Articles in Category: Global Trade

UPDATE: Ruling from Commerce detail on 5050 aluminum extrusions now included in this post.

The Department of Commerce is expected to launch a formal investigation today into whether Chinese steel companies are shipping steel through Vietnam to avoid U.S. import tariffs, a person familiar with the matter told the Wall Street Journal.

Steelmakers Asked for Vietnam Investigation

The decision to investigate follows a complaint in September from U.S. steelmakers, and is an escalation of U.S. efforts to stop a glut of China-made metal from flooding U.S. markets. The inquiry could result in new tariffs on steel imported from China via Vietnam, under rules designed to prevent such a tariff-evading practice, known as circumvention. Read more

Unplanned global oil supply disruptions averaged more than 3.6 million barrels per day in May, the highest monthly level recorded since the U.S. Energy Information Administration started tracking global disruptions in January 2011.

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

From April to May, disruptions grew by 0.8 million bpd as increased outages, largely in Canada, Nigeria, Iraq, and Libya, more than offset reduced outages in Kuwait, Brazil, and Ghana. Six months later, the U.S. is joining the energy disruption party. On Saturday, an explosion and fire in Alabama sent futures surging and traders scrambling to supply the East Coast states with fuel.

EIA Energy Disruptions

Oil supply disruptions as measured by the U.S. Energy Information Administration. Source: EIA.

Colonial Pipeline Co., which carries gasoline and other refined products from Houston to Linden, N.J., was forced Monday to shut its two main pipelines after a crew working near the site of a prior spill hit the line with construction equipment. Read more

As anyone watching and, worse, listening to the U.S. presidential election will attest, global trade is not in favor at present.

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

Nor is this trend just in the U.S. Europe very nearly failed to ratify a free trade deal with unthreatening Canada last month. A deal that had been seven years in the making scraped through after considerable arm wrestling with the minor regional government of Wallonia (a German-speaking region of Belgium) which had been holding it up.

Free Trade’s Have Nots

Voters in developed nations increasingly view themselves as the victims of trade with the developing world and the reaction is to embrace more isolationist policies. Read more

LME week is upon us and one of the stories coming out of London is how reforms to end long lines have distorted the metal’s supply picture. A new European metals trading platform has been launched.

Aluminum’s Fundamental Picture

Reforms to the London Metal Exchange‘s global warehouse network have, as planned, cut the amount of metal trapped in storage, but the unintended consequence is a distorted fundamental picture and more pressure on already tumbling volumes.

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

Since 2013, the LME has implemented measures aimed at reducing queues for aluminum as it leaves warehouses after banks and traders that own them profited from letting long queues build up while charging rent.

New German Metals Trading Platform

A new trading platform for buying and selling of base metals for immediate physical delivery was launched in October by German company Metalprodex GmbH, with the most initial trading liquidity in aluminum and lead, the company’s head said.

Free Download: The October 2016 MMI Report

Newly established Metalprodex is offering an electronic trading platform enabling delivery of physical metal within two days.

The tight oil and natural gas story here in the U.S. is often framed as a struggle between environmentalists who want to keep it — and other fossil fuels such as tight oil — in the ground, and drilling and exploration companies who want to sell it as a home heating and transportation fuel that at least burns cleaner than coal.

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

What’s often left out of the discussion is the advantages gas can provide for plants, factories and other major industrial users that have nothing to do with the light switches in your house or apartment.

Voestalpine's reducing tower

Voestalpine’s 450-foot-high direct reducing tower near Corpus Christi, Texas, takes iron ore pellets and reduces them to 91% iron briquettes. Customers include steel suppliers for BMW and Mercedes-Benz. Source: Jeff Yoders

Austria in Texas

Last week, I toured Austrian specialty steelmaker Voestalpine AG‘s new $1.4 billion, direct-reduction hot-briquetted iron (HBI) production facility near Corpus Christi, Texas. It’s estimated that company’s investment will generate an estimated $600 million over the next decade and the new facility has already added 190 jobs to the local economy.

HBI, or sponge iron is a pre-material used in steel production. The new Texas facility takes iron ore pellets that are roughly 60% iron and reduces them down to HBI that is 91% iron. They use a high-temperature, natural-gas fueled furnace tower, now the tallest building in South Texas at 450 feet, to “reduce” oxygen and other impurities out. Read more

Welcome back to the MetalMiner Week-in-Review! As the week began we marveled at (and questioned) the latest GDP figures from China, as the People’s Republic is chugging along at 6.7% despite a slowdown pretty much everywhere else.

Is it time to exit free trade pacts?

Free trade, what is it good for? Source: Adobe Stock/Argus.

This happened even as we received yet another warning that global steel overcapacity, particularly production in China, must change. This strange dichotomy of demanding that China change while also relying on her for growth to bolster the global economy seemed to haunt our coverage like a particularly effective Halloween ghost this week.

Anti-Dumping Duties for Overproduced Products

There were final tariffs for welded circular steel pipe, some as high as 113%, this week. Then vanadium from South Korea got the same treatment.

Free Download: The October 2016 MMI Report

The world seems more protectionist every day. It’s not just the U.S. The European Union is coming very close to scuttling its long-term trade agreement with Canada, the European and Canadian Comprehensive Economic and Trade Agreement, over the objections of a regional government in the German-speaking Wallonia area in Belgium. Read more

Vanadium from Korea was hit with anti-dumping tariffs and finished steel imports were down in September.

Vanadium Anti-Dumping Tariffs

The Department of Commerce initially placed anti-dumping duties on imports of ferrovanadium from the Republic of Korea ( South Korea) yesterday.

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

Commerce preliminarily found dumping by mandatory respondent, Korvan Ind. Co., Ltd., at a preliminary margin of 4.48%. Additionally, based on the application of adverse facts available, Commerce preliminarily found that dumping has occurred by mandatory respondents, Fortune Metallurgical Group Co., Ltd. and Woojin Ind. Co., Ltd., at 54.69%. Commerce assigned a preliminary dumping margin of 4.48% to all other producers/exporters in Korea. Read more

While there may be much eye-rolling and tutting, observers of Europe’s prevarications over ratification of the CETA, the European and Canadian Comprehensive Economic and Trade Agreement, the reality is the E.U.’s deep divide over the merits of this agreement are but the tip of a much larger iceberg.

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

Within any free trade agreement there are always winners and losers. When the government to government FTAs are negotiated and agreed, a balanced judgement is made as to whether the agreement has overall benefits for each party. But, when the right to pick agreements apart and focus on the detail is given to interest groups down to a granular level of interested parties, there are bound to be those that find one or two issues unacceptable.

How One Region is Killing an EU-Wide Deal

In the case of CETA, Wallonia (a German-speaking region of Belgium) has taken exception to the rights of major corporations to take legal action against governments in the event of subsequent legislation which goes against the terms of the agreement.

They also dislike some of the changes to agricultural trade. Both the E.U. and Canada are making last-ditch attempts to secure agreement prior to the intended signing on Thursday, but after all these years of negotiation even if matters cannot be resolved this week no doubt both sides will continue to try and find solutions.

The problem, though, is not really one of minor vested interests, rather it is a rise in anti-globalization among mature economies who see their standard of living, their manufacturing base and their very future threatened by the rise of global competition.

The Implications for TPP and TTIP

Where CETA leads TTIP — the Transatlantic Trade and Investment Partnership — follows. If Europe does not ratify CETA, TTIP is almost certainly dead in the water. Maybe more significance for U.S. foreign policy is the fortune of TPP, the Trans-Pacific Partnership.

Andrew Hammond an Associate at the Centre for International Affairs, Diplomacy and Strategy at the London School of Economics, writing in the Telegraph, says that TPP represents a major plank of U.S. policy to pivot towards Asia and is said to contain elements to counter the economic threat of a rising China not playing by the same rules.

The Obama administration was seeking, with TPP, to set standards of trade for the 21st century. And not just of trade but investment, data flows and intellectual property. TPP has an important rules-setting component, Hammond said, perhaps more so than any other previous trade deal.

The agreement sets rules to limit subsidies to state-owned companies which could become very important should China eventually join TPP. With the bill languishing in the U.S. Congress and a rising tide of populist sentiment against globalization, championed by both Republican and Democratic candidates, serious questions are being asked about whether TPP will see the light of day.

Free Download: The October 2016 MMI Report

Other parties such as Canada, Australia, Japan, and New Zealand, including Southeast Asian members would collectively account about 40% of world GDP.  Yes, there would be winners and losers on both sides, that is the nature of free trade agreements, the job of government is to judge whether any agreement is on balance in their country’s best interests. The US conceived of and largely set the agenda for TPP. It is not in agreement that is being forced on the US by some foreign power, quite the contrary.  Failure to enact the agreement will have repercussions for US foreign economic policy for decades to come and the failure of CETA, TTIP and TPP would set the tone for a more introverted, protectionist and isolationist World to come.

Chinese GDP is on a roll this year. After turning out less steel in 2015 than the year before, the first time in more than three decades that steel production declined, 2016 is back on the rise.

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

According to Bloomberg, crude steel output totaled 603.78 million metric tons in the first nine months of this year, up 0.4% from a year ago. Demand has been boosted by stimulus measures encouraging investment in the real estate and infrastructure sectors. The September output of 68.17 mmt implies that Chinese apparent steel consumption jumped 9% from a year earlier, RBC capital markets is quoted as saying.

Surging in September

This makes September the strongest month so far in 2016 and October will probably stay high as consumption typically rises in the Fall. Steel mills are being encouraged by a return to profitability and, in spite of protectionist moves from overseas, markets around the world say China’s exports in the first nine months rose 2.4% on a year earlier at 85.1 mmt, the highest ever Bloomberg says.

Nor is this stimulus and debt-fueled binge restricted to steel. Global daily average aluminum production rose to 164,600 mt from 159,800 mt in August, led by a rise in China’s output for the month to 2.75 mmt, the highest in 15 months.

A rally in Shanghai aluminum prices and demand from housing and infrastructure encouraged Chinese smelters to bring back some 1.8 mmt of capacity this year in addition to adding some 2.9 mmt of new capacity. Chinese output is expected to continue to rise, Reuters mentioned in a recent note, and suggested that prices could soften to $1,550 per mt by the end of the year as a result of excess supply. While total global primary aluminum production increased to 4.937 mmt, up 1.2% from the same month last year,  growth continued to be at the expense of western smelters with North American output falling 11%  to 325,000 mt last month.

Markets React to Stimuli

As we have seen in the past, China’s stimulus measures are rather like the sugar rush that comes and goes. Chinese GDP has been boosted or at least stabilized at 6.7% this year on the back of measures introduced by Beijing towards the end of last year.

Free Download: The October 2016 MMI Report

But, like previous stimulus measures, the result is increased debt progressively at lower rates of return and ultimately adding to more of a global overproduction problem. In the short term then, demand for iron ore, coking coal, bauxite and alumina looks set to remain firm at least until the winter slow down begins to bite. Depending on how marked that is we will either see a drop in raw material demand, and hence prices, or a drop in finished steel and aluminum output. Neither scenario being particularly positive for prices.

AISI_kevin_dempsey-testimony_180_102116

Kevin Dempsey, AISI.

MetalMiner Managing Editor Taras Berezowsky recently sat down with Kevin Dempsey, Senior VP for public policy at the American Iron & Steel Institute. Dempsey leads the AISI public policy team representing the interests of North American steel producers and also serves as General Counsel to the Institute. Before that he was a practicing attorney who specialized in trade matters.

During his years on Capitol Hill and in the private sector, Dempsey has worked extensively on international trade negotiations, including the Doha Development Agenda and the original negotiations on the accession of China to the World Trade Organization. He also has considerable experience with U.S. and international law related to subsidies, trade remedies, market access, intellectual property rights, and product standards, as well as U.S. legislative procedures for authorizing and implementing trade agreements.

This is part three of their discussion. Read part one  and pick up where we left off in part two for more on the U.S., China, steel and trade matters.

Kevin Dempsey: I’m not a believer that there’s a WTO case that’s going to solve all of this problem, either, but there may be aspects of the Chinese system that can be addressed. We have successfully brought several WTO cases against China for restrictions they’ve placed on the export of raw materials.

It’s another way in which they subsidize their domestic steel producers. They restricted the export, for instance, of coking coal, which had the effect of lowering the price for their domestic producers and raising the price on the world markets for everybody else. That was a violation of their WTO commitment, so we took them into WTO and we succeeded in that the WTO changed that policy. It’s going to require firing on all cylinders and pressing on all these fronts because it’s not just one single thing in China, it’s this whole range of government policies that are at play.

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

So, we have to press on enforcing our trade laws, getting our allies to enforce their trade laws. Enforce, really,  at every chance we get. If there’s a WTO violation to push China to address that. But then keep pressing through international forums to get China to make the necessary economic reforms domestically and get out of the steel business. Read more