Articles in Category: Global Trade

More and more Indian companies, including steelmakers such as Tata and Essar Steel, are entering the defense manufacturing sector. Essar Steel, for example, recently announced a game plan to develop steel grades for land and naval defense applications.

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Essar Steel made a low key entry into the sector about five years ago, but it’s now turned bullish on defense because of the increased marketability of its products. Essar’s products include an indigenous armor plate for ballistic protection. Some of its products are innovative while others are simple substitutes for imports for India’s native contractors looking to keep more of their supply chains close to home. The latter have been used in the construction of naval destroyers, offshore patrol vessels and floating docks. Other products are used in the construction of Coast Guard vessels, so also the repair of naval ships.

In land defense, Essar Steel’s products are used in battle tanks, the motor casings of missiles, combat vehicles, and artillery guns. Read more

On its journey of self-reliance, India still needs coal.

Highly dependent on imports for this crucial raw material needed for steel and power generation, India has decided to tackle its coking coal deficit by acquiring a foreign coking coal asset, and washing certain grades of coal to make it fuel-ready.

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Power Minister Piyush Goyal told news agency Press Trust of India that one of the ways the government was contemplating reducing its reliance on imports was to wash certain grades of coal to make available 20 million metric tons of coking coal in the next three to four years for the domestic steel industry.

Not Enough Coal for Steel Production or Power Generation

Chairman and Managing Director of Coal India Ltd. S. Bhattacharya has reiterated that coking coal requirements for the domestic steel industry are still not being met. State-run CIL, the country’s near-monopoly coal producer, is said to be looking at coking coal assets overseas as the country was faced with constraints of commercially viable domestic metallurgical coal reserves, the Minister told Parliament in a statement. CIL is looking to appoint a merchant banker to assist it in acquiring assets overseas. Read more

U.S. M3 grain-oriented electrical steel prices dropped slightly with the M3 index moving from 200 to 197.

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Though U.S. prices dipped slightly, China’s Baosteel announced a price hike for GOES close to $40 per metric ton, according to a recent TEX Report. Although the Chinese have led recent GOES and other steel product price hikes, others have not necessarily followed. Nevertheless, Chinese steel prices set the floor for global steel prices.

GOES MMI

Now that the Trump administration has begun to settle in, market observers have paid close attention to trade actions within the metals industry, particularly the cold-rolled coil circumvention case and most recently a case filed by the Aluminum Association against China involving aluminum foil. Both the domestic steel and aluminum industries have pursued trade cases to address overcapacity concerns.

GOES Prices and NAFTA

GOES markets follow some of these same patterns. Back in 2013, GOES from China accounted for about 10% of total U.S. GOES imports (by tonnage). Clearly, the trade cases filed by the domestic producers at the time limited Chinese imports, but that trade case sought to stop other countries’ imports as much as China’s.

Herein lies a big difference between the GOES case and the aluminum case as well as the prior flat-rolled product steel cases. The GOES trade case did not result in any finding of injury, so no anti-dumping and countervailing duties were assessed. Instead, domestic power equipment manufacturers shifted their global supply chains to source GOES globally and purchase transformer parts and wound cores from NAFTA countries.

Some have speculated that two years ago, the addition of two new harmonized tariff codes for both transformer parts (8504.90.9546) and wound cores (8504.90.9542) would set the stage for future trade cases brought by the lone domestic GOES producer. We think this looks like a “stretch” and, legally, we’re not even sure there is a case to be had as AK Steel currently does not manufacture transformer parts or wound cores.

Import volumes for wound cores have modestly increased, but imports for transformer parts have actually declined:

GOES imports from 2015 to today

GOES imports from 2015 to today. Source: Lisa Reisman/MetalMiner.

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President Trump’s budget proposal this week would cut the federal government to its core if enacted, culling back numerous programs and expediting a historic contraction of the federal workforce, according to economists who spoke to the Washington Post and saw the draft plans.

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This would be the first time the government has executed cuts of this magnitude — and all at once — since the drawdown following World War II, economists and budget analysts told the Post.

Chinese Rebar Jumps

Shanghai rebar steel futures rose nearly 3% on Monday, supported by a pickup in seasonal demand in top consumer China that also lifted Chinese iron ore off of a one-month low.

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But bloated stockpiles of iron ore at China’s ports — holding near their highest in at least 13 years — capped price gains in the steelmaking raw material.

The most-active rebar on the Shanghai Futures Exchange was up 2.7% at 3,496 yuan ($506) a metric ton by the midday break.

U.S. infrastructure was given a near-failing grade of D+ by the American Society of Civil Engineers (ASCE) yesterday, the largest trade association of the civil engineering profession in the U.S. This was the second time in two reports that our national roads, bridges, railways, airports, dams and other infrastructure sites barely avoided the dreaded F.  The criticism could give momentum to President Donald Trump’s vow of a $1 trillion investment to rebuild everything from roads to dams.

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The D+ grade from the American Society of Civil Engineers‘ (ASCE) is unchanged from its last report card in 2013, suggesting that only minor progress had been made in improving public works.

The ASCE estimated in a statement that the United States needed to invest $4.59 trillion by 2025 to bring its infrastructure to an adequate B- grade, a figure about $2 trillion higher than current funding levels.

Chinese Steel Exports Plummet

Chinese steel exports tumbled to a three-year low in February, customs data showed on Wednesday, lower than expectations, as steelmakers in the world’s top producer shifted to meeting rising demand at home.

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Shipments for the month were 5.75 million metric tons, the lowest since February 2014, data from the General Administration of Customs showed. It was down 29.1% from a year ago and down 22.5% from January.

Just a few weeks ago, the future looked bright for the oil price. Back in November, the Organization of Petroleum Exporting Countries and a number of non-OPEC producers agreed to cutbacks intended to reign in surplus global oil stocks and, in so doing, support the oil price.

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Initially, the agreement met with considerable success. Hedge funds and speculative investors went long on oil and the price rose. But, this week several comments and statistical reports coincided to remove some of that optimism and resulted in steep price falls. The West Texas Intermediate benchmark fell under $50 for the first time since December while Brent Crude was also down to $52.41 a barrel, its lowest level since November.

Source: The Financial Times.

According to the Financial Times, Wednesday’s decline came after the Energy Information Administration said inventories of U.S. crude stocks climbed by 8.2 million barrels, far more than analysts expected, as refinery oil purchases declined. If the rise in inventory was solely down to refineries slowing or delaying purchases, the impact would not have been as dramatic but the fear among investors is U.S. shale production is roaring back.

Reshalience Explained

Even Saudi Arabia’s oil minister, Khalid al-Falih, is quoted as saying OPEC’s agreement and the corresponding price increase has helped the U.S. shale market to recover and, perversely, undermined efforts to stabilize crude prices. U.S. shale producers have responded to low crude prices by innovating and cutting costs. Breakeven for many is now $40 a barrel, with some said to be as low as $25. Rig counts have doubled since the Spring of last year and output has continued to rise, contributing to the increase in WTI inventories.

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The oil price faces two major headwinds the FT reports. The first is little or no evidence the global oil market is really coming into balance as signatories to the agreement continue to cheat, and the second is an overhang of speculative length in the futures market. Part of this week’s price falls are said to be due to speculators bailing out of long positions after the realization that the market may not be coming back into balance as hoped late last year.

Where to, Brent?

Where the oil price goes from here is anyone’s guess but with even Saudi Arabia threatening not to renew the cutback agreement in the summer if global inventories do not fall back as expected — if other members of the agreement continue to cheat — the probability is the market overhang could get worse in the second half of the year.

U.S. shale oil producers appear to be enthusiastically ramping up production which will likely add do U.S. oil inventories and further depress the price. The oil price has a level which realistically reflects supply and demand but it’s almost certainly below $50 a barrel in today’s market.

The Aluminum Association, the group that represents the North American aluminum production industry, today filed a trade enforcement action against the People’s Republic of China seeking relief for domestic producers of aluminum foil. This action is part of the industry’s broad trade strategy to address Chinese overcapacity throughout the value chain.

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The Aluminum Association’s Trade Enforcement Working Group filed anti-dumping and countervailing duty petitions alleging that dumped and subsidized imports of aluminum foil from China are causing material injury to the domestic industry.

“Today’s action marks the first time the Aluminum Association has filed unfair trade cases on behalf of its members in its nearly 85-year history,” said Heidi Brock, President & CEO of the Aluminum Association. “This unprecedented action reflects both the intensive injury being suffered by U.S. aluminum foil producers and also our commitment to ensuring that trade laws are enforced to create a level playing field for domestic producers.”

The anti-dumping margins alleged by the domestic industry range from 38% to more than 134% of the value of the imported aluminum foil. The domestic industry’s countervailing duty petition alleges that Chinese producers benefit from 27 separate government subsidy programs.

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The industry group previously said it wanted to avoid filing the trade actions if it could via meetings with its Chinese counterparts but, apparently, there simply was not enough progress in curtailing injurious imports.

German Dominguez

German Dominguez

There’s been a lot of talk about President Trump’s “border tax” lately as it relates to reshoring manufacturing to the U.S. and financing “great, great” border walls, and my colleague Jeff Yoders has done a bang-up job covering the gamut of the Trump administration’s proposed policies in general.

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On our sister site Spend Matters, we tried to get closer to the bottom of the whole south-of-the-border tax issue, which opened up a can of worms — and devolved into golf analogies.

But what does it all mean for U.S and Mexican manufacturers and their future strategies?

Q&A With German Dominguez, Independent Advisor and LatAm Sourcing Expert

We caught up with German Dominguez, an independent sourcing advisor helping U.S. manufacturers to best-cost-country-source direct materials where it is most advantageous in Latin America, mainly within The Pacific Alliance region (Mexico, Colombia, Peru and Chile) — the largest emerging markets economic bloc in Latin America. Read more

The serial entrepreneur is never shy of making bold claims, and recently he announced plans for Space X to fly two private citizens on a mission around the moon by late 2018.

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The journey would take about a week and the astronauts will travel deeper into space than any human has ventured before, the Washington Post reports. Let’s think about this. Space X has never flown people before and in the last two years has had two rockets blow up on the launch pad or in flight. Even more challenging is that the mission would require the untested Falcon Heavy Rocket which has yet to fly and a modified Dragon Capsule which is also, as yet, untested in space.

So far Musk’s Space X has operated unmanned missions in a long-running partnership with NASA, to fly cargo to the International Space Station. The program to run manned missions has been delayed but the company still claims it will happen by the middle of next year.

Most, therefore, expect the end 2018 deadline for the lunar mission to be delayed but SpaceX has earned itself a reputation for setting and mostly achieving ambitious targets. It was the first private company to fly to the ISS and the first ever to land the first stage of a rocket that had lifted its payload into orbit. Along with Boeing, Space X has worked closely with NASA to develop reusable launch systems that not only service the space station but could ultimately go to Mars. Maybe spurred by this pace, the private sector is setting the agenda for space exploration. NASA recently announced that it is considering adding astronauts to the first flight of its Space Launch System rocket and Orion crew capsule the Post reports.

Interestingly, the change of administration in the White House has also had an impact on space exploration. Bob Richards, the chief executive of Moon Express, a private company that plans to land a robotic spacecraft on the moon this year is quoted as saying “With the new administration, regardless of what you think politically, comes a new sense of commercial partnerships which is good for us in the space industry. I feel, as many do, a lunar tide rising. The political environment is catching up with logic. With the moon as an important step for even deeper space exploration.”

As the Trump administration looks for a big win in space exploration, somewhat like Kennedy’s promise to send a man to the moon over 50 years ago, there is a new willingness to commit dollars. Some, particularly outside the U.S., look back on that decade in the 1960’s as America’s greatest hour, when the country achieved something no one else dared or could develop the technology to do.

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Not just for that generation, but in the years that followed it was an inspirational program that developed technologies and advanced science for decades to follow. Maybe it is with one eye on history and a fondness for private enterprise that the new administration is looking at the private sector to again take America to new goals. One man who does not lack the ambition to fulfill such ambition is Elon Musk. We should applaud it.

CME Group and Thomson Reuters will step down from providing the LBMA silver price benchmark auction, the London Bullion Market Association said on Friday, less than three years after they successfully bid to provide the process.

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“In consultation with the LBMA, CME Group and Thomson Reuters have decided to step down from their respective roles in relation to the LBMA Silver Price auction,” the LBMA said in a members update seen by Reuters.

The two will continue to operate and administer the silver auction until a new provider is appointed, the LBMA said. It will launch a new tender to appoint an alternative provider to operate the process “shortly”, it said.

“We would be looking to identify a new provider in the summer, and have the new platform up and running in the autumn,” an LBMA spokesman said.

The two companies launched the LBMA silver price in August 2014 to replace the telephone-based London silver “fix,” which had been in operation for more than a century, with an electronic, auction-based and auditable alternative.

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CME Group provides the electronic auction platform for the benchmark, while Thomson Reuters is responsible for administration and governance. The LBMA owns the intellectual property rights.

Philippines Might Consider Indonesia-Style Ore Export Ban

The Philippines may consider banning exports of raw minerals to encourage domestic processing and boost the value of shipments, an environment official said on Friday, as the government looks to extract more from its mining sector after a crackdown.