Global Trade

Fresh MetalCrawler news today on the US housing market, China's attempt to restructure its economy and a short-term fix to fund the Highway Trust Fund.

US Housing Starts Disappoint

US housing starts rose far less than expected in March and factory activity in the mid-Atlantic region grew modestly this month, suggesting the economy could struggle to rebound from a soft patch hit in the first quarter.

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There are expectations growth will rebound in the second quarter, but Thursday's lukewarm data suggest the momentum will probably not be strong enough for the Federal Reserve to start raising interest rates before September.

Controlling The Chinese Slowdown

Beijing's efforts to wrestle China's growth model from its investment and credit-fueled addiction to a more sustainable long-term footing, as well as to clean up the environmental damage wrought by decades of industrial pollution, is predictably slowing growth there. The difficult task for Chinese leaders will be to control the slowdown of the world's second-largest economy among calls for stimulus and government help.

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The US ranks 41st in the world in terms of the ease of gaining federal permits to proceed with construction or infrastructure projects, according to the 2014 World Development Indicators‘ Ease of Doing Business Index.

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Philip K. Howard of Common Good, recently discussed with us how permitting, not funding, is the biggest obstacle to renewing and replacing the nation’s crumbling infrastructure.

A Chief Permitting Officer

Senators Rob Portman (R. – Ohio) and Claire McCaskill (D. – Mo.) have introduced a bill that requires the first chief permitting officer for federal agencies. The bill would impact projects that cost more than $25 million and receive federal dollars, which includes most interstate roads and bridges. However, it does not give the new CPO the right to force individual agencies involved with projects to make decisions or move forward on projects in a timely manner.

“It’s a multi-headed federal bureaucracy that we have,” Howard said. “The problem with their bill is the CPO doesn’t have any authority. He can’t lean on one unreasonable agency if it’s holding up a project. There needs to be a dialectic here. If any one of 19 different agencies involved (in the Bayonne Bridge project in New Jersey) decides it’s going to dig in its heels in, there is no alternative but to give in to what they want. That feeds the paralysis. There needs to be a presumptive authority somewhere. There needs to be someone who can cut through that. If that authority is too high-handed that won’t work, either. You want an incentive for everyone to be reasonable and agree to make decisions within a reasonable timeline.”

In countries that rate higher on the Ease of Doing Business Index, interstate road or bridge projects there is a permitting officer or a department designated as the one stop for permitting and review. You can’t ignore it. There is an internal mechanism where agencies inside the permitting process can, essentially, complain if their concerns are being ignored by the overseeing agency and its CPO.

“If the question is the adequacy of environmental review, the decision maker to draw the line on that would be an environmental official,” Howard said. “If it’s a powerline running through several states, it should be the agency responsible for the adequacy of the power grid.”

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India’s dependence on thermal coke from abroad is beginning to raise concern in international circles, though some exporting countries are happy to have the business.

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India sits on mountains of thermal coke, yet mainly due to bureaucracy, it has to depend on imports.

The day, it seems, is not far off when India will topple China as the World’s number one importer, if analysts were to be believed.

Coal, Coal, Everywhere But Nary a Chunk to Mine

The situation is, indeed, grim. It has made Indian Power Minister Piyush Goyal remark at a public platform that it (importing thermal coke) is shameful. The minister told an audience after inaugurating a power project recently near Nagpur in central India that the government plans to almost double the government coal production by 2019-20. He added that importing coking coal, used for making steel, may be a necessity but thermal coal is at a surplus in the country, yet India is still being forced to import it. A Ministry of Coal report estimated coal reserves at about 300 billion metric tons, of which 125 billion mt were in the “proved” category.

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Today in MetalCrawler; the Chinese economy continues to disappoint, gold breaks a key support level and nobody agrees about when copper prices might recover.

Chinese Economy May Be Stimulus-Proof

In many ways China doesn’t really look like an economy growing at even 7%, with exports plunging in March, power generation dropping 3.7%, the biggest fall since 2008, and a host of other indicators pointing to sluggish growth.

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Reuters Clyde Russell writes that increased economic stimulus spending by Beijing may not be able to do much to help the Chinese economy this year.

Gold Falls

Gold slid below $1,200 an ounce on Thursday as the dollar pared losses after upbeat US factory data and demand for physical metal stayed weak, though uncertainty over the timing of a Federal Reserve rate increase underpinned prices.

The dollar index, strength in which tends to weigh on gold, recovered from lows against a basket of currencies after a survey showed factory activity in the mid-Atlantic region accelerated in April.

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The Chinese economy is still posting slow growth and US rare earths producer Molycorp, Inc. signs a major new customer.

Chinese Economy Can’t Get Started

In the first quarter of this year, the Chinese economy grew at its slowest past since the first quarter of 2009, when the global financial crisis was at its height.

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That this slowdown has continued despite the fact that the Chinese government has enacted a number of large-scale economic stimulus programs in recent months reveals that the slowdown is, indeed, gaining momentum. Nearly all sectors of the Chinese economy recorded lower rates of growth in recent months, China may find itself forced to turn back to an economic model that is driven by exports rather than domestic consumption.

Siemens Selects Molycorp

Siemens AG has selected Molycorp, Inc. to supply rare earth materials over the next 10 years from its Mountain Pass, Calif., facility for incorporation into Siemens’ high-efficiency, direct drive wind turbine generators. Molycorp will supply raw rare earth materials to Shin-Etsu Chemical Co., Ltd., which will produce the rare earth magnets Siemens intends to utilize in its wind turbines.

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The nation’s reliance on imported minerals has more than doubled in the past 30 years and manufacturing executives say the lack of domestic exploration has affected their businesses.

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In a recent PricewaterhouseCoopers report published by Minerals Make Life, 78% of high-tech industry CEOs said that their businesses face minerals and metals scarcity. 73% of automotive CEOs and 67% of renewable energy CEOs agreed that their businesses face minerals and materials scarcity.

Though the US is home to more than $6.2 trillion worth of key mineral resources US-based businesses imported more than $42 billion worth of minerals last year to help meet manufacturing needs.

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Construction employment declined by 1,000 in March but is still up by 282,000 compared to March 2014, as the sector’s unemployment rate fell to 9.5%, according to an analysis by the Associated General Contractors of America. Association officials noted that declining demand for residential and public sector projects offset gains in other areas to contribute to the overall month job losses.

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“After 14 months of steady job gains, construction employment suffered in March,” said Ken Simonson, chief economist for the AGC. “Except for multifamily construction, home building remains weak and government officials just can’t seem to find a way to pay for needed repairs to a host of aging facilities.”

Housing/Commercial Construction Shortfall

Construction employment totaled 6.34 million in March, compared to 6.345 million in February and 6.06 million in March 2014, the AGC reported of its analysis of US Census Bureau data. Residential building and specialty trade contractors lost 2,800 jobs (-0.1%) since February but added 136,300 jobs (6%) over 12 months. Results were split in the homes sector, with residential building contractors adding 3,700 jobs for the month while residential specialty trade contractors lost 6,500 jobs compared to February.

Nonresidential contractors—building, specialty trade, and heavy and civil engineering construction firms—hired a net of 1,100 workers for the month and 145,000 (3.8%) since March 2014. As with the residential sector, the nonresidential employment sector varied by segment. The nonresidential and specialty trade contractors and nonresidential building contractors added a combined 5,000 jobs for the month, but heavy and civil engineering contractors—who typically perform public sector projects such as highway construction—lost 3,900 jobs since February.

Non-Existent Investment

The employment figures are consistent with February federal spending data released earlier this month that showed declining investments in residential and public sector construction projects offsetting growing demand for private, nonresidential construction. Simonson noted that the industry’s recovery would continue to suffer if public sector investments continue to decline and the residential market remains weak.

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Oil prices went up today. Tariffs were also placed on durable steel containers in today’s MetalCrawler.

Crude Oil Rising

Crude oil rose today after a forecast that US shale oil output would record its first monthly decline in more than four years and also on tensions in Yemen, where top oil exporter Saudi Arabia is embroiled in a civil war.

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Brent crude was up 32 cents at $58.25 a barrel this morning, while US crude was up 57 cents at $52.48.

The US Energy Information Administration (EIA) said on Monday it expected US shale production to fall by 45,000 barrels per day to 4.98 million bpd in May.

Shale production has helped boost US oil output by more than 4 million bpd since 2010 and has been a key factor behind the collapse in world oil prices over the last year. A collapse in oil prices from above $115 a barrel last June has now begun to hit exploration.

Commerce Places Tariffs on Shipping Containers

The Dept. of Commerce determined that imports of steel shipping containers from China have been sold in the US at dumping margins ranging from 107.19% to 111.22%. Commerce also determined that imports of containers from China have received countervailable subsidies ranging from 17.13% to 28%. The products covered by these investigations are 53-foot domestic dry containers, which are durable, reusable, weatherproof, closed van containers approximately 53 feet in exterior length, designed for the intermodal transportation via container ship, rail or trucking. Wisconsin-based petitioner Stoughton Trailers LLC filed the initial complaint against the Chinese manufacturers.

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Speaking at the agreement signing ceremony featuring India’s seven steel majors in the creation of the new Steel Research and Technology Mission (SRTMI), Indian Steel Minister Narendra Singh Tomar said the joint initiative of steel industry and the government would also help the steel industry to play a major role in creating employment.

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This new industry-led initiative to promote collaborative research programs in India’s steel sector aims to increase investment in research and development in the steel sector from its present level of 0.2-0.3% of turnover progressively towards the international benchmark of 1-2% of turnover.

Public-Private Partnership

The initial approximately $32 million (about Rs 200 crore) investment for SRTMI will come in equal contribution from the Steel Development Fund of the ministry and the participating companies: Steel Authority of India Ltd. (SAIL), Tata Steel, JSW Steel, Jindal Steel and Power Ltd., Rashtriya Ispat Nigam Ltd., the National Mine Development Corporation and MECON Ltd.

SRTMI, as conceptualized by a high-level government task force, will carry out research and development in priority areas of Indian national importance covering best usage of available raw materials and conservation of natural resources, optimum energy conservation coupled with minimum emissions, innovation and in-house development of design, engineering and manufacturing facilities of key steel plant equipment.

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While India’s recent growth has helped propel sales and exports of steel, the federal government here wants to maximize returns by creating a favorable atmosphere for research and development.

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As many as seven steel majors joined hands with the Ministry of Steel on Wednesday to set up a Steel Research and Technology Mission (SRTMI) in the Indian capital of New Delhi. The Steel Authority of India Ltd. (SAIL), Tata Steel, JSW Steel, Jindal Steel and Power Ltd., Rashtriya Ispat Nigam Ltd., the National Mine Development Corporation and MECON Ltd. are the first to join the project that many analysts say marks the start of a new chapter in steel research and development in India.

New Legislation

The government is considering introducing a bill in Parliament in the next session for the creation of an educational institute under the Ministry of Steel, on the pattern of India’s famous Indian Institutes of Technology, where students are able to formally learn and undertake research programs on steel.

The institute may offer graduate, post-graduate, doctoral and research programs. This is line with the recommendations of a ministerial committee instituted in 2014 that recommended such an institute to ensure a stream of knowledge workers for the domestic steel industry.

The planned outcome of these efforts goes beyond the quality of finished steel, too. The initiative is being taken, also, to find innovative uses for steel and create entire new fields of employment for India’s youth.

Investment in Research

Speaking at the signing ceremony involving the seven steel majors in SRTMI, Steel Minister Narendra Singh Tomar said the joint initiative of the steel industry and the government would also help it play a major role in new employment.

This industry-led initiative will promote collaborative research programs in the steel sector and aims to increase investment in research and development in the steel sector from the present level of 0.2-0.3% of turnover, progressively toward the international benchmark of 1-2% turnover.

The initial approximately $32 million (about Rs 200 crore) for the creation of the SRTMI will come in equal contribution from the Steel Development Fund of the Ministry and the participating companies.

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