Articles in Category: Public Policy

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This morning in metals news, steel prices in China are up and the government is looking to strike a balance, German company Thyssenkrupp isn’t in a rush to forge a merger with the European business of India’s Tata Steel and China responds to the U.S. Department of Commerce’s ruling this week regarding Chinese aluminum foil, which the DOC determined was being unfairly subsidized by the government.

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Steel Prices On the Way Up in China

Rising steel prices have Beijing looking for ways to adapt, according to a CNBC report.

On the heels of efforts to cut excess Chinese steel production, prices are rising — but the government is looking to strike a balance.

“For Beijing, it’s a tough situation: tackle steel overcapacity, rebalance economic growth, control environmental pollution and also manage market stability — especially in advance of a leadership shuffle due in the fall,” CNBC’s Sophia Yan writes.

No Rush to Merge, Thyssenkrupp CFO Says

Talks of a merger between the European businesses of Thyssenkrupp and India’s Tata Steel have hung around since last year.

They even seemed to get a boost in light of news reported yesterday about Tata’s plans to separate its British pension scheme from its businesses.

Despite that step, Thyssenkrupp CFO Guido Kerkhoff says not so fast.

Kerkhoff told reporters Thursday that while they prefer a “fast solution” in potential merger talks, quality comes first.

China Warns U.S. After DOC’s Aluminum Foil Ruling

Unsurprisingly, the U.S. aluminum industry applauded the Department of Commerce’s preliminary determination Tuesday regarding Chinese aluminum foil.

Also unsurprisingly, China had something to say about it, too.

The Chinese Ministry of Commerce wrote in a statement on its website that the DOC’s claims were “without foundation” and urged the U.S. to “act cautiously and make a fair decision to avoid any negative impact on the normal economic and trade exchanges between China and the U.S.”

On Tuesday, Secretary of Commerce Wilbur Ross announced the findings of the countervailing duties investigation, declaring that Chinese exporters of aluminum foil received countervailing subsidies of 16.56 to 80.97 percent. As a result, the U.S. could impose duties of up to 81 percent on Chinese foil in return.

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Meanwhile, the outcome of the Section 232 investigation into aluminum imports, however, remains pending.

Global trade developments with a dose of healthy demand appear to be setting the stage for grain-oriented electrical steel (GOES) price movements for H2.

Although the big story in the U.S. involves Section 232 developments, GOES prices globally are increasing because of several measures in both China and Europe.

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According to a recent TEX Report, Japanese mills received a $100/metric ton increase for GOES shipments to India and Southeast Asia. And, because of an anti-dumping order in China, Baoshan has raised its prices six times this year.

Curiously, the European Union implemented a system by which a “price floor” has been established for GOES. This price, according to TEX Report, is higher than the international GOES price. Europe can expect to see higher-priced imports as a result.

Meanwhile, the U.S. Department of Commerce has not released any recommendations on the Section 232 investigation. Although GOES producer AK Steel — along with other steel producers —  has lobbied hard for some sort of import curb, the fact that no recommendations have been made suggests the DOC acknowledges that the Section 232 investigation contains a number of complexities across a broad range of stakeholders that have all weighed in on the findings.

The Section 232 investigation, to some extent, has slowed down annual negotiating cycles for manufacturing organizations, as several recently told MetalMiner at our 2018 Budgeting and Forecasting workshop.

Producers had likely hoped for the release of the findings to take their price cues. MetalMiner believes that without the release of the report, producers will start considering 2018 contracts in September, similar to normal annual contract cycles.

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This morning in metals news, the still-pending Section 232 investigations into steel and aluminum imports, raw steel production is up 2.7% in the U.S. year-over-year and aluminum has reached its highest point in 2.5 years.

Uncertainty Growing in Aluminum Market

It’s not exactly surprising that some in the aluminum and steel industries are feeling anxious about the Section 232 investigations, still unresolved, initiated by the Trump administration in April.

According to a report in Platts, that’s exactly how some are feeling on the aluminum side. Not only that, the uncertainty is making what was already considered a volatile aluminum market even more volatile.

Another potential consequence of the investigation? The cost of downstream products could go up, according to industry sources cited by Platts.

Raw Steel Production Down From Previous Week, Up For the Year

The American Iron and Steel Institute released its weekly raw steel production data on Monday, and the numbers are both up and down.

For the week ending Aug. 5, production was down 0.4% from the previous week ending July 29. Production for the week ending Aug. 5 amounted to 1,762,000 tons.

Production for the year to date, however, was up 2.7%, with 53,870,000 tons produced through Aug. 5 this year.

Aluminum Heats Up

The durable metal reached a 2.5-year high Tuesday on news of Chinese supply cuts and signs of strong Chinese demand, Reuters reported.

According to the report, 3.21 million tons of production will be shut down in China’s Shandong province.

LME aluminum eclipsed the $2,000/ton mark on Tuesday, reaching as high as $2,007 — the highest since December 2014, according to Reuters.

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This morning in metals news, Indian steel company JSW Steel Ltd. could partner with a Japanese firm to acquire distressed Indian companies, steel import permit applications fell 12.3% in the U.S. last month and Chinese aluminum capacity cuts are sending prices up.

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Steel Tycoon Sajjan Jindal Open to Partnership with JFE

A deal might be in the works between Indian and Japanese companies.

Bloomberg reported Sajjan Jindal and his JSW Steel Ltd. would be open to investment from the Japanese firm JFE Holdings Inc., per JSW Joint Managing Director Seshagiri Rao. According to the report, JSW is looking to acquire distressed companies in India.

With plants in southern and western India, JSW is looking to expand into the eastern half of the country.

Steel Imports Permit Applications Fall in July

According to the Commerce Department’s most recent Steel Import Monitoring and Analysis (SIMA) data, steel import permit applications fell 12.3% in July compared with the previous month.

According to a release from the American Iron and Steel Institute (AISI), in July the largest finished steel import permit applications for offshore countries were for: South Korea (333,000 net tons, down 14% from June preliminary), Turkey (211,000 net tons, down 36%), Japan (149,000 net tons, up 20%), Germany (144,000 net tons, up 24%) and Taiwan (136,000 net tons, down 17%).

Through the first seven months of 2017, the largest offshore suppliers were South Korea (2,261,000 net tons, down 5% from the same period in 2016), Turkey (1,681,000 net tons, up 11%) and Japan (935,000 net tons, down 12%).

Chinese Capacity Cuts Lead to Rising Aluminum Prices

The longevity of the positive effects of China’s capacity cuts has been debated here and elsewhere. In some cases, capacity cuts have simply given way to new capacity elsewhere, effectively negating the initial cuts’ support of aluminum prices.

For now, however, the most recent round of aluminum capacity cuts in China has been good news for the metal’s price, which has risen in recent days.

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According to Reuters, China is “forcing the suspension of aluminum plants that have not obtained proper permits to build or expand, or that have not met strict environmental standards.”

According to Reuters, shares of Aluminium Corp of China rose 47 percent since the start of July. Shares in Shenzhen-listed Yunnan Aluminium rose even more, by a whopping 55 percent.

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Talk of tariffs stemming from the Trump administration’s Section 232 investigations of steel and aluminum imports has seemingly softened over the last couple of weeks, but the overall trade dynamic between the to countries remains tense.

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First, President Trump told the Wall Street Journal last week that “we don’t want to do it at this moment” in reference to trade actions on steel imports resulting from the administration’s Section 232 investigation.

Section 232 of the Trade Expansion Act of 1962 gives the Secretary of Commerce authority to conduct comprehensive investigations to determine the effects of imports of any article on national security. The investigations were announced open in April. By law, the investigation must be concluded, including a submitted report, within 270 days of its opening.

More recently, a shift toward a negotiated agreement seems to be gaining favor. According to Inside U.S. Trade ($), Secretary of Commerce Wilbur Ross suggested “voluntary” agreements, according to House Ways & Means Committee members who met with Ross on July 27.

However, in terms of getting any additional clarity on what the administration plans to do, the committee members left the July 27 briefing without much of that.

“I don’t think that there was a lot of clarification,” Richard Neal (D-MA) told Inside U.S. Trade.
The deadlines for the Section 232 investigations are well down the road (not until January), but, until then, talk is likely to continue about what the administration will or won’t do, in addition to what other relevant parties could do in retaliation.
In similar news, the administration and many in the U.S. steel industry have pointed to China’s excess capacity as the major problem for the domestic industry, leading to suggestions of tariffs or quotas targeting China (but also affecting other steel-producing countries).
Talk of trade remedies against China, however, hasn’t just been limited to steel and aluminum.
Bloomberg reported earlier today that the Trump administration could go after China for perceived intellectual property violations.
According to the Bloomberg report, the administration is considering invoking another article — Section 301 of the Trade Act of 1974.
In essence, Section 301 is the mechanism by which the U.S. can respond to countries in violation of trade agreements or engaging in unfair trade practices. The move would further increase tensions between the U.S. and China, particularly in light of Trump’s admonishments of China for not doing enough to rein in North Korea.

The steel market is doing rather well, particularly in the U.S., but an improvement in demand is helping lift earnings in Europe, too.

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The phrase “a rising tide lifts all boats” is probably true of steel companies — it is also true to say it doesn’t lift all boats equally.

ArcelorMittal, part way through a major re-structuring program to re-focus the business on value add growth areas and exit less attractive market segments, is doing rather well judging by both the share price and recent reporting.

The Northwest Indiana Times reported last week that the world’s largest steelmaker grew its second-quarter profit by 19% to $1.3 billion, lifting its first-half profit to $2.3 billion (compared to just $696 million during the same period in 2016).

Demand in the U.S. — though it has been impacted by imports, the firm claims — was high, as the firm shipped 21.5 million tons of steel in the second quarter, a 2% increase over the first quarter. So far this year, however, its steel shipments in H1 declined by 2.4% to 42.5 million tons compared to the year before.

So, margins are up but volumes are down. North American shipments dropped 3.4% to 5.4 million tons and crude steel production fell 7.3% to 5.8 million tons, the Northwest Indiana Times reports. Yet, with sales prices up 5.7%, sales values were up 3.3% to $4.6 billion in North America, leading to much-improved profits.

Even U.S. Steel is doing better. CEO Dave Burritt said U.S. Steel saw “higher prices and volumes in all of our segments.” Burritt also said management believes that if the steel market continues going as it is currently, it could earn as much as $1.70 per share this year – adding the caveat that unfortunately it doesn’t see the market continuing in the same manner for the rest of the year.

Analysts are questioning whether the present share value is justified, suggesting after falling some 30% already this year it could have further to go.

Analysts such as Citi see major “downside” in 2018 and 2019 to U.S. Steel’s share price, predicting a loss for the year even though the first half has been relatively (for U.S. Steel) strong.

Waning Optimism and What Comes Next

Some steel sector share prices were boosted earlier this year by the hope President Trump would pump billions into infrastructure. Then, as hopes faded for that outcome, they got a sugar rush from the prospect of trade measures to curb imports of foreign steel.

But the Motley Fool, quoting the Wall Street Journal last week, reported comments by the president suggesting he was kicking trade action into the long grass.

Trump said he does not want to impose tariffs and quotas on imported steel “at this moment.” Objections from trade partners (who don’t want their exports curbed), and from domestic steel users as well (who like the idea of cheap foreign steel) are sapping the administration’s support for the trade action. It’s hardly surprising, but until recently the steel lobby had been putting a powerful case for action, and it took time for counterarguments to gain traction.

The president went on to say that instead of imposing sanctions “very soon,” as the steel industry was hoping, his staff will need to do “statutory studies … addressing the steel dumping” issue. And while the president promised action “fairly soon,” he also said the administration plans to address health-care reform, tax reform, and may even want to get an infrastructure bill passed by Congress before returning to the steel issue.

So, for the time being, forget about it — “he has other fish to fry” seems to be the position.

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Without curbs to imports, the view for steel companies’ profits remaining robust becomes less compelling.

Companies like Nucor and Arcelor will continue to do well, but others, like U.S. Steel and AK Steel, will struggle later this year and into 2018.

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You would think that a stiffening of Washington’s backbone when it comes to Russia would be welcomed by Europe. After all, it was Germany’s Angela Markel that has led the tough stand taken against Moscow following the Russian-sponsored uprising in eastern Ukraine and annexation of Crimea.

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But on the contrary, cross-party support in the U.S. House of Representatives led to a 419 to 3 vote in favor of new financial sanctions against Russia this week, a move that has faced fierce criticism from Bonn and considerable debate about the wider implications.

The EU probably does not care about the inclusion of North Korea in the proposed sanctions, although it has taken a distinctly different and more tolerant line on Iran (the third regime included in the action).

But it is Russia that is really raising the hackles in Bonn according to Carnegie Europe, a Brussels-based think tank.

Impact on Europe

A post on the site reports the action could not only severely impact many European companies who have already invested heavily in projects, particularly in the oil and gas sector, but that it could also precipitate a political divide among Europe’s partners. Seen in the context of this development, President Donald Trump’s focus on Poland during his recent visit to the continent for the G-20 summit takes on a more sinister slant — at least, that is the view many Europeans are taking.

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This morning in metals news, a recent report predicts the precious metal catalysts market will reach $19.4 billion by 2022, Reliance Steel and Aluminum Co. posted strong second-quarter numbers and   China’s Ministry of Commerce says it is willing to work with the U.S. on global aluminum market issues.

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Precious Metal Catalysts Market to Grow to $19.4B

Precious metal catalysts will prove to be especially precious on the market in the near future, according to a report from Research and Markets.

The report indicates the market will grow from $14.37 billion this year to $19.41 billion by 2022, at a compound annual growth rate (CAGR) of 6.19%.

Why is this metal sector set to become even more precious? Advances in automobile technology and pharmaceutical applications will see a rise in demand for this subset of metals, according to the research report.

“The newly developed emission standards demand additional improvements in catalyst technologies to successfully remove toxic substances from car exhausts, which will, in turn, drive the precious metal catalysts market growth through the automobile sector,” the report states.

A Good Q2 for Reliance

Reliance Steel and Aluminum Co. — the largest metals service center operator in North America,  headquartered in Los Angeles — posted strong numbers for this year’s second quarter.

According to a report on the Nasdaq website, the company reported a bottom line of $103.1 million, ($1.40 per share), compared with $99.5 million, or $1.36 per share, for Q2 of 2016.

The company’s revenue total also rose in Q2 by 12.7% to $2.48 billion, up from $2.20 billion last year.

China Signals Willingness to Work on Aluminum Market Issues

Ever since announcing Section 232 investigations of steel and aluminum, the Trump administration and the U.S. Department of Commerce have made it clear that Chinese excess capacity is the primary focus (notwithstanding the fact that Chinese steel and aluminum represent relatively small portions of U.S. imports).

On the heels of the U.S. International Trade Commission’s (USITC) Section 332 report on competitive factors affecting U.S. aluminum, China’s Ministry of Commerce suggested a global approach to tackling problems within the aluminum market, Reuters reported.

According to the Reuters report, Ministry of Commerce spokesman Gao Feng did not agree with the assessment that the USITC report accused China of “sponsoring” its aluminum industry.

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The results of the aluminum investigation will likely not be coming for some time, as the steel report is expected to come first. However, June came and went without a steel 232 announcement. Plus, if President Donald Trump’s comments earlier this week are any indication, steel trade policy doesn’t seem to be a top priority at the moment, particularly as the health care debate continues to heat up.

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This evening in metals news, President Donald Trump indicated yesterday Section 232 might be going on the backburner, data show a sharp rise in steel imports during June and a new report predicts the 3-D printing metals market will be worth $12 billion by 2028.

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Taking 5 on Section 232

The Trump administration’s Section 232 investigations are being watched closely by metals producers around the world — but Section 232 is just one thing on the administration’s plate.

On Tuesday, President Trump told the Wall Street Journal that when it comes to enacting measures against steel imports (like tariffs or quotas), “we don’t want to do it right now.”

In April, the administration launched a national-security probe of steel and aluminum imports. Under Section 232 of the Trade Expansion Act, Secretary of Commerce Wilbur Ross has 270 days to present the president with a report and recommendations.

With health care currently in the spotlight — in addition to Trump’s announcement today regarding banning transgender individuals from serving in the military — Section 232 has seemingly lost a little steam. Previously, the steel investigation results were expected to be announced by the end of June.

Steel prices performed well in the weeks following the April announcement, but that initial optimism has fizzled. Trump’s noncommittal comment regarding the investigation sent several domestic steel companies downward yesterday, according to MarketWatch, including AK Steel, Nucor and ArcelorMittal.

Steel Imports Rise in June

U.S. imports of steel rose sharply for the month of June, according to U.S. Census Bureau data cited by the American Iron and Steel Institute (AISI) on Wednesday.

The country imported approximately 3.87 million net tons in June. In the year to date, 19.64 million tons have been imported, up 25% from the same time frame in 2016. Finished steel imports amounted to 15 million tons in the year to date, up 17.2% compared with the same time period in 2016.

Per the report, products which saw significant increases from May to June included: reinforcing bars (84%), sheets and strip all other metallic coatings (61%), heavy structural shapes (40%), cold-rolled sheets (32%), hot-rolled sheets (29%), mechanical tubing (25%), oil country goods (19%), hot-rolled bars (12%) and plates in coils (11%).

Notable year to date increases versus the same period in 2016 include: oil country goods (248%), cold rolled sheets (41%), sheets and strip all other metallic coatings (36%), standard pipe (35%),  line pipe (32%), mechanical tubing (29%), hot-rolled bars (28%), sheets and strip hot-dipped galvanized (26%), tin plate (17%) and wire rods (10%).

3-D Printing Worth $12B by 2028: Report

Momentum continues to build for 3-D printing technology, so much so that a recent report predicts the growing sector will be worth $12 billion in just over a decade from now.

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The report, from IDTechEx Research, states that “at this stage it would be a mistake to underestimate the enormous potential for innovation in 3D printing of metals.”

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For India, a recent development may turn its minerals industry on its head.

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Scientists from the Geological Survey of India (GSI), a department under the Ministry of Mines, recently discovered millions of tons of precious stones and minerals under the deep waters that surround peninsular India.

What’s more, the discovery lies within the Exclusive Economic Zone (EEZ), which means India will benefit the most.

It was sometime in 2014 that the scientists found the huge presence of marine resources off the Indian coast, extending till the Andaman and Nicobar Islands and around Lakshadweep. The amount of lime mud, phosphate-rich and calcareous sediments, hydrocarbons, metalliferous deposits and micronodules called for a more extensive exploration, and that’s precisely what the GSI team did.

After three years of exploration, they hit paydirt.

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