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This evening in metals news, President Donald Trump indicated yesterday Section 232 might be going on the backburner, data show a sharp rise in steel imports during June and a new report predicts the 3-D printing metals market will be worth $12 billion by 2028.

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Taking 5 on Section 232

The Trump administration’s Section 232 investigations are being watched closely by metals producers around the world — but Section 232 is just one thing on the administration’s plate.

On Tuesday, President Trump told the Wall Street Journal that when it comes to enacting measures against steel imports (like tariffs or quotas), “we don’t want to do it right now.”

In April, the administration launched a national-security probe of steel and aluminum imports. Under Section 232 of the Trade Expansion Act, Secretary of Commerce Wilbur Ross has 270 days to present the president with a report and recommendations.

With health care currently in the spotlight — in addition to Trump’s announcement today regarding banning transgender individuals from serving in the military — Section 232 has seemingly lost a little steam. Previously, the steel investigation results were expected to be announced by the end of June.

Steel prices performed well in the weeks following the April announcement, but that initial optimism has fizzled. Trump’s noncommittal comment regarding the investigation sent several domestic steel companies downward yesterday, according to MarketWatch, including AK Steel, Nucor and ArcelorMittal.

Steel Imports Rise in June

U.S. imports of steel rose sharply for the month of June, according to U.S. Census Bureau data cited by the American Iron and Steel Institute (AISI) on Wednesday.

The country imported approximately 3.87 million net tons in June. In the year to date, 19.64 million tons have been imported, up 25% from the same time frame in 2016. Finished steel imports amounted to 15 million tons in the year to date, up 17.2% compared with the same time period in 2016.

Per the report, products which saw significant increases from May to June included: reinforcing bars (84%), sheets and strip all other metallic coatings (61%), heavy structural shapes (40%), cold-rolled sheets (32%), hot-rolled sheets (29%), mechanical tubing (25%), oil country goods (19%), hot-rolled bars (12%) and plates in coils (11%).

Notable year to date increases versus the same period in 2016 include: oil country goods (248%), cold rolled sheets (41%), sheets and strip all other metallic coatings (36%), standard pipe (35%),  line pipe (32%), mechanical tubing (29%), hot-rolled bars (28%), sheets and strip hot-dipped galvanized (26%), tin plate (17%) and wire rods (10%).

3-D Printing Worth $12B by 2028: Report

Momentum continues to build for 3-D printing technology, so much so that a recent report predicts the growing sector will be worth $12 billion in just over a decade from now.

Free Download: The July 2017 MMI Report

The report, from IDTechEx Research, states that “at this stage it would be a mistake to underestimate the enormous potential for innovation in 3D printing of metals.”

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The U.S. steel industry upped its production levels during the week ending July 22.

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In total, U.S. raw steel manufacturers produced 1.77 million net tons for that week, according to weekly data from the American Iron and Steel Institute (AISI). Compared with the previous week (ending July 15), that figure makes for a 0.6% increase.

Meanwhile, compared with the same week in 2016, production was up 6.4%.

Production is also up when comparing the year to date (until July 22) with the same time frame last year. Thus far in 2017, U.S. steel amounts to 50.3 million net tons, a 2.5% increase from the 49.1 million net tons in 2016.

The weekly AISI report also breaks down production by region. Once again, the Great Lakes region came in first with 677,000 net tons, followed by the Southern region (637,000), Northeast (214,000), Midwest (166,000) and Western (79,000).

Of course, the elephant in the room continues to be the Section 232 investigation into steel imports.  The results of the Department of Commerce probe were expected to be announced by the end of June, but that has long come and gone.

Most have speculated that the administration will opt to slap tariffs on steel imports in an effort to combat excess capacity from China.

It remains to be seen when the administration will announce anything on Section 232. However, if tariffs come to pass, other steel-producing nations will likely have something to say about it. As reported yesterday, Kosei Shindo, chairman of the Japan Iron and Steel Federation, warned of the opening of a Pandora’s box — meaning, nations might retaliate by placing tariffs on other products.

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That is on top of comments made in June by European Commission Trade Commissioner Cecilia Malmstrom regarding the EU’s intent to retaliate in the face of U.S. steel tariffs.

According to preliminary data from the U.S. Census Bureau, the U.S. imported 3.1 million tons of steel, with a monetary value of about $2.6 billion. The preliminary May data show Canada leading the way in steel exports to the U.S. (514,488 tons). Mexico shipped 266,544 tons, while Germany (135,279), Turkey (139,728), Korea (298,527) and Brazil (513,889) featured near the top of the list. China, meanwhile, exported 73,594 tons, according to the preliminary May data.

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This morning in metals news, the chairman of the Japan Iron and Steel Federation warns that U.S. tariffs on its steel imports could lead to retaliation, copper hit its five-month high and aluminum producer Norsk Hydro expects 2017 to present a balanced aluminum market.

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Section 232 Tariffs, If Instituted, Could Lead to Blowback

The world continues to wait for the Trump administration’s announcement regarding the conclusion of its Section 232 investigation into steel imports. Most, however, predict that tariffs will be the remedy President Donald Trump chooses, a course of action which EU Trade Commissioner Cecilia Malmstrom in recent weeks said would lead to retaliatory measures from the EU.

Japan has also joined the fray in warning of retaliation if tariffs are slapped onto steel coming into the U.S.

In a report from Industry Week, Kosei Shindo, chairman of the Japan Iron and Steel Federation, told reporters Monday that other countries could respond with protectionism on products other than steel, opening Pandora’s box.

Copper Riding High

Copper continues its strong run, hitting a five-month high Tuesday, Reuters reported.

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Positive news on the Chinese economy and a weak U.S. dollar contributed to the rise for copper.

Earlier today, our Stuart Burns wrote about copper’s big year to date.

A Balanced Market

Norsk Hydro CEO and President Svein Richard Brandtzaeg said he expects a “largely balanced” global aluminum market this year.

“We see a global primary aluminium deficit in the quarter. This is driven by increasing deficit outside China. For the full year, we are maintaining our 4-6 percent annual aluminium demand growth outlook for 2017 and expect a largely balanced, global aluminium market,” Brandtzæg said in the aluminum producer’s second-quarter results announcement.

Hydro, which earlier this month announced the acquisition of Sapa, reported second-quarter earnings of NOK 2,930 million.

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This morning in metals news, a team of researchers has developed a magnesium alloy that is billed to be at least 1.5 times stronger than aluminum sheet metal, copper is up and one analyst writes that China should not be the primary focus of the U.S. steel industry.

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A New Metal

Aluminum is renowned for its many qualities, including its strength, light weight and durability.

Now, scientists have developed a new magnesium alloy that appears to be even stronger than aluminum sheet metal.

According to a phys.org report, a team at NIMS and Nagaoka University of Technology has developed a high-strength magnesium sheet metal that “has excellent formability comparable to that of the aluminum sheet metal currently used in body panels of some automobiles.”

According to the report, the new magnesium alloy is lighter than aluminum and composed of common metals, making it a low-cost material.

Copper Gets a Boost

Copper rose Monday on news of supply disruptions and a weak dollar, according to Reuters.

The metal crossed the $6,000 dollar mark while the U.S. dollar approached 13-month lows.

Elsewhere, halting of mine operations also pushed prices up. In Chile, talks last week fizzled between union workers and management at the Zaldivar copper mine.

According to the report, the government-mediated talks will continue into this week.

China’s Not the Problem?

Ever since the Trump administration announced Section 232 investigations into steel and aluminum imports, China has been the primary focus. Chinese excess capacity, the administration and many in the U.S. aluminum and steel industries argue, has driven prices down worldwide and negatively impacted U.S. primary producers.

Clyde Russell, however, writing for Reuters, argues that China isn’t the U.S.’s biggest obstacle when it comes to strengthening its domestic steel industry.

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Russell points to statistics showing China’s relatively small U.S. market share, which even lags behind fellow Asian countries Japan, South Korea and India. In May, China was the 10th-largest supplier of steel products to the U.S., Russell writes.

Russell argues that rather than looking at China, the U.S. should focus on fellow North American Free Trade Agreement (NAFTA) partners Canada and Mexico, which exported significantly more steel in May to the U.S. than did China.

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Before we dive into the weekend, let’s take a look back at the week in metals news:

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• Our Stuart Burns started out the week with a piece on confirmation bias and how those in the media and metal-buying communities can sometimes let bias affect their interpretation of data.
• What’s the diagnosis for the ailing U.K. steel industry? According to Burns, it’s a product of a lack of government support and global oversupply. A recent report showed that the U.K. steel industry has declined in monetary output value by 30% from 1990 to 2013.
• In case you missed it, our July MMI report has long been in the books. You can download it here.
• What did the recent G20 summit in Germany mean for India? Our Sohrab Darabshaw touched on the subject this week.
• What’s up with oil prices? Unsurprisingly, as with the metal markets, prices are so low because there is just so much of the stuff out there. Burns dug deeper into oil price trends in a piece earlier this week.
• What’s a Section 332? In short, it’s a fact-finding investigation by the United States International Trade Commission, which recently conducted a large-scale look into the competitive factors affecting the U.S. aluminum industry.
• Another big story, the ongoing debate regarding a potential renegotiation of NAFTA, got an update this week when it was announced that the U.S., Canada and Mexico will come together for talks beginning Aug. 16.

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It didn’t take long for President Donald Trump to extricate the U.S. from one trade deal, the Trans-Pacific Partnership. Now, the Trump administration is looking to make good on a promise to revamp the North American Free Trade Agreement (NAFTA), the 23-year-old trilateral trade agreement with Canada and Mexico.

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On Wedesday, U.S. Trade Representative Robert Lighthizer announced the first round of negotiation talks will be held Aug. 16-20 in Washington, D.C.

A 90-day consultation period with Congress and the public kicked off May 18. Late last month, the Office of the USTR held public hearings over three days regarding NAFTA, welcoming comments from lawmakers, businesses and other stakeholders. Some U.S. industry sectors agreed NAFTA has been largely successful, but that the agreement forged in 1994 needs modernizing tweaks.

Lighthizer also announced John Melle, the assistant U.S. trade representative for the Western Hemisphere, will serve as the chief negotiator during the NAFTA talks. Melle has worked for the Office of the USTR since 1988.

The USTR also released its trade objectives for the negotiations on Monday. Perhaps not surprisingly, the primary goal for the Trump administration is a reduction of trade deficits with Mexico and Canada.

“President Trump continues to fulfill his promise to renegotiate NAFTA to get a much better deal for all Americans,” Lighthizer said in the prepared statement released Monday. “Too many Americans have been hurt by closed factories, exported jobs, and broken political promises. Under President Trump’s leadership, USTR will negotiate a fair deal. We will seek to address America’s persistent trade imbalances, break down trade barriers, and give Americans new opportunities to grow their exports. President Trump is reclaiming American prosperity and making our country great again.”

In 2016, the U.S. had a $64 billion trade deficit with Mexico and an $11 billion deficit with Canada. In 1994, when NAFTA went into effect, the U.S. had a $1.3 billion trade surplus with Mexico.

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According to a recently released study from the Boston Consulting Group (BCG), a border tax or the U.S. exiting the agreement could negatively impact U.S. automotive manufacturers. The study argues that a 15% border tax would cost U.S. automakers and suppliers $22 billion a year and a 20% tariff on Mexican imports would drive up production costs per vehicle by $650 on average.

Whatever happens, though, Mexico and Canada clearly would like to get the ball rolling.

Reuters reported today that diplomats from the U.S.’s NAFTA partners are hoping to reach a deal quickly to put an end to uncertainty in the business community regarding the trade deal’s future.

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Although oil and gas remain Iran’s most important exports by far, one beneficiary of the relaxation in trade embargoes has been the metals industry.

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According to an analysis by the Ministry of Industries, Mining and Trade, reported in the Financial Tribune, the data show growth in the production of crude steel, finished steel products, iron ore, coal concentrate and sheet glass in the last Iranian financial year running March 2016 to March 2017 compared to the year before, showing a significant uptick in output (much of it for export).

Coal concentrate saw the greatest increase with the rise of 10.6%, from 1.113 million tons in March 2015-16 to 1.232 million tons last year. Crude steel output had the second-largest gain, rising from 16.538 million tons to over 18 million tons (a 9% increase).

Iran holds the world’s 10^th-largest reserves of iron ore. Despite dominance by Australia and Brazil, Iran still managed a 4.2% increase to 31.711 million tons, helping lift production of steel products 1.4% to 17.681 million tons.

These sound like modest increases for a country recently facing lower barriers to trade, but that may be because the benefits have yet to percolate through to the wider economy.

In the meantime, it is direct exports that have benefited the most. The Financial Tribune reported Iran’s total mineral products shipments last year registered a 17% and 38% increase in value and volume, respectively, year-on-year.

Source: Trading Economics

From a value perspective, it is difficult to make a judgement year-on-year for total exports because some 82% by value is oil and gas, for which prices have been highly volatile.

Even so, with a depressed oil price, Iran’s exports are heading back above their historical long-term trend of some $20 trillion, as the above graph from Trading Economics shows. The oil-price-induced spike of 2006-10 was an anomaly not seen before or since.

Economically, Iran would benefit enormously from a full and unfettered return to the international markets, but that is not going to happen while the autocratic mullahs remain in control. Liberal parties are dissuaded from the political process and many opposition politicians remain in jail. As in so many authoritarian regimes, those in power live well while the clear majority fail to enjoy the standard of living they could achieve based on their high standards of education and young, dynamic population.

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Even so, the country’s economic situation is trending positively. Foreign firms are showing greater confidence in returning to the Iranian market after years of sanctions.

The Trump administration’s Section 232 investigations have been getting all the headlines — but let’s not forget about Section 332.

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Earlier this month, the House Ways and Means Committee released the United States International Trade Commission’s (USITC) Section 332 investigation into the competitive factors affecting the U.S. aluminum industry. (A Section 332 entails a fact-finding investigation “on any matter involving tariffs or international trade, including conditions of competition between U.S. and foreign industries.”)

The lengthy report, which checks in at just over 600 pages, details the major competitive forces at play in the global aluminum market and how those forces impact the U.S. aluminum industry. Unlike its Section 232 counterpart, the 332 report — which focuses on 2011-2015 — predates the Trump administration. The Ways and Means Committee requested the report from the USITC in February 2016.

The report offers a sweeping, macroscopic view of the U.S. aluminum industry and the global picture, too. Like the Department of Commerce’s 232 probe, China figured prominently in the findings of the USITC survey.

Among the key points in the report is China’s role as the principal driver of the aluminum market during the time frame assessed (2011-2015). During that time, China’s production skyrocketed, so  much so that it became the world’s largest aluminum producer and consumer, and ranked second behind the U.S. in secondary unwrought production.

Source: Compiled by USITC staff from CRU Group.

Aluminum associations from the U.S., Canada and the European Union praised the USITC report. In a joint release Monday, the Aluminum Association of the United States, the Aluminium Association of Canada and European Aluminium all praised the report for touching on the industry’s biggest buzzword today: oversupply.

“The study details the government-sponsored rise of Chinese aluminum production in the global market and the effect of Chinese oversupply on global prices, which fell roughly 30 percent during 2011–15,” the joint release said. “Chinese government intervention in the form of programs and subsidized loans for electricity has played a significant role in China’s aluminum expansion.”

The release also reiterated the associations’ desire to work with the Chinese government to reach a “negotiated agreement” that would “result in measurable and consequent reductions in Chinese aluminum capacity and/or growth.”

Among other findings, the USITC report noted government intervention is high worldwide  (and not just from China).

The study also found the chief determinant of competitiveness for primary aluminum producers to be electricity costs, while for secondary and wrought producers the determinants were reliable scrap supplies and proximity to end markets.

Unsurprisingly, however, the study also found that China proved to be the exception to the aforementioned expectations for competitiveness.

“Despite having a fairly new aluminum industry, relatively high electricity costs in many regions, and a less developed consumer economy than many other countries where the industry is important, China is the world’s leading aluminum producer,” the report states.

While the aluminum associations of the U.S., Canada and Europe submitted a joint statement in support of the report’s findings, the U.S. industry might have more at stake than anyone. Per the report, “U.S. primary production capacity shrank more than in any other large producing country.”

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It might be a while before the Section 232 aluminum probe comes to a conclusion and policy recommendations are drafted. Whatever happens, it will be interesting to watch the dynamic between primary and downstream producers, who approach this debate with very different business needs. Similarly, the CMI request is just one of its kind — there will surely be others. How will the administration deal with these requests? Will it allow industry sub-groups, like the beverage lobby, to carve out exceptions?

Or, will the hypothetical trade response include a blanket measure against all Chinese products, regardless of type?

That remains to be seen. What is still certain, however, is that many in the U.S. aluminum industry are looking for help from Section 232.

Whether they’ll get it also remains to be seen.

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Despite U.S. oil stocks falling 7.6 million barrels, the biggest drop since September, a recent Financial Times article reports, quoting U.S. Energy Information Administration data, that the oil price is struggling to get back to $48 per barrel, let alone the heady heights above $50 it achieved in May.

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U.S. refineries are running flat out to meet summer demand, drawing down on U.S. stocks — but still, the price is not responding.

Meanwhile U.S. exports are booming. Rather than being constrained by OPEC cuts, global production is rising. Ironically, even Saudi Arabia is pumping above its target, reporting to the cartel that last month it raised output to 10.7 millions barrels per day, a 190,000 b/d increase on the previous month and 12,000 b/d above its own target.

The Kingdom claims it needed to increase output to meet peak electricity-generating demand experienced during the summer months, but the Saudi increase contributed to total OPEC overproduction of 393,500 b/d from last month, according to the Financial Times.

Source: Financial Times

Iraq, Nigeria and Libya are all pumping more oil than at any time this year and Iran is close to its own year’s highest output, too.

In addition, Canadian oil sands production is rising, Production is predicted to be higher still next year as new projects come on-stream (despite the low prices), making many projects marginal or even loss-making, debts must be repaid and oil sands producers are hanging in there hoping for firmer prices.

News south of the border is not encouraging, though. U.S. tight or shale oil production has continued to rise this year, although at a more gradual rate than seen over the last 12 months. Nevertheless, shale oil producers have become adept at squeezing profits out of production, even at sub-$50 per barrel prices, and show no signs of backing off at current levels.

Long-position holders are hoping OPEC may take further action to curb supplies, but members are sticking to their mantra that they expect stocks to decrease and, therefore, prices to rise, as the current restrictions bite.

But as the Financial Times notes, OPEC’s own monthly report indicates the group still faces an uphill struggle to balance output under the terms of its supply deal, what with cheating and non-OPEC production.

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A balanced oil market seems a distant dream for producers.

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This morning in metals news, the EU is planning to impose heavy duties on steel from several countries, copper is down on gains by the U.S. dollar and June was a good month for U.S. service center  shipments of steel and aluminum.

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EU Gets Defensive on Steel

In the world of trade measures, most eyes are on the U.S.’s Section 232 investigations into steel and aluminum imports. However, the U.S. is certainly not the only entity looking to protect its products.

The European Union plans to impose heavy duties on hot-rolled coil steel from Russia, Ukraine, Iran and Brazil, a measure to counter what it sees as unfairly low prices, Reuters reported Wednesday.

According to documents seen by Reuters, the EU plans on imposing duties of up to 33%. Just last month, the EU imposed duties of 35.9% on Chinese steel, according to the report.

Dollar Up, Copper Down

Copper had a strong start to the week, hitting its highest price since early May, but that optimism has started to temper.

Prices of the metals trended downward Wednesday after the U.S. dollar rose, Reuters reported.

The metal struggled to hold onto gains above $6,000, even with good news regarding Chinese demand, Danske Bank analyst Jens Pedersen told Reuters.

Steel, Aluminum Shipments Up in June

U.S. steel shipments were up in June, according to a Metals Service Center Institute report released Tuesday.

Shipments in June 2017 increased by 1.1% from June 2016. In addition, steel product inventories decreased 4.9% from June a year ago.

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Aluminum shipments were also up compared with the same month last year. Shipments of aluminum products increased by 10.3% from the same month in 2016. Inventories of aluminum products increased 0.2% from June a year ago.