Articles in Category: Global Trade

In case you missed it, just before President Trump went on his Asia tour (including a state visit with China’s President Xi Jinping), the U.S. finally went on record in ruling that China is still not a market economy for purposes of determining anti-dumping duties.

To folks inside the Beltway on the front lines of trade policy, this is a big deal.

In fact, it’s China’s single-biggest trade issue, said Tim Brightbill, partner at Wiley Rein LLP in Washington, D.C., in the second episode of our series, “Manufacturing Trade Policy Confidential.”

So what will this mean for the U.S.-China relationship?  What will happen if the U.S. slaps China with even bigger tariffs after the Section 232 investigation is completed? Will China retaliate? How?

Listen to the full episode!

Manufacturing Trade Policy Confidential: Background

With everything that’s been happening on the international trade policy front over the past year, we wanted to give metal buying organizations more insight into the issues they may not be reading or hearing enough about — or at all — in the mainstream B2C media.

What better way to do so than go straight to the source — or sources — and interview some key movers and shakers on the manufacturing and policy fronts? So we’ve started a brand-new series called “Manufacturing Trade Policy Confidential.”

If you’ve visited MetalMiner’s digital pages over the past several months, you’re no stranger to the phrase “Section 232” — shorthand for the U.S. Department of Commerce investigation into whether certain steel imports constitute a national security risk, under the namesake section of the U.S. Trade Expansion Act of 1962.

The outcome of the investigation (findings from which were slated to come down last summer but have been delayed) could have significant effects on upstream and downstream manufacturing organizations, ranging from metal producers to buying organizations – even the mom-and-pops.

But Section 232 is only one small part. Trade circumvention, China’s non-market economy status, domestic uncertainty amidst proposed tax plans and many other issues have pushed us to start this new podcast series.

We’ll be publishing several more interviews in the coming weeks and months – stay tuned!

Listen to more episodes and follow the MetalMiner Podcast on SoundCloud.

President Donald Trump may not have said much, if anything, about China’s steel exports during his recent tour. Both European and U.S. legislators, however, are carrying out investigations into not just simple dumping but more complex and illegal activities, such as shipping via third parties to hide the origin and avoid pre-existing dumping tariffs.

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A Reuters article this week explains how the European Union’s anti-fraud office (OLAF) said it has found Chinese steel was shipped through Vietnam to evade the bloc’s tariffs.

In part, the current case may be a matter of timing.

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This morning in metals news, Tata Steel announces a big investment, Chinese steel shipments have continued to drop and the U.S. International Trade Commission (ITC) will expedite a five-year sunset clause review of carbon and alloy steel standard, line, and pressure (CASSLP) pipe from Germany.

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Tata Steel Makes Big Port Talbot Steel Investment

Tata Steel announced it is investing £30 million in its Port Talbot steelworks, the BBC reported.

According to the report, the Indian firm will install a 500-ton steelmaking vessel at the plant, in addition to other upgrades.

Dropping Chinese Steel Shipments

President Donald Trump kicked off his tour of Asia this week; while North Korea draws much of the headlines, China’s steel industry is also among the list of items in the spotlight.

Bloomberg notes that dropping steel shipments from China, the world’s top steel producer, undercut the Trump administration’s rhetoric calling out China’s excess steel capacity.

“Exports from the country that accounts for half of global production dropped to 4.98 million tons last month, down from September’s 5.14 million, and the lowest since 2014, according to customs figures,” Bloomberg’s report reads. “That’s a far cry from the monthly peak in late 2015, when they exceeded 11 million tons.”

U.S. ITC Expedites Review of CASSLP Pipe From Germany

The U.S. ITC announced Monday that it voted to expedite its five-year sunset review concerning the antidumping duty order on seamless CASSLP pipe from Germany.

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“As a result of the vote, the Commission will conduct an expedited review to determine whether revocation of the order would be likely to lead to continuation or recurrence of material injury within a reasonably foreseeable time,” the ITC release about the vote reads.

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This morning in metals news, China is looking to the World Trade Organization (WTO) to make its case with respect to the ongoing aluminum foil dispute with the U.S., copper and nickel are up, and Kobe Steel executives are deciding whether or not to resign.

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China, the U.S. and the WTO

According to a Reuters report, China has asked the WTO report for consultations regarding the recent U.S. Department of Commerce antidumping decision on Chinese aluminum foil.

China’s Ministry of Commerce submitted the request for supplementary consultations under the WTO dispute resolution mechanism on Nov. 3, according to the report.

Copper, Nickel Rise With EV Optimism

Copper and nickel saw their fortunes rise on Monday, according to Reuters, backed by optimism regarding the electric vehicle market, pollution crackdown in China and global economic strength.

Nickel rose 10% last week to hits its highest price since June 2015.

Kobe Execs Consider Resignation

According to a Reuters report, Kobe Steel executives will decide whether or not to resign following the results of an independent probe into the firm.

Free Download: The October 2017 MMI Report

The firm also plans on releasing an internal report regarding the company’s quality data falsification scandal, which has seen the company’s share price plummet in recent weeks and significantly dented the firm’s credibility in the global market.

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The European Steel Association (Eurofer) had good news about the EU steel sector last week, albeit with a caveat.

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According to a report from Eurofer last week, EU investment in steel and its exports have trended positively.

“Strengthening investment and robust exports are boosting the performance of steel-using sectors in the EU,” the report states. “Steel demand is expected to continue its gradual recovery in 2018.”

The report continues with a caveat.

“However, increasing import pressure in in the second quarter of 2017 signals that foreign supply remains a critical issue for the EU steel sector.”

Steel consumption in the EU dipped slightly in the second quarter compared to the first quarter, according to the report. As a result, EU domestic suppliers suffered. Deliveries by EU domestic suppliers in the second quarter fell 3.5% year-over-year. In addition, third country imports rose by 10% year-over-year.

“The relative balance between growth in domestic and foreign supply seen in the first quarter of 2017 was reversed at the expense of EU steel mills,” said Axel Eggert, director general of Eurofer, in a prepared statement. “Despite a reduction in imports from China and several other countries owing to corrective anti-dumping duties put in place third country import volumes have risen again in the second quarter.”

Overall, however, EU steel consumption for 2017 is forecast to rise 2.3%. The report also notes that steel demand is expected to continue its “gradual recovery” into next year (a recovery dating back to 2014). The report cites the “expected rise in real steel consumption in the EU market and very modest support from the stock cycle” as factors underpinning the ongoing bounceback.

As for steel-using sectors, the report states production activity grew by 3.1% year-on-year. Moreover, first-quarter growth was revised up to 6.3% (compared to the same period in 2016).

“We welcome the healthy performance of relatively steel-intensive sectors,” Eggert said in the release. “These include the automotive and engineering industries, as well as tube manufacturers, over the first half of 2017. Growth in the construction industry was the strongest it has been for many years and clearly reflects improving fundamentals in this important steel-using segment.”

Eurofer expects total output to continue to trend positively throughout the remainder of the year, building on the momentum of the first half. Total output is forecast to rise by 4.2% for the year, according to Eurofer.

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Despite import pressures, the total economic picture for the EU bloc leaves room for optimism. Eurofer’s October outlook forecasts GDP growth of 2.1% this year and 1.9% for 2018.

“The business climate looks set to remain supportive to continued healthy investment growth, whereas private consumption growth is foreseen to slow down somewhat,” the report states. “In combination with stable growth of government consumption, domestic demand will be the major driver of economic growth in the EU.”

McKinsey is a highly respected firm of consultants, but we rarely report findings of its work because the material released into the public domain is often too generalist for our practitioners at the coal face of metal procurement.

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Arguably, a recent article on the future of containerization could be said to be in the same vein, comparing as it does their findings in 1967 to today and weighing up current trends extrapolating how the industry could change over the next 50 years. Fifty years is a long time — many of us won’t even be working anymore by then — but of course changes will happen gradually over the period. Some of the developments they mention are already in process today.

Careful not to make specific predictions, McKinsey suggest the following may happen by 2067. Like cars, the firm sees ships becoming autonomous — a scary thought, but, realistically, if you can do it with trucks and cars, why not boats?

Read more

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Before we head into the weekend, let’s take a look back at the week that was:

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Free Download: The October 2017 MMI Report

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Forecasts made by the World Steel Association in its latest October Outlook paint a relatively rosy picture for the global steel industry — not least because it’s not all about China.

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The outlook predicts that growth outside of China will be 2.6% this year and rise to 3% in 2018. China’s figures, by comparison, have been skewed by a statistical sleight of hand.

A Caveat in the Chinese Numbers

Chinese demand is forecast by the World Steel Association to grow by 12.5% in 2017. A large part of this, however, is due to the closure of Chinese induction furnaces this year, creating demand at state-owned conventional steelmakers. “Illegal” induction furnace numbers didn’t appear in the statistics, but legal, state-owned conventional steelmakers figures do.

A true figure for the underlying growth is more like 3%, with next year expected to be flat as stimulus measures fade and the economy continues to rebalance away from infrastructure investment and toward consumption.

Global Growth

The good news from the report is that the World Steel Association expects growth in both developed and emerging markets to be widely distributed and broadly positive.

The European Union is expected to see demand grow at 2.5% this year, while the other major trading blocs, such as NAFTA, should grow by 4.9% and the ASEAN region by 4.8%. Demand growth in India, the world’s No. 3 producer, continues to outstrip that of Japan, the world’s No. 2 producer. The WSA expects growth in India this year to be 4.3% compared to 2.9% for Japan. A bullish economic Times of India article suggests India is on track to overtake Japan as the world’s second-largest global steel producer within this decade.

Demand growth across the Americas has been solid this year, with the U.S. putting in a substantial 4.8% number and contributing over 69% of the NAFTA region’s 139 million tons.

China remains the world’s largest producer by a country mile — so growth, or not, here in 2018 will likely determine the overall direction of the global steel market.

Much will depend on how demand unfolds as the economy continues to cool and possibly face disruption this winter from enforced environmental closures.

After a Strong 2017 for Steel Producers, What’s Next?

Broadly, though, this year has been a good one for steel producers.

Crude steel capacity utilization jumped 2.8% to 73.5% last month, which is not fantastic but is heading in the right direction.

With the prospects of significant short-term cuts in China’s production capacity this winter, producers elsewhere must be hoping prices can rise in 2018. Much will depend on continued growth and discipline among producers.

Free Download: The October 2017 MMI Report

It will be an interesting next six months.

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Stakeholders of all stripes have weighed in on the North American Free Trade Agreement (NAFTA) this year, as renegotiation talks have now gone through four rounds.

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Negotiators from the U.S., Canada and Mexico most recently met Oct. 11-17 for a fourth round of talks in Arlington, Virginia. Despite progress on some issues, the talks overall seem to have hit an impasse.

As a result, the talks appear set to extend into 2018, which was previously hoped to be avoided, as elections are scheduled next year in each country. Among other things, U.S. proposals of a sunset clause and tighter automotive rules of origin have led to friction, as the U.S. attempts to negotiate what it considers to be a more beneficial deal while Canada and Mexico hope to preserve the deal (while also modernizing it for the 21st century).

According to a trilateral statement released by the Office of the United States Trade Representative, the negotiating parties made some progress on a few issues.

“Building on the progress made in prior rounds, the United States, Canada, and Mexico have now substantively completed discussions in the Chapter on Competition,” the statement reads.

“Additionally, negotiators made progress in several other negotiating groups, including customs and trade facilitation, digital trade, good regulatory practices, and certain sectoral annexes.”

However, it’s clear the parties are still far apart on a number of other issues.

In Oct. 17 remarks, Ildefonso Guajardo Villarreal, Mexico’s economy secretary, cautioned that negotiations must yield a “win-win-win” result, and that none of the parties want to end the process “empty-handed.”

“Working together, we can find the necessary balances to achieve a NAFTA consistent with the reality of our economies and societies,” he said.

While a number of groups — namely, U.S. workers associations — have petitioned the Trump administration to point out the negative impacts of NAFTA, others have worked to tout the agreement’s positive impacts.

Auto associations are among the latest to petition the administration in that latter capacity.

According to a Reuters report, major automakers, suppliers and auto dealers are launching a coalition to convince President Trump not to withdraw from the trade agreement (a threat the president has made on more than one occasion this year).

According to the report, auto trade associations representing General Motors, Toyota Motor Corp, Volkswagen AG, Hyundai Motor Co and Ford Motor Co, among other major automakers, on Tuesday launched the “Driving American Jobs” coalition, which includes an advertising campaign that aims to showcase the positive impacts of NAFTA on the automotive sector and the American workforce.

“American automakers are driving the revival of American manufacturing,” said Governor Matt Blunt, President of the American Automotive Policy Council (AAPC), in a prepared statement. “When you examine the data there’s no question that NAFTA has helped advance the global competitiveness of the U.S. auto industry sector. Now we have an opportunity to strengthen North America as a manufacturing powerhouse with a modern NAFTA that maintains the features that are working and makes improvements to benefit American workers and jobs. We look forward to working with the coalition, the Trump administration, members of Congress and all stakeholders to ensure American autos remain competitive in our global economy.”

The effort includes a website, www.drivingamericanjobs.com, which touts the trade agreement’s benefits to the sector and the American workforce, including a section of “American worker stories.”

“The American worker is in the middle of the greatest manufacturing comeback of all time,” the website’s homepage reads. “We’re winning with NAFTA. Tell Washington: Don’t change the game in the middle of a comeback.”

The effort comes on the heels of an Oct. 10 letter, undersigned by 310 local and state chambers of commerce, addressed to President Trump.

“We look forward to working closely with you and your Administration to grow the economy and create jobs through free and fair trade,” the letter concludes. “To help facilitate that growth, we urge you to support America’s workers, farmers, ranchers, and businesses of all sizes by protecting and preserving the deep economic ties and benefits the United States continues to enjoy under NAFTA.”

In a release from the U.S. Chamber of Commerce, U.S. Chamber President and CEO Thomas J. Donohue underscored the aforementioned sentiment.

“We’ve reached a critical moment, and the Chamber has had no choice but to ring the alarm bells,” Donohue said. “Let me be forceful and direct. There are several poison pill proposals still on the table that could doom the entire deal.

“The U.S. business community will stand up for an important agreement that makes North America stronger and more prosperous.”

Free Download: The October 2017 MMI Report

A fifth round of renegotiation talks is scheduled for Nov. 17-21 in Mexico City.

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This afternoon in metals news, renegotiation efforts focused on the North American Free Trade Agreement (NAFTA) appear to be at a standstill, Chile’s state copper commission boosts its 2018 copper forecast and a European agency advises plane manufacturers to suspended their use of products from embattled Japanese steelmaker Kobe Steel.

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NAFTA Deadlock

The fourth round of renegotiation talks regarding the 23-year-old NAFTA concluded yesterday, but the U.S., Mexico and Canada appear to be no closer to a consensus.

According to Bloomberg, initial hopes for a quick resolution have fizzled, as talks will now be extended into 2018 (which was previously hoped to be avoided, given the scheduled elections in each country next year).

The next round of talks is scheduled for Nov. 17-21 in Mexico.

Cochilco Forecasts Copper at Nearly $3/Pound in 2018

Chile’s state copper commission, Cochilco, on Wednesday put out a forecast for 2018 including a prediction of the average global copper price hitting $2.95/pound.

The new forecast is up significantly from Cochilco’s mid-year estimate of $2.68/pound. Greater Chinese demand is cited as a supporter of the global price.

Kobe Steel Saga Continues

The fallout from the Kobe Steel data falsification scandal continues, as the European Aviation Safety Agency (EASA) advised plane manufacturers to suspend their use of products from the firm, the third-largest steelmaker in Japan, according to CNN Money.

According to the report, EASA advised those manufacturers to find alternative suppliers and conduct a “thorough review of their supply chain.”

Free Download: The October 2017 MMI Report

A number of global heavyweights use Kobe Steel products, including GM, Boeing, Ford and Toyota, according to the report.