Global Trade

Since 2014, tin prices have done anything but rise and 2015 is turning to be an even worse year for tin producers.

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In 2014 tin fell 15% while in 2015 prices are down 24% on the year to date. As you know, base metals are in a falling market but at least we have seen other metals make unsuccessful attempts to rally. Tin prices haven’t even made an effort to rally for the past 18 months.

3M LME Tin price 1 year out

3-month London Metal Exchange tin price one year out.

This year, tin exporters in Indonesia agreed to limit overseas sales to 4,500 metric tons a month. The limits were scheduled to go into effect in April which would have helped prices return to $23,000. However, as the government is still tightening exports and trading rules to limit shipments to the desired quota, the market constriction has not yet materialized.

According to data from Indonesia’s Ministry of Trade, Indonesia exported 6,300 mt of tin in May, showing that the export limitation just isn’t happening.

Indonesian producers expected prices to rebound to $20,000 in the second half of the year as production was cut back. That scenario seems unlikely as tin is trading at $14,800/mt this month, below producers’ operating costs of more than $16,000/mt.

 

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China is planning to replace business taxes with a revamped value-added tax that may expand three crucial sectors next month, according to a report Thursday from the state-run Economic Information Daily.

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A revamped VAT in China will affect imports and exports.

The program is an extension of a pilot project in Shanghai.

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The Ministry of Finance laid out a reform plan involving real-estate, finance and consumer services that it expects to put into effect in July, the report said. Under the blueprint, an 11% tax will be levied on property and construction companies, while a 6% rate will be imposed on financial and consumer-service industries. China started a trial run of VAT reform in 2012, aiming to reduce double taxation on companies and reduce their overall tax burdens. If fully implemented in the entire country, the VAT reform could lower taxes as a whole by 900 billion CNY ($144 billion). The Ministry is under pressure to increase consumer spending and increase growth.

A VAT taxes the difference between the sale price charged to a customer, minus the cost of materials and other taxable inputs. It is collected at the point of sale, making it, theoretically, easier to collect than individual and corporate taxes.

The Ministry of Finance already recently slashed tariffs by 50% for 14 categories of products including cosmetics, shoes and diapers. The reduction in taxation was intended to get Chinese consumers to spend more and give them access to more international brands and products.

One industry that would not welcome the new structure is China’s financial sector. Scrapping the old VAT and replacing it with the new 11% and 6% rates of taxation would likely raise the net tax burden of Chinese financial firms. There is currently a 5% corporate tax on the sector. A new VAT would also affect firms in the US taking delivery of exported Chinese goods, such as steel. China removed export tax rebates on boron-containing steels to dissuade producers from simply shifting excess production onto export markets back in January, but removing the rebate didn’t really make much of a dent in Chinese exports. It’s still unclear how the new rates would effect exports.

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Since we remain ever vigilant on DumpWatch here at the Metalminer week-in-review, we couldn’t help but be proud of India, US steelmakers and even the EU who grew a spine and said “no mas” to illegal dumping of steel from several nations, principally China. The petitioning nations’ steel industries deserve mad props for standing up for their markets.

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China, you see, threw down the gauntlet two weeks ago when Ministry of Commerce spokesman Shen Danyang said the rise in steel exports from his country was due to higher global demand and was a natural result of Chinese steel products having “strong export competitiveness.”

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“Export competitive” steel rod just looking for a new home somewhere other than China.

Ya Down With OPM (Other People’s Markets)?

Producing steel for overseas consumption to meet demand would be one thing but, as the American Iron & Steel Institute has long protested, China’s steel companies are subsidized at the state and national levels meaning they can often undercut prices in countries they export to by charging cost or even less than the cost of production thanks to the subsidies and what some say is a purposely devalued currency.

So, by calling Chinese steel “export competitive” Danyang was, essentially, saying “bring it” to all of the nations whose shores China exports its rebar, H-beams and coil products to. So, when six producers with major US operations —including Nucor Corp., ArcelorMittal USA, Steel Dynamics and U.S. Steel. — brought an anti-dumping action against China and four other nations this week over corrosion-resistant steel, they were saying, in international trade terms, “oh it’s already been brung, China!”

You Just Got Served

The US case, however, is the least of Chinese steel companies such as Baosteel‘s worries, as final rulings by the Commerce Department and US International Trade Commission aren’t expected until mid-2016. India has fast-tracked its beef with China’s dumpers and is already collecting duties. And they didn’t stop there. Malaysia and South Korea get their own duties when they try to bring that wack, cheap stainless steel into India.

Anti-dumping tariffs ranging between $180 and $316 per metric ton for industrial-grades of stainless steel have been imposed and are being collected at India’s borders as we speak. Not only are the duties already imposed, but N.C. Mathur, president of the Indian Stainless Steel Development Association (ISSDA) also said they were “long overdue.”

Oh, snap.

Right now, India is just collecting duties on hot-rolled coil products from the three countries but Mathur added that they might add cold-rolled tariffs, too, if the dumpers don’t step off. Okay, so he didn’t say “step off,” but the message was very clear as the tariffs were set for five years.

Keepin’ Electrical Steel Real

Prior to this week of anti-dumping actions, the European Union got in on the action by imposing duties of 28.7% from Chinese companies, including Baosteel and Wuhan Iron and Steel Corp over imports of grain-oriented electrical steel (GOES) and of 22.8% from South Korean producers such as POSCO. Even US producers such as AK Steel got hit with 22% tariffs. Once again proving that dumping steel in somebody else’s backyard ain’t nothin’ to mess around wit’.

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MM-IndX_TRENDS_Chart_June-2015_FNLRemember that bounce we saw in most of the metal prices we track last month? Annnnd it’s gone.

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The bearish environment our metals are up against resumed this month as the strong dollar erased nearly all of the gains from May. There were some positive outliers, though, with construction showing growth just as the summer building season begins in the US and the Global Precious Metals MMI was able to hold onto its May gains.

Check out the June MMI Report to get details on the fundamentals of all of the markets we track.















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India’s BJP-led government, more precisely its finance ministry, recently announced that it would impose, for a period of five years, anti-dumping duties ranging between $180 and $316 per metric ton for some industrial-grades of stainless steel imported from China, Malaysia and South Korea. The idea, obviously, is to stop the tide of surging steel imports.

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Subsidized imports, or “dumping,” of steel into a country by producers from other nations can be a vexing issue. Steelmakers from the US, India and Europe have been facing mounting pressure from cheap imports.

US Anti-Dumping Accusations

Earlier this month, for example, MetalMiner reported that six steelmakers with major US operations had filed a trade complaint seeking punitive tariffs for alleged unfair pricing of imported steel from China, India, Italy, South Korea and Taiwan.

The move by the Indian government came after persistent efforts by steel producers to place tariffs on the foreign products for nearly two years. The cheap imports, claimed the Indian steel industry, were damaging its business prospects.

India consumes about one million mt of industrial steel stainless steel, of which, around 40% is imported, largely from China.

Indian Tariffs

The anti-dumping tax obviously was welcomed by domestic steelmakers. N.C. Mathur, president of the Indian Stainless Steel Development Association (ISSDA) was quoted in a news report as saying the move was long overdue. According to Mathur, the duty has been imposed on hot-rolled flat products stainless steel with all its variants originating from China at $309 per mt, $316 per mt from Malaysia and from Korea at $180 per mt. He added the move would give a respite to the domestic industry.

The ISSDA also complained to the government about of abuse of the India–Malaysia comprehensive economic cooperation agreement (CECA). Stainless cold-rolled flat products from Malaysia are being imported to India through a preferential tariff benefit, the association had claimed in its statement. ISSDA demanded that the Ministry of International Trade and Industry, Malaysia, investigate the cold-rolled imports.

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The author, Sohrab Darabshaw, contributes an Indian perspective on industrial metals markets to MetalMiner.

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The imposition of anti-dumping duties by the Indian government should encourage US authorities who have been asked to enforce a similar move. The suit filed by six US companies concerns corrosion-resistant steel, a type of coated steel used in automobile and construction industries. The US has been witnessing an unprecedented flood of imports in the last one year or so.

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As reported by MetalMiner last month, the US steel industry is suffering because the imports hit a record 34% of market share, according to the American Iron and Steel Institute (AISI).

The US slapped duties on imports of steel used in the energy industry from South Korea and five other countries last year but, evidently, those tariffs did not have the desired effect. The AISI in its press briefing last month, asked the US Government to first enforce existing trade laws which would be an immense help to the steel industry.

In India, steel imports had increased to 0.91 million metric tons this May, an increase of 58% as compared to the same month’s figure last year. As compared to April 2015, the import rate was up by about 20 mt, according to a report by the Ministry of Steel.

Many analysts said the Indian stainless steel industry started resembling a sick industry, as cheap imports were leading to a situation of under-utilization of installed capacities. The local industry hopes the anti-dumping duties will send out a clear signal to those sending in cheap imports, and lead to a resurgence in India’s steel sector.

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The author, Sohrab Darabshaw, contributes an Indian perspective on industrial metals markets to MetalMiner.

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A steelworkers’ strike looms in the UK while India expands its lead in the world’s largest big economy title race.

UK Workers Authorize Strike against Tata

Shares of Tata Steel fell over 2% on international exchanges after UK unions notified the company that they planned to strike on June 22 over the firm’s proposal to revise the British Steel Pension Scheme (BSPS).

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In a filing on June 10, the firm said: “Tata Steel UK (indirect subsidiary of Tata Steel Ltd.) has now been notified by the four unions (Community, GMB, Ucatt and Unite) of their plans to take industrial action in dispute over the company’s proposal to revise the BSPS’ contribution and benefits framework.”

Tata Steel employs more than 17,000 workers at four sites across Wales in Port Talbot, Newport, Flintshire and Carmarthenshire, as well as sites around England including Corby, Hartlepool, Rotherham, Scunthorpe, Teesside and York.

India Will Keep Fastest Growing Big Economy Title

India will continue to be the world’s fastest growing big economy and expand its lead on China over the next two years, the World Bank said Wednesday.

The bank expects global growth to slow this year, only to rebound next year. However, it expects India’s gross domestic product expansion to accelerate to 7.4% this calendar year, 7.8% next year and 8.0% in 2017.

Over the same three years, the multilateral lender predicts China’s growth to slow from 7.1% this year to 7.0% in 2016 and 6.9% the year after that.

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Indian exports of aluminum have been on the rise for some time now, since local use has fallen because of the slow economy prior to the election of the new Modi government last May.

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Aluminum from Hindalco’s Mahan unit in Madhya Pradesh province is being shipped to Japan and South Korea, the US, and some African nations, too. A surge in demand for aluminum by the automobile industry and for use in can sheets were said to be the main drivers of the exports.

Strong Export Demand

India was already a net exporter of aluminum even before this surge happened.

India has a smelting capacity of over 36 million metric tons. Last year, its manufacturers produced about 28 million mt of the metal, while this year, analysts say, the figure could go even higher. However, with Chinese imports are affecting domestic consumption. The question on everyone’s mind is – who’s buying?

New capacity is being added in the face of slow growth in domestic demand. Chinese producers are simply undercutting local prices.

Chinese Imports Not Stopping Production

Some Indian aluminum producers remain undaunted by the imports. One such optimistic person is Debu Bhattacharya, managing director, Hindalco, who told the Hindustan Times recently that the phenomenon of Chinese goods coming into the Indian market would be “short-lived.” He said aluminum’s wide applications would ensure a strong outlook for the metal in the coming months.

Hindalco is one of India’s largest aluminum producers, and has posted aluminum sales growth of 14% on the fiscal year that ended in March 2015 due to higher production at its two new smelters — Mahan Aluminum and Aditya Aluminum.

Independent research agency CRU, too, seems to be on the side of Indian producers. It said in a recent forecast that aluminum production would rise throughout this year despite the announced closure of AlcoaBHP Billiton‘s Sao Luis plant in Brazil. The global production estimate for Indian aluminum is high, betting on the two Hindalco smelters and Balco’s Korba all seeing production rise this year.

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The author, Sohrab Darabshaw, contributes an Indian perspective on industrial metals markets to MetalMiner.

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Indian aluminum is flying through some turbulence right now as neighbor China tries to push some of its surplus aluminum into India. At the same time, for some Indian manufacturers of the metal, the Chinese imports are no deterrence to capacity expansion.

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National Aluminium Company (NALCO) is a case in point. Late last week, its board approved a major capacity expansion plan to set up a one million-metric-ton alumina refinery in the Odisha province for about $860 million. NALCO plans to use bauxite from its captive mine in the same province for this project. Executives there say they anticipate a spurt in demand because of the “Make in India” campaign, hence the move.

NALCO’s New Park

NALCO has a committed client, as well. 50,000 mt of aluminum metal to be supplied to Angul Aluminium Park, a joint venture between NALCO and the Industrial Development Corporation of Odisha.

Elsewhere, Sesa Sterlite, a Vedanta Group company, too, contemplates ramping up its aluminum capacity at its Jharsugda plant, again in Odisha. CEO Tom Albanese went on record saying his company was actively thinking of stepping up aluminum production.

For now, Sesa operates the plant at about 25% of installed capacity. What stands in the way is limited electricity supply and s raw materiadl crunch (bauxite), both of which Sesa claims to be working on.

New Hindalco Capacity

Another aluminum major, Hindalco, is in the process of adding 720,000 mt of smelting capacity since April 2013, trying to step into the gaps left by plants shuttered in North America, Australia and Europe.

In fact, Indian exports of aluminum have been on the rise for some time now, since local use had gone down because of the economy grinding to a standstill until the election of the new government in May last.

Aluminum from Hindalco’s Mahan unit in Madhya Pradesh province is being shipped to countries such as Japan and South Korea, the US, and some African nations. A surge in demand for aluminum especially by the automobile industry and for use in cans was the driver, benefiting Hindalco and others.

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The big news in rare earths this week and month was that Molycorp Inc., the sole US-based RE miner and processor, missed a $32.5 million loan payment on Monday, triggering a 30-day grace period that will likely end with either a Molycorp debt restructuring or an outright bankruptcy.

Molycorp released a statement that read, "[the company] has elected to take advantage of the 30-day grace period with respect to the $32.5 million semi-annual interest payment due June 1, 2015 on its 10% senior secured notes due 2020, as provided for in the indenture governing the notes. This election by the company will not trigger any cross-default provisions in other outstanding company debt prior to the end of the grace period and should not affect current operations. As previously disclosed, the company has retained financial and legal advisors to assist the company to restructure its debt."

Meanwhile, MetalMiner's monthly Rare Earths MMI® registered a value of 26 in June, a decrease of 3.7% from 27 in May.

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Already weak prices have fallen further this month as Chinese REs, now free of export taxes, are flooding foreign markets. So what's the relationship between Molycorp and RE prices?

Molycorp's major concentration in the light RE market – the metals that customers have been finding substitutions for over the last three years, causing prices to fall – likely had as much to do with its missed payment as the structure of the company's outstanding debt.

“Bankruptcy for Molycorp is definitely a possibility, but I think at least as many people think it’s more likely to come in the form of restructuring and a temporary shutdown rather than a clean sweep,” said Zachary Schumacher, market research analyst, tech metals & rare earth elements with Asian Metal, Ltd. "As for customers, I think there’s a few timeframes to look at it. In the short term, I think the effect will be mostly small. Molycorp’s play is heavily in the lanthanum and cerium markets with some noticeable market shares in NdFeB and some heavies. At the moment, with the current resource tax changes in effect in China, prices have if anything softened when compared with the prior export tariff system, so pricing is quite affordable."

* Get the complete RE prices every day on the MetalMiner IndX℠

That affordability of light REs has been readily apparent in our MetalMiner IndX ever since we started tracking RE prices in 2012. This is why we were skeptical when 60 Minutes and other national media seemed to discover Chinese dominance of the RE market and Molycorp's Mountain Pass, Calif., mine briefly became a bit of a cause célébre in Washington a few months ago.

That's not to say that conceding rare earth production to other nations would not be bad for national security, as the elements have many defense industry uses as magnets, batteries and other high-tech applications.

"Consumers still want a non-Chinese producer in the market," Schumacher said. "Consumers are definitely wary about the type of price spikes that were seen in 2010-2011. While smuggled material is definitely a significant part of the market, and goes a long way in undercutting any potential oligopoly that either exists or could exist, I think consumers want to feel there’s a profitable non-Chinese producer in the sphere. What they’re willing to do for that still is apparently limited. Outside of a few notable/key joint-venture agreements or off-take agreements, they’re mostly just hoping a current in-development mine comes online in the near future to fill the need."

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