Articles in Category: Global Trade

The onward march of an “aggressive” China, the world’s biggest supplier and consumer of steel, has virtually come to a halt in recent times due to a variety of reasons, but India’s steel sector has picked up speed, both in steel output and demand.

Two-Month Trial: Metal Buying Outlook

A fresh report by Moody’s Investors Services said demand in India is set to outstrip the region’s average. It said the need for steel in India would outpace the regional average as the country’s GDP growth of around 7.5% in 2016 and 2017 was the highest in Asia.

As reported by MetalMiner, China’s steel production was predicted to contract this year and shrink even further in 2017. Li Xinchuang, Vice-chairman at the China Iron & Steel Association explained that was due to a drop in local demand.

So when the red dragon’s huffing and puffing, what’s added speed to the elephant?

Here’s why:

  • India’s reform and policy support for infrastructure and manufacturing, as well as increasing urbanization is driving steel consumption.
  • The Indian government’s protectionist measures over the last two years like anti-dumping tax are bearing fruit.
  • Recent commissioning of capacities by big producers such as Steel Authority of India Limited, JSW Steel and Tata Steel.

Moody’s said the profitability of Indian steel companies such as Tata would outperform that of regional peers owing to increasing domestic demand and measures like minimum import prices. Read more

Steel production in China, the world’s biggest supplier and consumer, will likely contract this year and shrink further in 2017 as local demand slows, according to Li Xinchuang, a vice chairman at the China Iron & Steel Association.

Two-Month Trial: Metal Buying Outlook

“There will be significant declines in the next three months,” said the influential Li, who’s also dean of the China Metallurgical Industry Planning & Research Institute, in a phone interview with Bloomberg News. “If steel consumption and production are set to decline, then there’ll definitely be less demand for iron ore.”

morningstar_chinese_steel_investment_550_082931

Metals and minerals are actually in a decade-long down cycle. Source: Morningstar/World Bank.

“Our original estimate was for a 3% decline this year,” Li told Bloomberg. “Based on how things have played out this year, I think the decline in output might be less than anticipated but the downtrend remains unchanged. Iron ore should be on a downtrend, not on an uptrend.”

This falls in line with many public statements from Beijing that have said China will get serious about curtailing production in the second half of the year and also reduce stimulus measures to the sprawling Chinese carbon steel industry. Citigroup, UBS Group, Morningstar and others are predicting a fall in steel prices and iron ore, as well, as demand wanes in the world’s largest consumer. This group includes James May of Steel-Insight, a MetalMiner contributor.

Morningstar’s Andrew Lane recently cautioned that steel is one of many metals and minerals in a decade-long decline. The investment research firm also pointed out that China’s excess capacity equates to nearly 4 times actual steel production in the U.S. in 2015, so the resilience of loss-making capacity in China reflects the heavy involvement of local governments eager to support employment, GDP, and tax revenue rather than optimize profitability.

Free Download: The August 2016 MMI Report

Whether Li is right and China actually cuts back in the second half — through mergers, closures or other instruments — the odds against steel prices continuing to increase, globally, are still long.

The U.S. Senate will not vote on the Trans-Pacific Partnership this year and the General Accounting Office found that most companies still can’t source their conflict minerals.

No TPP Vote This Year

Senate Majority Leader Mitch McConnell said on Friday that passage of the Trans-Pacific Partnership will be the next president’s problem, saying that the Senate will not vote on the treaty this year.

Free Download: The August 2016 MMI Report

McConnell’s comment comes despite an Obama administration push to at least attempt a TPP vote during congress’ lame-duck session after the November elections.

GAO Says Conflict Minerals Reporting Still Inaccurate

Less than half of all companies required to track down the source of key minerals potentially central to war-torn parts of Africa have been able to do so, according to a new government study.

Two-Month Trial: Metal Buying Outlook

The Government Accountability Office (GAO) reported on Tuesday that 67% of companies that rely on so-called “conflict minerals” to make products have been unable to determine whether their supply has come from parts of Africa where armed groups profit from their production.

The month of August has seen the Indian government slap anti-dumping duties on the import of a variety of steel products from six countries including China, South Korea, Brazil and Indonesia.

Two-Month Trial: Metal Buying Outlook

In the first week, the import duty was imposed on hot-rolled steel products, while a few days ago, the duty was enforced on certain cold-rolled flat steel products from different countries to protect the domestic industry from cheap imports.

In the first case, anti-dumping duties $474-557 per metric ton were imposed on hot-rolled flat products of alloy or non-alloy steel from China, Japan, South Korea, Russia, Brazil and Indonesia, according to a government notification.

Coiledsteel_585

Imports of coiled steel will be heavily tariffed in India, too. Source: iStock.

The duty will be in force for six months until February 7.

Hot-Rolled Duties

An anti-dumping duty of $474 per ton was imposed on import of hot-rolled flat products of alloy or non-alloy steel of a width up to 2,100 millimeter with a width up to 25 mm from Korea and Japan.

According to an Indian Express report Korean firms affected by this were Hyundai Steel Co. and POSCO. Three Japanese companies — JFE Steel Corp., Nippon Steel and Sumitomo Metal Corp. are also on the list. A similar anti-dumping duty was slapped on imports of similar products from China. Exporters Angang Steel Company Ltd. and Zhangjiagang were among the hardest hit. Imports of the same from Indonesia, Russia and Brazil attracted the $474 per mt duty. Read more

Iron ore prices have done an amazing job of defying gravity, the price has risen 41.7% this year after three straight years of losses according to Australia’s Business Insider.

Two-Month Trial: Metal Buying Outlook

Prices for 62% fines hit $61.75 per dry ton this week and have averaged $53.64 per dry metric ton this year.

Source: Business Insider

Source: Business Insider

The raw material has variously been called the darling of the commodities market and by Citicorp as 2016’s hot commodity but many are now beginning to ask if enough is enough and just how much support there is for current price levels let alone further rises. Read more

In a speech in Tampa, Fla., Wednesday afternoon, Republican Presidential Nominee Donald Trump outlined a seven-point plan to bring millions of jobs to the U.S. that involved labeling China a currency manipulator.

Two-Month Trial: Metal Buying Outlook

He proposed renegotiating unconfirmed trade agreements such as the Trans-Pacific Partnership and told his audience he would pull the U.S. out of the North American Free Trade Agreement. In a first, Trump challenged China for “illegal activities” and vowed to label the country he did real estate business with a currency manipulator.

“I am going to instruct my Treasury Secretary to label China a currency manipulator,” he said. “Any country that devalues their currency in order to take unfair advantage of the United States — and all of its companies who can’t (then) compete —will face tariffs and to stop the cheating.”

Getting Tough With China

Trump also vowed to instruct the office of the U.S. Trade Representative to bring trade cases against China, both in this country and at the World Trade Organization. Read more

The London Metal Exchange and CME Group took action recently to, respectively, cut fees for traders and stop a spoofer.

We’re Sorry: LME Cuts Fees

The London Metal Exchange has cut fees in half for open outcry trades during August as a goodwill gesture after it had to vacate its premises because of structural problems, it said on Monday.

Free Download: The August 2016 MMI Report

Ring trading moved to its disaster recovery site in Chelmsford, east of London, in July after a potential safety issue was discovered in the building that houses its offices in London’s financial district.

CME Suspends Spoofer

CME Group, Inc. suspended a futures trader from its markets for spoofing on Monday, the exchange operator said, the latest regulatory action over the manipulative trading practice.

The company — which owns Comex, the Chicago Mercantile Exchange and other exchanges — barred Andrey Sakharov from trading for 60 days and could extend his ban, according to a disciplinary notice.

On multiple dates starting last month, Sakharov entered electronic orders in CME’s gold and natural gas markets that he did not intend to trade, the disciplinary notice said.

Two-Month Trial: Metal Buying Outlook

The practice of placing bids to buy or offers to sell contracts with the intent to cancel them before execution is known as spoofing and is illegal. It is used to create an illusion of demand in markets, so that spoofers can influence prices to benefit their market positions.

The Office of the U.S. Trade Representative recently sent to Congress a draft Statement of Administration Action for the Trans-Pacific Partnership, a procedural step necessary before a draft implementing bill is sent to Congress.

Two-Month Trial: Metal Buying Outlook

According to the fast-track law, the trade rep must send a draft SAA to Congress at least 30 days before it submits a draft implementing bill, but that does not mean it will be submitted in that timeframe, that’s just merely the minimum before a bill can be sent. The trade rep sent notification August 12th. Read more

The Aluminum Association has not given up on the U.S. reaching a binding bilateral deal with China to reduce aluminum overcapacity, but the group is also holding out the option of pursuing anti-dumping or countervailing duty cases if market conditions fail to improve.

Two-Month Trial: Metal Buying Outlook

The aluminum industry is gearing up for a Sept. 29 International Trade Commission hearing, which would serve as the first step in any future trade defense cases on aluminum. The industry has taken a less aggressive approach than steel in not more pursuing anti-dumping, countervailing duties or World Trade Organization action against China on aluminum, opting instead to try to reach a bilateral or multilateral deal, Aluminum Association Vice President of Policy Chuck Johnson told World Trade Online.

“The issues of overcapacity really came to a head in the middle of last year,” Johnson said. “Prior to that, we had not been active on this issue. We have not, as an association, pursued antidumping and other trade enforcement remedies for our industry as have steel and other industries that have been facing a more endemic and long-term conditions. … But we are not taking anything off the table.”

This is a shift for the association, which represents original aluminum manufacturers throughout North America.

The ITC hearing will look at Chinese trade practices including trade policies, export duties and industry subsidization. The goal, Johnson said, is to get better documentation on China’s industry than has previously been gathered.

Free Download: The August 2016 MMI Report

The ITC is currently collecting information and gathering public comments in preparation for the hearing. The commission is also circulating a questionnaire looking at the competitive conditions affecting the U.S. aluminum industry as a whole.

Another Chinese steelmaker, Bohai Steel Group, has been given a bailout and Japan’s Tokyo Steel Manufacturing has left prices unchanged for three months.

Bohai Bailout

Bohai Steel Group, the indebted state-owned conglomerate, may receive help from a local government bailout fund to restructure its debts, the online financial magazine Caixin said over the weekend.

Two-Month Trial: Metal Buying Outlook

Bohai Steel, which was created in 2010 through the combination of four manufacturers, holds liabilities of $28.9 billion (192 billion CNY) from 105 creditors, alongside assets of nearly CNY 290 billion, Caixin reported.

The Tianjin government plans to create a local asset manager to assist in the debt workout of Bohai Steel, alongside other troubled Tianjin enterprises, the magazine said.

Restructuring of the group represented the biggest since the global financial crisis, Standard & Poor’s analyst Christopher Lee told Reuters in March.

Tokyo Steel Leaves Prices Unchanged

Tokyo Steel Manufacturing, Japan’s top electric arc furnace steelmaker, said on Monday it would keep product prices unchanged for the third month in September, reflecting a slow recovery in its local market.

Free Download: The August 2016 MMI Report

Tokyo Steel’s pricing strategy is closely watched by Asian rivals such as POSCO, Hyundai Steel Co. and Baosteel, which all export to Japan.