Articles in Category: Public Policy

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The Department of Commerce issued a preliminary affirmative determination Tuesday in the countervailing duty investigation of cold-drawn mechanical tubing from China and India.

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“The Trump Administration will not sit back and watch as American companies and workers are harmed by unfair government subsidies,” Secretary of Commerce Wilbur Ross said in a prepared statement. “The United States is committed to free, fair and reciprocal trade, and will continue to validate the information provided to us that brought us to this decision.”

The Department of Commerce determined that the form of tubing from China benefited from countervailable subsidies of 33.31-35.69%, and that Indian tubing benefited from subsidies of 3.04-8.09%.

In 2016, cold-drawn mechanical tubing from China and India were valued at an estimated $29.4 million and $25 million, respectively, according to the Department of Commerce.

The petitioners in the case were ArcelorMittal Tubular Products (OH), Michigan Seamless Tube, LLC (MI), PTC Alliance Corp. (PA), Webco Industries, Inc. (OK), and Zekelman Industries, Inc. (PA).

The Department of Commerce will instruct U.S. Customs and Border Protection to collect cash deposits from importers of cold-drawn mechanical tubing from China and India based on the aforementioned preliminary rates. The department collected $1.5 billion in duties on $14 billion of imported goods found to be underpriced, or subsidized by foreign governments, according to the department’s release.

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The Department of Commerce is scheduled to announce its final determinations in the case on Dec. 4.

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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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After two rounds of talks on the renegotiation and modernization of the North American Free Trade Agreement (NAFTA), uncertainty continues to loom.

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The 23-year old trilateral trade deal linking the U.S., Mexico and Canada has been the subject of talks between trade representatives of the countries in recent months.

An initial round of talks was held in Washington, D.C., with a second round coming earlier this month. A third round is scheduled for Sept. 23-27 in Ottawa.

Renegotiation of the deal, which President Donald Trump once referred to as possibly the worst trade deal ever, has not seemed to gain much traction through two rounds of talks.

In a closing statement after the recently concluded round of talks in Mexico City, United States Trade Representative Robert Lighthizer again laid out the U.S. delegation’s goals:

“The American delegation is focused on expanding opportunities for American agriculture, services, and innovative industries. But, as I alluded to in my opening round, we also must address the needs of those harmed by the current NAFTA, especially our manufacturing workers. We must have a trade agreement that benefits all Americans, and not just some at the expense of others. I am hopeful we can arrive at an agreement that helps.”

While Lighthizer said the parties “found mutual agreement on many important issues,” other reports indicate the negotiators are still far apart.

The New York Times reported that, during a question-and-answer session Monday at the Center for  Strategic and International Studies (CSIS), Lighthizer said negotiations were “moving at warp speed, but we don’t know whether we’re going to get to a conclusion, that’s the problem.”

During his opening statement prior to taking questions, Lighthizer said support for free trade in recent decades has been “eroding” among the electorate.

“There has been a growing feeling that the system that has developed in recent years is not quite fair to American workers [and] manufacturing, and that we need to change,” he said.

The ambitious timeline for the talks is further complicated by elections in the three countries next year: U.S. midterms, the Mexican presidential election and provincial election in Canada. Producing a mutually agreed upon and revamped trade deal by the end of the calendar year will require the negotiations to move at breakneck speed.

On Monday, Mexican Economy Minister Ildefonso Guajardo said rules of origin and the U.S. trade deficit with Mexico are the issues that will determine whether a new deal can be reached, Reuters reported.

The trade deficit has been a primary talking point for the U.S., one which Lighthizer referred to Monday at the CSIS.

“I think it is reasonable to ask, when faced with decades of large deficits, globally and with most countries in the world, whether the rules of trade are causing part of the problem,” he said.

The U.S. had a $63.4 billion trade deficit with Mexico in 2016. Though the first seven months of 2017, the U.S. has a $41.2 billion trade deficit with Mexico, up from approximate $37 billion through the first seven months of 2016.

Another idea that has come up in renegotiation talks that has generated pushback is that of a sunset clause.

According to The New York Times report, Secretary of Commerce Wilbur Ross said the administration was considering such a clause, which would mean that the trade deal would expire after five years unless all parties voted to continue it. (Lighthizer declined to expand on the idea of a sunset clause vis-a-vis NAFTA during the CSIS event.)

Aside from NAFTA, Lighthizer called China the biggest challenge for the global trading market, adding that the World Trade Organization is not equipped to tackle the challenges China presents.

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“We must find other ways to defend our companies, workers, farmers, and indeed, our economic system,” he said.

Following this coming weekend’s round of talks in Ottawa, four more rounds of talks remain on the negotiating agenda this year.

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The U.S. Department of Commerce has been busy this year.

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The department added another investigation to its agenda, announcing late last week that it had launched antidumping and countervailing duty investigations into titanium sponge imports from Japan and Kazakhstan.

“The Department of Commerce intends to act swiftly to halt any unfair trade practices and will render our decisions at the earliest opportunity, while also assuring a full and fair assessment of the facts,” Secretary of Commerce Wilbur Ross said in a release. “The U.S. market is the most open in the world, but we must take action to ensure U.S. businesses and workers are treated fairly.”

The new investigation marked the 65th new antidumping or countervailing duty probe of the year by the Department of Commerce. Through Sept. 14, the number of new investigations has increased by 45% compared with the same time frame last year, according to the Department of Commerce release.

The case comes on the heels of petitions filed by Titanium Metals Corporation (TIMET) on Aug. 24.

The investigations will seek to determine whether titanium sponge from Japan and Kazakhstan is being sold at less than fair value, as well as if the imports from Kazakhstan are receiving countervailable government subsidies.

Imports of titanium sponge from Japan and Kazakhstan were valued at an estimated $144.8 million and $374,000, respectively, according to the Department of Commerce.

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The U.S. International Trade Commission (ITC) will make a preliminary determination in the cases on or before Oct. 10. Assuming the ITC determines there is a reasonable indication that imports of the product threaten the domestic industry, the Department of Commerce will then issue a preliminary determination in the countervailing duty case by Nov. 17, 2017, and the antidumping cases by Jan. 31, 2018.

TIMET, based in Exton, Pennsylvania, supplies nearly a fifth of the world’s titanium, and has production facilities in both the U.S. and Europe, according to its website.

Our September MMI report is in the books — overall, it was another strong month for metals.

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For our latest batch of readings, all 10 of the MMI sub-indexes posted upward movement.

It was a big month for aluminum, as the Aluminum MMI rose 8.2% and LME aluminum jumped 10.73% through the month. The Construction and Automotive MMIs also had solid months, while the Copper MMI shot up 7.7% in what was another good month for Dr. Copper.

Meanwhile, in policy news, last week the U.S. Department of Commerce launched an anti-dumping and countervailing duty investigation into stainless steel flanges from China and India. As our Irene Martinez Canorea wrote in her Stainless MMI report, a preliminary determination in the case is coming Oct. 2.

In addition, today the DOC announced it had launched an investigation into imports of titanium sponge from Japan and Kazakhstan.

More broadly, the Section 232 investigations into aluminum and steel imports are still ongoing. It’s unclear when exactly a ruling will be made, but Secretary of Commerce Wilbur Ross has January deadlines to meet, as he is required to present President Donald Trump with a report and policy recommendations vis-a-vis the probes.

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You can read about all of the aforementioned — and much more — by downloading the September MMI report below.

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India’s recent decision to impose an additional import tax on a number of stainless steel flat products from China for five years has generally been welcomed by the Indian steel industry and trade bodies.

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The tax, said the Government of India, was to curb the influx of cheaper foreign imports.

A countervailing duty of 18.95% has been imposed on some hot-rolled and cold-rolled stainless steel flat products. This is aimed at helping local steelmakers benefit when there is a surge in imports, the government said.

A statement by the government said Chinese imports “were distorting the domestic market, which was under huge stress and led to financial stress in the industry.”

In the past, too, India has imposed a slew of anti-dumping duties on imports of steel and stainless steel products from China, Japan and South Korea.

According to a Reuters report, the U.S. Department of Commerce also said it would be looking into possible dumping and subsidization of stainless steel flanges from China and India.

Steel producers in India have welcomed the move.

According to Jindal Stainless Vice-Chairman Abhyuday Jindal, the decision will encourage production of the metal within the country and will provide some relief to the domestic industry.

India’s apex stainless steel industry body, the Indian Stainless Steel Development Association (ISSDA), has also welcomed the imposition of countervailing duty, President KK Pahuja said.

Due to the subsidized imports from China, the domestic players were facing huge losses. Industry experts have claimed several MSME segment businesses were forced to shut down due to subsidized imports from China. The imposition of a countervailing duty would help revive the industry, regain lost ground and create jobs, the Pahuja added.

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The CVD investigation was initiated on April 12, 2016, by the Directorate General of Anti-Dumping and Allied Duties (DGAD) in response to a surge in subsidized imports of stainless steel flat products from China.

For firms buying from suppliers in Europe, the rise of the Euro this year must have caused acute problems. Or, for those with contracts buying from European suppliers in dollars, those contracts will adjust sharply come renegotiation, as current exchange rates are applied to new contracts.

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The future direction of the world’s second-most-widely-used currency is of interest to many firms that directly or indirectly are a part of extended global supply chains.

Europe, too, is perplexed by the rise of the Euro. The dollar has declined relative to the Euro by more than 13% this year, driven by tensions with North Korea and dysfunction in Washington, according to The New York Times.

But investor appetite for the Euro has been fueled by more than tensions over North Korea.

Whereas the Euro is seen as a relative safe haven compared to the dollar, there is also a growing realization the Trump administration may not be able to deliver on tax reforms promised during his campaign at the end of last year. As a result, the relatively better-performing European markets may offer investment opportunities not previously available.

Nations Push Back Against Quantitative Easing

Many in northern Europe — Germany, in particular — are pushing for an end to quantitative easing (QE) for fear that it is stimulating asset bubbles.

The Telegraph reported comments by Deutsche Bank chief John Cryan last week saying property prices in advanced economies had hit record levels. In the same speech, Cryan urged European policymakers to start tapering relief of the Eurozone’s €60 billion ($72 billion) per month stimulus program sooner rather than later.

On the other hand, policymakers are worried about the impact of bringing money printing to an end and postponed a decision this month because of the recent weakness of the dollar. Any firm decision to taper or cease QE would result in the Euro strengthening further, potentially choking off Europe’s nascent recovery (during which growth has returned for the first time this year since the financial crisis).

Interest Rates Still Low

Inflation remains stubbornly low. At 1.5% last month, they show little prospect of hitting the 2% target this side of 2019, The New York Times reports.

The Federal Reserve began raising interest rates at the end of 2015, but the European Central Bank (ECB) is reluctant to do anything that could undermine what it still sees as a fragile recovery.

The absence of rising headline inflation figures to create an imperative — policymakers are largely turning a blind eye to asset price inflation for the time being, preferring to sweat over the rise in the Euro.

Indeed, Jörg Krämer, the chief economist at Commerzbank in Frankfurt, said as much in a recent note to clients, saying the pace of Euro strength is driving the ECB’s QE policy right now. Commerzbank is not expecting the Euro to continue to strengthen — and they may well be right.

If investors think there is a chance Congress will support the Trump administration’s tax reform that would allow businesses like Google and Apple to repatriate profits held overseas, the exchange rate landscape would transform overnight.

Half of what has been estimated as up to $1 trillion dollars is held in currencies other than U.S. dollars, so the demand for dollars would be immense, as would the boost to the U.S. economy if funds were repatriated and invested. Of course, that is the administration’s intent; for now, Washington seems in such a logjam that investors are discounting the prospects of such legislation being passed anytime soon.

The Euro, therefore, is being carried by its own relatively optimistic narrative: decent growth, low inflation and a sense of stability and, Brexit excepted, harmony not seen since the financial crisis. It’s hard to see the Euro weakening this year, but further direction may come in next month’s meeting of the ECB.

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MetalMiner is expecting any decision to taper QE to be kicked further down the road, putting a lid on further rises.

Euro strength is today’s problem, asset prices are tomorrow’s — that seems to be the order of the day.

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This morning in metals news, U.S. primary aluminum is still low despite an increase in prices, China Zhongwang Holding announced it had purchased a German aluminum producer and associations representing steel, soybeans and poultry were united by the issue of steel tariffs.

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U.S. Primary Aluminum Production

Aluminum prices have been on a steady climb in recent months, but primary aluminum production remains low, according to a report in Hellenic Shipping News.

In fact, since January 2015, the country’s primary aluminum production has dropped 50%.

Zhongwang Makes Investment

China Zhongwang Holding announced Wednesday that it is making an investment in a German aluminum producer Aluminiumwerk Unna AG, according to state-owned news agency Xinhua.

The value of the deal has yet to be disclosed, according to the report, but the acquisition is part of Zhongwang’s effort for an increased presence in the aircraft aluminum market.

Steel, Soybeans and Chicken

Associations representing steel, soybeans and chicken came together this week to express their belief regarding the potential negative impact of steel tariffs.

Platts reported that the American Institute for International Steel, the National Chicken Council and the American Soybean Association published a new report covering the impacts of steel tariffs on supply chains.

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The Trump administration’s Section 232 investigation into steel imports is ongoing. The probe, launched in April, has a January deadline for completion.

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This morning in metals news, a U.S. line pipe producing association is the latest group to urge President Donald Trump to act vis-a-vis Section 232, Tata Steel officially sheds a major pension liability and the U.S. once again invokes the possibility of withdrawing from the North American Free Trade Agreement (NAFTA).

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ALPPA Asks Trump Administration to Take Action

The American Line Pipe Producers Association (ALPPA) is the latest U.S. metals association to petition the Trump administration to take action regarding its ongoing Section 232 investigation.

The Trump administration launched Section 232 investigations into steel and aluminum imports back in April, and has January deadlines for both.

In a letter to the Trump administration, Timothy Brightbill, counsel to the ALPPA, wrote: “There is an urgent need for immediate Section 232 relief for the domestic large diameter line pipe industry. The large diameter line pipe industry continues to face a sustained surge in imports, largely driven by global overcapacity. Chinese producers are increasingly shipping greater volumes of dumped and subsidized steel to other countries for production of large diameter line pipe that can then be shipped to the U.S. market at lesser duty rates or, in many cases, duty free.”

Tata Steel Gets Rid of U.K. Pension Scheme

One major holdup in Indian steel giant’s merger talks throughout the last year has been its £15 billion U.K. pension scheme, The Telegraph reported.

After much effort, Tata has finally rid itself of the massive pension liability, which should make merger talks go a little more smoothly.

Ross Adds NAFTA Threat of His Own

As the U.S, Mexico and Canada continued NAFTA renegotiation talks earlier this month, Trump, on numerous occasions, has threatened to pull the U.S. out of the trade deal.

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On Friday, Secretary of Commerce Wilbur Ross further backed up the president’s comments about the 23-year-old trade deal, restating the president’s assertions that if a negotiated solution favorable to the U.S. can’t be reached, withdrawal is a serious possibility (if not a certainty).

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This morning in metals news, Chinese steel futures hit a 4 1/2-hear high, European aluminum alloy prices are heading downward and the latest round of talks on the North American Free Trade Agreement (NAFTA) ended without any major breakthroughs.

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Chinese Steel Futures Continue to Rise

Chinese steel futures rose to a 4 1/2-year high after a furnace fire inspired fears that increased safety inspections could lead to a tightening of supply, according to Reuters.

Some rebar futures on the Shanghai Futures Exchange rose by as much as 5%, according to the report.

Approximately 4,500-5,000 tonnes of daily steel output at Benang — a subsidiary of government-backed Benxi Iron and Steel Group Co. — could be affected by the fire, Reuters reported.

European Aluminum Alloy Prices Under Pressure

As buyers negotiate fourth-quarter prices, European aluminum alloy prices are trending downward, according to Platts.

According to the report, competition for sales resulted in 226 ingot sales prices falling by about $24/metric ton.

NAFTA: Round 2

The second round of NAFTA talks traveled to Mexico, running from Sept. 1-5. However, on the heels of renewed threats from President Donald Trump on the future of the trade deal, no major breakthroughs were made this time around, according to Bloomberg.

The U.S. is seeking to address ballooning trade deficits with NAFTA partners Mexico and Canada, and Trump is looking to fulfill a promise to either favorably renegotiate the deal or pull the U.S. out entirely (in January, Trump withdrew the U.S. from the Trans-Pacific Partnership, or TPP).

According to the Bloomberg, officials said some progress has been been on some issues, but the parties have “yet to agree on any major contentious issue.”

The December target date for a resolution seems too ambitious, at this point, officials added.

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A third round of talks is currently scheduled to take place in Canada later this month.