Articles in Category: Imports

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It’s been five months and a day since President Donald Trump signed a memorandum calling for Secretary of Commerce Wilbur Ross to prioritize the Section 232 investigation that would assess whether steel imports posed a national security risk.

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Many expected an announcement of the investigation’s findings in June or July, but it never came.

As the delay drags on, the U.S. steel industry has expressed its desire for the Trump administration to act vis-a-vis the 232 probe.

The United Steelworkers (USW) union was the latest group to urge the administration to act.

“The time to act is now, and workers are telling politicians their first-hand stories of the devastation in the industry and the critical importance of providing relief,” USW International President Leo W. Gerard said in a prepared statement.

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This afternoon in metals news, steel imports are up 21.4% through the first eight months of the year, a report considers whether copper’s run will last and China has agreed to loan Guinea $20 billion in exchange for concessions on the country’s bauxite reserves.

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Steel Imports Up 21.4% This Year

The American Iron and Steel Institute (AISI) released steel import data earlier this week showing that total steel imports have risen 21.4% through the first eight months of this year compared with the same time frame in 2016.

According to the report, steel import permit applications in August totaled 3,572,000 net tons (NT).

The largest finished steel import permit applications for offshore countries in August were for: South Korea (418,000 NT, up 24% from July preliminary), Germany (141,000 NT, down 5%), Turkey (132,000 NT, down 48%), Taiwan (115,000 NT, down 4%) and Japan (107,000 NT, down 22%).  Through the first eight months of 2017, the largest offshore suppliers were South Korea (2,683,000 NT, down 1% from the same period in 2016), Turkey (1,855,000 NT, up 9%) and Japan (1,044,000 NT, down 18%).

Can Copper Keep Up the Pace?

Copper has been on a tear, earlier this week hitting a three-year high.

But can it last? Is the metal due for a market correction?

A report on nasdaq.com speculated about the future of the metal.

“While copper has lately been enjoying a stellar run, analysts are skeptical about the sustainability of the recent price rally,” the report states. “Many believe that prices of the metal will come under pressure as the market remains adequately supplied and demand is not strong enough.”

China Makes Deal on West African Nation’s Aluminum Ore

On Wednesday, China agreed to loan Guinea $20 billion over 20 years in exchange for concessions on the country’s bauxite reserves, Reuters reported.

Guinea is Africa’s leading bauxite producer.

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According to Guinean Mines Minister Abdoulaye Magassouba, the revenues generated from the mines would be used to pay for infrastructure in the country.

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Before you get into your planned Labor Day festivities, let’s take a look back at some of the stories here on MetalMiner from the past week:

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  • After a somewhat stagnant run, aluminum had a strong August — why? Our Stuart Burns covered aluminum’s upward momentum last week.
  • Ah, the North American Free Trade Agreement (NAFTA), the deal that’s stayed in the news for much of the year. President Donald Trump recently renewed rhetoric threatening the 23-year-old trade agreement on the heels of the completion of the first round of negotiating talks held in Washington, D.C. We recapped the recent developments in the ongoing talks held by trade representatives of the U.S., Canada and Mexico.
  • Speaking of trade agreements, talks are also underway between the U.S. and South Korea on KORUS, the free trade deal the two countries began in 2012.
  • China was reportedly amenable to making further significant cuts to tackle excess capacity, which has been a major talking point, not just for the U.S., but the global market. However, President Trump rejected China’s proposal. Burns offered his analysis on the situation.
  • It’s been a mostly good year for base metals — but not every metal has joined in on the fun, as our Irene Martinez Canorea wrote last week.
  • Hurricane Harvey inflicted a severe toll on the people of southeast Texas and southwest Louisiana. Now, there’s a long road ahead to recovery, both in terms of the humanitarian and economic impacts of the storm.
  • Burns looked to the the so-called “lucky country” of Australia, which is rich in iron ore. But what happens when iron ore reserves are exhausted? Answering the question briefly: look to the sun.

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Hurricane Harvey touched down in Texas late last week — in the ensuing days, thousands were displaced as record rainfall of more than 50 inches blanketed some areas of Houston (the fourth-most populous city in the U.S. with a population of about 2.3 million).

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According to a USA Today report citing preliminary research from the firm AccuWeather, Harvey could become the costliest disaster relief effort in U.S. history, with a potential price tag of $160 billion.

It should of course be noted that, before anything else, the natural disaster’s human impact is of utmost importance. The New York Times reported the death toll has hit at least 30, according to Texas officials.

In addition to widespread flooding, property damage and displacement suffered by residents in the hurricane’s path, Harvey has also left an economic impact that will be felt for the foreseeable future.

Among other things, metals prices, oil prices and shipping have all been, or will be, impacted by Harvey.

Trade Impact

The Port of Houston is one of most important trading locations in the U.S. As a result of Harvey, the port was completely closed as of last Friday. According to the Port of Houston website, it will remain closed on Thursday.

“We will continue to work alongside local agencies and the USCG to determine when operations can safely resume,” an alert on the Port of Houston website read Wednesday.

According to data on the Port of Houston website, the port is ranked first in total foreign tonnage and ranks second in total tonnage. As the largest Gulf Coast container port, it handled 68% of U.S. Gulf Coast container traffic in 2016.

So, a total shutdown of the port is a big deal.

On the export side, 3% of total container volume exported last year came from steel and other metals (27,127 TEUs).

A larger percentage of total imports come in steels and other metals — 8.6%, or 76,853 TEUs, last year.

Meanwhile, the Port of Corpus Christi, the fourth-largest port in total tonnage, was also closed as of Tuesday.

The affected areas have an immediate need for supplies of all kinds, but transportation modes are at a general standstill for the moment.

Steel Stocks

Much of Houston has been hit by record rains, leading to flooding and stranding locals without food or supplies.

Although it won’t happen overnight, eventually the area will begin to rebuild in the wake of the damages caused by Harvey.

According to a report on the Nasdaq website, Houston receives between 30% and 35% of all U.S. steel imports, making it a pivotal point of access.

In the wake of Harvey, some U.S. steel companies saw their stocks rise. According to the report, shares of United States Steel Corporation jumped by over 2.5% on Tuesday, while Olympic Steel rose more than 1.5%.

Nucor and AK Steel Holding Corporation both saw their stock prices rise by over 0.5%.

However, it’s still early to determine the true damage to the steel industry caused by Harvey.

According to a Platts report, Harvey could have a similar impact to that of 2012’s Hurricane Sandy, particularly with respect to steel scrap.

Freight Service Disrupted

In addition to the disruption of port activity, rising water levels have taken a bite out of freight service.

As a result, a rise in trucking rates can be expected, according to freight analyst firm FTR Transportation Intelligence.

“Look for spot prices to jump over the next several weeks, with very strong effects in Texas and the South Central region,” said Noel Perry, a partner at FTR. “Spot pricing was already up strong, in double-digit territory. Market participants could easily add 5 percentage points to those numbers.”

According to Steel Market Update, FTR predicted 10% of freight activity will be disrupted over the next two weeks.

Gas Prices Rise

As a result of an overall glut in global production, gas prices have come down significantly since 2014, when the gas price in some metropolitan areas exceeded $4 gallon.

However, the average national gas price has increased as a result of Harvey and shutdowns of refineries in Corpus Christi and Galveston. As of Wednesday afternoon, the average national gas price stood at $2.40 gallon, up from $2.37 on Monday, according to AAA. The average price had already risen $0.04 to $2.37, which AAA said Monday was one of the largest one-week surges this summer.

According to AAA, about one-quarer of Gulf Coast refining capacity was taken offline, according to forecasts by Oil Price Information Service (OPIS), which equated to about 2.5 million barrels per day.

“Despite the country’s overall oil and gasoline inventories being at or above 5-year highs, until there is clear picture of damage and an idea when refineries can return to full operational status, gas prices will continue to increase,” said Jeanette Casselano, AAA spokesperson, in a prepared statement.

Time to Rebuild

Rescue missions continue in the Houston area, as officials move residents in flooded areas to shelters. According to the Washington Post, 32,000 people have taken refuge in 231 shelters, with many volunteers need to help clean out damaged homes.

“We expect a many-year recovery in Texas, and the federal government is in this for the long haul,” said Elaine Duke, acting secretary of the Department of Homeland Security, to the Washington Post.

The damage won’t be contained to Texas, however. According to the National Hurricane Center, Harvey touched down again, this time in southwestern Louisiana at 4 a.m. today.

More than 12,400 employees from more than 17 federal departments and agencies are working together in support of the ongoing response to damages resulting from Hurricane Harvey and subsequent flooding across Texas and Louisiana, according to the Federal Emergency Management Agency (FEMA).

When all is said and done, affected communities will have a long road to recovery. Many will eventually return to homes either damaged beyond habitability or totally destroyed.

Houston is the largest U.S. market for newly constructed homes, and demand for materials used in home construction will surge as communities transition from rescue and recovery mode to begin the arduous rebuilding process.

The question is: When will that transition happen?

For now, government agencies on the ground are prioritizing the primary disaster relief effort, and it’s unclear when resources can eventually be shifted to construction.

The pipe and tube market, in particular, is well represented in the Houston area, which offices for the multinational firm Vallourec. The Port of Houston took in nearly 40% of iron and steel pipe and tube imports through the first six months of the year, according to ustradenumbers.com.

Earlier this week, the Committee on Pipe and Tube Imports sent a letter, obtained by CNBC, to the Trump administration, urging it to move forward with trade remedies in the Section 232 investigation of steel imports. According to the letter, over 60% of current U.S. demand for pipe and tube materials is supplied by foreign producers.

The request tied into the ongoing situation in Houston.

“Based on the amount of imports flooded into America now we will not be able to help rebuild Houston,” Robert Griggs, president and CEO of Trinity Products, told CNBC.

“Not one U.S. pipe company will get a lick of work in rebuilding Houston. It will all go to China. The president needs to level the playing field and make it fair. The way it is now, American steel pipe companies will lose the opportunity to rebuild Houston.”

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Several sources are leading on news that President Trump has twice rejected a Chinese proposal to cut steel overcapacity, despite the endorsement of some of his top advisors.

An agreement reached between U.S. Commerce Secretary Wilbur Ross and Chinese officials last month agreed a cut of 150 million tons per annum of capacity by 2022 was vetoed by the president, apparently because he preferred a more “disruptive strategy,” according to Reuters and the Financial Times.

The articles suggested the 22% rise in steel imports through July of this year compared to a year ago, reported by the American Iron and Steel Institute (AISI), spurred calls for action from U.S. steel producers to apply tariffs. Those calls may have influenced Trump’s position, as may the input of Steve Bannon, since fired, and Peter Navarro, an economic assistant to the president on trade matters.

The rejection of a deal brokered by Ross’ team seems to have undermined his position and probably leaves little room for further negotiation. The Chinese have gone away to consider their options, but rumors reported in the Financial Times suggest retaliatory action seems the most likely.

But while picking a fight with China probably makes for good headlines, at least as far as U.S. imports are concerned, is it the primary antagonist?

Not if you look at the AISI data.

Their findings suggest Taiwan and Turkey were the countries making up much of the increase. There was a sizeable increase from other countries, too, meaning Germany, up nearly 60%, and Brazil, up 80%, on three-month rolling average measures.

At 83,000 tons, China’s share of finished steel imports is a fraction of South Korea’s 352,000 tons, Turkey’s 245,000 tons or Japan and Germany’s about 138,000 tons.

Unless the administration plans on tackling these suppliers, picking out China seems a bit like fiddling while Rome burns.

We would hope that Trump’s presidency ends much better than Nero’s both for the man and the country, but picking fights that have a pragmatic strategy rather than catching headlines would be a good first step.

The North American Free Trade Agreement (NAFTA) isn’t the only trade deal the Trump administration is eyeing for changes.

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Last week, United States Trade Representative (USTR) Robert Lighthizer and Korean Trade Minister Hyun-chong Kim discussed the U.S.-Korea free trade agreement, referred to as KORUS, via video conference, according to a USTR release.

Like NAFTA, the trade deficit is a central talking point for the U.S. In a statement from the Office of the USTR, Lighthizer summarized the administration’s goals with respect to trade with South Korea.

“The United States and Korea have an important economic relationship,” Lighthizer said in the prepared statement. “Unfortunately, too many American workers have not benefited from the agreement. USTR has long pressed the Korean government to address burdensome regulations which often exclude U.S. firms or artificially set prices for American intellectual property. This negotiation offers us an opportunity to resolve these and other barriers.”

“Since KORUS entered into effect, U.S. goods exports have decreased while the trade deficit overall with Korea has nearly tripled,” Ambassador Lighthizer continued. “American service exports have seen virtually no growth in the past four years. President Trump is committed to substantial improvements in the Korean agreement that address the trade imbalance and ensure that the deal is fully implemented.”

According to a release on the Korean Ministry of Trade, Industry and Energy website last Wednesday, Kim said no decision had been reached regarding the next step in the discussion.

“The Trade Minister said the Korean representatives had proposed a joint study to examine the effects of the trade pact before starting talks on a revision of the deal, and will await the USTR’s review of the proposal and response before deciding how to proceed,” the release said.

The Trade Deficit Rises

The U.S.’s trade deficit with South Korea has ballooned since implementation of KORUS in March 2012.

In 2011, the last full year before KORUS went into effect, the U.S. had a $13.2 billion trade deficit with South Korea, according to U.S. Census Bureau data.

That deficit has increased in size every year since: $16.6 billion (2012), $20.7 billion (2013), $25 billion (2014), $28.3 billion (2015) and $27.6 billion (2016).

Thought the first six months of 2017, the U.S. has a $11.2 billion trade deficit with South Korea.

The automobile sector is the source of much of the deficit, according to the USTR release. In 2016, 90% of the $27.6 billion deficit came from the auto sector alone.

Impact on Steel?

As for metals, South Korea is a leading steel exporter to the United States, as a recent American Iron and Steel Institute (AISI) report on steel imports showed.

Although South Korea’s steel exports in July to the U.S. dropped by 13% from June totals, South Korean steel still led the way with 337,000 net tons exported — ahead of Turkey, Germany, Japan and Taiwan.

South Korea is also the largest supplier through the first seven months of 2017, sending nearly 2.3 million net tons to the U.S., which is actually down 4.5% year-over-year.

While China has been the focus of the Trump administration’s Section 232 investigation into steel imports, countries like South Korea could also be impacted if Trump opts to slap tariffs on steel imports.

As our Stuart Burns wrote last week, it might be a faulty assumption to think that the trade imbalance is the direct result of the free trade agreement.

“Bilateral trade has surged since KORUS, as the Korean-U.S. trade deal is known, was implemented five years ago,” Burns wrote. “Although there is a trade imbalance, the reality is no two countries will have exactly balanced trade. Balances have more to do with relative competitiveness than a rigged system.”

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Whatever happens to KORUS, it appears the South Korean government is preparing to pursue alternative economic avenues.

Following a meeting on the country’s exports last Thursday, a release posted on the Ministry of Trade, Industry and Energy website the following day read: “Trade Minister Kim, who presided the meeting held in the Korea Trade Insurance Corp. (K-sure), said that the Korean government will actively respond to trade protectionism, strengthen economic cooperation with emerging markets, and help boost the link between trade and industrial development.”

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This morning in metals news, production of raw steel in the U.S. is up for the year, President Donald Trump reportedly rejected a Chinese proposal to cut its steel excess capacity and copper approached a three-year high.

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Steel Production Up 3% Year-Over-Year: AISI

According to data released by the American Iron and Steel Institute on Monday, U.S. raw steel production for the week ending Aug. 26 was down 1.3% from the previous week.

However, compared to the same week in 2016, production was up 5.1%.

In the year to date, production through Aug. 26 amounted to 59,153,000 net tons, up 3% from the 57,416,000 net tons during the same period last year.

Trump Reportedly Rejects China’s Capacity Cut Proposal

Given how much ink has been spilled and time spent talking about Chinese excess steel capacity and its effect on the global market, one would think any proposals from China aimed at cutting capacity would be welcomed.

Apparently not.

According to reporting from the Financial Times, President Trump rejected a Chinese proposal to cut its excess capacity. China proposed cutting 150 million tons by 2022, but Trump instead directed advisors to find ways to impose tariffs on imports, according to the report.

As has been discussed ad nauseam, China’s overcapacity has been the focal point of the Trump administration’s Section 232 investigations into steel and aluminum imports.

Copper Continues Rise

Copper rose nearly to a three-hear high Tuesday on falling inventories and a dropping dollar, Reuters reported.

The metal reached $6,825 per ton, its highest since October 2014, according to the report.

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A week after the conclusion of the first round of talks to renegotiate the North American Free Trade Agreement (NAFTA), President Donald Trump once again made comments putting the 23-year-old trade agreement’s continued existence into question.

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In a tweet early Sunday, Trump wrote: “We are in the NAFTA (worst trade deal ever made) renegotiation process with Mexico & Canada.Both being very difficult,may have to terminate?”

In April, Reuters reported Trump was “psyched” to terminate the deal, and was prepared to do so until calls from Canadian Prime Minister Justin Trudeau and Mexican President Enrique Peña Nieto convinced him otherwise.

Trump also tweeted about his proposed border wall with Mexico, restating a campaign pledge to have Mexico pay for the structure: “With Mexico being one of the highest crime Nations in the world, we must have THE WALL. Mexico will pay for it through reimbursement/other.”

The Mexican Foreign Ministry issued a statement Sunday in response to Trump’s tweets.

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Before we head into the weekend, let’s look back at some of the top stories on MetalMiner this week.

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Free Download: The August 2017 MMI Report

U.S. Steel Imports Up 22% in YTD

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U.S. year-to-date imports of steel are up by more than one-fifth of 2016 levels, according to a Wednesday release from the American Iron and Steel Institute (AISI).

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According to the AISI report based on preliminary U.S. Census Bureau data, through the first seven months of 2017 total and finished steel imports are 23,168,000 and 17,938,000 net tons, up 22.1% and 17.3%, respectively, versus the same period in 2016.

Several products posted significant year-to-date increases in import volumes. Oil country goods (up 254%), standard pipe (up 47%), line pipe (up 39%), cold rolled sheets (up 37%), sheets and strip all other metallic coatings (up 35%), mechanical tubing (up 32%), hot rolled bars (up 26%), sheets and strip hot dipped galvanized (up 25%), wire rods (up 13%) and tin plate (up 11%) were among the leaders in this category.

In terms of steel import market share, the U.S. hit 30% in June, but dipped down to approximately 29% for July. The year-to-date market share stands at 28%, according to the data.

By country, South Korea led the way as the biggest exporter of steel to the U.S. in July, sending 332,000 NT (which was actually down 13% from the final June total). Turkey (252,000 NT, down 23%), Germany (148,000 NT, up 27%), Japan (137,000 NT, down 2%) and Taiwan (120,000 NT, down 29%) followed South Korea as the top exporters to the U.S.

On a year-to-date basis, Taiwan boasts the largest percentage increase in exports to the U.S. In descending order of volume, South Korea (2,265,000 NT, down 5%), Turkey (1,723,000 NT, up 14%), Japan (937,000 NT, down 12%), Taiwan (784,000 NT, up 54%) and Germany (750,000 NT, up 7%) led the way.

China Posts Month-Over-Month Increase, YTD Decrease

China, which has drawn much criticism from the Trump administration and U.S. primary steel producers for excess capacity, exported 86,000 NT of steel to the U.S. in July, a 4.6% increase from the 82,000 NT exported in June. In the first seven months of the year, however, Chinese steel exports to the U.S. are down from 515,000 NT last year to 506,000 this year, good for a 1.7% drop.

Of course, the Trump administration’s Section 232 investigation into steel imports, launched in April, has yet to be publicly concluded. While the impact of Chinese excess capacity has dominated much of the steel discourse within the Trump administration and the U.S. steel industry, China represents a relatively small share of the U.S. steel import market.

Should the Trump administration opt for trade remedies in the form of tariffs, quotas, or a hybrid tariff-quota solution, countries like South Korea, Turkey, Japan and Germany could also be affected.

What About NAFTA?

In other policy news, during a campaign-style rally Tuesday in Phoenix, President Donald Trump said the North American Free Trade Agreement (NAFTA) would “probably” be terminated. Whether that is a negotiating tactic — as Mexican and Canadian officials opined — or an earnest indication of Trump’s policy direction remains to be seen. Given that Trump reportedly nearly pulled the U.S. out of NAFTA in April — just three months after withdrawing from the Trans-Pacific Partnership (TPP) — one cannot dismiss the potential reality of his comments.

While various stakeholders have differing opinions on the success of NAFTA — the 23-year-old trade agreement uniting the U.S., Canada and Mexico — there is no doubt that the U.S.’s withdrawal from it would have far-reaching effects, particularly on long-established supply chains.

For example, although Canada is not a top-level steel exporter, a significant majority of its steel exports go to the U.S.

According to the International Trade Administration’s February steel exports report on Canada, Canadian steel exports in 2015 amounted to 1.5% of global exports and one-twentieth of Chinese steel exports that year.

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From January-September 2016, 87% of Canadian steel exports went to the U.S., with 8% going to Mexico. As such, Section 232 trade remedies, combined with a potential withdrawal from NAFTA by the U.S. could conspire to severely impact — or, at the very least, significantly alter — the composition of the Canadian steel export market.