Commentary

Goldman Sachs Group, love ‘em or hate ‘em, has an enviable reputation for correctly predicting economic trends, be they stock markets, exchange rates or commodities.

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Part of the reason is that they hire some of the brightest and best, and another part is that they have enormous resources at their disposal.

A combination of the two is channeled into top-class research and analysis, so when the bank creates a new index, the markets take notice. A Financial Times commodities note reviews Goldman’s latest creation, the China Metals Consumption Index and reports what it has to say about China’s economy based on 100 components of China’s industrial production data that pertain to commodity consumption.

China’s Far-Off Hard Landing

The index shows the pace of demand growth for metals and other mined commodities has now been slowing for four years. In the second quarter, Chinese demand actually fell for the first time since the financial crisis, the FT says, and as a result Goldman is now forecasting a “hard landing” for metals demand for the first half of this year which has not fully translated into prices yet.

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It was no surprise last week when AK Steel Corp., ArcelorMittal USA LLC, Nucor Corp., Steel Dynamics, Inc., and U.S. Steel Corp. filed petitions with the Commerce Dept. and the US International Trade Commission against eight countries the domestic industry believes are receiving illegal government subsidies and “dumping” flat cold-rolled coil products here.

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The eight countries included in the anti-dumping petitions and the dumping margins alleged by AK Steel and the domestic industry are:

  • Brazil, 50 to 59.74% subsidy rate
  • China, 265.98%
  • India, 42.28%
  • Japan, 82.58%
  • South Korea, 93.32 to 176.13%
  • Netherlands, 47.36 to 136.46%
  • Russia, 69.12 to 320.45%
  • The United Kingdom 47.64 to 84.34%

The petitions also allege that the foreign producers benefit from numerous countervailable subsidies.

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Could the cold-rolled coil anti-dumping cases set a new precedent for dumping steel in the US?

Again, this was no surprise as the case with China, in particular, has been well-documented and this isn’t the first go around with anti-dumping duties with most of these countries. What will be interesting to see, however, is how new trade remedy measures adopted by the federal government as part of two trade bills signed by President Obama in June, will affect enforcement of anti-dumping or countervailable duties that come out of these petitions.

At the time American Iron and Steel Institute President and CEO Thomas Gibson said, “We thank the Administration for recognizing the critical role of the steel industry by supporting these initiatives to improve the effectiveness of our anti-dumping and countervailing duty laws.”

Part of the remedies in the trade package was language that would force US Customs Enforcement and Border Protection to tariff imports more stringently, eliminating loopholes that allowed countries to essentially created stops in other ports to disguise the origin of shipments.

“AK Steel and the domestic industry have been facing a surge of what we believe are unfairly dumped and subsidized imports of cold-rolled steel coming into this country,” James L. Wainscott, chairman, president and CEO of AK Steel said in a statement. “The negative impact to our company and to other U.S. producers has been significant in terms of pricing, production, sales and earnings.”

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If the new measures deliver high margin tariffs and enforceable import protections it will be the culmination of decades of legislative of enforcement work by the US steel industry. Work that began as far back as the North American Free Trade Agreement.

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The Senate Energy and Natural Resources Committee voted 18-4 Friday to advance the Energy Policy Modernization Act of 2015, a broad bipartisan measure that would fund modernization of the energy grid and reauthorize the Land and Water Conservation Fund.

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10 Republicans and eight Democrats voted for the bill, presidential candidate Bernie Sanders (I-Vt.) was among those who voted against the bill, which would fund improvements to the energy grid, streamline mine permitting and set deadlines for liquid natural gas export decisions. It would also streamline the approval process for projects such the Alaska gas pipeline.

11 Environmental groups – including The Sierra Club, the League of Conservation Voters, the Environmental Defense Fund, and the Natural Resources Defense Council – oppose the legislation and sent a letter to the committee attacking several of its measures. Maria Cantwell (D.-Wash.), the ranking Democrat on the committee and a co-sponsor of the bill with Lisa Murkowski (R.-Alaska), usually enjoys the support of the environmental groups.

Controversial Measures Left Out

In fact, Cantwell and Murkowski specifically tailored the bill to avoid controversial issues that had stalled earlier energy bills over the last eight years. These included the Keystone XL Pipeline and tying any of its measures to climate change. The mainstream bill, apparently, was still not enough for Sanders of the environmental groups.

The letter said the bill needs a “stronger vision for accelerating the development and deployment of clean energy.”

The mining and manufacturing industries have generally been supportive of the bill.

“It should be a top priority for Congress this session to implement policies that take advantage of our significant resource abundance in order to bolster our energy supply and strengthen the economy,” said Hal Quinn, the National Mining Association‘s president and CEO, of the bill.

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With the gridlock in Washington, it is difficult to pass legislation at all, let alone get everything you want. Environmental groups called out 10 specific measures they found unacceptable in the letter. These included the sections on expediting LNG exports, ending the mandate to phase out fossil fuels in federal buildings, altering certain Energy Department efficiency programs, and expediting mineral mining permits.

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They may want to reconsider their opposition if this bill passes the full Senate, which it’s on track to do. A Cantwell spokeswoman said that amendments were planned to deal with many of the environment groups’ concerns. If this bill should fail it’s unlikely that a more environmentally friendly one will pass with both houses of Congress controlled by Republicans. The Sierra Club and the other groups might find themselves wishing for a bipartisan compromise bill like Murkowski and Cantwell’s.

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Domestic steel producers have filed new anti-dumping petitions against eight countries, charging them with unfairly subsidizing steel exports into the US. Also, the Senate Energy Committee has advanced a bill that would lift the 40-year US oil export ban but it faces a tough road with the full Senate.

Domestic Producers File New Steel Anti-Dumping Cases

AK Steel Corp., ArcelorMittal USA LLC, Nucor Corp., Steel Dynamics, Inc., and U.S. Steel Corp. – filed petitions recently with the Department of Commerce and the US International Trade Commission charging that unfairly-traded imports of cold-rolled steel flat products from Brazil, China, India, Japan, South Korea, Netherlands, Russia and the United Kingdom are causing material injury to the domestic industry.

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The petitions allege that producers in each of the eight countries are dumping cold-rolled steel in the US market at substantial margins, all above 42% government subsidy.

Bill to Lift US Oil Export Ban Advances

The US Senate Energy Committee on Thursday narrowly passed a bill to lift a 40-year-old ban on the export of crude oil, but the measure faces an uphill battle in getting passed by the full Senate, Reuters reported. The bill would allow the US to export oil and boost state revenue-sharing for offshore oil and gas drilling. It passed along party lines by a vote of 12-10.

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A giant robot fight will happen sometime next year. MegaBot MKII from the US will square off against Japan’s Kuratas.

I won’t try and justify this by the metal content — which is interesting in its own right — or by the turn of fortunes that has been created by taking an old repair shop for cargo ships and turning into a new industrial enterprise, admirable as that is, no this posts stands on its own two mechanical feet as pure fun.

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The robot constructors of the American entry are three engineers who basically wanted to live out their childhood fantasies and build a fighting robot. Weighing in at 12,000 lbs. and measuring some 15-ft. tall the MegaBot MKII is everything a child could imagine and more.

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We have often noted the funny ways metals are marketed in the overall media here at MetalMiner. Whether it’s steel being touted for its strength, while alloyed with titanium, or zinc being used to galvanize rods in environments where galvanizing won’t help, the the images of strength, resiliency and luxury certain metals hold benefit the sector as a whole.

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The American Institute of Architects’ (AIA) semi-annual Consensus Construction Forecast, a survey of several construction forecasters, is projecting that nonresidential spending will see a nearly 9% increase in 2015, with next year’s projection being 8.2%.

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One may think that China’s steel industry could hardly be in a worse place.

Half the industry is losing money in spite of falling iron ore and coking coal costs and a reduction in domestic power costs all aiding steel producers on the supply side. Even among those that did not lose money in the first half, margins are said to be razor thin and banks are reported to be cutting credit lines and presenting difficulties in rolling over loans according to China Iron and Steel Association (CISA) comments posted by Reuters.

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Concern in China is rising that June’s 3.4% fall in auto sales, compared to the year before, could be the start of a trend. After two years of consistent growth and high capacity utilization the world’s largest car market is showing signs of fragility.

Data from the China Association of Automobile Manufacturers quoted in the FT suggests China’s automotive market may be maturing after years of breakneck growth.

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How will US construction purchasing move forward with, apparently, no cost certainty for Highway Trust Fund projects beyond six months?

As House members convened Monday for their final days of work before an annual August recess, Majority Leader Kevin McCarthy (R.-Calif.) ruled out taking up the Senate’s $130 billion highway bill, which cleared a procedural hurdle Monday.

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“We’re not taking up the Senate bill,” he told reporters at the Capitol, adding that the Senate should instead take up the bill passed last week by the House. “My best advice to the Senate is to get our highway bill moved forward,” he said.

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