Industry News

Indonesia introduced new rules last week that will allow exports of nickel ore and bauxite and concentrates of other minerals under certain conditions in a sweeping policy shift by the key global supplier, Reuters reported.

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A ban on unprocessed ore exports was imposed in 2014 to, the thinking went, encourage investment in mills and smelters in the islands. The government of Southeast Asia’s biggest economy has faced a hefty budget deficit since and missed its 2016 revenue target by $17.6 billion.

The resumption of shipments may have been drafted to help stop the gap.

The new regulations, which took effect on Wednesday, sent nickel prices tumbling more than 5% to a four-month low of $9,660 a metric ton before they recovered.

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The rules include broad changes to permit extensions, which may now be applied for up to five years in advance of expiration, as well as new divestment requirements.

U.S. customs officials have seized $25 million worth of aluminum linked to a Chinese billionaire accused of stockpiling the metal across the world, the Wall Street Journal reported this morning.

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The Obama administration also launched a formal complaint Thursday against the Chinese government with the World Trade Organization over subsidies it says Beijing provides to the country’s vast aluminum industry.

The move against the stockpile of aluminum connected to Chinese billionaire Liu Zhongtian, the owner and CEO of aluminum company China Zhongwang, is the strongest action yet by federal authorities probing whether U.S. companies connected to the Chinese magnate illegally avoided nearly 400% tariffs by routing the metal through other countries.

An aluminum stockpile like this one has been seized by Homeland Security.

We previously reported the whereabouts of the aluminum stockpile as it curiously moved around the globe. China Zhongwang has denied any connection to the stockpile or its movements, but hundreds of shipping containers of aluminum were seized this week by the Department of Homeland Security. The containers are owned by Perfectus Aluminum, Inc., a California company founded by Mr. Liu’s son, Liu Zuopeng. Perfectus is now run by one of Liu’s close business associates, Jacky Cheung, who runs several companies with connections to Liu.

Homeland Security is conducting laboratory tests on the aluminum to determine whether the metal is restricted under U.S. law, according to federal court documents. The seized aluminum is in the form of pallets and court records don’t state which company manufactured the aluminum. The WJ saw shipping records which show that a separate company called Peng Cheng — which later became part of Perfectus in a merger—imported the metal from an affiliate of China Zhongwang in 2013 and 2014.

Homeland Security and the Justice Department are investigating whether the companies committed criminal or civil violations that could include smuggling, conspiracy and wire fraud. The WSJ reported that Homeland Security agents have also questioned former employees of the companies associated with Liu, according to people familiar with the investigation.

WTO Case Against Chinese Aluminum Subsidies

As for the subsidies case, the U.S. Trade Representative‘s office said in a formal complaint that China’s actions in the aluminum sector violate WTO rules prohibiting subsidies that cause “serious prejudice” to other members of the trade body. Read more

Rising raw material surcharges are driving up U.S. steel prices, particularly stainless surcharges. The Allegheny Ludlum304 and 316 stainless surcharges rose 34% and 25%, respectively, on the MetalMiner IndX from December to January.

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The chrome portion of our prices jumped month on month and Platts reported that the same thing happened to its stainless benchmarks.

Turner Construction Index Posts Strong 4Q

Turner Construction Company reported recently that its Fourth Quarter 2016 Turner Building Cost Index — which measures costs in the nonresidential building construction market in the U.S. — has increased to a value of 1006. This represents a 1.11% quarterly increase from the Third Quarter 2016 and a 4.90% yearly increase from the Fourth Quarter 2015.

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The U.S. construction market continues to experience broad growth, with the West and Southeast regions seeing more significant gains, and the Northeast and Central regions seeing more moderate gains. While raw material prices have remained flat, they have experienced an overall gain this year and fabricated material prices have seen a continuous growth this quarter.

The Chinese yuan weakened on Monday afternoon after its midpoint was set at its lowest level in half a year.

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China’s authorities sets the mark 0.87% or 594 points lower than last Friday, the biggest daily decline since late June in 2016. Traders are allowed to trade up to 2% either side of the reference point for the day.

The Hong Kong Interbank Offered Rate for offshore yuan, known as the CNH Hibor, plummeted to 14.05% from last Friday’s 61.33%, down 4,728 points.

The People’s Bank of China set the yuan midpoint at 6.9262, a sharp drop for the renminbi compared with Friday’s fixing at 6.8668.

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China’s central bank does not allow the currency to move more than 2% from its daily fixing in onshore trade. While policymakers cannot closely control offshore trade of the currency, it usually remains relatively close to its onshore counterpart.
Onshore, the dollar was fetching as little as 6.8679 yuan last week, compared with 6.9318 yuan at 9:54 a.m. today.

After President-elect Donald Trump targeted Toyota Motor Corp. yesterday with a taunt about the Japan-based multinational’s plan to build a new plant in Baja, Mexico, to build the Corolla model, both Toyota and Japan are fighting back.

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Trump warned Japan’s biggest automaker that it will face heavy penalties if it chooses to make cars for the U.S. market in Mexico, writing “Toyota Motor said will build a new plant in Baja, Mexico, to build Corolla cars for U.S. NO WAY! Build plant in U.S. or pay big border tax.”

The president-elect’s tweet sent shares of Japanese automakers makers sliding today. An angry Japanese government and corporate establishment pushed back against Trump’s criticism of Toyota.

“Toyota is responsible for large employment at U.S. plants such as in Kentucky. It’s questionable whether the new U.S. president has a grasp of how many vehicles Toyota builds in the U.S.,” said Taro Aso, Japan’s finance minister.  Hiroshige Seko, minister for trade and industry, added that the Japanese government would do its part to explain to the new U.S. administration about the contribution of the country’s car industry to the U.S. economy.

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Other Japanese CEOs also chimed in in support of Toyota including Sony’s Kazuo Hirai and Nissan’s Carlos Ghosn in what seemed like a full-court press from “Japan, Inc.” condemning Trump’s tweet.

Brazilian flat steel producers have notified distributors they are raising prices of hot- and cold-rolled steel between 8 and 10% this month, a steel market source and an analyst told Reuters on Wednesday.

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Cia Siderúrgica Nacional SA, Usinas Siderúrgicas de Minas Gerais SA and the Brazilian unit of ArcelorMittal SA will keep zinc-coated steel prices unchanged, the source said. The price hikes are effective Jan. 1, Jan. 5 and Jan. 10, respectively, the source added.

Vitol Signs First Major Iranian Oil Deal

The world’s largest oil trader, Vitol, has clinched a deal with the National Iranian Oil Co. (NIOC) to loan it an equivalent of $1 billion in euros guaranteed by future exports of refined products, four sources familiar with the matter told Reuters.

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The pre-finance deal is the first such major contract signed between Iran and a trading house since sanctions were lifted in early 2016.

China will impose higher power costs for steel mills operating outdated production equipment, the country’s economic planner said in a statement on Tuesday.

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The National Development and Reform Commission (NDRC) ordered utilities to raise power prices by 0.5 yuan ($0.0719) per kilowatt-hour on top of current prices for steel mills preserving equipment that ought to be eliminated.

AISI Hires Tax and Trade Policy Director

The American Iron and Steel Institute today announced the appointment of Raphael Goodstein as director of tax and trade policy.

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Goodstein has 15 years of Congressional and government affairs experience, including 10 years representing the common policy interests of the domestic auto industry as legislative director with the American Automotive Policy Council. He has also worked on Capitol Hill, for Senator Debbie Stabenow, and for a number of political and public affairs organizations.

President-elect Donald Trump named Robert Lighthizer, a former trade official in the Reagan administration and a harsh critic of China’s trade practices, to be his U.S. Trade Representative today, the chief trade negotiator responsible for better deals aimed at reducing U.S. trade deficits.

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Trump, who promised during his presidential campaign to renegotiate international trade deals like NAFTA and punish companies that ship work overseas, said in announcing his choice that Lighthizer would help “fight for good trade deals that put the American worker first.”

Lighthizer is a former deputy U.S. trade representative under former Republican President Ronald Reagan who helped to stem the tide of imports from Japan in the 1980s with threats of quotas and punitive tariffs. His return to the agency follows nearly three decades as a lawyer representing U.S. steelmakers and other companies in anti-dumping and anti-subsidy cases.

“The American Iron and Steel Institute welcomes the president-elect’s nomination of Robert Lighthizer as the U.S. Trade Representative,” said Thomas J. Gibson, president and CEO of the AISI. “Bob’s nomination sends a strong signal regarding the incoming administration’s commitment to address the injury that the steel industry has suffered from unfairly traded imports.”

Gibson went on to say Bob Lighthizer is eminently qualified to serve in this position and his dedication not only to the steel industry — but to the manufacturing sector as a whole — will enable him to have a strong and prominent role in addressing the critical issues that face our companies and workers. He also said AISI looks forward to working with Lighthizer and the new administration on trade enforcement issues in the new year.

Remember that giant aluminum stockpile that sat in a Mexican desert for years before being transported to Vietnam recently?

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Why it has crisscrossed the globe remains a puzzle for American executives and investigators trying to unravel the logic behind its movements.. Now, a Dallas attorney’s correspondence suggests a surprising possibility: that the stash is Chinese billionaire Liu Zhongtian’s retirement fund.

Like all Chinese citizens, Zhongtian, the 52-year-old chairman of aluminum giant China Zhongwang Holdings Ltd., isn’t supposed to move more than $50,000 a year out of the Communist Party-led country. To get around the restrictions, Chinese nationals have used Hong Kong money changers to illicitly transfer cash between bank accounts, combined their $50,000 quotas to make large-scale transfers and even carried cash across borders in suitcases.

The Wall Street Journal reports that Zhongtian developed an industrial-scale approach involving boatloads of aluminum which he stockpiled with plans to sell the metal over time, according to the Dallas attorney’s correspondence and people who have worked for Mr. Liu whose accounts are supported by shipping and corporate records.

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Representatives of China Zhongwang deny that the stockpile is an attempt to move wealth out of China.

The cost to produce the penny rose to 1.5 cents in the 2016 fiscal year, U.S. Mint spokesman Tom Jurkowsky recently said. That’s the first time costs have been up since 2011, but still just the latest in a string of losses for the most abundant but least valuable coin in circulation.

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In fiscal 2015 the cost was 1.43 cents; in 2014, it was 1.66 cents. The latest figures will be released in the Mint’s upcoming annual report.

For now, Mint facilities in Philadelphia and Denver will continue to stamp out the zinc slugs with a copper coat. In fiscal 2015, they churned out 9.16 billion pennies—more than the nickel (1.48 billion), dime (2.87 billion) and quarter (2.65 billion) combined. The Mint traditionally makes money on the dime and quarter. The combined fiscal weight of materials and overhead sink the penny and nickel, both of which are made of zinc slugs with a fine sheen of copper and nickel, respectively. We’ve documented how the penny and nickel cost more to produce than they are worth before.

Congress would have to pass a law to stop producing either the penny or the nickel.