Articles in Category: Public Policy

The Supreme Court sided with a company that wants to appeal a Clean Water Act determination claiming private land is “waters of the U.S.” and Iran has found shipping partners to bring its oil to international markets.

SCOTUS Rules Against Clean Water Act

The Supreme Court recently ruled against the Obama administration in a case regarding water pollution permits.

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The nation’s highest court ruled unanimously that a landowner can appeal through the federal court system a determination from the Army Corps of Engineers that a water body is subject to federal jurisdiction and permit requirements under the Clean Water Act.
The court’s eight justices agreed in Army Corps of Engineers v. Hawkes Co. Inc. that the Corps’ final “jurisdictional determination” regarding a peat mining company’s wetlands is a “final agency action,” so the company can challenge it like any regulation. The case is likely to have consequences for the federal government’s entire enforcement of the Clean Water Act, the main law regarding pollution control.

Iranian Oil Coming to Market Faster Than Expected

More than 25 European and Asian-owned supertankers are shipping Iranian oil, data seen by Reuters shows, allowing Tehran to ramp up exports much faster than analysts had expected following the lifting of sanctions in January.

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Iran was struggling as recently as April to find partners to ship its oil, but after an agreement on a temporary insurance fix more than a third of Iran’s crude shipments are now being handled by foreign vessels.

I don’t know if any of you have been following the Sky Atlantic series “Billions” — it may be screened here in the U.K. later than the U.S. and is already history stateside — but after the first two episodes it is following an intriguing if well-worn path of the demon hedge fund manager pitted against the flawed but public-serving attorney general. Echoes of the big short and other films demonizing hedge funds come to mind, but it’s well done all the same.

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This is not all Hollywood, or wherever Sky films its TV series, though. In the real world, we are seeing the impact of unbridled and largely unregulated hedge funds manipulating the market and our purchase costs, our cash flow, and, ultimately, our profitability every day. Read more

An interesting article in the Financial Times recently reviewed the acquisition by China Molybdenum of the Tenke copper-cobalt mine in the Democratic Republic of Congo from Freeport-McMoRan.

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As the FT points out the purchase at a price of $2.65 billion is the largest single private investment in the DRC’s history and will be the largest purchase of copper assets since China’s purchase of Glencore’s Las Bambas mine in Peru for $6 billion in 2014.

Cobalt Control

The article examines the risks not to the copper market but to the co-product produced at Tenke, cobalt. The article focuses on risks to the cobalt supply chain of China gaining a dominant position in the global chain for this increasingly critical metal. Read more

There are seven suitors in the ring for the United Kingdom assets of Tata Steel, but is the Indian steelmaker possibly rethinking selling the unit off and planning to keeping the business?

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A report in the Guardian quotes “sources close to Tata Steel” has claimed that Tata, even as it was going through the motions of the sale process, “was evaluating” the performance of its U.K. operations and the package of financial support that the U.K. government offered.

This steel plant at Port Talbot in South Wales, U.K., could close if Tata Steel can't find a buyer. Even as steel prices increased last week. Source: Adobe Stock/Petert2

This steel plant at Port Talbot in South Wales, U.K., might stay in Tata’s hands if the owner can work out a similar pension fix to what other suitors are offering. Source: Adobe Stock/Petert2

Hit by cheap Chinese steel imports, as elsewhere in the world, in addition to supply glut, Britain’s steel industry has been in the doldrums for some time now. In March this year, Tata Steel announced that it wanted to sell its remaining plants in the country, putting over 11,000 jobs at risk. Read more

This week, we asked if cheap Chinese steel imports are really that bad for the U.S.? After all, if Beijing and China’s regional governments are subsidizing steel production exported to the U.S. to the tune of 522% for cold-rolled and 451% for corrosion-resistant, aren’t U.S. manufacturers gaining a huge cost advantage on the finished products they ship back to the People’s Republic? Or even sell domestically?

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U.S. Producers certainly don’t see it that way. Neither do steel producers in most of the developed world, save China. 12 Steel associations from the Americas and Europe released another strongly worded letter to governments around the world, lamenting Chinese overproduction. Just look at those tariffs! The steel associations really mean business this time!

Nice job on the ditch, USA! I’m China, I’m here to fill it back in. Source: Adobe Stock/Kara.

China, of course, doesn’t see it this way at all and has previously said, through its Ministry of Commerce, that its steel industry is merely “export competitive.” It’s certainly a novel defense, but it would also be the equivalent of Tom Brady saying his footballs are only “deflation competitive” without dealing with why they are so. Or Russia saying Crimea is “annexation competitive” without saying why it should stop being a part of Ukraine and start becoming a part of the federation.

What is Protectionism?

Still, U.S. regulators like the Commerce Department and the International Trade Administration may want to tone down their heavy anti-dumping and countervailing duties decisions as 522% and 451% is an awful lot of anti-dumping and countervailing duties and the extreme outlier positions that Commerce has staked out could garner sympathy for China in front of a future World Trade Organization court. Read more

On Wednesday, the People’s Bank of China weakened the yuan/renminbi to its lowest level in five years. The actual cut was small: only about 0.34%. The Chinese yuan closed 0.2% weaker on Tuesday at 6.559 per dollar compared with that morning’s midpoint of 6.5468. Since the end of April, the currency’s value has dropped three weeks in a row.

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It did not send world markets spiraling downward as panicked investors did last August when China devalued its currency by nearly 2%, or in early January, when it cut by about 0.5%.

How Fast is the Chinese Economy Growing?

China’s ruling Communist Party still claims the country is growing 6.5% to 7% a year. Capital Economics, among other independent forecasters, believes the real number is closer to 4.2%.

Bloomberg_yuanfix_550_052516

Click for full size. Source: Bloomberg News

Market watchers believe there is a struggle going on between China’s top leaders on what to do next.

The Wall Street Journal reported that, behind closed doors in March, some of China’s most prominent economists and bankers bluntly asked the PBOC to stop fighting the financial markets and let the value of the nation’s currency fall. They supposedly got nowhere with bank officials.

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Domestic HRC steel prices have surged 67% since they hit a floor just six months ago.

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The duties imposed on steel products caused imports to taper down in a big way this year and U.S. steel mills now have the power to raise their base selling prices. Moreover, China’s stimulus measures boosted demand for steel in this first half, causing prices in China to rise, too.

Domestic HRC prices continue to surge

Domestic HRC prices continue to surge. Source: MetalMiner Index

Earlier this month we’ve heard many analysts say the recent steel price rally was purely speculative, without a fundamental justification for the price swings, as steel-rebar and iron-ore futures traded in China went into sharp decline in recent weeks. However, U.S. domestic prices are rising without looking back, at least for now.

Higher U.S Steel Prices: Is That What We Really Want?

Some firms have lost a ton of money in recent years as China created global oversupply, bringing global steel prices down with massive exports. In the face of rising imports, American production has dropped and U.S. steel producers are justifiably unhappy with the circumstances.

Now U.S. policymakers seem determined to follow a protectionist path because, truth to be said, it’s unfair that a company has to go out of business because of the stupidity of Chinese policymakers. These protectionism measures might or might not help the U.S. steel industry in the long-term, however, this raises another question: will this really help the broader U.S. economy?

Steel Exports, Tariff Economics

The cost of import restrictions directly equals the harm they do to manufacturers of value-added products that use steel as an input. According to Department of Commerce statistics, downstream steel manufacturers that utilize steel generate much more jobs and wealth to the U.S economy than what metal manufacturers generate.

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This subject is very controversial and, perhaps, there is not a right answer to the issue as someone is always going to get hurt. What’s true is that China is losing money in the form of subsidies to save its steel industry and keep its massive population employed, and by doing that China is actually transferring so much of its wealth into the U.S. by selling low-priced steel. Which, doesn’t sound as bad as U.S. steel producers make it sound

In exactly 30 days the people of Britain will vote on whether to leave the European Union.

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For the people of the U.K., and indeed the rest of Europe their decision could be a turning point in the future of their country and the wider European community. It is no exaggeration to say Britain’s exit could spark the break-up of the E.U.

The near-miss Austria experienced yesterday in voting in a far right president illustrates how extreme tensions within the European Union have become. Only by all the opposing parties supporting pro-E.U. Green party socialist Alexander Van der Bellen were they able to beat the far-right Freedom party candidate Norbert Hofer from becoming head of state, the margin was a miniscule 31,000 votes out of an electoral return of 4.64 million.

Angry Voters

Dissatisfaction with the E.U., supported by fears of immigration destroying the social fabric and cultural heritage of societies across the continent, has played a major part in not just the U.K.’s referendum but in the rise of both far-right and far-left parties across Europe in recent years.

Anecdotal evidence can be very misleading, dependent as it is on the social mix such opinion is garnered from and the geographic location. Until recently, the decision in the U.K. seemed on something of a knife edge, particularly in the weeks following the announcement by Boris Johnson, London’s charismatic former mayor, that he was actively campaigning for the Leave vote, but in recent days the markets at least have been pricing in a Stay outcome, as evidenced by the strength of sterling.

Investment Sentiment

Indeed, a poll this week showing a late swing by older voters to maintain the status quo resulted in a sharp jump in the value of the pound as this FT graph shows.

Source: Financial Times

Source: Financial Times

Alluring as the Leave campaign’s image of a free and unrestricted future for the UK would be, most are coming to realize such an outcome is unlikely to be achievable. The least-damaging outcome in the months after leaving would be for a quick trade deal with the rest of the E.U. Read more

Jennifer Diggins is the director of Government Affairs at Charlotte, N.C.-based Nucor Corp., the largest steelmaker in the U.S. and North America’s largest recycler of any material (Nucor recycled 16.9 million tons of scrap steel in 2015 at its 23 electric arc furnace mills). Diggins serves as the firm’s liaison to Washington, D.C. MetalMiner’s editorial staff recently had a chance to sit down with Jennifer for a MetalMiner Q&A to discuss recent issues in steel, including Chinese overproduction, the tariffs recently passed against some imports and the role of the international scrap market.

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MetalMiner: Recently, executives from the five leading steel companies in the U.S. told the Congressional Steel Caucus that unfair foreign trade practices have caused an increase in steel imports resulting in the loss of more than 13,000 jobs in the industry this year. How was that number arrived at? Could it be even worse than the 13,000 estimated?

jennifer_diggins_headshot_300_Nucor_052116Jennifer Diggins: There is the potential for the number to be much worse when you factor in job losses in industries that support steel.

People often fail to appreciate the broad impact the steel industry has on the rest of the economy. Every one job in the steel industry supports seven other jobs in the economy. These are jobs in businesses that supply steelmakers with raw materials, contractors who do maintenance work at steel mills, truck drivers who transport our products, just to name a few. When steel production decreases like it has, workers in these supporting industries also are impacted. Read more

The scrapping of rare earths export quotas late last year resulted in soaring exports from China which produced 84% of total world rare earths output of 124,000 metric tons, but prices have fallen to multiyear lows in 2016 in response to low demand and oversupply.

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Oxide shipments more than doubled in Q1 2016 at 11,956 mt. March was the second best month on record. That was despite expectations that exports were expected to drop off dramatically this year after December when cargoes hit a record high of nearly 5,000 mt as users built up inventories ahead of the Chinese new year.

Exports Up, Demand Down

Exports of dysprosium surged five-fold while neodymium shipments jumped more than 300%. The Chinese government plans to complete the consolidation of its rare earth industry under six large state-owned firms — Chinalco, Northern Rare Earth, Xiamen Tungsten, China Minmetals, Southern Rare Earth and Guangdong Rare Earth — by the end of June, deputy industry and information technology minister Xin Guobin said.

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Much of the expected consolidation in China was slowed in the first two quarters by the weak market and stimulus at home that has led miners and domestic producers of smartphones and cars to increase production despite demand not moving much at all. If rare earths are to make a comeback in the second half of the year, actual end user demand will have to increase independent of government stimulus.