The American Iron & Steel Institute, a key lobbying force for the steel industry, is focused on two major policy issues for the remainder of the year: getting the G20-initiated “Global Forum” on steel overcapacity officially in motion before the Obama administration leaves office, and ensuring that the U.S. continues to refuse to recognize market economy status for China.
“If China gets market economy status it will mean 400,000 to 600,000 lost jobs (in steel, other metals and services for the industries) the U.S.,” said Thomas J. Gibson, President and CEO of the AISI in a conference call with reporters yesterday.
When asked what the position of the AISI is, as opposed to that the U.S.-China Business Council, AISI Senior VP for public policy and general council Kevin Dempsey said, “what the Chinese are trying to present is sort of a legalistic argument that, regardless of the facts, they should be granted the status. I don’t think that legal argument stands up to scrutiny.” Read more
On the one hand, as a steelmaker, it is exploring the possibility to merge its European steel operations with those of Tata Steel. The European steel market desperately needs consolidation, but no one is willing to bear the brunt — politically or economically — of closing multiple plants and laying off thousands of workers.
One attraction of a merger could be that ThyssenKrupp and Tata might keep open its German and Dutch facilities, but try to close or scale down Tata’s Port Talbot operations in South Wales. After Brexit, Britain — and maybe all of what’s presently the U.K. — will no longer be of much concern to the rest of Europe. Regardless, the article’s main focus is on protectionism. The E.U. is in the process of applying historically high duties to Chinese steel; some as high as 73.7% for heavy-plate and 22.6% for hot-rolled, levels said by the Chinese to represent “reckless trade protectionism.”
Protected Bubbles in a Global Marketplace
That sours the air between Europe and China on the question of open trade relations. ThyssenKrupp, one would think, would benefit, though. Of its six divisions — Steel Europe, Steel Americas, Components Technology, Elevator Technology, Industrial Solutions and Materials Services — the steel divisions represent 30% of its revenue but only turned a modest profit in Q2 not least of which because prices were depressed in part by China’s low-priced imports.
In microcosm, ThyssenKrupp is an example of a wider issue, the article suggests. You can’t adopt selective punitive tariffs on some products and not expect some form of retaliation or more willing adoption of reciprocal tariffs on other products or services areas by those affected importers. Steel generates just 2% of Thyssen’s profits, so 98% come from its much more promising elevator and industrial products divisions… divisions that benefit most from a free and open global market place.
Diversified Companies, Single-Industry Tariffs
The article berates ThyssenKrupp for its capital-destroying and high loss-making forays into primary steel production in Brazil and processing operations in the U.S. that the company has since sought to extract itself from. The share price, the FT says, has made no progress in five years.
But, from our perspective, the impressive fact is that even after these massive loss-making ventures — said to total some $15 billion — the share price has still managed to maintain its level from five years ago. Other steelmakers that have not made such, in hindsight, poor investment decisions are doing no better. ArcelorMittal is much the same, if not worse. The trend has been consistently down.
Source: Yahoo Finance.
What has held ThyssenKrupp up, kept the faith of its shareholders and created growth and promise for the future, is those elevator and industrial products divisions. Those divisions that rely on open, unfettered, access to world markets. Read more
This week we saw precious metals, particularly gold, fall as the Federal Reserve board looked increasingly hawkish about finally raising interest rates significantly by December. They really mean business this time!
The strong dollar has been causing metal prices to fall for the last two months, but this week it hit a seven-month high. If the dollar was Nickelback, precious metals would be Bon Jovi. When investors put their money into the metal, itself, it directly affects the value of the dollar, a commodity that’s merely a certified paper version of the valuable metal and, in this case, vice versa. Why is the dollar riding so high? The rally is based, partially, on those hawkish Fed governor comments. But there’s another reason…
The U.K. and E.U. Can’t Stop Their Brexit Bickering
Other European leaders are rattling the sabre right back and threatening punitive sanctions and zero access to the U.K. once it leaves. French President Francois Hollande seems to be leading the charge but, honestly, most French people would gladly give the U.K. anything it wants if they’d simply promise to take Hollande off their hands. He’s seriously the most disapproved of president in French history.
This has to do with metals because the back-and-forth finally resulted in a flash crash in the pound’s value and that dragged the Euro down against the dollar, too. Here in the U.S. our presidential election has turned childish bickering into somewhat of an art form. Nice that the Europeans have taken notice and are trying the same. It’s helping to boost the dollar.
Alcoa’s Last Stand (Kind of)… As One Company
Meanwhile, Alcoa, Inc., will be splitting itself in two next month. The company reported disappointing earnings in its last earnings season kickoff report as a unified group. A spin-off will take its aerospace and automotive metals business into a new direction while leaving its money-losing primary aluminum smelting business gets to… still smelt.
Anyway, the company posted a higher third-quarter profit, but revenue fell and that discouraged investors who punished the company’s stock. I bet the titanium and nickel-alloy business unit members of Alcoa thought to themselves, “not my problem anymore.”
In the final reporting period before it splits into two companies in November, Alcoa’s net income more than tripled from $44 million a year ago to $166 million in the third quarter. Excluding one-time items, adjusted net income increased 47.7% to $161 million. But total revenue fell 6.5% to $5.2 billion. The company cited “curtailed and closed operations” and lower pricing for its products. Alcoa asset sales are expected to total $1.2 billion for the year.
Alcoa shares plunged 10.7% to $28.15 at 2:15 p.m. Tuesday.
China Pushes Back on North Korean Coal Sales
China appears to have pushed back on a U.S. bid to close a United Nations. loophole that allows North Korea to export coal for “livelihood purposes,” saying the well-being of North Koreans is a priority in negotiations on possible new U.N. sanctions on Pyongyang.
How anyone can even contemplate bringing such a freakish looking robo doll into their home I cannot imagine. Not since “The Conjuring,” a 2013 film about a possessed doll called Annabelle, has quite such a scary looking item been released on the unsuspecting public. What was Toyota thinking?
What am I talking about? Toyota’s 10-centimetre (4-inch) tall talking robot called Kirobo Mini, which will be sold in Japan from next year for $392 (¥39,800) and claims to have the intelligence of a five-year-old.
Kiroboo Mini. Source: Financial Times.
The idea of the robot is that it is supposed to provide an emotional connection, maybe particularly relevant for Japan’s aging population bereft of company, Kirobo is said to be able to learn phrases and recognize facial expressions with a built-in camera and sensors. A veritable helper robot with a personality.
The firm is heavily into artificial intelligence although they do not suggest Kirobo will go that far, yet, rather they are building on the platform built by Sony with their Aibo robotic dog; Toyota will be partnering with Vaio, the personal computer company that was spun off from Sony. Vaio’s plant in Nagano prefecture is also where Sony’s Aibo robotic dog was formerly produced.
As anyone who has lived with a five-year-old in the house will confirm, they can be the most manipulative and capricious of individuals. One hopes Toyota’s programmers do not take the “abilities of a five-year-old” too far or Kirobo may be rather more of a handful than Japan’s elderly but lonely seniors can cope with.
You wonder if Toyota has their target audience right, sure domestically in Japan their demographic may be crying out for such a product but internationally one could imagine plenty of single people living in rented accommodation who cant have animals would find something to talk to and have talk back an improvement on Siri. If they would just change that face….
In ironic twist of fate, the U.K.’s new nuclear-powered, nuclear-armed, nuclear deterrent submarine fleet (aptly named) after repeated government delays the Successor Class, is being made with French steel.
I suppose it could be worse. They could be made with Russian steel, but the reality is after closures of much of the U.K. steelmaking industry in recent years, there no longer remains a domestic steel manufacturer capable of producing the grades required for the critical outer pressure hull.
That material looks like it is to be supplied by Industeel of France. Not that France isn’t an ally of the U.K., a fellow European country, on the same and opposing side of countless wars with us over the centuries but it is, rather, a sad reflection on the U.K. that it’s gone from being one of the world’s great steel producers in the last century to the point where we cannot, now, even manufacture the grades necessary to make our own last line of defense.
The project to build four Successor class submarines is conservatively budgeted to cost $53 billion (£41 billion) and will be built at BAE Systems’ plant at Barrow-in-Furness in Cumbria, the Telegraph reports. Read more
It may not have been a very good year so far for India’s Tata Steel but things seem to be looking up. It’s also looking good for former Tata Steel companies.
Former Tata Operations Turn a Corner
While Tata continues to report consolidated losses, although it hopes to recover in the short term, there’s plenty of cheer for its former European operations. British Steel, after being spun off from Tata is back in the black, just a few weeks after the completion of the sale of Tata’s steelworks at Scunthorpe.
Greybull Capitalis the new owner of Tata Steel’s long products business and British Steel now plans to pump in about $65 million (£50 million) of investment this financial year.
Tata Steel is supposedly in pension talks with its union to save this steel plant at Port Talbot in South Wales, U.K.. Source: Adobe Stock/Petert2
In nearby Scotland, the Dalzell plant at Motherwell, Glasgow, reopened recently after the India-native businessman Sanjeev Gupta’s Liberty House Group acquired the steelworks from Tata earlier this year. Read more
The International Trade Commission is preparing new rules for tariff cuts and Alcoa’s board has approved the plan to split the company in two.
ITC Adopts New Rules for Tariff Cuts
The U.S. International Trade Commission said Thursday that it is adopting interim rules to create a way for companies to submit items for potential tariff cuts under the new miscellaneous tariff bill process, forgoing the normal rulemaking process to meet a mid-October deadline.
Alcoa Board Approves Split
Aluminum producer Alcoa Inc. said on Thursday its split into two publicly traded companies is expected to be effective Nov. 1, after the company’s board approved the separation.
Alcoa said last year it would break itself in two, separating a faster growing aerospace and automotive parts business from the traditional aluminum smelting and refining operations, as shareholders sought higher returns amid a commodity slump.
At the International Manufacturing Technology Show in Chicago, the Reshoring Initiative‘s Harry Moser laid out what he called the “reshoring roadmap” of what congress and the next president need to do to bring manufacturing jobs back to the U.S.
Moser said that rapid job loss has been stemmed in the U.S. but more needs to be done to bring manufacturing jobs back to the U.S. The roadmap included corporate tax reform to make the U.S. more competitive with countries like Ireland, which boasts a 2% corporate tax rate. Republican presidential nominee Donald Trump has said he will lower the corporate tax rate of 39.1%. Democratic nominee Hillary Clinton has said she will raise taxes on “corporations and wealthy individuals.”
Don’t Drown in the VAT
Another part of Moser’s roadmap is a value-added tax in the U.S. A VAT is a type of general consumption tax that is collected incrementally, based on the “value added,” at each stage of production and is usually implemented as a destination-based tax, where the tax rate is based on the location of the customer. If I purchase something from the U.K, I would have to pay the vote to get it imported into the U.S.
Companies are reshoring jobs to the U.S. Source: The Reshoring Initiative.
Moser said the rest of the world has a VAT of about 15% whereas the U.S. has no VAT. 159 of the 193 countries in the world have a VAT.
There are two main methods of calculating VAT: the credit-invoice or invoice-based method and the subtraction or accounts-based method. Using the credit-invoice method, sales transactions are taxed, with the customer informed of the VAT on the transaction, and businesses may receive a credit for VAT paid on input materials and services. The credit-invoice method is the most widely employed method, used by all national VATs except for Japan. Using the subtraction method, at the end of a reporting period, a business calculates the value of all taxable sales then subtracts the sum of all taxable purchases and the VAT rate is applied to the difference. Read more
Welcome back to the MetalMiner week-in-review! This week we’ve got in-depth reporting on China and market economy status, India getting tough on aluminum imports and Canada… well, you’ll see what happened in Canada.
We Know Gold Prices Have Gone Up… Butt This is Ridiculous
The theft of about $140,000 worth of gold ($180,000 in Canadian dollars) from the Royal Canadian Mint, was supposedly an inside job… in more ways than one.
After a trial that concluded in Ottawa on Tuesday, Leston Lawrence, a 35-year-old employee of the government mint in Ottawa, stood accused of foiling the facility’s high security and smuggling out 18 7.4-ounce pucks — this is Canada, after all — worth about $6,800 each. He sold most of the pucks, cooled into the size of a purity testing dipper used at the mint, to an Ottawa Gold Sellers retail store at a nearby mall. The accused criminal mastermind also had four more of the pucks in a safe deposit box.
“Go ahead, scan me with the wand. Nothing to see here.” Source: Adobe Stock/John Takai.
The question the Royal Canadian Mounted Police, or the Mint, couldn’t figure out is how he got past the state-of-the-art security that featured full-body metal detectors and secondary screenings with a wand for anyone that tripped the first scan?
Before Lawrence was fired from the Mint and arrested in 2015, investigators also found a tub of Vaseline in his locker. While the wand scanners can pick up even small pieces of metal in a person’s clothes, security officials from the Mint said they probably would not detect dipper-sized gold pucks that were forced between someone’s buttocks using the vaseline.