Articles in Category: Imports

Oil prices fell as Saudi Arabia poured cold water on a potential deal with other Organization of Petroleum Exporting Countries members and other countries such as Russia. China is threatening to place tariffs on sugar imports.

Crude Oil Selloff

Crude prices are selling off today, aided by Saudi comments that a decision will not be forthcoming from next week’s Organization of Petroleum Exporting Countries meeting in Algiers.

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Many had thought that OPEC was close to reaching a deal to curtail production for up to a year with its members and non-member producers such as Russia, but the Saudi announcement makes it highly unlikely that any deal will happen soon now.

Clipperdata_OPEC_Production_500_092416

Source: Clipperdata.

Saudi Arabia has made production by regional rival Iran an issue in any deal to constrain production. The Saudis say Iran must abide by any deal just like other member-states and Iran and its allies say Iran should be allowed to bring its capacity up to full production, as it just re-entered markets after decades of sanctions, before it starts to cut.

China Explores Sugar Tariffs

China has launched a probe into soaring sugar imports following complaints by its domestic industry, the government said on Thursday, the latest sign that trade tensions between major commodities producing nations is intensifying.

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The Ministry of Commerce said the probe will look at imports since 2011 and into possible protectionist measures provided by foreign countries for their producers. It will last six months, with an option to extend the deadline, it said.

So, will aluminum receive a similar tariff shield as steel has enjoyed in India? The shield refers to a minimum import price (MIP) that is generally imposed on cheap commodities entering India, just like cheap steel from China.

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In the case of aluminum, too, the main “culprit” seems to be China. Yet, the stance of the Indian government vis-à-vis an MIP is still not clear, as various ministries concerned with the development have given divergent opinions. Read more

The Commerce Department placed initial anti-dumping tariffs on imports of carbon and alloy steel cut-to-length plate (CTL plate) from Brazil, South Africa, and Turkey late Friday.

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For the purpose of an anti-dumping investigation, dumping occurs when a foreign company sells a product in the U.S. at less than its fair value.

n the Brazil investigation, Commerce preliminarily found that dumping has occurred by mandatory respondents, Companhia Siderurgica Nacional and Usinas Siderurgicas de Minas Gerais SA, at a preliminary dumping margin of 74.52%. The dumping margin for the mandatory respondents was based on adverse facts available (AFA) as a result of their failure to cooperate in the investigation. Commerce assigned a preliminary dumping margin of 74.52% for all other producers/exporters in Brazil. Read more

Earlier this year, China promised it would cut steel capacity. However, despite friction with several trading partners, Chinese exports continued to look strong in the first half.

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China’s Vice Minister of Industry said in July that the country will step up efforts in the second half. The minister pointed out that focus of their work in the first half was mission planning, and in the second half they will step up implementation and enter a new stage, from allocating targets and drawing policies to actually pushing capacity cuts.

Exports Fall in August

Chinese exports decline in August. Source: Customs Dept PRC

Chinese exports decline in August. Source: Customs Dept. People’s Republic of China.

Following those comments, exports started to taper down. In August, China exported 9.01 million metric tons of steel, a year-over-year decline of 7.4%. Other than capacity cuts, the anti-dumping duties that many countries have slapped on Chinese steel products are contributing to this decline. Read more

The Department of Commerce has preliminarily found that Chinese stainless steel sheet and strip producers illegally dumped — sold at less than fair value — their products in the U.S.

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Commerce preliminarily found that dumping occurred by mandatory respondents, Shanxi Taigang Stainless Steel Co., Ltd. and Tianjin Taigang Daming Metal Product Co., Ltd. Commerce also determined that the mandatory respondents are not eligible for a separate rate, and therefore part of the China-wide entity.

Commerce calculated a preliminary dumping margin of 63.86% for the non-selected respondents eligible for a separate rate. Commerce preliminarily assigned a dumping margin of 76.64% based on adverse facts available for all other producers/exporters in China that are part of the China-wide entity due to their failure to respond to Commerce’s requests for information.

As a result of the preliminary affirmative determination, Commerce will instruct U.S. Customs and Border Protection to collect cash deposits based on these preliminary rates.

The petitioners for this investigation are AK Steel Corporation, Allegheny Ludlum, LLC d/b/a ATI Flat Rolled Products, North American Stainless, and Outokumpu Stainless USA, LLC.

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Commerce is scheduled to announce its final determination on or about November 25.

Our Aluminum MMI finished the month flat.

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Aluminum prices rallied into August but they failed to breach $1,700 per metric ton for the third time this year. Aluminum is up 7% this year but unlike other industrial metals, prices haven’t really made that much progress. With the ongoing debate of whether aluminum markets will be in deficit or surplus this year, investors seem hesitant to chase prices much higher.

China’s Exports Fall

Aluminum’s fundamentals look much better than at the beginning of the year, especially when we look at the supply side which has always been the biggest concern for the markets over the past few years. The biggest challenge for the aluminum industry was Chinese exports and they have started to come down.

Aluminum_Chart_September_2016_FNL

China exported 390,000 mt of unwrought aluminum in July, down 9.3% from July of last year. Chinese aluminum exports have fallen around 7% for the first seven months of 2016. Lower aluminum exports are supporting aluminum prices this year.

Chinese Aluminum Production Falls

According to data released by the International Aluminum Institute, China’s aluminum production declined 2.4% in July compared to the same month last year. For the first seven months, production in China has fallen by 3.1%.

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This is the first time the markets have witnessed a fall in China’s aluminum production since 2010. This fall in production is good news for aluminum bulls, which see a market headed for deficit in 2016. However, there is also the other side of the coin…

Fears of Rising Production

Fears of rising Chinese aluminum production in the second half seem to be putting pressure on aluminum prices, limiting any price rally. Whether markets are in a deficit or a surplus this year depends on China’s production. While producers such as Alcoa projecting a record deficit for 2016, Goldman Sachs sees a record surplus in the year.

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Aluminum-industry representative Jeff Henderson says he is convinced that China Zhongwang Holdings Ltd., a Chinese aluminum giant controlled by billionaire Liu Zhongtian, tried to evade U.S. tariffs by routing aluminum through Mexico to disguise its origins, a tactic known as transshipping.

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Nearly one million metric tons of aluminum was discovered stockpiled neatly stacked behind a fortress of barbed-wire fences in rural San Jose Iturbite, Mexico two years ago. The stockpile is worth around $2 billion and represents roughly 6% of the world’s total inventory and it quickly became an obsession for the U.S. aluminum industry.

“My Moby-Dick has been Zhongwang,” Henderson, president of U.S. trade group the Aluminum Extruders Council told the Wall Street Journal.

U.S. executives contend that the mysterious cache was part of a brazen scheme by one of China’s richest men to game the global trade system.

Zhongtian denies any connection to the Mexican aluminum or transshipping, but company records, trade documents and legal filings reviewed by The Wall Street Journal, along with interviews of people who have done business with Mr. Liu, raise doubts about his account.

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The Commerce Department says it is investigating the Mexican aluminum’s origin now as part of a slew of trade complaints by the domestic metals industry against China, many of which include allegations of transshipping.

The Federal Reserve released its last assessment of the economy before its next meeting and steel imports into the U.S. were down in July.

Fed Upbeat About the Economy Ahead of Meeting

The Federal Reserve‘s Beige Book assessment of the economy is generally positive, noting a tight labor market in some areas but little evidence of wage inflation.

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It’s the latest data point for policymakers before they meet this month and decide whether to raise interest rates amid mixed signals and scant progress toward a 2% inflation target.

Steel Imports Into the US Down in July

Based on the Commerce Department’s most recent Steel Import Monitoring and Analysis (SIMA) data, the American Iron and Steel Institute (AISI) reported recently that steel import permit applications for the month of August totaled 3,028,000 net tons. This was an 8% decrease from the 3,294,000 permit tons recorded in July and a 7% decrease from the July final imports total of 3,266,000 nt.

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Import permit tonnage for finished steel in August was 2,282,000 nt, down 8% from the final imports total of 2,471,000 nt in July. For the first eight months of 2016 (including August SIMA permits and July final data), total and finished steel imports were 22,001,000 nt and 17,576,000 nt, down 22% and 23%, respectively, from the same period in 2015. The estimated finished steel import market share in August was 25% and is 25% year-to-date.

Today, the Department of Commerce placed countervailing duties on imports of carbon and alloy steel cut-to-length plate from China and cleared South Korea simultaneously.

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For the purpose of countervailing duties investigations, a countervailable subsidy is financial assistance from foreign governments that benefits the production of goods from foreign companies and is limited to specific enterprises or industries, or is contingent either upon export performance or upon the use of domestic goods over imported goods.

In the China investigation, Commerce calculated preliminary subsidy rates of 210.50% for mandatory respondents Jiangyin Xingcheng Special Steel Works Co. Ltd., Hunan Valin Xiangtan Iron & Steel, and Viewer Development Co., Ltd. based on the application of adverse facts available. All other producers/exporters in China have also been assigned a preliminary subsidy rate of 210.50%.

In the Korea investigation, Commerce calculated a de minimis preliminary subsidy rate of 0.62% for mandatory respondent POSCO. All other producers/exporters in Korea have been assigned a de minimis preliminary subsidy rate.

As a result of the preliminary affirmative determination for China, Commerce will instruct U.S. Customs and Border Protection (CBP) to require cash deposits based on these preliminary rates. For Korea, because its preliminary determination was negative, Commerce will not instruct CBP to require cash deposit rates.

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The petitioners are Arcelormittal USA LLC, Nucor Corporation and SSAB Enterprises, LLC. Commerce is scheduled to announce its final determinations on or about January 19, 2017, unless the statutory deadline is extended.

The price of domestic flat steel products declined in August. Interestingly, cold-rolled coil prices (CRC) declined less than hot-rolled (HRC), widening the unprecedented price gap that we are witnessing between these two.

Domestic CRC-HRC price spread at record highs. Source: MetalMiner Index

Domestic CRC-HRC price spread at record highs. Source: MetalMiner Index.

The supply-demand equation for CRC (and hot-dipped galvanized) appears better than for HRC since CRC goes into consumer products such as automobiles and appliances which have seen stronger demand this year.

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Moreover, the lead times for CRC products are longer than for HRC products. But the main driver of this spread involves the high duty imposed on Chinese CRC since China accounted for more than half of CRC imports. Read more