Commentary

The Department of Commerce announced its affirmative final determination in the anti-dumping duty investigation of imports of South Korean ferrovanadium.

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

Commerce found dumping by mandatory respondent, Korvan Ind. Co., Ltd., at a final margin of 3.22%. Additionally, based on the application of adverse facts available, Commerce found that dumping has occurred by mandatory respondents, Fortune Metallurgical Group Co., Ltd. and Woojin Ind. Co., Ltd., at final margins of 54.69%. Commerce assigned a final dumping margin of 3.22% to all other producers/exporters in Korea.

As a result of the final affirmative determination, Commerce will instruct U.S. Customs and Border Protection to collect cash deposits based on these final rates.

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The petitioners for this investigation are the Vanadium Producers and Reclaimers Association — a Washington DC-based trade group — and its members: AMG Vanadium LLC of Ohio; Bear Metallurgical Company in Pennsylvania; Gulf Chemical & Metallurgical Corporation of Texas; and Evraz Stratcor, Inc. in Arkansas.

This week, metals manufacturers, construction and automotive companies and even the Federal Reserve expressed optimism about the strong economy we’ve seen since the election of President Donald Trump.

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We love economic optimism as much as the next metals intelligence and price data service, but count us among the many who wonder if all these happy thoughts are based on real world data or just, well, feelings?

When Can We Get an Actual Bill?

We kind of expected to have at least something concrete (pun intended) out of the administration on infrastructure by now but even the most optimistic among us concede that an infrastructure bill might not even happen this year with a healthcare repeal currently sucking up all the oxygen in Washington and tax reform, supposedly, the next big hurdle.

The Fed raised interest rates a quarter-point this week and hinted at more rate increases later in the year, pointing to strong jobs and manufacturing data but the tax cut the administration promised looks like it will only happen after the Summer, if at all, this year.

Automakers got some good news this week in the form of a promised review of corporate average fuel economy emissions standards that the industry says will hurt sales and production by the time they’re fully implemented between 2022 and 2025, but the actual rules haven’t changed yet and no one knows what the final review will keep or cut.

All of this begs the question: Are we being too optimistic?

TIGERs Ensnared

While Trump’s budget blueprint cut construction TIGER grants that fund many transportation projects, including the New York-New Jersey Gateway, it did allocate $2 billion toward the design and construction of a  wall between the U.S. and Mexico. That’s not what many construction companies were planning on hearing.

“Looked at in the absence of any broader infrastructure plan, it is hard not to view proposals to eliminate programs like the TIGER grants and wonder how such cuts are consistent with the President’s oft-repeated pledge to invest in infrastructure,” the Associated General Contractors of America Executive Director of Public Affairs Brian Turmail said.

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We, too, would like to see the text of actual infrastructure and tax reduction bills from the administration before we predict continued economic growth or even a continuation of the metals bull market. Or at least a working framework. With the pace in Washington, many of the president’s priorities are going to have to move to year two and delays beyond that would further threaten action in this term.

For off-road cognoscenti, there are few automobiles more iconic than Jaguar Land Rover’s Defender. Since its introduction in 1948, the rugged old workhorse has earned a reputation for go anywhere capability and durability as an article in the FT notes.

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The Defender’s engineering simplicity meant that the car could be repaired in the middle of the desert with the sparsest of resources and spare parts. But that rugged simplicity also led to its downfall. The SUV’s body-on-frame construction meant that it failed to meet modern safety crash tests and the engine just polluted the air too much to meet European emission rules. JLR consequently halted Defender production last year to the anguish of its diehard fans.

Land Rover Defender. Source: Autoexpress

Well, it would seem JLR has aspirations for a comeback. According to the FT, the group expect to relaunch the Defender in 2019 and its design group is working furiously to reconcept a new vehicle that meets modern environmental and safety standards, requiring a complete redesign from the ground up of the old Defender.

Aluminum Everywhere

It would be inconceivable if the new Defender was less capable than the old, a betrayal of that once iconic brand and, by all accounts, JLR has no intention of letting them down. Like the old Defender, a new version will employ considerable use of aluminum in the body, but unlike the old steel chassis will have an entirely new aluminum frame construction. Read more

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

Those not involved in the steel industry tend to look at large, integrated blast furnace steel plants as dated technology light-years from the gleaming glass and concrete operations of IT or electronics. However, steelmakers are constantly striving for technological improvements.

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In fact, the very marginal nature of steel production in the western world means that constant innovation is a necessity for a firm’s survival. Comparisons between U.S. Steel and Nucor Corp. illustrate this point. When U.S. Steel was focused on cost reduction and rationalization at the turn of the century, Nucor was innovating and investing not just in alternative electric arc furnaces, but in direct casting and other downstream technologies. As a result, Nucor is now North America’s most successful steel company but they’re not alone in looking to technology for their future prosperity.

Continuous Casting

An interesting article in the Economist details efforts at a number of steel producers around the world to find a better alternative to the traditional blast furnace. The slab casting and re-rolling route is epitomized by the likes of U.S. Steel and the major Asian steel mills. For years, the only real challenger to this process was the electric arc furnace which enjoys the benefits of scrap as a raw material and greater flexibility and economies of scale allowing it to operate profitably on a fraction of the cost required throughout for a traditional blast furnace-based integrated steel plant.

Liquid steel.

Innovation in steelmaking is coming from novel uses of liquid metal. Source: Adobe Stock/Photollug.

One of the major attractions most EAF plants have is that they produce final product by the continuous casting route. The liquid metal is taken from the refining vessel and, for flat-rolled products, continuously cast into 80-120-mm thick slabs, which can then be further rolled to thinner gauges. Read more

As one might misquote Mark Twain, we have been here before.

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In 2016, analysts were queued up to predict the iron ore price was going to collapse only for it continue its relentless rise. The recent pull back from $90 per metric ton has brought a fresh crop of dire predictions. Yet maybe, just maybe, there is more validity this time around for caution as to future price direction. There are a number of factors, each of which individually does not signal a price reversal but collectively suggests iron ore prices later this year could be lower than they have been in the first quarter.

Why Iron Ore Prices Might Really Fall

An article in the Australian Financial Review quotes analysts saying, the strength of recent pricing is encouraging Chinese domestic production to increase. In the first half in 2016 it was averaging a 220 million mt per year run rate, but rose to 280 mmt per year in the second half of the year. At the same time, global supply continues to rise with not just increased shipments from Australia but also number three miner Vale SA expanding supply from its $14 billion S11D mine. 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

I know it sounds a bit geeky, but we at MetalMiner love to hear about new applications for aluminum. This latest development is not exactly going to change the global demand-supply balance for aluminum but it does showcase one of the many qualities the metal possesses, one which is sometimes overshadowed by aluminum’s lightweight or easy formability.

Benchmark Your Current Aluminum Price by Grade, Shape and Alloy: See How it Stacks Up

Aluminum’s use in batteries is nothing new. Aluminum–air batteries have been a topic of research for some time and work by producing electricity from the reaction of oxygen in the air with aluminum. They have one of the highest energy densities of all batteries, but they are not widely used because of problems with high anode cost and by-product removal when using traditional electrolytes. Read more