Commentary

Should we live like wookiees?

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Well, maybe not EXACTLY like Han Solo’s best pal, Chewbacca, but live in tall, wooden structures?

Wookiee Cultural Center

A wookiee cultural center nestled deep in the trees of Kashyyk. Why don’t we get Pete Nelson to design treehouses for all of us? Painting by the incomparable Ralph McQuarrie. Source: Lucasfilm.

Wookiee civilization, as depicted in the “Star Wars” films, is an advanced, highly sophisticated one. The ape-like humanoids have all of the intelligence of the human characters in the movies, save the ability to vocalize and speak in a language that isn’t moans and growls. Read more

We wrote recently about the probable impact of President-elect Trump’s forthcoming economic policy, particularly his focus on infrastructure spending, Global trade and putting U.S. manufacturing, particularly steel, at the heart of his economic policy.

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His promises have been generally well-received yet they raise an awkward question: Creating demand and limiting supply — first by rolling out steel-consuming infrastructure projects and second by taking more aggressive action against steel imports — will inevitably raise domestic steel prices.

This would be good for domestic U.S. steel producers, in as much as construction companies could pass along the costs infrastructure projects, it would incur only marginally higher input costs as a result paid the taxpayer. But it would inevitably also have a wider impact on the steel market, rising prices for steel consumers and higher prices, in turn, for the wider population buying automobiles, refrigerators and other products manufactured with any significant steel content.

How We Got Here

The U.S. steel industry has suffered grievously at the hands of cheap imports. Steel dumped by producing countries with a massive overhang of spare capacity and hidden subsidies such as China have depressed prices and pushed many major producers such as U.S. Steel into loss-making positions that resulted in downsizing and the loss of jobs. Read more

Long row of rolls of aluminum in production shop of plant.

Long row of rolls of aluminum in production shop of plant.

In a year that saw most industrial metals rally to record highs, aluminum has lagged behind. The reason? Oversupply.

According to a recent report from The Wall Street Journal, citing data from the International Aluminum Institute, global aluminum production grew to a record high of close to 5 million metric tons in October. It’s expected aluminum will continue to fall behind other metals in 2017 in terms of price growth as a result of oversupply.

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“As we expect to see further production increases in the next few months, a record-high quantity of aluminum is likely to be produced on a whole year basis,” states a Commerzbank report, according to the WSJ.

Chinese Aluminum Producer Moves Its Supply

Our own Raul de Frutos recently reported on a significant stockpile of 500,000 metric tons of aluminum that’s been shipped from Mexico to Vietnam. What will its impact on price be?

“Although the volume is pretty big, it’s immediate impact on global aluminum prices will likely be none. This is because the metal has already been produced and it’s just moving from one place to another before its final use. The metal is already there and it’s going to be consumed whether it is in the U.S. or in another country. Therefore, it’s all already factored into the price,” de Frutos wrote.

How will aluminum and base metals fare for the remainder of 2016 and into 2017? You can find a more in-depth copper price forecast and outlook in our brand new Monthly Metal Buying Outlook report. For a short- and long-term buying strategy with specific price thresholds:

 

 

No sooner than when Indiana-based manufacturing company United Technologies announced it would keep 1,000 jobs in the state last week — after it had initially planned to move 1,400 jobs to Mexico from its Carrier division — than 538.com almost immediately chimed in to say how it “was not the way to save U.S. jobs.”

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The Washington Post warned “beware of Donald Trump’s con” and that Trump can’t “turn back the clock on decades of automation.”

factory manufacturing

Isn’t it time to remind companies about the benefits of keeping manufacturing jobs in the U.S.? Source: Adobe Stock/Anastasia Usoltceva.

We here at MetalMiner have been on the automation beat for quite some time and, while it’s true that the Carrier deal won’t end automation, we fear that some of our media colleagues may not be seeing the full picture here, either. We talked to Harry Moser, founder of the Reshoring Inititiative, for a different perspective on what this kind of deal means for American manufacturers. Read more

In much the same way as President-elect Donald Trump conducted his election campaign, he has kept himself very much in the headlines in the interim period until he takes charge as president in January.

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Trump won by promising infrastructure investment and that he’d protect American manufacturing jobs. What’s that mean for American steel? The two were seen by many as mutually supportive. Read more

A massive stockpile of 500,000 metric tons of aluminum has been trucked out of the Mexican city of San José Iturbide and shipped to a remote port in Vietnam.

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The Wall Street Journal reports that the stockpile is believed to be related to the product of Chinese aluminum producer China Zhongwang.

Zhongwang is a state-supported enterprise that has received large benefits and financing from the government of China. The company also has a long history of circumventing and evading duties in trade cases. Read more

There has been a long running debate about the loss of American manufacturing jobs over the last decade. Blame for job losses is largely laid at the door of globalization, specifically China.

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The rhetoric was ramped up in the recent presidential election campaign when both candidates came out firmly against more globalization but Donald Trump in particular, strongly criticized China for stealing American jobs and vowed to return those jobs to the U.S., has placed the issue even more sharply under the spotlight.

AdobeStock_ruiponche_gllobalization_550_1201216

Is globalization really the culprit for moving jobs from the U.S. to elsewhere? Or is it merely automation and efficiency? Source: Adobe Stock/Ruiponche.

Certainly, jobs have been lost because of offshoring, but recent research suggests the extent may have been overestimated. Michael Hicks, a professor of economics at Ball State University in Muncie, Indiana, is quoted in a Financial Times article saying he could show that just 13% of the estimated 5.6 million job losses from U.S. manufacturing during 2000-10 were caused by international trade, while the rest came from that holy grail of economic progress, rising productivity!

Why Are Jobs Moving?

True, the effects have been disproportionate. Some industries have been hit hard, some hardly at all. Labor-intensive sectors relying on lower pay grades were hit much harder by international trade, Professor Hicks believes. About 40% of the job losses in the furniture industry and 45% in clothing were caused by shifts in trade, he estimated. Low wages in Asia were undoubtedly the main draw but labor costs in China have been rising rapidly of late and even China is now losing jobs to places like Vietnam and Bangladesh. Read more

Just when it all seemed to be going so well in in Europe, another potential crisis looms.

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Italy will hold a referendum on Sunday on whether or not to change the country’s constitution. The country’s center-left Prime Minister, Matteo Renzi, has promised to resign if the electorate rejects his proposals. At stake is political turmoil as Euroskeptic comedian Beppe Grillo’s Five Star Movement (M5S) is just a few percentage points behind the Democratic party in the polls.

Meanwhile, the global financial crisis saddled Italy’s banks with around $384.4 billion (€360 billion) of bad debt and there is no good solution to a growing bank crisis.

Source Independent Newspaper

Source: The Independent Newspaper

Unfortunately for Italy, new E.U. rules forbid governments from bailing out banks. Instead, they demand that shareholders and bondholders be what the Economist terms “bailed in,” forcing them to accept any losses that would otherwise be picked up by taxpayers.

Worse, in Italy bank debt worth around €170 billion is in private hands and it seems unlikely that in the current climate any Italian government, let alone M5S, would stand by while voters lost their savings. They may be tempted, therefore, to ignore the E.U.’s rules and rescue Italy’s banks, causing a split with Brussels.

Italy’s Plight

After Greece, Italy is earning the title of the sick man of Europe. Growth has not just stagnated but fallen and populist policies will not solve the economy’s long-term challenges.

Source Independent Newspaper

Source: The Independent Newspaper

Italy is far from alone in feeling the effects of the populist wave sweeping across western politics. In Italy, as in the U.S. and the U.K., the electorate is feeling empowered to vote against things they don’t like rather than necessarily voting for an uncomfortable reality.

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The five-star movement has said it would hold a referendum to decide whether Italy should leave the Eurozone, looking at what the E.U. has done to Greece, who could blame them? After the U.K.’s decision to leave, should another large and economically important economy like Italy decide the same it could herald the breakup of the single currency. Read more

Zinc, lead and tin all hit multiyear highs this week and the Organization of Petroleum Exporting Countries finally agreed on a production — with its own members and Russia — to cut back production so oil prices are up, too.

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We were already in a metals and commodities bull market before the beginning of the week but it’s now more like a bull stampede. They’re even running in India. Lead Forecasting Analyst Raul de Frutos notes that this bull market is particularly unusual because it coincides with a strong U.S. dollar. Since commodities are valued in dollars it’s odd that they’re both up — and rising — at the same time.

MetalMiner co-founder and editor-at-large Stuart Burns also chimed in with vexing information, noting that tin is up while there seems to be abundant to robust supply of the stuff in the Earth’s crust with stable nations and reliable companies set to mine it.

Bulls stampeding in a Madrid sculpture

Don’t get stuck under these guys in the rush to get into this market. Source: Adobe Stock/Kyrien.

So, supply and demand aren’t fueling tin’s rise and that’s likely true for other metals as well. “New money,” as they say, is flowing into metal markets as investors are excited about Chinese construction demand and the prospect of a still nebulous $1 trillion infrastructure plan here in the U.S. China is, once again, driving the demand boat as the U.S. consumes only about 8% of commodities worldwide and the People’s Republic consumes the most. Read more

The Department of Commerce, late yesterday, placed import duties on carbon and alloy steel cut-to-length plate from Brazil, South Africa, and Turkey.

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For the purpose of anti-dumping investigations, dumping occurs when a foreign company sells a product in the U.S. at less than its fair value.

In the Brazil investigation. Commerce found dumping has occurred by Companhia Siderurgica Nacional and Usinas Siderurgicas de Minas Gerais SA, at a final dumping margin of 74.52%. The dumping margin for the mandatory respondents was based on adverse facts available (AFA) they did not cooperate in the investigation. Commerce established a final dumping margin of 74.52% for all other producers/exporters in Brazil.

In the South Africa investigation, commerce found dumping occurred by Evraz Highveld Steel and Vanadium Corp., at a final margin of 94.14%. They also did not cooperate in the investigation. Commerce calculated a dumping margin of 87.72% for all other producers/exporters in South Africa.

In the Turkey investigation, Commerce found dumping occurred by Ereğli Demir ve Çelik Fabrikalari T.A.Ş., at a dumping margin of 50%. It, too, did not cooperate in the investigation. Commerce calculated a final dumping margin of 42.02% for all other producers/exporters in Turkey.

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As a result of the final affirmative determinations, Commerce will instruct U.S. Customs and Border Protection (CBP) to collect cash deposits equal to the applicable weighted-average dumping margins.