Author Archives: Taras Berezowsky

Don’t we all wish we could predict where the scrap markets are going?

Tracy Porter is no exception.

Porter, the executive vice president of operations for Commercial Metals Company (CMC) and board chairman for the Steel Manufacturers’ Association, sat down with us not too long ago to chat about a number of issues crucial to the steel industry, one of which is the volatility of scrap markets.

While certain short-to-medium outlooks, such as Platts’ recent view, may appear to be bullish for prices, the wild card is still China, as Porter mentions in the video interview above.

“There are a lot of unanswered questions with the new [US presidential] administration and China’s intervention in the coal futures,” a U.S. exporter told Platts. “At the end of the day, there is not enough scrap in the pipeline, here or abroad. It’s a good position to be in if you’re a scrap dealer.”

 

Tracy Porter, Executive Vice President of Operations for Commercial Metals Company (CMC) gives MetalMiner his thoughts on today’s United States presidential election between Hillary Clinton and Donald Trump – and what it would mean to the U.S. steel industry.

We recently sat down with Mr. Porter following the fall board of directors meeting of the Steel Manufacturers Association, of which he is the chairman, to discuss his take on a range of issues that the industry faces during the next President’s first 100 days and beyond, which we will cover in a follow-up.

But since the election is taking place now, let’s buckle up – the next 12 hours will surely be interesting.

MetalMiner’s Global Precious MMI dropped 5.8% to a value of 81 for November, the sub-index’s lowest level since June.

Two-Month Trial: Metal Buying Outlook

In the midst of worries over the U.S. presidential election and the Federal Reserve‘s interest rate moves, precious metal prices have been on the rise over the past week.

Global-Precious-Metals_Chart_November-2016_FNL

Many investors are girding for a Brexit-like jump if Republican contender Donald Trump wins; the U.S. palladium price, for example, coming off $700/ounce-level highs from early October to just around $600/oz at the start of November, jumped back up to $630 mid-last week.

Focus on Palladium Prices

While some more short-term spikes are undoubtedly coming, longer-term structural concerns continue to swirl around the PGM markets in particular.

In just last month’s analysis of another MetalMiner monthly sub-index (the Automotive MMI), my colleague Jeff Yoders brought up excellent points about the state of the platinum group metals:

“The increasing cost of PGMs was keeping the Automotive MMI in positive territory for most of the first three quarters of 2015. The pullback in precious metals prices could pull the rug out from under automotive, too. The catalyst metals never took off for investors the way that gold did and that’s bad news for their prices as supply was never really in much doubt without more investor interest.”

Now, it looks as though that’s coming true.

Bloomberg reports that palladium futures “tumbled to the lowest in more than three months amid signs of weakening investment and physical demand for the metal used in auto pollution control devices.”

MetalMiner Price Benchmarking: Current and Historical Prices for the Metals You Buy

Phil Streible, a senior market strategist at RJO Futures in Chicago, told Bloomberg that “demand is really starting to fall.”

“You’re going to see that as interest rates go up in the U.S., auto loan rates will rise and you’re probably going to see automobile sales decline,” according to Streible.

The Rest of the Precious Metals

Platinum, silver and gold prices fell across the board from October to November, across geographies including the U.S., China and India.

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cubs win chicago tribune home page

I had to go through the contemporary equivalent of ritually collecting newspapers’ front pages, and here’s the local’s effort (all the more fitting due to their parent company’s past ownership of the Cubs). Note the time – 1:28 a.m. ET. A long, yet exhilarating, night. Go Cubs Go!

The entire city of Chicago, our company headquarters included, is still in shock.

The lovable, perennially losing NorthSiders overcame the Curse of the Goat and so many other obstacles to take it all: The Chicago Cubs are, at last, World Series champions after 108 years.

Jayson Stark of ESPN put it best when he quipped, “It was suddenly possible to type a sentence that no living human has ever typed: The Chicago Cubs are the champions of baseball.”

I’m still coming out of a wonderful coma-like aftermath of emotions, having watched every pitch and vacillating between several elements of superstition (standing near the TV for top halves of innings, sitting in armchair for bottom halves since Game 5, among several others…don’t ask) as the Cubs and Indians’ seesaw battle jacked my heart rate up and knotted my neck-and-shoulder muscles in the early morning hours.

The fearless leader of our sister site Spend Matters, Jason Busch, wrote this excellent post-mortem earlier today, so head over there to read a great personal story of the Cubs’ triumph.

But first, share in this #TBT to when my colleague, MetalMiner Editor Jeff Yoders, and I did our parts last season in helping lay the literal groundwork for this 2016 victory:

Music: “All Those Devils…” by Holy Pain (http://www.myspace.com/holypain)

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Kevin Dempsey, AISI.

MetalMiner Managing Editor Taras Berezowsky recently sat down with Kevin Dempsey, Senior VP for public policy at the American Iron & Steel Institute. Dempsey leads the AISI public policy team representing the interests of North American steel producers and also serves as General Counsel to the Institute. Before that he was a practicing attorney who specialized in trade matters.

During his years on Capitol Hill and in the private sector, Dempsey has worked extensively on international trade negotiations, including the Doha Development Agenda and the original negotiations on the accession of China to the World Trade Organization. He also has considerable experience with U.S. and international law related to subsidies, trade remedies, market access, intellectual property rights, and product standards, as well as U.S. legislative procedures for authorizing and implementing trade agreements.

This is part three of their discussion. Read part one  and pick up where we left off in part two for more on the U.S., China, steel and trade matters.

Kevin Dempsey: I’m not a believer that there’s a WTO case that’s going to solve all of this problem, either, but there may be aspects of the Chinese system that can be addressed. We have successfully brought several WTO cases against China for restrictions they’ve placed on the export of raw materials.

It’s another way in which they subsidize their domestic steel producers. They restricted the export, for instance, of coking coal, which had the effect of lowering the price for their domestic producers and raising the price on the world markets for everybody else. That was a violation of their WTO commitment, so we took them into WTO and we succeeded in that the WTO changed that policy. It’s going to require firing on all cylinders and pressing on all these fronts because it’s not just one single thing in China, it’s this whole range of government policies that are at play.

MetalMiner Price Benchmarking: Current and Historical Prices for the Metals You Buy

So, we have to press on enforcing our trade laws, getting our allies to enforce their trade laws. Enforce, really,  at every chance we get. If there’s a WTO violation to push China to address that. But then keep pressing through international forums to get China to make the necessary economic reforms domestically and get out of the steel business. Read more

AISI_kevin_dempsey-testimony_180_102116

Kevin Dempsey, AISI.

MetalMiner Managing Editor Taras Berezowsky recently sat down with Kevin Dempsey, Senior VP for public policy at the American Iron & Steel Institute. Dempsey leads the AISI public policy team representing the interests of North American steel producers and also serves as General Counsel to the Institute. Before that he was a practicing attorney who specialized in trade matters.

During his years on Capitol Hill and in the private sector, Dempsey has worked extensively on international trade negotiations, including the Doha Development Agenda and the original negotiations on the accession of China to the World Trade Organization. He also has considerable experience with U.S. and international law related to subsidies, trade remedies, market access, intellectual property rights, and product standards, as well as U.S. legislative procedures for authorizing and implementing trade agreements.

This is part two of their discussion. Read part one for more on the U.S., China, steel and trade matters. Today’s piece examines the role of international diplomacy and even the WTO.

MetalMiner Price Benchmarking: Current and Historical Prices for the Metals You Buy

Taras Berezowsky: If you could pick one of those big issues or pieces of control what would be the biggest one as far as AISI and the whole industry domestically is concerned about? Is there one pet issue that trickles down to everything else?

Kevin Dempsey: Well, for steel I think you have to say if you’re in the steel industry the biggest issue is Chinese state ownership and control of its steel industry.

Because that is at the heart of the distortions that we see in our sector in terms of the massive overcapacity of steel in China that is leading to huge levels of exports of Chinese steel around the world. Read more

Kevin_Dempsey_144_102016

Kevin Dempsey

MetalMiner Managing Editor Taras Berezowsky recently sat down with Kevin Dempsey, Senior VP for public policy at the American Iron & Steel Institute. Dempsey leads the AISI public policy team representing the interests of North American steel producers and also serves as General Counsel to the Institute. Before that he was a practicing attorney who specialized in trade matters.

During his years on Capitol Hill and in the private sector, Dempsey has worked extensively on international trade negotiations, including the Doha Development Agenda and the original negotiations on the accession of China to the World Trade Organization. He also has considerable experience with U.S. and international law related to subsidies, trade remedies, market access, intellectual property rights, and product standards, as well as U.S. legislative procedures for authorizing and implementing trade agreements.

As such, he possesses a veritable wealth of knowledge about the issue of market economy status for China and how that would impact the U.S. steel industry.

MetalMiner Price Benchmarking: Current and Historical Prices for the Metals You Buy

Taras Berezowsky: Just initially, I saw in your bio that you had worked on China’s original agreement of accession to the WTO. In what capacity did you work with them?

Kevin Dempsey: I was a lawyer, a trade lawyer, in private practice representing a number of U.S. industries that were interested in the question of China’s role in the WTO and making sure that the rules going forward were going to be fair ones that ensure fair competition with China.

A big issue at the time was the extensive state involvement in the Chinese economy and the need to make sure that we had effective laws, including the ability to continue to treat China as a non-market economy under the anti-dumping law.

Read more

This morning, the U.S. International Trade Commission kicks off its 332 investigation of the aluminum industry’s competitiveness in the global arena.

MetalMiner Price Benchmarking: Current and Historical Prices for the Metals You Buy

Before the hearing, executives from Scepter, Inc., Novelis North AmericaHydro Metals USA and the Aluminum Association gave members of the press a preview of what the industry’s testimony before the ITC will sound like.

According to Aluminum Association President Heidi Brock’s testimony, the Commission should focus on 5 key areas:

  1. Needless production: Produce findings on the nature and extent of continued use of inefficient and antiquated facilities and the continued unwarranted expansion of greenfield capacity.
  2. Transparency: Highlight the need to obtain information and transparency about policies that encourage overcapacity including information about state-owned enterprises (SOEs) operating in the aluminum industry as well as SOEs that provide the industry with supplies, electric power, and services.
  3. Tax Policies: Investigate China’s tax policies on aluminum exports. Chinese traders are “gaming” the system such that primary aluminum that does not qualify for the tax rebate is making its way into the U.S. market disguised as a semi-fabricated product. How can China tighten its enforcement of the 15% export tax on primary aluminum and crack down on fake semis?
  4. Enforcement: Review the enforcement of countervailing duties/anti-dumping orders and research the impact of transshipments through third countries that circumvent those orders or other tariffs.
  5. Environmental Impacts: Examine the role of China’s aluminum industry in meeting the commitments China has made to reduce carbon emissions. China cannot meet its carbon reduction commitments without both eliminating energy subsidies and curtailing outdated, carbon-intensive production in the aluminum industry.

When MetalMiner asked Brock about how much data and information the AA currently has on Chinese state-organized enterprises and subsidization practices, per the second bullet point on transparency, her answer indicated that the domestic industry may still largely be in the dark regarding the details.

“It’s going to be a long process,” Brock said. “Compared to the U.S. industry, where we’ve been collecting and reporting [data] for decades now, our hope is that our Chinese colleagues commit to transparency in their markets.”

She mentioned that it is “frustrating” when China says they plan to cut capacity, and then turn around and go back on their word. For example, according to her testimony, one of the largest aluminum producers in China announced in October 2015 that it would curtail all of the capacity at one of its largest smelters due to low aluminum prices and the resulting losses. But the decision was reversed only a few weeks later when the local government offered significant discounts on critical inputs, such as power, in order to avoid the loss of local jobs.

Two-Month Trial: Metal Buying Outlook

“We are out there selling our product, and we have seen low prices coming from outside,” said Marco Palmieri, president of Novelis North America. “That has caused significant issues — and [those issues are] real.”

The Commission is expected to deliver a final report based on this investigation in summer 2017.

We’ve seen a lot of numbers being thrown around over the past year when it comes to trade actions and enforcement.

From the steel industry’s Section 337, to a Section 201 being thrown down, right up to the 332 investigation about to get underway, there are a lot of digits but sometimes a bit less clarity on what it all means.

We thought we’d share a tiny primer on the 332 investigation of the U.S. aluminum industry’s competitiveness about to get underway before the International Trade Commission.

Here’s a quick rundown, courtesy of the Aluminum Association:

332-investigation-Aluminum-Association

The Aluminum Association’s VP of Policy, Charles Johnson, shared some more details with us on how exactly the 332 investigation came about in a recent interview:

A number of AA’s member companies, including AA President Heidi Brock, are planning to testify before the ITC this Thursday morning.

A Special MetalMiner Project: Learn why China getting market economy status may just be the biggest trade issue of our time – and how it impacts the U.S. aluminum industry – in “China vs. the World.

china shipping port title

Let’s set aside Donald Trump’s one-track talk on China as a currency manipulator for just a sec, and focus on a slightly less understood, and arguably bigger, issue — the role of Chinese state subsidies and state-owned enterprises.

Using the steel industry as an example:

Top 10 Chinese Steel Companies in 2014

top 10 list china steel companies

With the exception of Shagang Group, China’s biggest steel companies are owned — therefore subsidized and otherwise supported — by Beijing. Courtesy of the American Iron and Steel Institute (AISI).

Because nine of the top 10 steel companies in China are SOEs, which get special support (read about it in our new project,China vs. the World,” here) — it ultimately spurs trends like these:

growth-china-steel-industry-vs-US-2000-2015

Almost immediately after China joined the WTO in 2001, the country’s steel industry began its exponential rise. Courtesy of AISI.

china-steel-exports-2005-to-2015

The Great Recession nipped Chinese exports a bit, but state-owned enterprises continued to be incentivized to produce by the Chinese government while domestic growth stagnated within the last few years, leading to a flood of Chinese steel being pushed outside the country’s borders. Courtesy of AISI.

A Special MetalMiner Project: Learn why China getting market economy status may just be the biggest trade issue of our time – and how it impacts the U.S. steel industry – in “China vs. the World.

china shipping port title