Articles in Category: Global Trade

We wrote recently about the probable impact of President-elect Trump’s forthcoming economic policy, particularly his focus on infrastructure spending, Global trade and putting U.S. manufacturing, particularly steel, at the heart of his economic policy.

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His promises have been generally well-received yet they raise an awkward question: Creating demand and limiting supply — first by rolling out steel-consuming infrastructure projects and second by taking more aggressive action against steel imports — will inevitably raise domestic steel prices.

This would be good for domestic U.S. steel producers, in as much as construction companies could pass along the costs infrastructure projects, it would incur only marginally higher input costs as a result paid the taxpayer. But it would inevitably also have a wider impact on the steel market, rising prices for steel consumers and higher prices, in turn, for the wider population buying automobiles, refrigerators and other products manufactured with any significant steel content.

How We Got Here

The U.S. steel industry has suffered grievously at the hands of cheap imports. Steel dumped by producing countries with a massive overhang of spare capacity and hidden subsidies such as China have depressed prices and pushed many major producers such as U.S. Steel into loss-making positions that resulted in downsizing and the loss of jobs. Read more

In much the same way as President-elect Donald Trump conducted his election campaign, he has kept himself very much in the headlines in the interim period until he takes charge as president in January.

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Trump won by promising infrastructure investment and that he’d protect American manufacturing jobs. What’s that mean for American steel? The two were seen by many as mutually supportive. Read more

There has been a long running debate about the loss of American manufacturing jobs over the last decade. Blame for job losses is largely laid at the door of globalization, specifically China.

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The rhetoric was ramped up in the recent presidential election campaign when both candidates came out firmly against more globalization but Donald Trump in particular, strongly criticized China for stealing American jobs and vowed to return those jobs to the U.S., has placed the issue even more sharply under the spotlight.

AdobeStock_ruiponche_gllobalization_550_1201216

Is globalization really the culprit for moving jobs from the U.S. to elsewhere? Or is it merely automation and efficiency? Source: Adobe Stock/Ruiponche.

Certainly, jobs have been lost because of offshoring, but recent research suggests the extent may have been overestimated. Michael Hicks, a professor of economics at Ball State University in Muncie, Indiana, is quoted in a Financial Times article saying he could show that just 13% of the estimated 5.6 million job losses from U.S. manufacturing during 2000-10 were caused by international trade, while the rest came from that holy grail of economic progress, rising productivity!

Why Are Jobs Moving?

True, the effects have been disproportionate. Some industries have been hit hard, some hardly at all. Labor-intensive sectors relying on lower pay grades were hit much harder by international trade, Professor Hicks believes. About 40% of the job losses in the furniture industry and 45% in clothing were caused by shifts in trade, he estimated. Low wages in Asia were undoubtedly the main draw but labor costs in China have been rising rapidly of late and even China is now losing jobs to places like Vietnam and Bangladesh. Read more

Zinc, lead and tin all hit multiyear highs this week and the Organization of Petroleum Exporting Countries finally agreed on a production — with its own members and Russia — to cut back production so oil prices are up, too.

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We were already in a metals and commodities bull market before the beginning of the week but it’s now more like a bull stampede. They’re even running in India. Lead Forecasting Analyst Raul de Frutos notes that this bull market is particularly unusual because it coincides with a strong U.S. dollar. Since commodities are valued in dollars it’s odd that they’re both up — and rising — at the same time.

MetalMiner co-founder and editor-at-large Stuart Burns also chimed in with vexing information, noting that tin is up while there seems to be abundant to robust supply of the stuff in the Earth’s crust with stable nations and reliable companies set to mine it.

Bulls stampeding in a Madrid sculpture

Don’t get stuck under these guys in the rush to get into this market. Source: Adobe Stock/Kyrien.

So, supply and demand aren’t fueling tin’s rise and that’s likely true for other metals as well. “New money,” as they say, is flowing into metal markets as investors are excited about Chinese construction demand and the prospect of a still nebulous $1 trillion infrastructure plan here in the U.S. China is, once again, driving the demand boat as the U.S. consumes only about 8% of commodities worldwide and the People’s Republic consumes the most. Read more

A massive stockpile of 500,000 metric tons of aluminum has been trucked out of the Mexican city of San José Iturbide and shipped to a remote port in Vietnam, according to shipping records and people familiar with the matter.

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The Wall Street Journal reports that the stockpile is believed to be related to or entirely the product of Chinese aluminum producer China Zhongwang. As a result of moving the massive stockpile, Vietnam has become a major importer of aluminum extrusions this year.

Preliminary Steel Exports Down

Based on preliminary Census Bureau data, the American Iron and Steel Institute reported that the U.S. imported a total of 2,682,000 net tons of steel in October, including 2,225,000 nt of finished steel (down 3.4% and up 4.7%, respectively, vs. September final data).

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On the year-to-date (YTD), through 10 months of 2016, total and finished steel imports are 27,486,000 and 22,017,000 nt, down 19% and 19.8%, respectively, vs. the same period in 2015. Annualized total and finished steel imports in 2016 would be 33.0 and 26.4 million nt, down 15% and 16.1%, respectively, vs. 2015. Finished steel import market share was an estimated 26% in October and is estimated at 25% on the year.

The Organization of the Petroleum Exporting Countries was trying this morning to rescue a deal to limit oil output as tensions grew among the producer group and non-OPEC member Russia, with top exporter Saudi Arabia saying markets would rebalance even without an agreement.

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OPEC experts started a meeting in Vienna at 0900 GMT and were due to make recommendations to their ministers on how exactly the organization and its member-states should reduce production when it meets on Nov. 30.

Meanwhile, the Algerian and Venezuelan oil ministers were to travel to Moscow on Monday and Tuesday in a final attempt to persuade Russia to take part in cuts instead of merely freezing output, which has reached new highs in the past year.

Steel Futures Surge on Upbeat Chinese Demand

Chinese steel futures jumped over 6% to the highest in 31 months on Monday, as investors raised bets that strong property and infrastructure investment will sustain demand in the world’s top consumer, spurring a similar rally in iron ore and zinc.

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The red-hot rally in steel is bound to push iron ore above $80 a metric ton for the first time since October 2014, having already lifted zinc to a nine-year high.

It’s not the first time, but the United States of America and Europe seem to be heading in opposite directions.

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In this case, it’s their currencies that are going opposite directions. The U.S. dollar’s rise and the euro’s fall are being driven by policies and perceptions of what those policies mean for growth and prosperity next year. The big questions for firms with business interests in both camps is does this mean we could see parity between the dollar and euro next year?

Source Analysis UK Ltd

Source: Analysis UK Ltd.

The euro was last at parity with the dollar in late 2002, but the first half of the decade saw expectations for strong growth in Europe after the financial crisis followed by a flight to safety that maintained a relatively strong euro relative to other currencies.

How the US Dollar Got its Groove Back

While the recovery of the U.S. economy has been somewhat unspectacular, it has at least been steady and heading in the right direction for the last few years. Europe, on the other hand, has been plagued with banking fears, political unrest and slow if not stagnant growth. Read more

The Commerce Department has placed countervailing duty investigation of imports of finished carbon steel flanges from India.

Free Download: The November 2016 MMI Report

A countervailable subsidy is financial assistance from foreign governments that benefits the production of goods from foreign companies and is limited to specific enterprises or industries, or is contingent either upon export performance or upon the use of domestic goods over imported goods.

Commerce calculated preliminary subsidy rates of 2.76% and 3.66% for mandatory respondents Norma (India) Ltd., its three cross-owned affiliates, and RN Gupta & Company Limited, respectively. Commerce established a preliminary subsidy rate of 3.21% for all other producers/exporters in India.

Industry Groups Still Challenging EPA Mercury Rule

The U.S. Environmental Protection Agency‘s additional, court-ordered justification of its rule limiting mercury and other toxic emissions from coal-fired power plants fails to show how the rule’s benefits outweigh its compliance costs, states and industry groups fighting the revamped rule told the D.C. Circuit on Friday.

What a possible infrastructure plan from President-elect Donald Trump might look like started to emerge this week. It involves public-private partnerships with the private dollars promised in exchange for tax credits and like much of what our soon-to-be-president does it’s yuuuuge at an estimated $1 trillion.

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The markets — including metals — responded favorably. Even the U.S. dollar and metals prices abandoned their usual inverse correlation as both increased. The Dow Jones Industrial Average hit its highest level since 2011, even.

Are aluminum slabs welded together really "deep-processed extrusions?"

Are aluminum stockpiles related to China Zhongwang?

While we were celebrating what we think is certain deregulation and a better business environment to come here in the U.S., our own government was doing some regulating of its own. The Commerce Department is still investigating China Zhongwang for allegedly selling Aluminum 5050 alloy products that make no sense just to avoid anti-dumping and countervailing duties orders.

A Simple Mistake? Or a Sophisticated Aluminum Scam?

China Zhongwang Spokeswoman Harriet Lau said the company only provided the product, which the company doesn’t normally sell, because their U.S. distributor requested it and that they made and shipped very little of it. The customer is always right, right? Wrong.

Now China Zhongwang’s proposed acquisition of U.S. aluminum company Aleris — a company that would love to be acquired by a multinational rather than an investor looking to make a quick buck on a turnaround — is in doubt.

Hey, Remember that Transpacific Trade Partnership?

Further cementing how difficult free trade between countries with disparate economic systems can be, the Trans-Pacific Partnership between the U.S. and 12 countries is dead for the short term and maybe permanently. China wasn’t a signatory to TPP but now that the U.S. and its allies are out of the way, the People’s Republic is stepping into the vacuum to try to woo the former Asian suitor nations to a new pact with China while leaving out the U.S., Canada, Australia and others.

Free Download: The November 2016 MMI Report

So, what could have been U.S.-style intellectual property and trading rules could very much be Chinese-style economics if a different deal is reached. Is this the price of anti-globalization?

The energy minister for top Organization of Petroleum Exporting Countries member-state Saudi Arabia said on Thursday on Saudi state-run television that he was optimistic about OPEC’s deal to limit oil output and mentioned the lower end of a previously agreed production target, helping spur a rally in the price of crude.

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The cartel, at a meeting in Algeria in September, made a preliminary deal to limit oil output. Its details are still being worked out.

SolarCity Shareholders Approve Tesla Merger

Shareholders of Tesla Motors Inc. and SolarCity Corp. approved Tesla’s $2.1 billion all-stock offer to merge and create one company headed by Elon Musk that would sell emissions-free cars and rooftop solar panels that power them.

“Your faith will be rewarded,” Mr. Musk told Tesla investors on Thursday after the company announced shareholders overwhelmingly approved the deal.

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Tesla announced that the merger was approved by 85% of Tesla shareholders, excluding Mr. Musk and other affiliated shareholders. SolarCity didn’t disclose the percentage of its shareholders voting.