How would an Aluminum Tariff affect the Values of our Trailers?

[Tomzstream]

Just curious if anyone is familiar with the sourcing of aluminum for modern day AS trailers. There is talk of an impending tariff on imported aluminum and steel on the business shows today. Any ideas how that might affect the cost of new and used trailers?

Please, no political discussions. Lets keep it on topic and discuss the economic impact as it relates to the cost of goods that make up Airstreams.

[dznf0g]

To make aluminium the ore (bauxite) must first be mined. The main sources of bauxite are in*Australia, South America and Africa, but other countries including China,*Jamaica, India and USA also have large amounts of the ore.

[mimiandrews]

In general, tariffs drive up prices and restrict free trade. Way back in college, Economics 101 or thereabouts, I was taught we are better off without them.

[Tomzstream]

There was some expectation the tariff would be announced today. Last I heard, all imports of aluminum would be taxed at 10%, which is less than the 25% or so for steel. I was thinking Alcoa was the source for the AS panels (the clearcoat prepped roll aluminum). There is a lot of idled capacity in the US, between Alcoa and Century. The latter makes high quality aircraft grade aluminum for defense purposes. In any case, the tariff is expected to raise prices for both imported and domestic aluminum production. Since China began dumping a few years ago, prices have actually rebounded about 10% in the last year. Not sure if that has been passed on to AS buyers yet. I imagine Thor has some pretty well hedged contracts. Maybe not.

[JCWDCW]

Question is where is the special grade Aluminum for AS made? I doubt it comes from Canada. If USA then there should be no change. The tariff is paid to the US government by the exporter, but in the case of Canada we export in US dollars so we either sell at a competitive price or we don't make the sale, and we also have the 10% extra charge that comes off the bottom line. Same goes for US manufacturers....market forces (price) will rule; probably will be some increased price but not that much.
JCW

[Royce]

Given the way our trailers are manufactured, I would expect very little change. Labor cost has to be one of the largest components driving price. In any case, the market will decide even it the extra cost of the aluminum was insignificant you could see it used as an excuse to raise the price if the market would stand it.

[sbowman]

Good question. Glade we ordered/bought our 2017 AS Nov. 2016. Am thinking investment appreciation. This is good.

Best regards and safe travels

[GammaDog]

In two ways:

1. It would increase the scrap value of our trailers... I'd guess +$5/trailer.

2. It would increase the cost to build new trailers. As a result, used trailers will increase as a percentage of that. At best, the impact on a used trailer resale would be in the few hundreds of dollars... probably not even that IMO.

It will, however, give builders of trailers yet another excuse to increase the selling price and blame it on someone else!

[vanster]

Watch China cancel Boeing orders and go to Airbus as well as building their own planes in their new factory in Tianjin. China already is selling 2 models of Buicks here along with the newest big Volvo, What is the end came with Washington other than we all pay more and Boeing does big layoffs?

[PecanMan5]

I thought Thor bought it’s own Aluminum plant.

[Schu]

Originally Posted by Tomzstream

Just curious if anyone is familiar with the sourcing of aluminum for modern day AS trailers. There is talk of an impending tariff on imported aluminum and steel on the business shows today. Any ideas how that might affect the cost of new and used trailers?

Please, no political discussions. Lets keep it on topic and discuss the economic impact as it relates to the cost of goods that make up Airstreams.

International trade Edit

The US imported nearly all the bauxite (the only commercial aluminum ore) used in producing primary aluminum. For years, the US has produced less than 1% of the bauxite used to make aluminum.

The US also imported 33 percent of the aluminum metal that was used in 2014. Of the imported aluminum, 63% came from Canada.[9]

History of US aluminum production Edit

The US used to be a much more important factor in the world primary aluminum market. As recently as 1981, the US produced 30% of the world's primary aluminum, and for many years up through 2000, the US was the world's largest producer of primary aluminum. In 2014, by contrast, the US ranked sixth in primary aluminum production, and provided only 3.5% of world production.

US production of primary aluminum peaked in 1980 at 4.64 million metric tons. Since then, US primary aluminum production has fallen by more than half, but secondary production has increased, making up much of the difference. In the 1950s and 1960s, primary production made up about 80% of the aluminum output. In 2014, primary production made up 32%, while secondary from new scrap made up 36% and secondary from old scrap made up 32% of US aluminum production.[10]

[Tomzstream]

Done deal. 25% Steel, 10% Aluminum. Applies to all markets. Lets not forget the chassis of the Airstream trailer is made of Steel. Alcoa also makes the Wheels for the Interstate and other manufacturers the wheels for the trailers. Its a metal intensive product. I expect raw material prices to rise at least 10% for trailers, so will that get passed on? The consensus here seems to be yes, and then some. I tend to agree that this will help resale values. I expect there will already be a good inflationary rise (3% or so) to trailer prices, and it might even offset the loss of the tax deduction for some.

[Tomzstream]

Scrap Value? Maybe you should consult Steve Martin...

https://www.youtube.com/watch?v=QPft5UsHh2A

[ndfrtrl]

I'm thinking Thor recently announced plans to increase factory size and employment by 300.

[jcl]

Wouldn't there be as much if not more impact on tow vehicle prices as trailers?

Would expect this to increase the US prices of all products that use steel and aluminum.

[glenrms]

Oh no. Up goes the 6 pack!

[zapper]

Originally Posted by Tomzstream

Just curious if anyone is familiar with the sourcing of aluminum for modern day AS trailers. There is talk of an impending tariff on imported aluminum and steel on the business shows today. Any ideas how that might affect the cost of new and used trailers?

Please, no political discussions. Lets keep it on topic and discuss the economic impact as it relates to the cost of goods that make up Airstreams.

Unfortunately the subject of economics is political because it is not an exact science. Remember the "Guns or Butter" text book arguments? all politics. But to the point the effect of tariffs on imported bauxite or aluminum would add costs to the end product. The question is, how much? The economist would say "it depends" upon the efficiencies of the US manufacturers and on the relative price of bauxite; energy; labor etc..;etc. blah, blah.

My "guess" is initially you may see a small increase in price in new aluminum products in the short term. Used aluminum vehicles an even smaller increases because of the already "sunk-cost" of production. Over the long term, (unless China retaliates with higher tariffs) I would "guess" prices to trend downward as more US excess aluminum production capacity comes on line. But who knows?

My suggestion would be if you are considering buying an AS (new or used) not to base it upon cost "guesses" of the future. Base it upon what you know and like today.

For those of you who are really into aluminum pricing trends, I suggest you look up on line "aluminum scrap" or "secondary aluminum" market prices. These scrap markets compete directly with primary aluminum ingots (takes 90% less energy to produce) and prices react almost immediately to changing market conditions. But who knows for sure?

[eggman]

Watch out for neighborhood pirates swiping your ladders and your football bleachers for scrap like they do the copper tubing in your air conditioners now. That was very common a few years ago when aluminum prices were high

[WayneG]

It looks like the Stock Market did not like the tariff news today, down $420 (So Far)

[Tomzstream]

Great feedback so far. I appreciate the comment about economics... I have been an economic analyst from time to time... though I really fancy myself as a statistician (but lets not get into an endless exchange of statistician vs economist humor). I once worked with ten PhD economists, tasked with sorting out the S&L mess... ask a question, get ten opinions...

As for the market, that's a bit touchy, but as others have said free markets are good. Trade Wars, not so much. That's as far as I dare to take that comment. I do believe the markets have been looking for a reason to correct again, and that event just came along at the right time. There's lots of reasons to argue for industrial capacity vis a vis national security, but then we are hardly to the point that we were in WWII when pennies were made from steel. And I don't know about the scavengers, other than to say there were plenty of houses built in the 60s with aluminum wiring that could use a good rewiring and they are welcome to it! Did Airstream ever use aluminum wiring?

So lets see where this goes... Alternative shell materials? Super lightweight trailers built with carbon fiber frames and shells as it becomes cost effective with aluminum and steel? That could be the direction of TVs as well, although the use of aluminum in trucks has been on the upswing. Let the brainstorming begin!