Articles in Category: Company News

Reuters reported that U.S. stock index futures rose to record intraday highs on Tuesday as oil prices surged and investors assessed earnings from top U.S. retailers.

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The theory is share prices are being driven higher by a strong oil price and retailers who are reporting better than expected store sales. Wal-Mart Stores, Inc., Macy’s, and Home Depot sales are all up on robust consumer demand. If stock prices were supported on consumer confidence alone, we could see an argument for this bull run in share prices to continue.

Stocks are up

Stock prices continue to rise thanks to strong retail sales and oil prices. Source Adobe Stock/Tiagozr.

There is plenty of optimism around. Donald Trump’s much-vaunted infrastructure projects are expected to create significant demand and have an inflationary impact on the economy… when they eventually see the light of day. 2018 At the earliest is our expectation since few are shovel-ready and all will have to get past Congress first. Meanwhile, though, the economy is adding jobs at a steady rate and unemployment is low.

Oil Supply

However, if Reuters is right and shares are being driven higher in part due to the oil price, we have a few concerns. The oil price was driven higher by the Organization of Petroleum Exporting Countries‘ production cap agreement last year, an agreement to which both major OPEC producers and 11 non-OPEC countries like Russia signed up to in an effort to reduce excess production and bring the market into balance by the summer. Read more

The showdown between global copper miner Freeport-McMoran, Inc. and the Indonesian government got a little hotter this week.

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Arizona-based Freeport majority-owns the world’s second-largest copper mine, Grasberg in Indonesia. The company has been trying to get a new permit from the Indonesian government to continue exporting copper concentrates for the last six months. On Monday Freeport said it would not accept terms of a deal the government offered that would allow it to resume shipments of copper concentrate that have been idled since January 12.

One More Year… Then Give Up Your Mine

Friday the Indonesian government offered Freeport a new, one-year deal that would allow the company to continue exports but only if it agrees to new rules requiring it to build a new copper smelter in Indonesia within the next five years and also agree to switch to an operating license, the terms of which would require Freeport to, eventually, give up control of Grasberg.

Kennecott Copper Mine

Open pit copper mines such as Rio Tinto’s Kennecott in Utah could increase production and increase sales if Grasberg stays closed. Source: Adobe Stock/Photofly.

Freeport CEO Richard Adkerson, naturally, turned down that offer and said the company is unwilling to revisit the terms of its 30-year contract to mine at Grasberg, which accounts for about a third of Freeport’s annual copper production and 40 to 50% of its worldwide assets. He also said Freeport would consider going to arbitration if it can’t settle this dispute within 120 days. Read more

Leading Republican lawmakers said over the weekend proposals for a new Trump-administration-backed infrastructure bill could be introduced as early as the coming weeks.

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Senate Majority Leader Mitch McConnell (R. Ky.) told reporters he expects to receive “some kind of recommendation on an infrastructure bill, a subject that we frequently handle on a bipartisan basis,” but gave no details or timing.

He has previously voiced concern over adding to budget deficits with a new injection of federal funds for road, bridge and other construction projects like the ones President Barack Obama secured from Congress in 2009, especially after a major highway funding law was enacted about a year ago.

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During the campaign, Trump said he would push for a $1 trillion infrastructure program to rebuild roads, bridges, airports and other public works projects. He said he wanted action during the first 100 days of his administration, which now seems unlikely.

This week President Donald Trump began to deliver on his campaign promises to deregulate industry and unshackle American manufacturing, using the Congressional Review Act, a 1996 law that empowers Congress to review, by means of an expedited legislative process, new federal regulations issued by government agencies and, by passage of a joint resolution, to overrule the regulation.

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First up, Congress passed a law under the CRA that rolled back an Obama administration rule that would have required oil, gas and mineral extraction companies to disclose payments made to governments. The Securities and Exchange Commission rule never went into effect and exploration companies and industry organizations such as the American Petroleum Institute, said it put natural resource companies at a competitive disadvantage to foreign firms by disclosing too much of their contract terms.

Iron ore mine

Deregulation via the CRA will help minerals mining and exploration. Source: Adobe Stock/nikitos77.

Metals producers and other companies dependent on minerals to make their products generally supported the repeal. Another potent input for the creation of metals is coal and Trump followed up the CRA action by signing a bill that quashed the Office of Surface Mining’s Stream Protection Rule, a regulation to protect waterways from coal mining waste that officials finalized in December. Regulators spent most of Obama’s administration eight years writing the Stream Protection Rule and it was effectively wiped away with the stroke of Trump’s pen thanks to the CRA.

The House has passed several CRA resolutions, and the Senate has so far sent three of them to President Trump so far, but there are at least 10 CRA bills still moving through the House and Senate. Until now, only one CRA resolution had ever been passed and signed into law: the Occupational Health and Safety Administration’s workplace ergonomics rules, in 2001.

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If Trump and the republican Congress continue to use the CRA to roll back rules, they could potently erase much of the regulation that business organizations have said hamstrung them for the last eight years.

Using the CRA to roll back regulations would certainly make it easier for Trump to deliver on his promises of smarter, better regulations for industries such as manufacturing and mining. Using it also helps the Congress keep up a commitment from an early Trump executive order that it must repeal two regulations for every new one. We could see a slew of deregulation actions to allow Congress to “bank” new regulations if it needs to pass a law to, perhaps, create a new definition of what a countervailable subsidy is for companies to petition the Commerce Department to allow it to place duties on foreign imports.

Much to the delight of not only its executives and employees but both the global steel sector and even stock markets, the Luxembourg-based steel giant ArcelorMittal has posted its first annual profit in more than five years, registering the biggest jump in earnings in the same period.

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The world’s largest steelmaker by output swung from a $7.9 billion net loss in 2015 to a net profit of $1.8 billion last year. Read more

China announced last year it had implemented ambitious cuts in steel capacity. Now, a new report says that not only did those cuts not happen, but China actually increased steel production capacity.

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But a new report by Greenpeace East Asia and Chinese consultancy Custeel says that number was largely smog and mirrors. Many of the plants China says it closed down were already idle, while production was restarted elsewhere and brand new plants opened.

China, which accounts for half the world’s steel production, has a total capacity of 1.1 billion metric tons, announced plans to eliminate 100-150 mt of annual production over the next five years.

Last year, it said it had far exceeded its initial target to cut capacity by 45 million mt, which China said its steel sector exceeded, recording total 2016 cuts of around 85 mmt.

But the Geenpeace/Custeel report said that 73% of the announced cuts in capacity were already idle — in other words the plants were not operating. Only 23 mmt of cut capacity involved shutting down production plants that were operating.

At the same time, some 54 mmt of capacity were restarted, and 12 mmt of new operating capacity came online.

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That left China showing a net increase in operating capacity of 36.5 mmt last year, a figure that is consistent with a 3% increase in steel production in the second half of last year.

Such an increase is consistent with evidence of a deterioration in the air quality in Beijing in the second half of last year — the steel industry is a heavy consumer of coal and contributor to air pollution, and most of the restarted capacity came in the industrial provinces near the capital, Shanxi, Hebei and Tianjin.

You may feel it cynical to say anyone would engage in a blue sky thinking if someone else is going to pay for it, but you have to question whether Voestalpine AG and its partners would be embarking on a research program that appears to have little prospect of economic viability in the next 20 years if the European Union was not funding the lion’s share of €18 million.

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The Austrian steelmaker Voestalpine, Siemens of Germany and Austrian renewable energy company Verbund party are building an experimental facility to economically produce hydrogen from water, which would then be used in place of coking coal for steelmaking. You may remember that my colleague, Jeff Yoders, noted that Voestalpine touted research into using hydrogen to reduce iron ore at its new DRI facility in Texas when the facility opened last year.

Voestalpine Corpus Christi

Voestalpine’s $750 million direct-reduced iron ore facility in Corpus Christi, Texas, could one day be fueled by hydrogen and not natural gas. Image: Jeff Yoders.

By the consortium’s own admission, an economically viable hydrogen process could take 20 years but should it eventually prove successful the benefits in decarbonizing a range of energy intensive industries such as ceramics, aluminum, glass, and cement in addition to steel could dramatically reduce emissions from one of the largest sources of industrial CO2 emissions. Read more

The Trump administration is reportedly considering an executive order that would suspend the conflict minerals rule of the Dodd-Frank banking regulation bill.

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The conflict mineral rule requires reporting of supply chains to enforce a ban on tin, tantalum, tungsten and gold from the Democratic Republic of the Congo. It’s backed by human-rights groups but many businesses say the rule, as is, requires a swath of industries to investigate whether their products contain metals that could have been sold by armed groups so far down their supply chains that it’s impossible to tell where it came from. Reporting has been spotty even under the current rules.

The proposed executive action, drafted last week and reviewed Wednesday by The Wall Street Journal, would suspend the conflict-minerals rule for two years. Business groups have fought the rule in court, saying its requirements are costly and burdensome.

US Sells Crude Oil From Strategic Reserve

10 million barrels of crude from the U.S.’s strategic reserve are scheduled to be sold later this month, the Department of Energy said.

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The shipment is part of a total 25 million barrels, to be sold over a period of three years, as per the 21st Century Cures Act, signed in December last year.

The U.S. Army Corps of Engineers approved the construction of the Dakota Access Pipeline on Tuesday, paving the way for an infrastructure project that has been surrounded by protest and controversy.

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Robert Speer, the acting secretary of the Army, announced the decision to Congress, saying he was ready to offer the pipeline’s owner a 30-year easement on a disputed patch of land.

In the decision, Speer said he would halt the preparation of an environmental impact statement meant to assess the effects of the pipeline, adding that he had sufficient information to support approval. The pipeline had already passed environmental review and a federal judge found for the pipeline after the Standing Rock Sioux Tribe flied a lawsuit, based on the tribe’s water supply and sacred lands, against it before then-President Obama halted the project last November. No part of the proposed route goes through tribal lands.

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The easement will allow for the completion of the last mile and a half of the 1,172-mile project, connecting oil production areas in North Dakota to a crude oil terminal near Patoka, Ill. The pipeline is owned by Energy Transfer Partners. In a statement, Sen. Heidi Heitkamp, D-N.D., said, “Today’s announcement by the U.S. Army Corps of Engineers brings this issue one step closer to final resolution — and delivers the certainty and clarity I’ve been demanding.”

The American Iron and Steel Institute Board of Directors has approved a public policy agenda outlining an aggressive, pro-manufacturing policy to guide advocacy for the upcoming year and highlight importance of the steel industry to the success of the American economy.

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“The impact public policies have on manufacturers must be carefully considered to ensure economic growth and our national security. Our 2017 Public Policy Agenda highlights a concerted effort on behalf of members of the North American steel industry to combat foreign unfair trade practices, create jobs, highlight our innovations and sustainability, and strengthen the manufacturing base,” said Thomas J. Gibson, AISI president and CEO. “We will be sharing our priorities with policymakers and government leaders, and look forward to working together to turn obstacles into opportunities.”

Highlights AISI priorities for 2017 include:

  1. Press China and other nations to eliminate their steel overcapacity and to end all subsidies;
    Enforce aggressively and expeditiously U.S. unfair trade laws.
  2. Defend the right to treat China as a Non Market Economy at the WTO.
  3. Improve the implementation of the ENFORCE Act against trade law evasion.
  4. Reduce the corporate tax rate to 15-20% while maintaining accelerated cost recovery.
  5. Revise the EPA Clean Power Plan and the New Source Performance Standard for utility greenhouse gas emissions.
  6. Ensure the approval and completion of the Keystone XL and Dakota Access pipelines and  facilitate investment in our national energy infrastructure.
  7. Withdraw EPA’s final determination for the light-duty vehicle GHG standards for model years 2022-2025.
  8. Ensure infrastructure funding is accompanied by reforms that streamline permitting and approval of large projects to speed project delivery time and reduce added cost.
  9. Direct increased funding of infrastructure improvements towards long-term, multi-year projects.