Articles in Category: Ferro Alloys

Iron ore has certainly been volatile so far this year. It jumped from the low $40s/ metric ton or 62% Fe fines on a delivered China basis to over $70/mt in April. It now stands at just below $50/mt.

Two-Month Trial: Metal Buying Outlook

In percentage terms, those are big moves in a short period of time, but frankly at Steel-Insight, we find this irrelevant. In context, the recent moves don’t hold a candle to the fundamental shift in the product’s shift from $200/mt in 2011 to the current level. Now that was a generational change.

Iron Ore Monthly Average Prices ($/Metric Ton cfr China 62% Fe fines)

steel_insight_ironore_053016_350

Source: Platts

In terms of the monthly average price, which is what many steelmakers’ costs outside of China are linked to, the moves have been relatively small from around the low $40s to the high $50s. For steelmakers, even that $20/mt change in iron ore costs actually only add $30/mt to their total cost structure (around 1.5 mt of iron ore is required to make a tonne of steel).

Meanwhile, North American steelmakers have seen steel prices rise from $360/short ton for HR coil at the beginning of the year to current levels of $620/short ton. The fact that ore costs may have gone up $30/mt in that period is pocket change.

Not a Long-Term Concern

Moreover, the rapid change in prices has clearly been a short-term event. It was driven by a modest improvement in steel market demand in China. However, this was compounded by the massive liquidity boost to the Chinese market that was seen in Q1 this year that the Chinese government injected in order to stave off an excessive slowdown. That allowed steelmakers, which had been forced to idle in late 2015 due to lack of credit, to secure iron ore and return to steelmaking. Their buying drove modest gains in iron ore pricing.

However, the market was turbo-charged by retail Chinese investors. Responding to the rising price and also public statements from Chinese political leadership, vast amounts of speculative finance surged into iron ore futures in China. In one day in April, the turnover in volume on the Dalian iron ore contract exceeded the combined turnover of all equities trading in China with pricing up 19%. Upon tightening access to trading, this liquidity ebbed as did the price. The most volatile pricing moves were not, therefore, an indication of fundamental demand.

Supply/Demand Picture

Fundamentally, iron ore is going to be boring for the next five-plus years. There is simply too much supply available to a steel industry where global demand is not growing. We expect iron ore prices to hit the $30s/mt for a period in the second half of this year and stay there for an extended period, with pricing moving in the $30-60/mt range for the next five years, i.e. exactly the trading range that they have been in the for the last year.

That will mean more pain for global iron ore miners. For steelmakers and steel buyers, however? A long period of low prices will be welcome….and boring.

Steel-Insight is a steel industry price-forecasting publishing company, based in Toronto. James May, the firm’s managing director, has been a steel industry analyst for 15 years and advises some of the major global steel trading companies, steel producers and steel consumers on the outlook for steel pricing and industry trends. For more information, visit www.steel-insight.com.

 

The U.S. International Trade Commission has officially started an inquiry into the hacking and theft of trade secrets from U.S. Steel Corp., allegedly by Chinese hackers. China’s largest steel-producing province has ordered production cuts due to air pollution.

ITC Launches Hacking Probe

U.S. regulators on Thursday officially launched an investigation into complaints by United States Steel Corp. that Chinese competitors stole its secrets and fixed prices, in the latest trade spat between the two countries. The International Trade Commission said in a statement that it has not made any decisions on the merits of the case.

Two-Month Trial: Metal Buying Outlook

The commission identified 40 Chinese steel makers and distribution subsidiaries as respondents, including Baosteel Group, Hebei Iron and Steel Group, Wuhan Iron and Steel Co Ltd., Maanshan Iron and Steel Group, Anshan Iron and Steel Group and Jiangsu Shagang Group.

U.S. Steel has accused Chinese hackers of stealing proprietary data to manufacture and sell dual-phase 980, a high-strength automotive steel alloy.

Tangshan Orders Steel Cuts

China’s top steelmaking city of Tangshan has ordered mills in and near the area to cut production for five days from Friday to ease air pollution, according to a notice from the local government.

Free Download: The May 2016 MMI Report

It was not clear how much capacity is affected but Tangshan is the biggest city in Hebei province, which accounts for more than 20% of China’s steel output.

The Commerce Department has delivered a final determination that imports of corrosion-resistant steel from China, India, Italy, South Korea, and Taiwan were illegally dumped in the U.S. The investigation found that countervailable subsidization of imports of corrosion-resistant steel products from China, India, Italy and South Korea occurred and that there were actually no countervailable subsidies of imports of corrosion-resistant steel from Taiwan.

Two-Month Trial: Metal Buying Outlook

Companies from China received final anti-dumping duties of 209.97%. Many Chinese companies also did not cooperate with the countervailing duties investigation and were hit with CVD tariffs of 241.07%.

This means many Chinese companies received total import tariffs of 451.04%.

Hyundai Steel Company in South Korea got hit with anti-dumping duties of 40.97%. Read more

12 Global steel trade associations today released a statement urging the leaders of the G7 nations to take steps to address the current global steel overcapacity situation which is negatively affecting economies, industries and workers around the world.

Two-Month Trial: Metal Buying Outlook

The American Iron and Steel Institute, the Japan Iron and Steel Federation, Eurofer (the European Steel Association), Canadian Steel Producers Association, UK Steel, the German Steel Federation (WV-Stahl), Alliance des Minerais, Minéraux et Métaux (A3M), Federacciai (the Federation of the Italian Steel Companies), the Steel Manufacturers Association (SMA), the Committee on Pipe and Tube Imports (CPTI), the Specialty Steel Industry of North America (SSINA), and the European Steel Tube Association said:

“Government support measures and other policies have contributed to significant global excess capacity in steel, unfair trade and distortions in steel trade flows around the world. Among other things, these market-distorting government policies have prevented adequate industry adjustment in some markets in response to changes in global demand. This is an issue of concern in countries where government policies encourage steel capacity growth without regard to market signals, or where government actions sustain uneconomic or consistently loss-making steel plants that otherwise would exit the market.

“Steel producers in the G7 nations, and elsewhere around the world, highly appreciate intergovernmental attempts so far to cope with the global overcapacity issue, and urge their governments to take urgent action to address this global problem, building upon the work program outlined by high-level government representatives in Brussels in mid-April to address the overcapacity and adjustment challenges facing the steel industry,” the statement, in part, read.

“It is critical that all major steel-producing nations participate in efforts to eliminate trade-distorting policies that are contributing to the current steel crisis,” it continued. “Otherwise, as was noted at the OECD Steel Committee meeting in May 2015, ‘a failure to address or halt market distortions will result in subsidized and state-supported enterprises surviving at the expense of efficient companies operating in environments with minimal government support.’

Free Download: The May 2016 MMI Report

“In this regard, we urge the G7 summit in Japan to discuss the need to maintain effective remedial measures, consistent with their WTO rights and obligations, against exports from countries in which market economy conditions do not prevail.”

Jennifer Diggins is the director of Government Affairs at Charlotte, N.C.-based Nucor Corp., the largest steelmaker in the U.S. and North America’s largest recycler of any material (Nucor recycled 16.9 million tons of scrap steel in 2015 at its 23 electric arc furnace mills). Diggins serves as the firm’s liaison to Washington, D.C. MetalMiner’s editorial staff recently had a chance to sit down with Jennifer for a MetalMiner Q&A to discuss recent issues in steel, including Chinese overproduction, the tariffs recently passed against some imports and the role of the international scrap market.

Free Download: The May 2016 MMI Report

MetalMiner: Recently, executives from the five leading steel companies in the U.S. told the Congressional Steel Caucus that unfair foreign trade practices have caused an increase in steel imports resulting in the loss of more than 13,000 jobs in the industry this year. How was that number arrived at? Could it be even worse than the 13,000 estimated?

jennifer_diggins_headshot_300_Nucor_052116Jennifer Diggins: There is the potential for the number to be much worse when you factor in job losses in industries that support steel.

People often fail to appreciate the broad impact the steel industry has on the rest of the economy. Every one job in the steel industry supports seven other jobs in the economy. These are jobs in businesses that supply steelmakers with raw materials, contractors who do maintenance work at steel mills, truck drivers who transport our products, just to name a few. When steel production decreases like it has, workers in these supporting industries also are impacted. Read more

The Commerce Department delivered final determinations in the case of Chinese cold-rolled steel this week, and while Commerce upheld the 265% duties initially placed on the imports, the agency also added 256% countervailing subsidy duties, nearly doubling the duties on Chinese cold-rolled.

Two-Month Trial: Metal Buying Outlook

It’s safe to say the gauntlet’s been thrown down when it comes to Chinese steel imports. Doubling up the duties shows that Commerce finally isn’t kidding around and that the reforms passed by Congress last year have teeth.

Freight train with cargo containers passing by

Freight, whether by boat or by train, is being checked and inspected more vigorously by U.S. Customs and Border Protection.

Still, we wondered what effect this would have on U.S. manufacturers. Not only the ones accustomed to lower prices from foreign imports, but also the ones who export their finished goods to China. To paraphrase J.R.R. Tolkien, open trade war is upon you whether you’d risk it or not!

Chinese Response

China’s not taking it with a grain of salt, either. The Ministry of Commerce said on Saturday that it was gearing up for a legal challenge over the steel duties, most likely by opening an arbitration panel in the World Trade Organization.

The WTO is a better venue for China than Commerce or the U.S. International Trade Commission, which is likely why most Chinese steelmakers did not respond to Commerce’s requests for information in the cold-rolled case. What more might come out at the WTO is anybody’s guess.

“China will encourage and support its steel companies to defend themselves according to law, and China will safeguard the legitimate rights and interests of its steel companies using World Trade Organization rules,” the Ministry said in a statement today, less than 24 hours after Commerce announced further investigations into China’s steel industry.

Two-Month Trial: Metal Buying Outlook

Understandable since there probably aren’t even any Chinese steel mills that can make money exporting goods to the U.S. with 522% tariffs upon entry. My colleague Katie Benchina Olsen reported this week that Customs and Border Protection is getting better at flagging trans-shipments and other tricks to avoid the duties, too.

The trade war is definitely on. Whether it ends quickly is up to the countries and companies involved.

In the last year, the U.S. steel industry has aggressively pursued anti-dumping and countervailing duty lawsuits against Chinese producers of various steel products.

Two-Month Trial: Metal Buying Outlook

U.S. Customs and Border Patrol has stepped up efforts to enforce U.S. trade law. Earlier this week, the Department of Commerce confirmed the cold-rolled steel anti-dumping margins from China (265.79%) and Japan (71.35%) as well as a countervailing subsidy for China of (256.44%). This makes for a total of 522% duties on Chinese cold-rolled steel.

The U.S. steel industry says we are at economic war with China. With cold-rolled steel being used in automobile panels, appliances and construction, could the anti-dumping and countervailing duties lawsuits against Chinese producers actually be hurting the United States?

Steel’s War

The steel industry directly employs 142,000 people which is part of the 12 million U.S. manufacturing jobs according to the National Association of Manufacturers (NAM). The newly elected chairman of American Iron and Steel Institute — John Ferriola, chairman, president and CEO of Nucor Corp. — said at a recent AISI CEO press briefing that steel jobs declined by 13,000 in 2015. Although steel jobs declined last year, manufacturing jobs in other subsectors have picked up the slack. According to the Bureau of Labor Statistics, a total of 13,000 manufacturing jobs were created in 2015.

china-ship-and-buildings

Trade is a two-way street, what if China begins to tariff the goods U.S. manufacturers sell there? Source: iStock.

Steel prices have been rising in the U.S. as domestic mills are now shielded from imports China and other countries named in the trade cases. According to numerous sources, the domestic lead times have extended which is leaving some companies scrambling for metal.  Read more

Anglo-Australian mining giant Rio Tinto Group has submitted feasibility studies to the Guinean government for its massive Simandou project, considered the world’s biggest untapped iron ore deposit.

Two-Month Trial: Metal Buying Outlook

The studies are a further step towards bringing onstream a deposit that holds more than 2 billion metric tons. The real cost of the project has yet to be revealed but it is tipped to reach $20 billion.

Finance Minister Says China Will Maintain Steel Tax Rebate

China will maintain its tax rebate policy for steel exports as part of its efforts to help the sector tackle its longstanding overcapacity problems, the country’s finance ministry said on Wednesday.

Free Download: The May 2016 MMI Report

Chinese steelmakers have relied on the overseas market to soak up excess production in the sector, prompting growing anti-dumping complaints from foreign competitors.

Today, the Department of Commerce affirmed anti-dumping duties on imports of cold-rolled steel flat products from China and Japan, and countervailing duties — levied due to foreign government subsidies — on imports of cold-rolled steel from China.

Two-Month Trial: Metal Buying Outlook

Commerce determined that imports of cold-rolled steel from China and Japan have been sold in the U.S. at dumping margins of 265.79% and 71.35%, respectively. Commerce also determined that imports of cold-rolled steel from China received countervailable subsidies of 256.44%. This brings the total duties on Chinese cold-rolled imports to a whopping 522%

These anti-dumping determinations were exactly the same as Commerce’s preliminary findings released in March.

Free Download: The May 2016 MMI Report

As a result of the affirmative final determinations, Commerce will instruct U.S. Customs and Border Protection to continue to require cash deposits based on the final rates, which were the same as the preliminary rates for the anti-dumping duties. The countervailing duties rates will be added to Chinese cold-rolled imports.

Cold-Rolled Steel Petitioners

The petitioners for these investigations are AK Steel Corporation, ArcelorMittal USA LLC, Nucor Corporation, Steel Dynamics, Inc., and United States Steel Corporation.

The U.S. steel industry has been aggressively addressing imports of Chinese steel through the filing of multiple anti-dumping and countervailing actions in recent months.

Two-Month Trial: Metal Buying Outlook

The enforcement of these trade laws is the responsibility of U.S. Customs and Border Protection. In Salt Lake City earlier this month, the American Iron and Steel Institute and Metals Service Center Institute held their general meetings where steel industry executives discussed why Chinese steel imports are of particular concern to the U.S. steel industry.

Dual Mission

CBP Chairman R. Gil Kerlikowske explained in his speech, “Protecting Our Borders, Protecting Our Industry” how CBP enforces U.S. trade law, saying that the title of his speech, “really speaks to the duality of CBP’s complex mission, which is facilitating lawful trade and travel while ensuring the safety and security of our borders and the global supply chain.”

Steel mills Molten iron smelting furnace production line

U.S. Customs and Border Protection explained its processes for dealing with illegally dumped steel products at the AISI/MSCI general meetings earlier this month. Source: Adobe Stock/ZJK.

The overarching theme of the annual conference was that the U.S. is in an economic war with China, and CBP knows it is on the “front lines of our nation’s economic security.” Read more