Articles in Category: Public Policy

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.

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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

Apparently, when the government is a shareholder in your business. Questions are being raised as to why the French government has gone soft on Renault‘s emissions probe, omitting crucial details a Financial Times article states.

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The government report, published last month, concluded that some Renault models emitted nitrogen oxide at nine to 11 times higher than European Union limits, the article states. But three of the 17 members of the commission said that the published report did not include the full details of their findings, including the fact that a NOx “trap” in the Renault Captur went into overdrive when the sport-utility vehicle was prepared for emissions testing but not during normal driving conditions.

It was similar software that induced changes in behavior that tipped off U.S. authorities investigating Volkswagen “defeat devices” last year.

Apparently, Renault was not the only manufacturer to fare badly in the probe, which covered some 86 vehicles from a dozen automakers; yet the report did not find any cases of intentional attempts to cheat emissions, admitting that the government tries to give a positive brand image to firms it was invested in and hoped to push manufacturers in the right direction rather than seek prosecution.

One wonders what their attitude would be if it were Toyota or General Motors found to be posting erroneous data? The same article said the Fiat 500x registered NOx emissions almost 17 times European Union limits.

In Renault’s case, the Captur’s NOx trap purged five times in rapid succession at the end of scripted test preparations, allowing the car to produce much lower emissions than on the road the article explained, suggesting the car’s software could have detected that a test was being performed.

“Everything in a car is controlled by software now,” one commission member said, many of whom asked to remain anonymous. “We can’t be sure that Renault’s software detected the test like Volkswagen’s, but it seems that Renault has optimized the NOx filter to target this very specific set of conditions.”

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It would seem it may well have benefited Renault to have both the judge and jury in the dock with you, but does it benefit the wider community the government was elected to represent? This story, no doubt, has further to run.

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.

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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

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.

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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.

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

This week, U.S. Steel got its section 337 investigation against 40 — yes 40 — Chinese steel companies reinstated and we got to see the minutiae of just how the International Trade Commission, administrative law judges and the Commerce Department work together. Or, in this case, don’t work together.

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To tell this tale we must go to a magical place full of bureaucrats called Washington, D.C., where one in every 12 residents, according to the American Bar Association, is a lawyer. The ITC is an independent, bipartisan, quasi-judicial, federal agency that provides trade expertise to both the legislative and executive branches.

AdobeStock_retrostar_bureaucracy_redtape_550_081616

Red tape has beset U.S. Steel’s pursuit of a section 337 investigation against Chinese steel companies. Source: Adobe Stock/retrostar.

The agency also determines the impact of imports on U.S. industries and directs actions against unfair trade practices, such as subsidies, dumping, patent, trademark, and copyright infringement.

What’s an Administrative Law Judge?

The ITC employs ALJs. Five of them, to be exact. These “finders of fact” adjudicate disputes for the six ITC commissioners, who are appointed by the president and confirmed by congress. The ALJs greatly reduce the workload of the commissioners who only deal with the most serious matters that reach their level. At least in theory, that is. Read more

I think it’s called the law of unintended consequences and it goes something like this: Government can take action or make a rule for the best possible reason but, sometimes as a result, there are unintended consequences that make the original decision seem stupid.

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So is the case with China’s export rebate scheme, the original rebate of tax on export of value-added products had a certain logic to it. China is not a low-cost producer of power and to support all exports of energy-intensive metals such as aluminum was a senseless act, while supporting exports of higher value alloys and forms had a certain logic for a country looking to develop its indigenous technology and capability to supply a rapidly growing domestic and regional market.

Subsidizing Exports

Supporting exports of unwrought metal, it was deemed, was tantamount to subsidizing the export of energy as a third of the cost of unwrought aluminum is made up simply of electricity costs, so exports of unwrought metal incur a 15% export duty whereas exports of value-added categories attract up to a 13% rebate of VAT costs. So, China split its subsidies scheme based on the harmonized tariff system supporting products falling in the value-added categories but not the basic 76.01 Unwrought Aluminum category of material suitable only for re-melting. Read more

Global stock markets continue to rise as we noticed last month. Stock markets have already made up for their losses following the U.K.’s decision to leave the European Union.

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This recovery suggests that investors are turning more positive on the health of the global economy, which bodes well for industrial metals demand growth.

The Chinese stock market ETF hits a nine-month high. Source: MetalMiner analysis of @Stockcharts.com data.

The Chinese stock market ETF hits a nine-month high. Source: MetalMiner analysis of @Stockcharts.com data.

This is especially true when China’s stock markets rally. China’s stock market is possibly the best benchmark for China’s economy or at least investors’ sentiment about the Chinese economy. The slowdown in the Chinese economy (weak demand with too much capacity) explains why industrial metals peaked in 2011.

China’s stock market bottomed out earlier this year (coinciding with a bottom in metal markets) thanks to China’s stimulus measures that fueled demand growth. Chinese shares have risen rapidly this month to the highest levels in nine months as investors expect its central bank to ease monetary policy again.

Caixin’s PMI measure of manufacturing in China moved above the boom-bust line of 50 last month, for the first time since early 2015 while China’s Q2 GDP growth came at 6.7%, beating the market’s expectations.

Industrial Metals Continue to Climb

Industrial Metals ETF rises to a 13-month high. Source: MetalMiner analysis of @Stockcharts.com data.

Industrial Metals ETF rises to a 13-month high. Source: MetalMiner analysis of @Stockcharts.com data.

Not surprisingly, the trend in industrial metal prices looks pretty similar to China’s stock market. The recent rally in global stock markets, particularly in China, favors a continuation of this year metals’ bull market.

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Some industrial metals have benefited from a bull narrative of supply shortfall this year but, on top of that, they have also benefited from higher demand coming from China which is being reflected in the surge in Chinese imports this year.

Renewable energy technology has been split into two camps since it became a reality around the turn of the century.

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On the one hand there are the passionate environmental believers for whom the inflated subsidies were an irrelevance in the face of saving our planet, and on the other were naysayers for whom the arguments about global warming were a plot by the far left to raise taxes or run some kind of tree-hugging environmental agenda at the expense of business and consumers.

Neither polarized position was fair, of course, and the quiet majority in the middle have watched the technologies become progressively more efficient and costs fall dramatically while the extremes of global warming horror stories have been discredited, but the hard science of gradually rising carbon levels has been widely accepted.

Who Cares Why The Temperature is Rising?

In the process, a wider acceptance has gained ground that global temperatures really are rising and whether it is part of a natural cycle or man-made is not a risk we can afford to take. Ultimately, action to reduce carbon emissions will be cheaper than many possible downside scenarios if left unchecked and most people would accept we are making a mess of our environment and really should behave more responsibly.

Meanwhile, politicians have been plowing our taxpayer money into supporting wind, solar and a number of other “renewable” technologies, with some degree of success. Costs for the major energy sources — solar and wind — have fallen, partly as a result of technology improvements and partly due to economies of scale, to the point now where private firms are signing up to invest in major wind projects for a tariff of just $100 per MegWatt/Hour (€90 per mw/h). Indeed, in Europe all the extra power capacity added since the mid ’90s has been renewable.

Source: Telegraph Newspaper

Source: Telegraph Newspaper

The biggest hurdle renewables now have to overcome is not the cost of production, but the curse of intermittency. Where does the power come from when the wind doesn’t blow or the sun doesn’t shine? Read more

This week, a comprehensive analysis of Dodd-Frank conflict minerals compliance filings showed that while some companies are going the extra mile to insure tantalum, tin, tungsten and gold are NOT influenced by the war in the Democratic Republic of the Congo, some still have a long way to go.

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Sadly, no Party City filing this year attesting to how conflict-free mylar party balloons are.

MetalMiner Olympic Construction Beat

The rushed and low-bid Olympic venues of Rio struck again this week as we all had to make sure to nut adjust the contrast on our sets when the games treated us to green water in indoor pools. Apparently they just ran out of pool-cleaning chemicals, not a high-up line-item in the Olympic punchlist, I’d imagine.

Just pretend it’s St. Patrick’s Day in Chicago. Rio visitors and athletes also got a visit from some ROUS’ (rodents of unusual size). Yes, they very much exist.

Metal Bulls

Our Metal Markets kept gaining this week as the Federal Reserve is still showing no stomach for interest rate increases and China’s stimulus keeps on stimulating. The London Metal Exchange is even breaking 30 years of tradition and introducing gold and silver contracts to get in on all of the precious fun.

LMEring_550

“Hey guys, let’s do this for silver and gold, too! Then, eventually, PGMs, too?” Source: London Metal Exchange.

Fresh off of slapping member-warehouse operator Metro International on the wrist, the LME is looking to expand its product mix and bring a greater return back to owner Hong Kong Exchanges and Clearing, Ltd.

Free Download: The August 2016 MMI Report

HKEX could use the help after this week.

Profits were down at Hong Kong Exchanges & Clearing Ltd. in the first half of 2016 and Rio Tinto and BHP Billiton are fighting an Australian iron ore mining tax.

Profits Down at HKEX in First Half

Core first-half earnings of the Hong Kong Exchanges & Clearing Ltd.’s commodity division slumped by 19% as trade in metals declined while hiring linked to a new spot commodities trading platform in China drove up costs, the exchange said on Wednesday.

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HKEX’s second-quarter net profit slumped 38% as falling trading volumes pushed down fees for buying and selling shares and commodities contracts.

BHP, Rio Blast Proposed Australian Iron Ore Mining Tax

Mining giants Rio Tinto Group and BHP Billiton on Tuesday issued statements attacking proposals for a new Australian mining tax as damaging and unfair. Brendon Grylls, leader of the National Party in Western Australia, has proposed an iron ore levy of $3.86 (Australian $5) a metric ton that would specifically target BHP and Rio.