The mining group Rio Tinto $RIO (-1,12%) has contingency plans in place in the event that US President Donald Trump's proposed 25 percent tariff on aluminum imports is implemented. CEO Jakob Stausholm said that Rio Tinto has not yet diverted any aluminum sales. The company is currently still waiting to see whether Trump withdraws his threat to introduce the tariffs from next month.
Of course, management wouldn't do the job if they didn't know the alternative, the manager said, referring to potential markets for aluminum. Rio Tinto generates around 17 percent of its revenue from sales to the US. Stausholm is in Washington this week to meet with senators, congressmen and members of the government and to take part in a meeting of the CEOs of the Business Council. The CEO wants to better understand the goals of the Trump administration.
The US is the world's number one importer of aluminum, which is used to build cars and trucks, for example. According to analysts at Goldman Sachs, the USA imports around 85 percent of the so-called primary aluminum it needs - i.e. aluminum that has not been recycled. Around 70 percent of this aluminum comes from Canada. As one of the world's largest producers of aluminum and iron ore as a steel component, Rio Tinto could be the most affected by Trump's tariff plans among the world's mining companies. Rio Tinto accounts for around half of Canadian aluminum sales to the USA. The company also supplies aluminum from Australia to the US, according to Goldman analysts.
Stausholm explained that Rio Tinto has options to sell its aluminum to markets outside the U.S., such as Europe, if necessary. American buyers may have to import more aluminum from countries such as China and the Middle East if the Canadian metal becomes too expensive. "At the end of the day, it's the customer who pays the tariffs," he added.