for the opportunity to share with you the challenges of Nature Alu, a new company located in Saguenay, Quebec.
First, I'll explain what we do. Nature Alu buys primary aluminum from Aluminerie Alouette, located in Sept-Îles, through its supplier, Albecour, and purifies it to a level of 99.99% or more using its innovative process designed entirely in Saguenay-Lac-Saint-Jean. The purified aluminum is destined for export to specialized high-tech markets, such as lithium ion batteries, aluminum-air batteries, electrolytic capacitors, specialty alloys, specialty paints, quantum computers, semiconductors and 3D printing.
Before talking about Nature Alu's challenges, I must briefly explain the price structure of aluminum. It is based on the LME price, the London Metal Exchange, which is announced daily. However, the LME is not the only factor dictating price when we buy or sell aluminum. In our case, when we buy aluminum from our supplier, a market premium is added to the LME price. This market premium is established for a given market: in North America, it is called the Midwest premium; in Europe, there is the Metal Bulletin premium; in Asia, it is the MJP, or Main Japanese Port premium.
For aluminum bought here in North America, we pay the LME price plus the Midwest premium. Then we process and purify it, adding value based on purity level and shaping.
The LME price fluctuates significantly, but that's not the real problem. The problem is that the market premium varies from market to market. In our case, we pay the Midwest premium, which is the most expensive. When we want to sell our product in Asia, the premium is much lower. So we are at a significant disadvantage in terms of aluminum pricing.
I'll explain what caused this premium variation problem. First, Canadian aluminum exported to the United States was hit by a 10% tariff under Section 232 of the American Trade Expansion Act. As soon as this tax was imposed, the Midwest premium increased by 10%. This created a huge gap between the Midwest premium in North America and other market premiums in Europe and Asia. In September 2020, this tax was abolished for Canadian aluminum producers, but the Midwest premium remained at a very high level, meaning 10% higher than the others. It has not returned to its normal value, which was about $100 higher than other market premiums. The level of inflation means a difference of nearly $800 between aluminum bought here in Quebec or Canada and the same aluminum bought in Asia. Recently, we did the math, and it was $770.
The disadvantage for Nature Alu is that it buys its aluminum at a very high price, processes it then exports it to Asia, a market where aluminum is worth much less. This distortion, introduced into the Midwest premium through the imposition of a tariff under Section 232 of the Trade Expansion Act, is effectively crippling processed exports to Europe and Asia. All aluminum exporters have the same problem as we do. Nature Alu is unable to export its processed products to Europe and Asia because of the gap between the Midwest premium and other market premiums.
Nature Alu asks the Government of Canada to use the money collected through its countermeasures to the American tariffs imposed under Section 232 of the Trade Expansion Act to help Nature Alu export its processed products to Europe and Asia. This assistance would reduce the effect of the gap and correct the distortion introduced in the Midwest premium...