Articles in Category: Global Trade

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This morning in metals news, Indian steel company JSW Steel Ltd. could partner with a Japanese firm to acquire distressed Indian companies, steel import permit applications fell 12.3% in the U.S. last month and Chinese aluminum capacity cuts are sending prices up.

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Steel Tycoon Sajjan Jindal Open to Partnership with JFE

A deal might be in the works between Indian and Japanese companies.

Bloomberg reported Sajjan Jindal and his JSW Steel Ltd. would be open to investment from the Japanese firm JFE Holdings Inc., per JSW Joint Managing Director Seshagiri Rao. According to the report, JSW is looking to acquire distressed companies in India.

With plants in southern and western India, JSW is looking to expand into the eastern half of the country.

Steel Imports Permit Applications Fall in July

According to the Commerce Department’s most recent Steel Import Monitoring and Analysis (SIMA) data, steel import permit applications fell 12.3% in July compared with the previous month.

According to a release from the American Iron and Steel Institute (AISI), in July the largest finished steel import permit applications for offshore countries were for: South Korea (333,000 net tons, down 14% from June preliminary), Turkey (211,000 net tons, down 36%), Japan (149,000 net tons, up 20%), Germany (144,000 net tons, up 24%) and Taiwan (136,000 net tons, down 17%).

Through the first seven months of 2017, the largest offshore suppliers were South Korea (2,261,000 net tons, down 5% from the same period in 2016), Turkey (1,681,000 net tons, up 11%) and Japan (935,000 net tons, down 12%).

Chinese Capacity Cuts Lead to Rising Aluminum Prices

The longevity of the positive effects of China’s capacity cuts has been debated here and elsewhere. In some cases, capacity cuts have simply given way to new capacity elsewhere, effectively negating the initial cuts’ support of aluminum prices.

For now, however, the most recent round of aluminum capacity cuts in China has been good news for the metal’s price, which has risen in recent days.

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According to Reuters, China is “forcing the suspension of aluminum plants that have not obtained proper permits to build or expand, or that have not met strict environmental standards.”

According to Reuters, shares of Aluminium Corp of China rose 47 percent since the start of July. Shares in Shenzhen-listed Yunnan Aluminium rose even more, by a whopping 55 percent.

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Talk of tariffs stemming from the Trump administration’s Section 232 investigations of steel and aluminum imports has seemingly softened over the last couple of weeks, but the overall trade dynamic between the to countries remains tense.

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First, President Trump told the Wall Street Journal last week that “we don’t want to do it at this moment” in reference to trade actions on steel imports resulting from the administration’s Section 232 investigation.

Section 232 of the Trade Expansion Act of 1962 gives the Secretary of Commerce authority to conduct comprehensive investigations to determine the effects of imports of any article on national security. The investigations were announced open in April. By law, the investigation must be concluded, including a submitted report, within 270 days of its opening.

More recently, a shift toward a negotiated agreement seems to be gaining favor. According to Inside U.S. Trade ($), Secretary of Commerce Wilbur Ross suggested “voluntary” agreements, according to House Ways & Means Committee members who met with Ross on July 27.

However, in terms of getting any additional clarity on what the administration plans to do, the committee members left the July 27 briefing without much of that.

“I don’t think that there was a lot of clarification,” Richard Neal (D-MA) told Inside U.S. Trade.
The deadlines for the Section 232 investigations are well down the road (not until January), but, until then, talk is likely to continue about what the administration will or won’t do, in addition to what other relevant parties could do in retaliation.
In similar news, the administration and many in the U.S. steel industry have pointed to China’s excess capacity as the major problem for the domestic industry, leading to suggestions of tariffs or quotas targeting China (but also affecting other steel-producing countries).
Talk of trade remedies against China, however, hasn’t just been limited to steel and aluminum.
Bloomberg reported earlier today that the Trump administration could go after China for perceived intellectual property violations.
According to the Bloomberg report, the administration is considering invoking another article — Section 301 of the Trade Act of 1974.
In essence, Section 301 is the mechanism by which the U.S. can respond to countries in violation of trade agreements or engaging in unfair trade practices. The move would further increase tensions between the U.S. and China, particularly in light of Trump’s admonishments of China for not doing enough to rein in North Korea.

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This morning in metals news, President Donald Trump might be close to a decision on how to deal with what are considered unfair Chinese trade policies, environmentally friendly aluminum produced by hydro-powered smelters is coming at a hefty price tag and aluminum got a positive boost Wednesday that might prove short-lived.

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Trump Could be Close to Decision on China Trade

According to a Reuters report, a Trump administration official said President Trump is close to a decision on how to respond to Chinese trade practices he considers unfair.

While the results of the Section 232 investigations into steel and aluminum imports have yet to be announced, Reuters reports Trump might ask U.S. Trade Representative Robert Lighthizer to initiate a Section 301 investigation of Chinese trade practices. A Section 301 investigation offers the “authority to enforce trade agreements, resolve trade disputes, and open foreign markets to U.S. goods and services.”

Section 301 was most recently used this past December by the Obama administration in the long-running dispute over the EU’s ban on U.S. beef, which dates back to 1989.

‘Green’ Aluminum to Cost a Lot of Green

Hydro-powered aluminum smelters producing so-called “green” aluminum are charging quite a bit for their product, according to a Reuters report.

Why? It’s partly because industrial consumers are under pressure to reduce their carbon footprints, so demand is high.

Big names like Norway’s Norsk Hydro, U.S.-based Alcoa, Russia’s Rusal and London-listed Rio Tinto all view this green wave as good news, Reuters reports.

Will more and more companies get on board with aluminum produced by more environmentally friendly processes? It’s safe to say that demand will likely only continue to grow in this sector (and for greener products and processes, generally).

Aluminum Gets a Boost, But It Might Not Last

Continuing with the aluminum thread, the metal got a boost Wednesday on news of expected capacity cuts, Reuters reported.

According to Reuters, the aluminum price moved up because of expectations of Chinese capacity cuts. However, as has been mentioned here before, the aluminum momentum might not last, as the capacity cuts might just end up being wiped out by new capacity.

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For example, Hongqiao Group plans to shut more than 2 million tons a year of outdated smelter capacity, Reuters reported — but after new investments, capacity will likely remain around current levels.

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You would think that a stiffening of Washington’s backbone when it comes to Russia would be welcomed by Europe. After all, it was Germany’s Angela Markel that has led the tough stand taken against Moscow following the Russian-sponsored uprising in eastern Ukraine and annexation of Crimea.

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But on the contrary, cross-party support in the U.S. House of Representatives led to a 419 to 3 vote in favor of new financial sanctions against Russia this week, a move that has faced fierce criticism from Bonn and considerable debate about the wider implications.

The EU probably does not care about the inclusion of North Korea in the proposed sanctions, although it has taken a distinctly different and more tolerant line on Iran (the third regime included in the action).

But it is Russia that is really raising the hackles in Bonn according to Carnegie Europe, a Brussels-based think tank.

Impact on Europe

A post on the site reports the action could not only severely impact many European companies who have already invested heavily in projects, particularly in the oil and gas sector, but that it could also precipitate a political divide among Europe’s partners. Seen in the context of this development, President Donald Trump’s focus on Poland during his recent visit to the continent for the G-20 summit takes on a more sinister slant — at least, that is the view many Europeans are taking.

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This morning in metals news, copper hits a two-year high, economic signals in July for China were a bit of a mixed bag and the London Metal Exchange continues a balancing act between tradition and change.

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Copper Reaches Highest Point in 2 Years

It’s been a big year for copper.

Copper reached a two-year peak on Monday, partially a result of solid manufacturing data in China, Reuters reported.

LME copper reached $6,431 per ton, its highest since May 2015.

Construction Up in China

Speaking of China, July saw a dip in factory growth but a surge in construction, Reuters reported.

China’s Purchasing Managers’ Index (PMI) remained above 50, however, as the Chinese government spent money on construction, fueling demand for building materials.

The Chinese steel industry, for example, had its strongest month of growth since April 2016.

Changing Times at the LME

Matthew Chamberlain became the boss of the world-famous London Metal Exchange at age 34.

A lot has changed for the LME, which was founded in 1877.

The exchange was sold to HKEX in 2012, and is currently engaging in efforts to bring back volumes, The Guardian reports.

The so-called “ring” where LME traders do their work is governed by a set of long-standing rules, like the prohibition on chewing gum. According to the report, Chamberlain says those rules aren’t likely to change.

However, he also acknowledges that the LME needs to be prepared to deal with changing demands — for instance, for cobalt and lithium to be used in electric car batteries.

Free Download: The July 2017 MMI Report

Felipe Peroni and Ana Paula Camargo of MetalBulletin spoke July 19 during a webinar about the Brazilian steel market — particularly, the slab market and hot-rolled coil (HRC).

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Brazil is the largest steel exporter in South America, with increasing production this year. Brazil exports primarily to the U.S. and Mexico, with Mexico serving as the second-largest steel producer in South America. According to preliminary U.S. Census Bureau for June 2017, the U.S. imported 590,473 metric tons of steel from Brazil, up significantly from the 259,285 metric tons imported in June 2016.

Source: TradingEconomics

Macroeconomics in Brazil

Brazil’s political crisis resulted in the impeachment of President Dilma Rousseff at the end of August 2016, which negatively impacted the economy and reduced investment activity in Brazil.

The lack of investments and spending have negatively impacted steel demand.

Although many expect demand to improve in the next few years, the Brazilian economy has not yet rebounded.  The recovery has taken longer than expected.

Source: MetalMiner analysis of MetalBulletin data

Brazilian GDP from construction has decreased since 2013. As construction activity has shown weaknesses, steel long products demand remains weak, as well.

Source: TradingEconomics

Even Brazilian auto sales remain in a downtrend since 2013 (when they last peaked).

Positive auto sector activity would positively impact flat steel market demand. Auto sales have increased by 22% this month. We’d expect to see more robust demand for hot-dip galvanized (HDG) and cold-rolled coil (CRC) steel.

Source: TradingEconomics

Brazilian Steel Drivers

In terms of domestic Brazilian steel prices, China is the main driver of the steel industry.

Both Chinese CRC and HRC prices have increased since April of this year. Considering a long-term perspective, the uptrend started in February 2016. Chinese steel prices, like they do in the U.S., also drive other domestic steel markets, including Brazil’s.

The latest increase in Chinese prices gave upward price momentum to Brazilian steel prices, together with the recovery of the steel industry. Brazilian mills increased margins to remain profitable.

Source: MetalMiner data

Iron ore prices also support the steel price uptrend. An increase in raw materials commonly goes along with an increase in steel prices, as production costs are higher. Oil and coking coal prices have also increased during July, adding price support.

Even though the Brazilian steel industry is recovering from its previous downtrend, it does not yet appear anywhere on the list of the top steel producers around the world. According to the Top Steelmakers 2017 edition published by MetalBulletin, the top Brazilian mill took 20th place.

What This Means For Industrial Buying Organizations

Even if Brazil is not currently a top producer of steel, the country currently exports steel to the U.S. If prices increase in Brazil, we expect U.S. buying organizations to source elsewhere.

In fact, buying organizations have reported to MetalMiner that prices for steel in Italy and Spain are some of the lowest in the world.

Free Download: The July 2017 MMI Report

Moreover, rising Brazilian steel prices point toward a general uptrend. Specific price dynamics will depend on the specific form of steel.

Further analysis and industrial buying strategies can be found in the Monthly Outlook Report.

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This morning in metals news, a recent report predicts the precious metal catalysts market will reach $19.4 billion by 2022, Reliance Steel and Aluminum Co. posted strong second-quarter numbers and   China’s Ministry of Commerce says it is willing to work with the U.S. on global aluminum market issues.

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Precious Metal Catalysts Market to Grow to $19.4B

Precious metal catalysts will prove to be especially precious on the market in the near future, according to a report from Research and Markets.

The report indicates the market will grow from $14.37 billion this year to $19.41 billion by 2022, at a compound annual growth rate (CAGR) of 6.19%.

Why is this metal sector set to become even more precious? Advances in automobile technology and pharmaceutical applications will see a rise in demand for this subset of metals, according to the research report.

“The newly developed emission standards demand additional improvements in catalyst technologies to successfully remove toxic substances from car exhausts, which will, in turn, drive the precious metal catalysts market growth through the automobile sector,” the report states.

A Good Q2 for Reliance

Reliance Steel and Aluminum Co. — the largest metals service center operator in North America,  headquartered in Los Angeles — posted strong numbers for this year’s second quarter.

According to a report on the Nasdaq website, the company reported a bottom line of $103.1 million, ($1.40 per share), compared with $99.5 million, or $1.36 per share, for Q2 of 2016.

The company’s revenue total also rose in Q2 by 12.7% to $2.48 billion, up from $2.20 billion last year.

China Signals Willingness to Work on Aluminum Market Issues

Ever since announcing Section 232 investigations of steel and aluminum, the Trump administration and the U.S. Department of Commerce have made it clear that Chinese excess capacity is the primary focus (notwithstanding the fact that Chinese steel and aluminum represent relatively small portions of U.S. imports).

On the heels of the U.S. International Trade Commission’s (USITC) Section 332 report on competitive factors affecting U.S. aluminum, China’s Ministry of Commerce suggested a global approach to tackling problems within the aluminum market, Reuters reported.

According to the Reuters report, Ministry of Commerce spokesman Gao Feng did not agree with the assessment that the USITC report accused China of “sponsoring” its aluminum industry.

Free Download: The July 2017 MMI Report

The results of the aluminum investigation will likely not be coming for some time, as the steel report is expected to come first. However, June came and went without a steel 232 announcement. Plus, if President Donald Trump’s comments earlier this week are any indication, steel trade policy doesn’t seem to be a top priority at the moment, particularly as the health care debate continues to heat up.

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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.

Free Download: The July 2017 MMI Report

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.

Free Download: The July 2017 MMI Report

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.