Articles in Category: Public Policy

A magnifying glass is on steel, particularly Chinese steel.

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The U.S. Department of Commerce’s Section 232 steel and stainless steel investigation appears to be under the watchful eye of European leaders.

In that vein, newly released Chinese data has not gone unnoticed.

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Two words are dominating the U.S. aluminum industry’s focus as it awaits the Department of Commerce’s Section 232 investigation findings relating to aluminum (and steel) imports: Chinese overcapacity.

Cheap Chinese imports, subsidized by the Chinese government, U.S. producers argue, have adversely affected U.S. producers — leading to job losses and closures of smelters.

Of course, Chinese overcapacity is not a new target — former President Barack Obama filed a complaint to the World Trade Organization in January regarding “artificially cheap loans” propping up Chinese producers and, consequently, undercutting U.S. producers.

Ahead of tomorrow morning’s scheduled Department of Commerce hearing (9 a.m., Eastern Time) on the ongoing Section 232 investigation into aluminum imports, senior-level executives in the U.S. aluminum industry on Wednesday offered a preview of the testimony they will deliver in Washington D.C.

Speaking at the conference Wednesday were: Garney B. Scott, president of Scepter, Inc. and chairman of The Aluminum Association; Marco Palmieri, president of Novelis North America, Heidi Brock, president and CEO, of The Aluminum Association; and John Herrmannpartner at Kelley Drye & Warren.

“The past two or three years have been among the most challenging in the industry’s history,” Scott told reporters. Scott said U.S. producers have competed on the global marketplace for decades, but cannot compete with China and “more than a decade of government subsidies that have led to irrational, non-market incentives for companies to produce metal the world does not need,” adding eight U.S. smelters have closed since 2014 as a result.

The executives were united in their expressed hopes for the outcome of the Section 232 investigation.

“What we want is a negotiated government-to-government agreement that has a concrete and enforceable plan to address Chinese aluminum overcapacity,” Brock said.

Brock added that China is the sole focus of the U.S. aluminum industry’s overcapacity concerns. Furthermore, she said it is important that any trade policy readjustments do not adversely affect countries, like Canada and those in the European Union, who are “playing by the rules.”

“Canada and countries that play by the rules and have not contributed to overcapacity … we want to make sure there are not unintended consequences on the supply chain,” she said.

In a show of solidarity, The Aluminum Association, the Aluminum Association of Canada and European Aluminium released a joint statement Tuesday, urging governments of the G20 to tackle global aluminum overcapacity.

“We acknowledge the issue of Chinese aluminum excess capacity as the root cause of the challenges faced by the aluminium industries in North America and in Europe,” the release said. “Overcapacity encourages unfair trading practices and displacement of domestic production, which cause global imbalances in the aluminium industry and distort international trade flows.”

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In terms of aluminum rolling, Palmieri told reporters Chinese capacity amounts to 15 million tons per year, while its consumption is approximately 9 million tons per year, leaving an excess of 6 million tons — greater than the 5 million ton capacity of the U.S. and Canadian markets.

Prepared statements provided and intended to be delivered as testimony during tomorrow’s hearing further drove home the focus on Chinese overcapacity.

Palmieri, the president of Novelis North America, wrote the investigation is “timely and vital to the future of the domestic aluminum industry,” adding that unfairly priced Chinese aluminum has already forced the company to “exit some product lines.”

“We also have reason to believe that Chinese producers will increase production of automotive aluminum capacity within the next few years,” Palmieri writes. “If this increased capacity of aluminum were permitted to be exported to the U.S. at subsidized and unfair prices, Novelis could be forced to slash production, lay off employees, and shutter entire facilities if those facilities are not able to deliver reasonable rates of return.”

Commerce Department Hearing Gives Aluminum Industry Chance to Express Concerns

What ultimately comes out of the investigation remains to be seen (including which policy recommendations Secretary of Commerce Wilbur Ross provides at the investigation’s conclusion will be accepted as given to President Donald Trump, which is in accordance with his authority under Section 232 of the Trade Expansion Act).

Free Download: The June 2017 MMI Report

Under Section 232, the Secretary of Commerce must conclude the investigation and deliver findings within 270 days of the investigation’s commencement. The investigations into the national-security threats posed by aluminum and steel imports were announced in April.

Whatever happens, U.S. aluminum industry figures across the supply chain will have the chance to make their concerns heard.

Thursday morning’s hearing can be live-streamed on YouTube and Facebook.

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This morning in metals news, the biggest aluminum smelter in China is cutting back on outdated capacity, New York State’s governor and legislative leaders announced a “Buy American” deal for state purchases of iron and steel, and the European Union’s trade commissioner says the European bloc “will have to respond” if President Donald Trump imposes trade tariffs on steel imports from China, the EU and other nations.

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China Targets Aluminum Capacity

China Hongqiao Group Ltd. will be cutting back on outdated aluminum capacity, Bloomberg reported.

The cutback comes at the same time as the Chinese government focuses on illegal production, according to the report.

Chinese overcapacity is a main talking point for metals producers around the world, especially in the U.S. A Department of Commerce hearing on the government’s Section 232 investigation of aluminum imports is scheduled for 9 a.m. Eastern Time on Thursday, June 22.

Analysts expect further Chinese aluminum production cutbacks throughout the year.

N.Y. Pledges to ‘Buy American’

As the U.S. aluminum and steel industries await the Department of Commerce’s Section 232 investigation findings, New York politicians agreed on a proposal for buying American iron and steel.

New York Gov. Andrew Cuomo and other state leaders announced a “Buy American” agreement, which calls for the use of American iron and steel for some state road and bridge projects, Newsday reported.

According to the report, the proposal gives preference to American producers for iron and steel contracts worth more than $1 million.

Although the proposal is a scaled-down version of the initial bill — the result of objections from neighboring Canada — the bill fits well in a climate dominated by talk about the potential outcomes and ramifications of the Section 232 investigation.

European Union Strikes Back?

As the U.S. Department of Commerce gets set to announce the findings and recommendations of its Section 232 investigations, trading partners abroad are keeping tabs on the process.

EU Trade Commissioner Cecilia Malmström said the EU “will need to respond” if President Donald Trump places tariffs on steel from the EU (and other nations), POLITICO reported.

Free Download: The June 2017 MMI Report

She mentioned Chinese overcapacity and market distortions as sources of the U.S.’s concerns about steel imports. Even if tariffs applied to Chinese steel don’t directly affect EU nations, Malmström said they will still be hit “very hard.”

In an increasingly interconnected world, rarely does a trade policy targeting one country — whether formally or in spirit — only affect that country. As the U.S. is expected to take aim at China with any trade policy readjustments that come as a result of the Section 232 investigation, other nations could very well be affected.

The findings of the 232 investigation are expected to be announced in the near future. Thursday morning’s Department of Commerce hearing on aluminum should shed additional light on the government’s thinking.

A Department of Commerce hearing is scheduled for Thursday morning on the subject of the Section 232 investigation into aluminum imports. qingwa/Adobe Stock

These days, three numbers in succession are all the talk in the worlds of steel and aluminum: 2-3-2.

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The U.S. Department of Commerce’s Section 232 investigations into steel and aluminum imports and whether they pose a national-security risk have been in the news since the probe was announced in April. Industry organizations have weighed in on the investigation, some in reference to the tangential debate of renegotiating the 23-year-old North American Free Trade Agreement (NAFTA).

During a scheduled press briefing Wednesday afternoon, several senior-level executives from the aluminum industry will preview testimony that will be given at Thursday’s Department of Commerce hearing. Thursday’s hearing is scheduled for 9 a.m Eastern Time and will be live-streamed on both YouTube and Facebook.

Free Download: The June 2017 MMI Report

Ahead of Wednesday’s preview, members of the Congressional Aluminum Caucus wrote in support of the domestic aluminum industry and the Section 232 investigation, stating “we support the Administration’s efforts to review the strategic importance of aluminum and consider actions that will address unfair trade.”

U.S. Reps. Larry Bucshon (R-IN), Suzan DelBene (D-WA), Bill Johnson (R-OH) and Bill Owens (D-NY-Retired) formed the Congressional Aluminum Caucus in August 2013. The Caucus consists of 35 Republicans and 13 Democrats.

The Caucus’ letter, signed by 13 representatives and addressed to Secretary of Commerce Wilbur Ross, outlined some of the main points of contention for the aluminum industry.

Unsurprisingly, Chinese overcapacity sits at the forefront of the policy debate for the American aluminum industry.

“Chinese overcapacity and trade of Chinese products through third countries is the fundamental issue that needs to be addressed by the Administration,” the letter states, adding that “Chinese oversupply affects the full value chain.”

While the representatives took China to task, they also made sure to highlight other trading partners, like fellow NAFTA member Canada, and their role in a hypothetical alteration of U.S.  trade policy.

“… U.S. aluminum trade with Canada is strategically vital and supports many American jobs,” the letter continued. “A trade remedy that impairs aluminum trade with Canada would not be in our national security or economic interest.”

According to a release from The Aluminum Association, Wednesday’s press briefing will focus on similar subjects, namely Chinese overcapacity, national security, and exemptions for Canadian imports and other producers who “trade fairly and who have not contributed to rising global overcapacity.”

Commerce Department Rulings Tackle Circumvention Efforts

In recent developments, the aluminum industry celebrated what some in the industry dubbed a “victory” last week when the Department of Commerce ruled in favor of the petitioning Aluminum Extrusion Fair Trade Committee.

The June 13 ruling determined Chinese imports of 6xxx series aluminum alloys disguised as pallets would be included in the scope of antidumping and countervailing duty orders on aluminum extrusions from China.

The ruling came approximately six months after another Commerce Department decision cracking down on Chinese circumvention of extrusion orders. The December ruling included 1xxx series aluminum alloys under the umbrella of the extrusion orders.

Like their colleagues in the steel industry for their respective Section 232 investigation, those in the domestic aluminum industry will watching Thursday’s Department of Commerce hearing with great interest.

China is far from alone in worrying about an investigation by the U.S. Department of Commerce into the impact of imported steel on the U.S. steel industry (due to be announced this week).

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The Section 232 investigation is the result of a campaign pledge by President Donald Trump to protect domestic steelmakers against foreign steel imports. Section 232 uses as its test whether imports have been detrimentally harmed the U.S. ability to produce steel for its defense industry, and while it is not country-specific there was little secret at whom it was primarily aimed.

The worry in Europe, generally, and in the U.K. in particular, is that supplies from the region will be caught up in a blanket Section 232 ruling, applying onerous duties that could hit some local steelmakers disproportionately hard.

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The landmark North American Free Trade Agreement (NAFTA) went into effect 23 years ago — unsurprisingly, many in the metals industry are eyeing reforms to modernize the long-standing agreement signed by the U.S., Canada and Mexico.

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In late April, President Donald Trump signed an executive order focusing on trade-agreement violations and abuses, directing the Department of Commerce and the United States trade representative (USTR) to study the U.S.’s free-trade agreements. One month ago, the office of the USTR notified Congress of the administration’s intention to renegotiate NAFTA.

In recent months, Trump has indicated he is willing to terminate the agreement if renegotiation efforts don’t go anywhere. In April, the president said he was “psyched” to terminate the deal, but ultimately had a change of heart after speaking with Canadian Prime Minister Justin Trudeau and Mexican President Enrique Peña Nieto, per media reports.

That came three months after Trump pulled the U.S. out of the Trans-Pacific Partnership (TPP), negotiated by his Democratic predecessor Barack Obama.

When will renegotiation actually happen? The timeline isn’t clear. On Monday, Secretary of Commerce Wilbur Ross told reporters renegotiation might not happen until next year.

As uncertainty clouds NAFTA’s future, domestic metals organizations have weighed in on the ways in which they believe the 23-year-old agreement can be improved.

Metal Industry Hopes to Keep Positives, Target Problem Areas

Players in the metals industry have spoken out about how they want to see 23-year-old trilateral trade agreement modified for this new age.

In a filing June 12, The Aluminum Association, addressing U.S. Trade Representative Robert Lighthizer, urged that NAFTA should be renegotiated in a way that modernizes it without compromising the benefits of the original agreement.

In the letter to Lighthizer, The Aluminum Association underscored three ways to strengthen the agreement:

  • Improving and strengthening customs procedures and cooperation to facilitate the movement of aluminum and aluminum products among the United States, Canada, and Mexico
  • Working with the Canadian and Mexican governments to ensure that “NAFTA preferences are available only to aluminum articles that truly originate in the territory of a NAFTA party” and that “unscrupulous producers and exporters operating outside the NAFTA region are not improperly claiming preferential treatment under NAFTA by either making fraudulent country of origin claims or incorrectly classifying the article at issue”
  • Negotiating common disciplines on the operations of State-Owned Enterprises (SOEs), which “often benefit from favorable government policies and subsidies that create significant market distortions”

Regarding the third point, the release specifically zeroed in on China, noting “massive overcapacity” encourages unfair trading practices.

In addition to the aluminum industry, steel groups are weighing in on a potential NAFTA face-lift.

The American Iron and Steel Institute (AISI), like The Aluminum Association, stressed in a letter to Edward Gresser, chair of the Trade Policy Staff Committee, that NAFTA has yielded “significant benefits” but could be modernized after nearly a quarter of a century since its passage.

NAFTA has been critical to the steel industry, as 90% of all U.S. steel mill product exports went to Canada or Mexico in 2016, according to the June 12 AISI letter.

U.S. steel exports to Canada and Mexico grew rapidly following the passage of NAFTA. Source: American Iron and Steel Institute

Like The Aluminum Association, the AISI cited rules-of-origin issues, global overcapacity and conduct of SOEs as issues needing assessment in a revamped agreement.

In addition, currency manipulation was a point of emphasis.

“Currency manipulation makes exports more expensive, imports cheaper, and can subsidize cheaper prices for exports to third-markets,” the AISI letter states. “The International Monetary Fund (IMF) has provisions against currency manipulation, but the lack of an enforcement mechanism has limited their effectiveness.”

The AISI also suggested possible improvements to “streamline” customs procedures and “to ensure that manufacturers can ship and receive steel in an efficient manner.” Part of that streamlining, AISI argues, includes updating border infrastructure.

So, in many ways, U.S. steel and aluminum seem to be on the same page with respect to NAFTA — that is, that there’s room for improvement.

NAFTA Renegotiation a Hot Topic

The USTR sent out a notice May 27 seeking public comments on the topic of NAFTA renegotiation. The period for public comments closed June 12, but not before 1,396 comments were submitted.

Clearly, NAFTA is a very important subject to many people and industry organizations. While the minutiae of free-trade agreements can sometimes make the subject seem opaque, the outcomes are decidedly human, as jobs and livelihoods are often at stake.

Leo Gerard, international president of United Steelworkers, submitted a public comment in support of renegotiating NAFTA, provided it is “along the lines identified in the comprehensive approach identified in the negotiating framework document submitted on behalf of the USW and other unions by the AFL-CIO.”

“We have felt the negative impact of the NAFTA first hand since it entered into force more than two decades ago,” Gerard wrote. “Tens of thousands of plants have shut down, millions of workers have lost their jobs and many other workers have seen their compensation stagnate or decline as a result of NAFTA.”

Looking Ahead

What’s next for the process? A public hearing will be held at 9 a.m. Tuesday, June 27, in the Main Hearing Room of the United States International Trade Commission, 500 E Street SW., Washington D.C.

As demonstrated by the volume of public comments, there is a wide range of suggestions being offered with respect to NAFTA renegotiations.

One thing, however, is clear: Many of the interested parties want change of some kind.

Free Download: The June 2017 MMI Report

It is not unusual for the wrong thing to be done for the right reasons.

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Whether it is the rule of unexpected consequences or blind adherence to doctrine, there are countless historical examples of individuals, companies and governments that made decisions, claiming the moral high ground, which have resulted in damage or impoverishment to those the decision was intended to assist.

The mining sector and even some unions have reacted angrily to South Africa Minister of Mining Mosebenzi Zwane’s announcement last week at a presentation in Pretoria of a new mining charter intended to further extend South Africa’s Black Economic Empowerment (BEE) rules.

The charter sets out a number of significant changes to the rules governing ownership of South Africa’s vast mining industry.

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The findings of the Trump administration’s ongoing Section 232 investigation into steel imports have yet to announced, but American metal producers are clearly anxiously awaiting the probe’s findings.

Earlier this week, White House spokesman Sean Spicer said the findings of the investigation could be released as early as this week (they have not been released yet).

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The investigation, launched by the Trump administration and announced in April, seeks to determine whether steel imports pose a national security threat. (For more background on the investigation, read our Lisa Reisman’s post earlier this week about the 232 investigation’s potential outcomes and impact).

Section 232 investigations are rooted in the authority of the Trade Expansion Act of 1962. At their conclusion, the president can either agree or disagree with the recommendations set forth by the secretary of commerce (Wilbur Ross, in this case).

It’s not yet clear what the investigation’s findings will be, or what practical impacts, in terms of enacted policy, they will have.

But it’s clear that U.S. companies are anxious for the Trump administration to make good on campaign promises to bolster American industry.

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Before we head into the weekend, let’s take a look back at a few of this week’s stories:

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A Surprise in the U.K.

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Our Stuart Burns wrote about the U.K. parliamentary elections, which surprised many and saw Labour outperform expectations against Prime Minister Theresa May’s Conservative Party.

What does the election result mean for business? Well, that will partially be determined by which path to Brexit the U.K. ultimately takes. Burns writes there is likely to be compromise and a search for alternate solutions — that is, a softer Brexit.

The 411 on 232

White House spokesman Sean Spicer announced Monday the findings of the administration’s Section 232 investigation into steel imports could be released as early this week.

Although the findings have yet to be released, our Lisa Reisman laid out the potential outcomes and impacts of the investigation on Wednesday.

How will the recommendations affect steel prices domestically? No one knows for sure, of course, but Reisman wrote we shouldn’t jump to conclusions about potential price increases.

“Some have speculated that the forthcoming recommendations would force prices higher, however, we would not necessarily rush to that same conclusion,” Reisman wrote.

Markets showing pessimistic side

Burns also wrote this week about commodities markets — and not just metals, but oil, too — which have seen a drop in optimism of late.

What’s the downtrend all about? Many reasons, Burns argues, including: oversupply, the Chinese government “squeezing investors by increasing shadow banking borrowing costs,” and waning optimism with respect to the Trump administration delivering on campaign promises regarding massive infrastructure projects.

But not to send you into your weekend on a down note — it’s not all cloudy skies.

“With that said, that doesn’t mean the U.S. or global economies are about to tank,” Burns writes. “European growth has been much better this year and Japan is expected to improve further, while the World Bank is predicting an unchanged 2.7% global growth this year in its latest report.”

June MMI Report Released This Week

In case you missed it, our monthly MMI Report was released this week; as always, it’s jam-packed with information.

The report covers markets trends in our 10 sub-indexes: Automotive, Aluminum, Construction, Copper, Global Precious, GOES (grain-oriented electrical steel), Rare Earths, Raw Steel, Renewables and Stainless Steel.

Want to know what’s happening in any of these categories? Get yourself up to speed by checking out the June report, which you can access by visiting the link below.

Free Download: The June 2017 MMI Report

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A new front seems to have opened up in India’s steel wars.

Only this time, the country seems to be fighting for its steel companies to be allowed to sell its steel in a foreign market.

India has complained to the World Trade Organization (WTO) that the U.S. had failed to drop anti-subsidy duties on certain Indian steel products. The move comes on the heels of India itself having imposed anti-dumping duty on 47 steel products from six nations in May.

According to the Indian government, the U.S. had not kept its promise of an April 2016 deadline to comply with a WTO ruling that faulted it for imposing countervailing duties on hot-rolled carbon steel flat products from India.

In December 2014, the WTO ruled against the U.S.’s move to impose high duty on imports of certain Indian steel products. The world body said the high duty by the U.S. was inconsistent with various provisions of the Agreement on Subsidies and Countervailing Measures.

The U.S. sought time until the April 2016 deadline to comply with the ruling. Realizing that the deadline had passed away without any action on part of the U.S. authorities, India has now requested the WTO dispute consultations with the U.S. regarding U.S. compliance.

Some experts say the U.S. will have to amend its domestic norms to comply with the WTO’s verdict on countervailing duties.

In May, India imposed anti-dumping duty on products from six nations — China, Japan, South Korea, Brazil, Russia and Indonesia — to protect its own industry from cheap imports.

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