Articles in Category: Public Policy

Speaking at S&P Global Platts’ recent Steel Markets North America conference, noted trade attorney Alan Price of the Washington law firm Wiley Rein said the World Trade Organization case that the federal government filed on behalf of aluminum producers against Chinese overproduction of the light metal in January, will essentially serve as a guide for other industries looking to challenge state-subsidized companies’ overproduction for export in the People’s Republic.

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“The solutions to Chinese overcapacity are to follow the money and see who’s subsidizing it,” said Price, who has represented several U.S. industries in anti-dumping and countervailing duty legal actions against Chinese producers, as well as WTO disputes. “China has not fundamentally reformed its excess capacity. The rest of the world’s production has remained stable, but the explosion in Chinese capacity is still there.”

Alan Price

Alan Price, image courtesy of Wiley Rein

Price said the aluminum case fundamentally attacks the mechanism China uses to back up failing businesses, the availability of subsidized money in China known as “money for metal” on the municipal, state and federal level there.

“The WTO case involving aluminum, challenges, fundamentally, the Chinese subsidization system,” Price said. “It goes after the financial systems of China and how everything is financed. In aluminum you can track all the companies involved. There are around 10 and it’s a much more understandable beast, much more understandable problem than the vastness of the Chinese steel industry. This case will fundamentally decide if China will be allowed to prop up failing businesses.” Read more

If you can’t beat them, then join them? That may be the gist of UC Rusal’s latest proposal for dealing with Chinese aluminum overproduction: an OPEC-like organization for the global aluminum industry.

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In a Reuters article the world’s largest aluminiu producer outside of China was quoted by the TASS news agency at an economic conference in Russia’s Black Sea resort of Sochi as suggesting that Industry ministers should get together and explore ways and means of creating a producers club.

Liquid metal

The Chinese aluminum industry has been able to cut costs by essentially selling liquid metal to nearby product manufacturers. Source: Adobe Stock/Kybele.

The trade minister quoted by TASS, Denis Manturov, talked of creating a single policy in the area of standards and technology but, in reality, there would be little to be gained if that was the sole purpose. More attractive to western smelters in general, and Rusal in particular, would be any mechanism that curbed China’s growing dominance of the primary aluminum market.

Rusal was, until a few years ago the world’s largest aluminum producer. In 2016 Rusal produced 3.685 million metric tons, according to Reuters, but China now produces over half the world’s aluminum with Chinese producers overtaking the Russian firm. China’s Hongqiao is now the world’s biggest aluminum producer overtaking Rusal in 2015 and again in 2016. Read more

More and more Indian companies, including steelmakers such as Tata and Essar Steel, are entering the defense manufacturing sector. Essar Steel, for example, recently announced a game plan to develop steel grades for land and naval defense applications.

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Essar Steel made a low key entry into the sector about five years ago, but it’s now turned bullish on defense because of the increased marketability of its products. Essar’s products include an indigenous armor plate for ballistic protection. Some of its products are innovative while others are simple substitutes for imports for India’s native contractors looking to keep more of their supply chains close to home. The latter have been used in the construction of naval destroyers, offshore patrol vessels and floating docks. Other products are used in the construction of Coast Guard vessels, so also the repair of naval ships.

In land defense, Essar Steel’s products are used in battle tanks, the motor casings of missiles, combat vehicles, and artillery guns. Read more

On its journey of self-reliance, India still needs coal.

Highly dependent on imports for this crucial raw material needed for steel and power generation, India has decided to tackle its coking coal deficit by acquiring a foreign coking coal asset, and washing certain grades of coal to make it fuel-ready.

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Power Minister Piyush Goyal told news agency Press Trust of India that one of the ways the government was contemplating reducing its reliance on imports was to wash certain grades of coal to make available 20 million metric tons of coking coal in the next three to four years for the domestic steel industry.

Not Enough Coal for Steel Production or Power Generation

Chairman and Managing Director of Coal India Ltd. S. Bhattacharya has reiterated that coking coal requirements for the domestic steel industry are still not being met. State-run CIL, the country’s near-monopoly coal producer, is said to be looking at coking coal assets overseas as the country was faced with constraints of commercially viable domestic metallurgical coal reserves, the Minister told Parliament in a statement. CIL is looking to appoint a merchant banker to assist it in acquiring assets overseas. Read more

President Trump’s budget proposal this week would cut the federal government to its core if enacted, culling back numerous programs and expediting a historic contraction of the federal workforce, according to economists who spoke to the Washington Post and saw the draft plans.

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This would be the first time the government has executed cuts of this magnitude — and all at once — since the drawdown following World War II, economists and budget analysts told the Post.

Chinese Rebar Jumps

Shanghai rebar steel futures rose nearly 3% on Monday, supported by a pickup in seasonal demand in top consumer China that also lifted Chinese iron ore off of a one-month low.

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But bloated stockpiles of iron ore at China’s ports — holding near their highest in at least 13 years — capped price gains in the steelmaking raw material.

The most-active rebar on the Shanghai Futures Exchange was up 2.7% at 3,496 yuan ($506) a metric ton by the midday break.

U.S. infrastructure was given a near-failing grade of D+ by the American Society of Civil Engineers (ASCE) yesterday, the largest trade association of the civil engineering profession in the U.S. This was the second time in two reports that our national roads, bridges, railways, airports, dams and other infrastructure sites barely avoided the dreaded F.  The criticism could give momentum to President Donald Trump’s vow of a $1 trillion investment to rebuild everything from roads to dams.

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The D+ grade from the American Society of Civil Engineers‘ (ASCE) is unchanged from its last report card in 2013, suggesting that only minor progress had been made in improving public works.

The ASCE estimated in a statement that the United States needed to invest $4.59 trillion by 2025 to bring its infrastructure to an adequate B- grade, a figure about $2 trillion higher than current funding levels.

Chinese Steel Exports Plummet

Chinese steel exports tumbled to a three-year low in February, customs data showed on Wednesday, lower than expectations, as steelmakers in the world’s top producer shifted to meeting rising demand at home.

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Shipments for the month were 5.75 million metric tons, the lowest since February 2014, data from the General Administration of Customs showed. It was down 29.1% from a year ago and down 22.5% from January.

German Dominguez

German Dominguez

There’s been a lot of talk about President Trump’s “border tax” lately as it relates to reshoring manufacturing to the U.S. and financing “great, great” border walls, and my colleague Jeff Yoders has done a bang-up job covering the gamut of the Trump administration’s proposed policies in general.

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On our sister site Spend Matters, we tried to get closer to the bottom of the whole south-of-the-border tax issue, which opened up a can of worms — and devolved into golf analogies.

But what does it all mean for U.S and Mexican manufacturers and their future strategies?

Q&A With German Dominguez, Independent Advisor and LatAm Sourcing Expert

We caught up with German Dominguez, an independent sourcing advisor helping U.S. manufacturers to best-cost-country-source direct materials where it is most advantageous in Latin America, mainly within The Pacific Alliance region (Mexico, Colombia, Peru and Chile) — the largest emerging markets economic bloc in Latin America. Read more

A Washington, D.C. federal judge on Tuesday rejected the Cheyenne River Sioux Tribe’s bid to block operation of the Dakota Access pipeline on federal land in North Dakota, saying the tribe likely won’t be able to show that the federal government interfered with its exercise of religion on land outside the tribal reservation by allowing the project to go forward.

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Judge James Boasberg of the U.S. District Court for the District of Columbia rejected the tribes’ request for an injunction to withdraw permission issued by the U.S. Army Corps of Engineers for the last, eight-mile link of the oil pipeline underneath Lake Oahe in North Dakota. Read more

After several hundred companies and individuals registered as potentially interested vendors, the Department of Homeland Security has added details to its request for Mexican border wall plans and delayed the procurement process by several days.

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The request for proposal is for a concrete wall structure or structures, nominally 30-ft. tall, that will meet requirements for “aesthetics, anti-climbing and resistance to tampering or damage,” according to a change in the solicitation plan posted to the DHS website on March 3.

Two-phase design-build procedures will be observed, under FAR Part 36.3, with Phase One of the RFP due on or about March 20th.

Under the procurement request, vendors must submit a concept paper of their prototype, which will result in the evaluation and down-selection. Offerers will then submit proposals to the full RFP, including prices, due on or about May 3, 2017.

Multiple awards of indefinite quantity, indefinite delivery contracts are anticipated, DHS said. Unless the full cost of the wall falls within DHS’ current budget for 2017, congress will have to appropriate money for its construction.

Not Only US-Made Steel After All

Speaking to reporters onboard Air Force One on Friday, White House spokeswoman Sarah Huckabee Sanders said that the Keystone XL pipeline, which has been in the works for a decade, will be exempt from an executive order President Trump signed in January requiring new pipelines, repairs, or retrofits to use only U.S.-made steel “to the maximum extent possible.”

The justification for that decision is that the pipeline is already under construction, and so is not covered by the executive order.

“The Keystone XL Pipeline is currently in the process of being constructed, so it does not count as a new, retrofitted, repaired, or expanded pipeline,” Sanders said.

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While it’s true that some parts of Keystone XL have already been built and its developer, TransCanada Corp., has likely already purchased steel for some of it, the 1,200-mile pipeline that is planned to stretch from Alberta, Canada, to Nebraska will likely require much more steel to be purchased before its eventual completion, a construction process likely to take years. The Dakota Access Pipeline that will run from North Dakota to Illinois, which has already restarted construction, was only eight miles of pipe from completion when the Obama administration stopped it last Fall and it, very likely, would not require more steel to be purchased for its completion.

President Donald Trump’s address to Congress this week included a defense department budget request which it claimed was historic.

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“I am sending Congress a budget that rebuilds the military, eliminates the defense sequester and calls for one of the largest increases in national defense spending in American history,” he is quoted by the New York Times is saying.

What’s a Few Hundred Billion?

While claims that the proposed increase to the defense budget is historic might be stretching the truth, Trump’s proposal to add $54 billion to the Pentagon’s budget is said to amount to a 10% increase, a significant rise — If it was true. Unfortunately, the New York Times is not alone in questioning numbers. We have little interest here in making claims about fake news, but we’re more concerned about those communities and industries that rely on military spending for their livelihoods.

You want F-35 fighter jets with those carriers? Better add about $500 billion to that budget. Source: Adobe Stock/Spacekris.

Questions have been raised in recent years about the readiness of today’s U.S. military. After fighting two major wars in Afghanistan and Iraq, troops are said to be exhausted and supplies depleted. Even so, the U.S. spends more money on its military than the next seven countries combined. Read more