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

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Before the hearing, executives from Scepter, Inc., Novelis North America, Hydro 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 China cannot meet its carbon reduction commitments without both eliminating energy subsidies and curtailing outdated, carbon-intensive production in the aluminum industry.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.

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“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:

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.“

The Philippines shut down 20 more mines recently, further curtailing nickel exports to China. There’s a chance a major Brazilian iron ore miner will divest some of its assets.

More Filipino Nickel Mines Shut Down

The Philippines has suspended 20 more mines for environmental violations, most of them nickel, a government official said on Tuesday, bringing to 30 the number of mines shuttered.

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The suspended mines account for 55.5% of nickel ore output in the Philippines based on last year’s production, Environment and Natural Resources Undersecretary Leo Jasareno told a news briefing.

Brazilian Iron Ore Miner Looks to Sell

Cia Siderúrgica Nacional SA is considering selling part of its stake in Congonhas Minérios SA, Brazil’s No. 2 iron ore producer, to China Brazil Xinnenghuan International Investment Co., two people familiar with the deal told Reuters on Monday.

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According to the people, the Chinese mill known as CBSteel is interested in buying about 25 percent of Congonhas directly from CSN. They said CSN, as Brazil’s No. 2 listed flat steelmaker is known, would remain in control of the unit, adding that talks are advancing slowly and may not necessarily result in a deal.

Traders love volatility.

They say that today’s electronic trading platforms play to that desire of investors to make a buck, regardless of the fundamentals, allowing investors to play each twitch up and each slip down at the touch of a button.

Oil Prices: Perception vs. Reality

Indeed, if you can shape the perception of those fundamentals so much the better, and that seems to be what has been happening in the oil market this year. In reality, the world is as awash with oil today just as it was six months ago. As it dawns on the market that nothing much has changed, prices fall and producers make statements like a cutback deal is near, or an output freeze is being discussed — bingo! up goes the market by several dollars a barrel and you can bet producers and investors alike are rubbing their hands in glee.

Then, news comes out reminding us of the reality of the situation: the Environmental Protection Agency reports that gasoline stocks are up 600,000 barrels and distillates like diesel up 4.6 million barrels. The news that refiners are drawing on crude reserves only to process it into unwanted downstream products depresses the markets and prices fall again. Read more

In a previous post about procurement-led inventory finance, we explained how in a zero-sum game, large buying organizations — when engaging directly with suppliers — often deploy forceful if not arbitrary rules around payment terms, delivery terms and even the reduction of inventory levels. These tactics, used to reduce working capital, each bring additional, mostly unnecessary risks and buyers working with sellers as a team could be more effective in assuaging such concerns.

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

New techniques and business practices based on inventory financing tied to broader procurement and supply-chain strategies have started to become more mainstream and they can help your business reduce its exposure to commodity price swings, long production times and other risks in the metals supply chain.

If you’re a large manufacturer, a metals service center or a metal producer, you can take advantage of these techniques and essentially link the buyer, seller and financing institution to lower financing costs to improve business efficiency.

Supply chain financing connects financial transactions to value as it moves through a supply chain. Instead of all parties working to maximize their profits and efficiency individually, supply chain financing links the chain financially, allowing it to work together as a team, maximizing value at each link and speeding products and transactions along. It’s the difference between individual companies working in silos and all of them truly functioning as one unit. Read more

China is importing record numbers of North Korean coal in violation of international sanctions and the shipping industry is still suffering under its worst downturn ever.

China Ignores Sanctions, Imports Record North Korean Coal

It appears that China is interpreting the “people’s well-being” as meaning North Korea should be able to export record amounts of coal in defiance of sanctions against the rogue nuclear-armed state.

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China imported 2.465 million metric tons of coal from North Korea in August, the highest on record, and 61% above what was bought in April, the month sanctions were supposed to take effect.

Shipping Downturn Claims Hanjin

The shipping industry is suffering its deepest downturn ever as trade slows. Around 90% of world trade is transported by sea.

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South Korean container line Hanjin, which filed for receivership on Aug. 31, is the latest casualty in a crisis exacerbated by a glut of ships, many of which were built before the financial crisis when the global economy was healthier. It did, however, gain a reprieve when its ships were allowed to unload cargo that had been sitting around waiting for a resolution.

Whether you’re a regular MetalMiner reader, or have never heard of us before, you’re likely familiar with the outsize role China has played in trading with the Western world — and especially with the United States.

That’s why we’ve taken the opportunity to dive deep on a nuanced issue that’s central to the U.S.-China relationship, now and into the future. Our new project, China vs. the World: Why the Battle for New Trade Status is Such a Huge Deal, explores how China’s approach to global trade over the past several decades has affected American commerce (for better and worse), and how something called “market economy status” could change the rules of the game as we know it.

In the latest move, U.S. Representatives Tim Murphy (R-PA) and Peter J. Visclosky (D-IN), the chairman and vice-chairman of the Congressional Steel Caucus, respectively, introduced a House resolution calling on the current Administration to take action on this very issue. But resolving the issue will likely be a longer battle.

While the mainstream media has taken advantage of reporting presidential hopeful Donald Trump’s numerous references to China and his blunt stance on how he intends to change our relationship with that country, MetalMiner’s journalists and editors set out to unpack the tangible drivers behind these types of general sentiments, with a particular focus on — and for — U.S. manufacturing organizations.

Among the highlights:

• The most comprehensive — yet easily understandable — exploration of what “market economy status” (MES) entails, why China is pushing the U.S. and Europe to grant the country MES, and what that would mean for trade, available today.
• Our explainer video provides a quick ‘101’ on the topic, and an interactive timeline explores how China got from the dawn of Mao to WTO entry to today, step by step.
• Personal video perspectives from key players across several different industries illustrate the China effect on American jobs, workers and approaches to business.

We hope you’ll find this type of project and its presentation refreshing and informative. If you like it, please share it with your networks! We welcome and value your feedback, so please feel free to send us a note at research@metalminer.com.

Thank you for reading,

Taras Berezowsky
Managing Editor

So, will aluminum receive a similar tariff shield as steel has enjoyed in India? The shield refers to a minimum import price (MIP) that is generally imposed on cheap commodities entering India, just like cheap steel from China.

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In the case of aluminum, too, the main “culprit” seems to be China. Yet, the stance of the Indian government vis-à-vis an MIP is still not clear, as various ministries concerned with the development have given divergent opinions. Read more

There appears to be an almost universal expectation that iron ore prices will start to retreat soon, after surging some 62% through April. They have since eased back but are still up 28% on the year.

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

Without doubt, much of iron ore’s gains in 2016 have been driven by strong demand from China, with imports up 9.3% to 669.65 million metric tons in the first eight months of the year from a year ago. But prices in Qingdao lost 5.8% in the seven sessions through Wednesday. That was the longest run of daily declines since March and while steel output remains robust, questions are again being asked how much longer prices can remain north of $55 per mt as yet more supply comes on stream. According to the MetalMiner index, finished steel prices have eased this month.

Iron Ore Output

You would expect the miners to refute this and, sure enough, in a Bloomberg report, Vale SA and Cliffs Natural Resources Inc. said that the impact of the new output won’t be as severe as expected and will see the $50 per mt level holding, but banking analysts are not so sure with Westpac saying last month rising supply will drive prices below last year’s lowest point of $38.30, while Citigroup expects an average of $45/mt next year. Read more

The Commerce Department placed initial anti-dumping tariffs on imports of carbon and alloy steel cut-to-length plate (CTL plate) from Brazil, South Africa, and Turkey late Friday.

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For the purpose of an anti-dumping investigation, dumping occurs when a foreign company sells a product in the U.S. at less than its fair value.

n the Brazil investigation, Commerce preliminarily found that dumping has occurred by mandatory respondents, Companhia Siderurgica Nacional and Usinas Siderurgicas de Minas Gerais SA, at a preliminary dumping margin of 74.52%. The dumping margin for the mandatory respondents was based on adverse facts available (AFA) as a result of their failure to cooperate in the investigation. Commerce assigned a preliminary dumping margin of 74.52% for all other producers/exporters in Brazil. Read more