Articles in Category: Public Policy

The Commerce Department found, preliminarily, yesterday that imports of heavy-walled rectangular welded carbon steel pipes and tubes from Turkey were illegally subsidized by its government.

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Commerce calculated a preliminary subsidy rate of 7.69% and 1.35% percent for mandatory respondents MMZ Onur Boru Profil uretim San Ve Tic. A.S. and Ozdemir Boru Profil San ve Tic. Ltd Sti., respectively. All other producers/exporters in Turkey were assigned a preliminary subsidy rate of 4.39%.

As a result of the preliminary affirmative determination, Commerce will instruct U.S. Customs and Border Protection to require cash deposits based on these preliminary rates. While domestic producers will surely welcome any and all import duties, the amount of the deposits, some as low as 1.35%, may not be significant enough to deter the imports.

The petitioners for the investigation are Atlas Tube, a division of JMC Steel Group; Bull Moose Tube Company; EXLTUBE; Hannibal Industries, Inc.; Independence Tube Corporation; Maruichi American Corporation; Searing Industries; Southland Tube; and Vest, Inc.

The products subject to the investigation are heavy-walled rectangular welded steel pipes and tubes of rectangular (including square) cross section, having a nominal wall thickness of not less than 4 mm.

The final determination of this countervailing duties investigation has been aligned with the final determination of the companion anti-dumping duty investigation of heavy walled rectangular welded carbon steel pipes and tubes from Turkey. Therefore, Commerce is scheduled to announce its final determination in this investigation on or about May 2, 2016, unless the statutory deadline is extended.

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As the year ends we are seeing movement on several different investigations countervailing duties and anti-dumping investigations at the Commerce Department with generally favorable results for the petitioners and other domestic producers.

Fans camped out for days as lines snaked their way across sidewalks and into the parking lot. Some even dressed up as if it was Halloween.

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The tension seemed to grow with every media mention as the hype surrounding this much-anticipated event gathered steam.

That’s right, the Federal Reserve held its last meeting of the year and, as expected, raised interest rates a quarter-point! Fed fans had been queuing outside the Fed’s New York Bank in anticipation of Chairwoman Janet Yellen’s press conference and the Federal Open Market Committee‘s statement at 2 PM Wednesday. Hype like this has not surrounded a Fed meeting since back when then-Chairman Alan Greenspan went on his club tour.

StarWarsFansWaitingInLine_Fed_550_121715

Federal Reserve fans wait in line outside the New York Fed, hoping to catch a glimpse of Chairwoman Janet Yellen. Okay, they might be Star Wars fans at Hollywood’s Chinese Theater. Source: Starwars.com.

MetalMiner Co-Founder and colleague Stuart Burns exclaimed, “well, they finally did it!”

Yellen addressed the massive crowd with a prepared statement, “We believe we have seen substantial improvement in labor market conditions and, while things may be uneven across regions of the country, and different industrial sectors, we see an economy that is on a path of sustainable improvement,” she said to cheers from the amassed fans.

Even the Wall Street Journal went all fanboy and referred to the announcement as “we’ll get Janet Yellen herself, sitting down for an hour to walk through the decision and take questions from a room of Fed nerds.”

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Yet many questions remained. How gradual is gradual? Household incomes remain lower than they were a decade ago when adjusted for inflation, and wages have climbed only sluggishly even as firms hired back workers, so, sans inflation, how will the Fed continue to raise rates?

I smell a sequel!

With the end of the US oil export ban approaching, traders of physical crude have been scouring the globe and poring over shipping rates to exploit what they hope will be the biggest new arbitrage in years: selling domestic crude abroad.

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The trouble is, they can’t seem to make the math work; and analysts say it could be months if not years before US crude flows to foreign markets in any significant volume.

Reuters reports that most dealers welcomed the likely end to a ban that restricted opportunities in recent years to export relatively inexpensive US crude to higher priced international markets, but now traders in the opaque physical crude market say they cannot find any overseas buyers in the current depressed global price environment.

Still, both metals and oil production industry groups have praised the move and said it will lead to greater prosperity.

“Today, the American people can cheer the House and now the Senate for putting the nation’s energy needs ahead of politics,” said American Petroleum Institute President and CEO Jack Gerard. “This is a historic moment in our energy renaissance. Lifting this ban will help put downward pressure on gas prices, create jobs, grow our economy and lower our trade deficit. We now urge the president to follow Congress’ lead and sign this legislation into law.

“With the administration’s push to allow Iran to export its oil to the global market, it’s time for U.S. producers to have the same opportunity. Our allies around the world are eager to reduce their reliance on energy from less friendly nations.”

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American Institute of Steel Construction President and CEO Thomas J. Gibson took his organization’s support a step further, saying that removing the ban is a step toward stopping government policies that hinder trade.

“The steel products made by our member companies are essential for oil exploration, production, transmission, refining, and distribution,” Gibson said. “Removing this export ban will facilitate greater production of domestic energy resources and should create additional demand for high quality, American-made steel products — in addition to providing opportunities to strengthen the supply chain. Removing the existing US ban on the export of domestic crude oil is consistent with AISI’s long-standing opposition to trade-distorting government policies. Foreign government restrictions on the export of steelmaking raw materials have been used to provide foreign steelmakers with preferential access to raw materials at artificially low prices.”

Well they finally did it.

After a year or more of teasing, the Federal Reserve finally plucked up the courage to tweak interest rates up a minute 0.25% for the first time in almost a decade. The increase draws to a close an unprecedented period of record-low rates stretching back to December 2008, three months after the collapse of Lehman Brothers. In contrast to previous ham-fisted communications this move was well orchestrated and the markets, particularly benchmark ten-year treasuries, barely fluttered in the hours after the move was announced yesterday.

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The US dollar strengthened a little against the euro, but weakened a shade against Asian currencies as investors, pleased the waiting game is over, were lured out of safe havens and into emerging markets.

Interest rates are finally rising. Source: Adobe Stock/hywards.

Interest rates are finally rising. Source: Adobe Stock/hywards.

Asian economies, though, are set on a path of looser monetary policy, particularly China and Japan, so any bounce is likely to be short-lived, the Financial Times said. Overall though, the US dollar index rose 0.9% to 98.77%, less than 2% shy of a 12-year high, a level likely to be tested further in 2016. Read more

Today, the Commerce Department announced its affirmative preliminary determinations in the countervailing duty investigations of imports of cold-rolled steel flat products from Brazil, China, India, and Russia, and its negative preliminary determination in the CVD investigation of imports of cold-rolled steel flat products from South Korea.

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The investigations cover cold-rolled, flat-rolled steel products. It should come as no surprise that the largest subsidies are being assigned to Chinese importers.

Chinese Imports Take a Hit

In the China investigation, Commerce preliminarily determined that mandatory respondents Angang Group Hong Kong Co., Ltd. and Benxi Iron and Steel (Group) Special Steel Co., Ltd. and, a non-cooperative exporter — Commerce’s term for companies that do not respond to requests for information in the investigation — Qian’an Golden Point Trading Co., Ltd., received whopping subsidy rates of 227.29%.

steel coil processing machine inside of steel  plant

Imports of cold-rolled steel from the China, Brazil Russia and India will now have countervailing duties collected upon import into the US. Source: Adobe Stock/icarmen13.

All other exporters of cold-rolled steel flat products from China will be subject to that same subsidy rate of 227.29%. The rates are based on adverse facts available. Commerce determined that the Government of the People’s Republic of China, and the mandatory respondents, did not fully cooperate in the investigation.

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David S. Abraham runs the Technology, Rare and Electronics Materials Center and is author of “The Elements of Power: Gadgets, Guns And the Struggle for a Sustainable Future in the Rare Metal Age.” His career spans from commodities trading and Wall Street to the White House where he oversaw international and natural resource programs. He is a frequent speaker on rare metals and technology demands. This is part two of a discussion about rare metals, particularly rare earth element production and other issues surrounding the metals that fuel the gadgets and technology we love, with MetalMiner Editor Jeff Yoders. Here is part one if you missed it.

This part of our discussion focuses on rare earths, environmental product declarations, conflict-free minerals certifications and the challenges for buyers, miners and refiners in very loosely defined markets. 

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Jeff Yoders: Looking at solar panels, cell phones, wind turbines and other end-use products that use rare earth elements, do you feel that, in the near future, their production will require more readily available data about available supply, production and existing stockpiles of these elements or more transparent commodity markets? As we’ve seen in other maturing manufacturing industries?

David Abraham: With the increasing specialization of the materials we need — higher-grade, different specs — it’s going to be increasingly challenging to commoditize them. There is not a lot of interest among the producer companies to open the books and allow people to know what materials are being produced at what grade and so forth. Although it would be much more beneficial to have an open accounting, it’s a real challenge to do so. The London Metal Exchange is trying to commoditize certain minor metals but the challenge there is at what stage? What becomes the base commodity? What grade of neodymium? What grade of dysprosium? Because they are traded so lightly, the challenge is are vast. I would love to see it done, but I just don’t see it being done very well anytime soon.

Circuit boards depend on minor metals such as tantalum. Source: Adobe Stock/Lionelpc

Circuit boards depend on minor metals such as tantalum. Source: Adobe Stock/Lionelpc.

JY: Too many hurdles to cross?

DA: The interests are there further downstream especially as companies need to report on conflict minerals. As I elude to in the book, the people who are buying and selling the metalsdon’t see much benefit without that pressure from further downstream.

JY: What about the trend toward environmental product declarations and conflict-free metal designations. Do they hold any hope for opening up the rare metal supply chain to transparency?

DA: We really want to make sure the products that we use aren’t causing unintended harm. That’s a wonderful thing in and of itself and it gets people thinking, ‘where did these materials come from?’ The challenge, though, for a company to know exactly where all its materials come from, it’s a huge hurdle. Right now, they have to know where the material doesn’t come from, which is a little easier.

To know where EVERY spec comes from is a lot harder, and unrealistic currently. Many parts of the world simply don’t document, and don’t really have a reason, honestly, to document. As you know, going seven or 10 layers deep in a supply chain is difficult and they are going to places that don’t understand conflict minerals or even what’s to understand about them. I appreciate the direction it’s going.

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JY: When Dodd-Frank conflict mineral certifications were due earlier this year we reported on the results and one of the companies that submitted a 1502 form SD was Party City. They wanted to disclose the supply chain for their mylar balloons. The company’s submission said “It is possible that certain of the company’s metallic balloon and novelty products may contain Conflict Minerals” while explaining the many layers of suppliers and sub-suppliers in their chain.

DA: Its a relatively easy thing to know where balloon material is coming from. Compared to, say, airplanes with really complex alloys with say, a sprinkling of titanium or rhenium in various components.  It’s a challenge and hopefully we are pushing people in the right direction to ask the right questions, even though they’re not always going to be able to come up with the complete answer. The US Congress is saying to the Department of Defense ‘know where everything comes from.’ But supply chains are moving things and go through time. They’re not only seven to 10 layers deep, they’re years deep, in some cases. To know where everything comes from all of the time is more of an ideal than an end statement.

Congressional leaders have agreed to lift the nation’s 40-year-old ban on oil exports, a historic action that reflects political and economic shifts driven by a boom in US oil drilling. Just a few months ago, any lifting of the ban was thought to be far away but the congressional new tax and spending deal is said to have broad, bipartisan support.

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The measure allowing oil exports is at the center of a deal congressional leaders announced early Wednesday on spending and tax legislation. Both the House and Senate still must pass it and President Barack Obama must sign it into law.

The deal would lift the ban, a priority for republicans and the oil industry, and at the same time adopt environmental and renewable measures that democrats sought.

Architecture Billings Falls in November

The Architecture Billings Index  dipped in November. An economic indicator of construction activity, the ABI reflects the approximate nine-to-12-month lead time between architecture billings and construction spending.

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The American Institute of Architects reported the November ABI score was 49.3, down from the mark of 53.1 in the previous month. This score reflects a decrease in design services (any score above 50 indicates an increase in billings).

David S. Abraham runs the Technology, Rare and Electronics Materials Center and is author of “The Elements of Power: Gadgets, Guns And the Struggle for a Sustainable Future in the Rare Metal Age.” His career spans from commodities trading and Wall Street to the White House where he oversaw international and natural resource programs. He is a frequent speaker on rare metals and technology demands.

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A recipient of numerous fellowships, Abraham researched the rare metal trade at Tokyo University, Japan’s Ministry of Economy, Trade and Industry and the Council on Foreign Relations. He also oversaw operations of a clean water non-profit, starting the organization’s operations in Japan and Uganda. He recently wrote in a New York Times Op-Ed that our emerging green energy market could quickly create a shortage of rare metals. Below is a discussion about rare metals, particularly rare earth element production and other issues surrounding the metals that fuel the gadgets and technology we love, with MetalMiner Editor Jeff Yoders.

Jeff Yoders: With your background in rare metals — as a trader, researcher and regulator — you are one of the few people who has an intimate knowledge of all facets or rare metal production, procurement and end use. Was this book the culmination of your career in rare metals?

David Abraham: I think I’ve been dancing around natural resources for much of my career. I’m not an expert in one particular area of the supply chain. The book is a culmination of my work trying to understand many aspects of the entire field. I was in commodities trading, I understand the language there, although I wasn’t in it for my entire career, I was in government. I understand government policy-making, although I’ve only been there for a little while, too. I’ve been able to understand the language and perspectives of many different folks and that helped me understand the flow of these materials better.

The problem with many rare metals is that there is no way to track their origins without known warehouses or chains of custody. Many are traded in handfuls such as this Coltan ore. Source: Adobe Stock/dipling

The problem with many rare metals, is that there is no way to track their origins without known warehouses or chains of custody. Many are traded in backrooms in handfuls, such as this Columbite-tantalum ore. There is little to no transparency of sourcing. Source: Adobe Stock/dipling.

JY: One of our founders, Stuart Burns, came to metals the same way. Stuart used his scientific training and business experience to communicate effectively with engineer and buyer, local politician and corporate manager before he and our other founder, Lisa Reisman, started MetalMiner in 2008. They met while both were trading metals. You were really able to explain the the complexity of the rare metals supply chain that we have known about for a long time.

DA: It’s amazing to me and it’s even more amazing (the complexity of the rare metals supply chain) when you draw it out graphically. I was at a conference a few months back and someone drew out the interplay between China and Japan just on rare earths phosphors, you can’t even put it on one sheet of paper because it spreads everywhere. And that’s just phosphors.

JY: Looking at the chapter you wrote about CBMM and niobium, it shows the full scope of how this mineral is mined in Brazil, refined in Estonia and then used to strengthen steel in many nations. Looking at rare earths, do you believe market-based producers can compete with Chinese mines that are mostly state-run? Such as Bayon Obo, the Chinese iron ore mine you wrote about that has a very profitable rare earths business on the side?

DA: Well, I’ll let the market determine that. What we have seen, though, is that when you have to pay back your debt — when you have to absorb all of the operating costs and capital costs, just to get your minerals out of the ground and to process them — when you’re competing against someone who can do the same thing without a debt overhang, with often lower absorbing those operating and capital costs, and you’re still competing with someone who has lower environmental costs, it becomes really hard to compete, especitally when people only want to spend a 3 to 5% premium for your products.

JY: We have not seen prices rise significantly for rare earths in the last 4 years, yet we have seen demand increase for both rare metals and rare earths. How does that square?

DA: : Abundant supply, has overwhelmed demand.  Eventually, increasing demand will have to cause an increase in prices, but with the illegal materials world — that many of these metals are traded in within China — it’s hard to come by statistics that will tell you when that will be. Moreover, we don’t know where these materials are stockpiled, how much of them are in government warehouses, private warehouses, etc.

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JY: After the 2010 incident where China stopped exporting rare earths to Japan, do you believe that China’s use of its near-monopoly on their production is a national security issue? Could Chinese producers simply refuse to export their minerals again? Possibly blocking exports to the US?

DA: When it’s something that has happened in that past, there is always a likelihood that it could repeat itself. The bigger question is, is how vulnerable are our supply chains? There are always ways to get materials from one place to another. In the book I wrote about how the US accessed titanium from Russia during the Cold War, despite non-existent trade relations. So, there are always going to be ways to get specialty materials, but it creates a huge risk when your defense supply line goes through another country. Alternatively, the fact that everyone is interdependent also creates some opportunities for collaboration that reduce the specter of war. You have both things going on at the same time.

JY: It’s such a web, with so many shared and competing interests. It makes it difficult to see the whole picture.

DA: Right. Is it true that US security is undermined because we need resources from countries that we consider competitors? I would say yes, but there are also some positive sides to this situation that aren’t discussed as much. Interdependencies can sow the seeds of cooperation.

We will showcase Part Two of our discussion with David Abraham tomorrow. Follow Jeff Yoders on twitter at @jyoders19.

One of only two US-based grain-oriented electrical steel (GOES) producers recently idled production of the specialty metal, alone with some of its stainless melting and finishing operations. Commodity data from China continues to disappoint.

ATI Idles Stainless Line, GOES Operations Over Low Prices

Allegheny Technologies, Inc. has idled its standard stainless melt shop and sheet finishing operations at its Midland, Pa. facility. ATI also idled its grain-oriented electrical steel (GOES) operations, including its Bagdad, Pa. facility.

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ATI said, in a statement, that the future restart of the Midland and GOES operations, respectively, will depend on future business conditions and ATI’s ability to earn an acceptable return on invested capital on products produced at those operations.

Chinese Slowdown Continues in November

China’s output of key industrial commodities, including coal and steel, remained weak in November amid chronic oversupply as slowing construction demand took its toll.

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The world’s second-largest economy has been hit by weak demand at home and abroad, factory overcapacity and challenges posed by its transition to a consumption-led growth model from one reliant on investments

As you well know, the main cause of the commodities meltdown has been China’s slowdown. Since China makes up half of the world’s demand for commodities, the economic slowdown means lower demand which has led to a situation where a glut of materials can’t find a home.

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The role that China plays in commodity prices is so big that the future of metal prices is totally dependent on China. The longer it takes China to clean up its mess, the later metal prices will hit bottom. Currently, some key Chinese indicators we are tracking are giving us no reason to expect higher metal prices in 2016.

Trade Surplus

Imports to China dropped 8.7% to $143.14 billion in November from a year earlier, extending a slump in imports to a record 13 months, suggesting that government stimulus measures are failing to boost growth.

China Imports (millions $) Source: trading economics.com

China Imports (millions $) Source: TradingEconomics.com from Customs Administration Data.

Meanwhile, Chinese exports declined 6.8% to $197.24 billion in November from a year earlier, marking the fifth straight falling month. The fact that China is struggling to increase its exports demonstrates that global demand is weak and that China will have to find a more painful solution to balance its surplus. The trade surplus and the inability to find a home for the excess of materials flow will continue to keep a lid on China’s growth, depressing commodity prices.

China Exports (millions $). Source: tradingeconomics.com

China Exports (millions of dollars). Source: TradingEconomics.com

 Yuan Falls To Four-Year Low Against The Dollar

Chinese authorities want to see a smooth depreciation of the yuan/renminbi as China faces external pressure not to devalue its currency too quickly. A sharp depreciation would probably hurt the country’s credibility at the same time China wants to attract more foreign capital. In addition, it would raise criticisms that China is keeping its currency artificially low to encourage more exports.

Yuan versus dollar. Source: yahoo finance

Yuan versus dollar. Source: Yahoo Finance.

Recently, China’s central bank cut its reference rate to the lowest level since 2011. The yuan fell against the dollar to the lowest level since 2011. Although China has said that it has not allowed the yuan to slide to boost the economy or increase exports, it seems that the market is taking these developments as desperate actions from China’s government to help the economy, raising concerns among investors that the country’s slowdown might worsen.

China’s Equity Markets’ Slump Continues

We believe that equity markets are the best benchmark for the performance of China’s economy, or at least investors’ sentiment about China. We’ve analyzed before the link between China’s stock market and commodity prices. Currently, this link is even more noticeable.

China FXI ishares

China FXI shares continue to fall. Source: @StockCharts.com.

After the huge slump this summer, equity prices mildly recovered, but since October we see that equities are heading south again. The poor performance of Chinese stocks demonstrates that investors are still worried about the future of the country and not lured by its government actions.

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Contrary to what others are saying, we suspect that the slump in China’s stock market could continue, resulting in more fears and more sell-offs in commodities/metals markets.