Industry News

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Before you head into the weekend, check out some of the stories that went up this week on MetalMiner:

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  • The London Metal Exchange (LME) is an institution steeped in tradition — but even the most tradition-rich entities have to change, eventually. Our Stuart Burns wrote about the LME and how it is changing (or, in some cases, staying the same).
  • The electric car industry continues to grow, but the move toward electric in China likely represents the biggest such move by a single nation to date.
  • Our Irene Martinez Canorea checked in on tin and other base metals. In short, many that boomed in August have come back down a bit this month.
  • Burns wrote about China Zhongwang and its ongoing efforts to build up its presence on the global stage.
  • The U.S. Department of Commerce opened countervailing duty and antidumping investigations into titanium sponge imports from Japan and Kazakhstan.
  • Meanwhile, the U.S. International Trade Commission, voted to uphold antidumping orders in a five-year sunset review related to CASSLP pipe from Japan and Romania.
  • The third round of North American Free Trade Agreement renegotiations kicks off tomorrow in Ottawa. United States Trade Representative Robert Lighthizer, during a question-and-answer session earlier this week, touched on the negotiations and what the U.S. is hoping to accomplish.
  • United Steelworkers issued a statement calling for the Trump administration to act vis-a-vis its ongoing Section 232 probe related to steel imports.
  • It’s been talked about for more than a year, but Tata Steel and Thyssenkrupp finally agreed to merge their European operations this week.

Free Download: The September 2017 MMI Report

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The Department of Commerce issued a preliminary affirmative determination Tuesday in the countervailing duty investigation of cold-drawn mechanical tubing from China and India.

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“The Trump Administration will not sit back and watch as American companies and workers are harmed by unfair government subsidies,” Secretary of Commerce Wilbur Ross said in a prepared statement. “The United States is committed to free, fair and reciprocal trade, and will continue to validate the information provided to us that brought us to this decision.”

The Department of Commerce determined that the form of tubing from China benefited from countervailable subsidies of 33.31-35.69%, and that Indian tubing benefited from subsidies of 3.04-8.09%.

In 2016, cold-drawn mechanical tubing from China and India were valued at an estimated $29.4 million and $25 million, respectively, according to the Department of Commerce.

The petitioners in the case were ArcelorMittal Tubular Products (OH), Michigan Seamless Tube, LLC (MI), PTC Alliance Corp. (PA), Webco Industries, Inc. (OK), and Zekelman Industries, Inc. (PA).

The Department of Commerce will instruct U.S. Customs and Border Protection to collect cash deposits from importers of cold-drawn mechanical tubing from China and India based on the aforementioned preliminary rates. The department collected $1.5 billion in duties on $14 billion of imported goods found to be underpriced, or subsidized by foreign governments, according to the department’s release.

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The Department of Commerce is scheduled to announce its final determinations in the case on Dec. 4.

Thyssenkrupp and Tata Steel have finally made it to the altar.

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After 18 months of mostly behind-the-scenes negotiations to resolve several potentially “deal-off” stumbling blocks, all the major issues have been resolved. The two firms have signed a memorandum of understanding to create a 50:50 joint venture based in Amsterdam, Netherlands, called Thyssenkrupp Tata Steel (TTS).

The behemoth will rank second to ArcelorMittal with 21 million tons of annual steel capacity generating sales of €15 billion ($17.8 billion) and employing 48,000 people, The Telegraph reported.

New Focus

TTS will focus on three main production hubs: Ijmuiden in the Netherlands, Duisburg in Germany and Port Talbot in South Wales, the paper reports, Analysts say improved viability will come from cost savings of between €400 million and €600 million a year arising after 2,000 redundancies and another 2,000 jobs going out of the combined business as overlapping operations are removed.

Not surprisingly, TTS sees the value proposition as the enhanced opportunity for the combined group to move its business up the value chain in cooperation rather than competition with each other.

Hans Fischer, Tata Steel Europe’s chief executive, said “We need to focus on higher value products, China has huge overcapacity and there is a risk they will flood the market. The answer is not to compete with them, but try but find a solution where we have products that cannot be produced easily. We need to be a technology leader.”

Tata wriggling out of the old British Steel Pension fund liabilities was the final major hurdle to overcome — albeit to be fair, at considerable cost to the parent — and the willingness of British workers to agree to an end to the final salary scheme and reduced benefits for existing members underlines their desperation for a deal, matched by compromises made in Germany by workers fearful of the prospects of foreign competition with the European steel industry.

But therein lies the dilemma.

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This morning in metals news, China gets called out with respect to its adherence to the rules of the World Trade Organization (WTO), the housing industry is slumping and Kazakhstan is the recipient of its first WTO complaint.

Aluminum Association, AISI Call Out China

The Aluminum Association recently filed comments with the United States Trade Representative (USTR) and the Trade Policy Staff Committee (TPSC) urging the Trump administration to press China on adherence to the rules of the WTO.

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In a release Wednesday, the Association said it “believes China has failed to adhere to the letter and spirit of its WTO accession.”

In a letter to TPSC Chairman Edward Gresser, Aluminum Association President and CEO Heidi Brock said China has regressed with respect to adherence to the rules set forth by the WTO.

“Despite initial progress after China’s WTO accession, the last decade has seen a major regression, which calls into question the underlying premises for the decision by the United States and other WTO members to welcome China into the WTO’s rules-based global trading system,” Brock wrote in the letter.

A filing from the American Iron and Steel Institute (AISI) signed by Kevin Dempsey, AISI’s senior vice president of public policy and general counsel, struck a similar tone.

“Now more than 15 years after it acceded to the WTO, China continues to fail to comply with its WTO obligations,” Dempsey wrote. “This trend continues to be a major problem for steel producers in the United States, other U.S. manufacturers, and the broader U.S. economy. AISI strongly urges the U.S. government to recognize China’s compliance failures and adopt a more aggressive strategy that is commensurate with the scope and severity of China’s failure to comply with its WTO obligations.”

Housing Market Down in August

U.S. home sales slumped in August as Hurricane Harvey devastated the Houston area, one of the most robust housing markets in the country.

According to the National Association of Realtors, existing-home sales in August dropped 1.3% and were at their lowest levels in a year.

According to Reuters, Texas and Florida (which was hit by Hurricane Irma earlier this month), comprise 18% of existing-home sales.

Ukraine, Kazakhstan Enter WTO Dispute

Ukraine is taking Kazakhstan to the WTO over a dispute regarding duties on steel pipes, Reuters reported. Ukraine argues that Kazakhstan is using antidumping duties on certain types of steel pipe imported from Ukraine.

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According to the report, the dispute is the first targeting Kazakhstan, which has been a WTO member since 2015.

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It’s been five months and a day since President Donald Trump signed a memorandum calling for Secretary of Commerce Wilbur Ross to prioritize the Section 232 investigation that would assess whether steel imports posed a national security risk.

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Many expected an announcement of the investigation’s findings in June or July, but it never came.

As the delay drags on, the U.S. steel industry has expressed its desire for the Trump administration to act vis-a-vis the 232 probe.

The United Steelworkers (USW) union was the latest group to urge the administration to act.

“The time to act is now, and workers are telling politicians their first-hand stories of the devastation in the industry and the critical importance of providing relief,” USW International President Leo W. Gerard said in a prepared statement.

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After two rounds of talks on the renegotiation and modernization of the North American Free Trade Agreement (NAFTA), uncertainty continues to loom.

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The 23-year old trilateral trade deal linking the U.S., Mexico and Canada has been the subject of talks between trade representatives of the countries in recent months.

An initial round of talks was held in Washington, D.C., with a second round coming earlier this month. A third round is scheduled for Sept. 23-27 in Ottawa.

Renegotiation of the deal, which President Donald Trump once referred to as possibly the worst trade deal ever, has not seemed to gain much traction through two rounds of talks.

In a closing statement after the recently concluded round of talks in Mexico City, United States Trade Representative Robert Lighthizer again laid out the U.S. delegation’s goals:

“The American delegation is focused on expanding opportunities for American agriculture, services, and innovative industries. But, as I alluded to in my opening round, we also must address the needs of those harmed by the current NAFTA, especially our manufacturing workers. We must have a trade agreement that benefits all Americans, and not just some at the expense of others. I am hopeful we can arrive at an agreement that helps.”

While Lighthizer said the parties “found mutual agreement on many important issues,” other reports indicate the negotiators are still far apart.

The New York Times reported that, during a question-and-answer session Monday at the Center for  Strategic and International Studies (CSIS), Lighthizer said negotiations were “moving at warp speed, but we don’t know whether we’re going to get to a conclusion, that’s the problem.”

During his opening statement prior to taking questions, Lighthizer said support for free trade in recent decades has been “eroding” among the electorate.

“There has been a growing feeling that the system that has developed in recent years is not quite fair to American workers [and] manufacturing, and that we need to change,” he said.

The ambitious timeline for the talks is further complicated by elections in the three countries next year: U.S. midterms, the Mexican presidential election and provincial election in Canada. Producing a mutually agreed upon and revamped trade deal by the end of the calendar year will require the negotiations to move at breakneck speed.

On Monday, Mexican Economy Minister Ildefonso Guajardo said rules of origin and the U.S. trade deficit with Mexico are the issues that will determine whether a new deal can be reached, Reuters reported.

The trade deficit has been a primary talking point for the U.S., one which Lighthizer referred to Monday at the CSIS.

“I think it is reasonable to ask, when faced with decades of large deficits, globally and with most countries in the world, whether the rules of trade are causing part of the problem,” he said.

The U.S. had a $63.4 billion trade deficit with Mexico in 2016. Though the first seven months of 2017, the U.S. has a $41.2 billion trade deficit with Mexico, up from approximate $37 billion through the first seven months of 2016.

Another idea that has come up in renegotiation talks that has generated pushback is that of a sunset clause.

According to The New York Times report, Secretary of Commerce Wilbur Ross said the administration was considering such a clause, which would mean that the trade deal would expire after five years unless all parties voted to continue it. (Lighthizer declined to expand on the idea of a sunset clause vis-a-vis NAFTA during the CSIS event.)

Aside from NAFTA, Lighthizer called China the biggest challenge for the global trading market, adding that the World Trade Organization is not equipped to tackle the challenges China presents.

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“We must find other ways to defend our companies, workers, farmers, and indeed, our economic system,” he said.

Following this coming weekend’s round of talks in Ottawa, four more rounds of talks remain on the negotiating agenda this year.

This morning in metals news, a new European steel giant could be coming on the scene, that giant could result in the loss of thousands of jobs and aluminum hits a five-year high ahead of further Chinese supply cuts.

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Tata Steel, ThyssenKrupp Agree to Merge European Operations

The New York Times reported Wednesday that Tata Steel and ThyssenKrupp had agreed to a deal to merge their European steel operations — a merger that has been in the news for more than a year.

According to the report, while there are still some obstacles to completion of the merger, if it goes through the merged operation would make the second-largest steelmaker in Europe, behind only ArcelorMittal.

Merger Could Yield Loss of 4K Jobs

While the potential merger of the Indian steel giant Tata and German firm ThyssenKrupp’s European operations might be cause for celebration for some, it won’t be for a considerable number of workers, according to one report.

The merger of the two firms’ European operations could lead to the loss of 4,000 jobs, according to CNNMoney.

The merger is expected to cut costs by between €400 million and €600 million ($720 million) a year, according to the report.

Aluminum Soars to Five-Year High

Aluminum continued its strong 2017, hitting a five-year high, Reuters reported.

Not surprisingly, news from China has much to do with the rise, as supply cuts are forthcoming from Chinese producer Chinalco, according to the report.

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LME aluminum traded at $2,191 per ton, its highest since September 2012, according to Reuters.

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After a required five-year review, existing antidumping duty orders on carbon and alloy seamless standard, line, and pressure pipe (CASSLP) from Japan and Romania were kept in place after a vote Tuesday by the U.S. International Trade Commission (USITC).

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According to the Uruguay Round Agreements Act, the Department of Commerce must revoke an antidumping or countervailing duty order, or terminate a suspension agreement, after five years unless the Department of Commerce and the USITC determine that “revoking the order or terminating the suspension agreement would be likely to lead to continuation or recurrence of dumping or subsidies and of material injury USITC within a reasonably foreseeable time.”

According to a USITC release, Chairman Rhonda K. Schmidtlein, Vice Chairman David S. Johanson, and Commissioner Irving A. Williamson voted in the affirmative. Commissioner Meredith M. Broadbent voted in the affirmative with respect to Japan and in the negative with respect to Romania.

The five-year sunset reviews in the case — Carbon and Alloy Seamless Standard, Line, and Pressure Pipe from Japan and Romania — were instituted Sept. 1, 2016.

The determination came on a third review of the orders. The second review of the orders led to a continuation of them as of Oct. 11, 2o11, for both Japanese and Romanian imports of the products.

According to the USITC’s posted notice explaining its determination to conduct full reviews for CASSLP imports from each country, it noted that it received a joint response filed on behalf of Vallourec Star, LP and U.S. Steel, domestic producers of CASSLP.

“Because these producers accounted for a substantial majority of domestic production of CASSLP pipe in 2015, the Commission determined that the domestic interested party group response was adequate,” the explanation noted.

Although the Commission did not receive a response from any interested parties in Japan, it received a joint response filed by S.C. Silcotub S.A., a Romanian producer of CASSLP pipe, and Tenaris Global Services (U.S.A.) Corporation, an affiliated U.S. importer of subject merchandise from Romania, the explanatory document said.

Free Download: The September 2017 MMI Report

The Commission’s public report containing information on the reviews will be available by Oct. 31 and can be accessed, once available, at http://pubapps.usitc.gov/applications/publogs/qry_publication_loglist.asp.

In another five-year sunset review, the Commission voted Sept. 14 to keep in place existing antidumping duty orders on steel nails from the United Arab Emirates.

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The U.S. Department of Commerce has been busy this year.

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The department added another investigation to its agenda, announcing late last week that it had launched antidumping and countervailing duty investigations into titanium sponge imports from Japan and Kazakhstan.

“The Department of Commerce intends to act swiftly to halt any unfair trade practices and will render our decisions at the earliest opportunity, while also assuring a full and fair assessment of the facts,” Secretary of Commerce Wilbur Ross said in a release. “The U.S. market is the most open in the world, but we must take action to ensure U.S. businesses and workers are treated fairly.”

The new investigation marked the 65th new antidumping or countervailing duty probe of the year by the Department of Commerce. Through Sept. 14, the number of new investigations has increased by 45% compared with the same time frame last year, according to the Department of Commerce release.

The case comes on the heels of petitions filed by Titanium Metals Corporation (TIMET) on Aug. 24.

The investigations will seek to determine whether titanium sponge from Japan and Kazakhstan is being sold at less than fair value, as well as if the imports from Kazakhstan are receiving countervailable government subsidies.

Imports of titanium sponge from Japan and Kazakhstan were valued at an estimated $144.8 million and $374,000, respectively, according to the Department of Commerce.

Free Download: The September 2017 MMI Report

The U.S. International Trade Commission (ITC) will make a preliminary determination in the cases on or before Oct. 10. Assuming the ITC determines there is a reasonable indication that imports of the product threaten the domestic industry, the Department of Commerce will then issue a preliminary determination in the countervailing duty case by Nov. 17, 2017, and the antidumping cases by Jan. 31, 2018.

TIMET, based in Exton, Pennsylvania, supplies nearly a fifth of the world’s titanium, and has production facilities in both the U.S. and Europe, according to its website.

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This morning in metals, the Aluminum Extruders Council praised the Department of Justice for its allegation that Zhongwang and its affiliate illegally evaded $1.5 billion in tariffs, Tokyo Steel is raising its prices and hedge funds are high on the metals industry.

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DOJ Alleges Zhongwang, Affiliate Illegally Avoided $1.5B in Tariffs

The Aluminum Extruders Council applauded the U.S. Department of Justice late last week, praising it for its allegation that China Zhongwang and an affiliate eluded $1.5 billion in tariffs while smuggling aluminum pallets into the U.S.

“We want to applaud the Department of Justice’s decision to begin civil proceedings against Zhongwang’s affiliate Perfectus,” said Jeff Henderson, president of the Aluminum Extruders Council. “Today’s filing is the culmination of a concerted effort by the AEC and its members in conjunction with Customs and the Department of Commerce to investigate Zhongwang’s alleged attempts to avoid paying duties since the orders went into effect. The AEC will continue to assist the agencies in their efforts to investigate this matter going forward.

“Furthermore, this should be a clear signal to those that seek to evade, circumvent, or in any way violate our orders that such activities will be uncovered and prosecuted.”

According to the civil complaint in the Department of Justice investigation, California company Perfectus Aluminum Inc. is allegedly owned by Liu Zhongtian, founder and chairman of Zhongwang.

Tokyo Steel Ups Prices

Tokyo Steel announced its prices will be going up in October, Reuters reported.

The price hike, which is taking place for the second month in a row, comes as a result of higher prices overseas and a tight domestic market, according to the report.

Hedge Funds Feeling Metal

The hedge fund industry is feeling good about the future of the metal industry.

According to Reuters, hedge fund investment in the metals industry is at its highest since 2011.

Free Download: The September 2017 MMI Report

A major reason for the bounceback? A tightening of global supply, to a significant extent the product of China’s supply cuts.