Industry News

President Donald Trump’s administration is mulling changes to how the U.S. calculates trade deficits. A change could be made that would show more movements of goods between free trade agreement countries, the Wall Street Journal reported recently citing people involved in the discussions.

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The leading idea under consideration would exclude from U.S. exports any goods first imported into the country, such as cars, and then transferred to a third country like Canada or Mexico unchanged, the sources told The Wall Street Journal. These would not be traditional transshipments, generally done to disguise a country of origin, but rather shipments that are manifested to include the country of origin but simply move goods through a trade agreement country.

Economists say that approach would cause trade deficit numbers to go up because it would typically count goods as imports when they come into the country but not count the same goods when they go back out, known as re-exports.

Trump has been highly critical of trade deals including the North American Free Trade Agreement (NAFTA) with Mexico and Canada. By using a metric that widens the trade deficit, it could give him political leverage to make sweeping changes, the newspaper reported.

If the government adopted the new method, the deficit with Mexico would be nearly twice as high.

The effect of such a change would be particularly stark on data involving countries that have free trade deals with the U.S., this person said—and in some cases the new methodology could even change a trade surplus into a trade deficit.

Trump trade officials said the idea is part of an early discussion and that they are examining various options. It is unclear whether the administration would adopt any new approach for measuring trade as part of official government data, or just use the higher deficit calculation to make the case for new trade deals.

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“We’re not even close to a decision on that yet,” Payne Griffin, the deputy chief of staff at the office of the U.S. Trade Representative told the Journal. “We had a meeting with the Commerce Department, and we said, ‘Would it be possible to collect those other statistics?’”

The Journal reported that career government employees at the USTR’s office complied with the request to prepare data using the new methodology but also noted their objections.

Leading Republican lawmakers said over the weekend proposals for a new Trump-administration-backed infrastructure bill could be introduced as early as the coming weeks.

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Senate Majority Leader Mitch McConnell (R. Ky.) told reporters he expects to receive “some kind of recommendation on an infrastructure bill, a subject that we frequently handle on a bipartisan basis,” but gave no details or timing.

He has previously voiced concern over adding to budget deficits with a new injection of federal funds for road, bridge and other construction projects like the ones President Barack Obama secured from Congress in 2009, especially after a major highway funding law was enacted about a year ago.

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During the campaign, Trump said he would push for a $1 trillion infrastructure program to rebuild roads, bridges, airports and other public works projects. He said he wanted action during the first 100 days of his administration, which now seems unlikely.

All work has stopped at Freeport-McMoran‘s giant Grasberg copper mine in Indonesia, just over a month after the country halted exports of copper concentrate to boost domestic industries.

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Freeport had said the suspension would require the mine to slash output by 60% to approximately 70 million pounds of metal per month if it did not get an export permit by mid-February, due to limited storage. A strike at Freeport’s sole domestic taker of copper concentrate, PT Smelting is expected to last at least until March and has limited Freeport’s output options as Grasberg’s storage sites are now full.

Nippon Exec: Chinese Steel Prices Will Hold Firm

Nippon Steel & Sumitomo Metal Corp., Japan’s biggest steelmaker, expects steel prices in top consumer China to hold firm at least until its Communist Party congress late this year, amid solid demand that is underpinning coking coal and iron ore markets.

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Chinese futures contracts for steel rebar used in construction have already risen 17% in 2017, on top of a gain of more than 60% last year

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President Trump signed a bill to roll back a Dodd-Frank banking reform disclosure requirement that demanded that resource exploration and extraction companies disclose any payments that they might make to foreign governments, the U.S. federal government or other entities in their exploration activities.

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Rule 13q-1 adopted by the SEC, would have implemented the resource extraction issuer payment disclosure provisions of Section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Under the SEC rule, a public company that qualified as a “resource extraction issuer” would have been required to publicly disclose in an annual report on Form SD of its tax return information relating to any single “payment” or series of related “payments” made by the issuer, its subsidiaries or controlled entities of $100,000 or more during the fiscal year covered by the Form SD to a “foreign government” or the U.S. Federal government for the “commercial development of oil, natural gas, or minerals” on a “project”-by-“project” basis.

House Speaker Paul D. Ryan (R-Wis.), who attended the signing Tuesday, said it would be “the first of many Congressional Review Act bills to be signed into law by President Trump.” He said they would “provide relief for Americans hurt by regulations rushed through at the last minute by the Obama administration.”

Supporters of the SEC regulation say it would have provided greater transparency. The SEC said Congress had sought transparency “to help combat global corruption and empower citizens of resource-rich countries to hold their governments accountable.”

The regulation, which never went into effect, was drafted at the direction of the Obama administration in response to directions in the Dodd-Frank financial reform legislation. The directive was in an amendment backed by Sen. Benjamin L. Cardin (D-Md.) and then-Sen. Richard G. Lugar (R-Ind.).

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Foes of the regulation, led by the U.S. Chamber of Commerce and the American Petroleum Institute, said the rule would put natural resource companies at a competitive disadvantage to foreign firms by disclosing too much of their contract terms.

A Washington, D.C. federal judge refused Monday to halt construction and drilling on the recently approved, eight-mile final stage of the Dakota Access pipeline, rejecting the Cheyenne River Sioux Tribe’s plea for a temporary restraining order to ostensibly protect a religiously and culturally significant lake.

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A similar challenge was rejected by another federal judge last year.

Philippines Environment Czar Cancels 75 Mining Contracts

The Philippines’  Environment Ministry, under the direction of Environment and Natural Resources Secretary Regina Lopez, on Tuesday ordered the cancellation of 75 mining contracts, stepping up a campaign to stop extraction of resources in sensitive areas after earlier shutting more than half of the country’s operating mines, Reuters reported. The contracts are all in watershed zones, with many in the exploration stage.

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They cover projects not yet in production and the latest action by Lopez suggests she will not allow them to be developed further. The move turns up the heat in her battle with the mining sector after she ordered the closure of 23 of the country’s 41 mines earlier this month on environmental grounds.

China announced last year it had implemented ambitious cuts in steel capacity. Now, a new report says that not only did those cuts not happen, but China actually increased steel production capacity.

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But a new report by Greenpeace East Asia and Chinese consultancy Custeel says that number was largely smog and mirrors. Many of the plants China says it closed down were already idle, while production was restarted elsewhere and brand new plants opened.

China, which accounts for half the world’s steel production, has a total capacity of 1.1 billion metric tons, announced plans to eliminate 100-150 mt of annual production over the next five years.

Last year, it said it had far exceeded its initial target to cut capacity by 45 million mt, which China said its steel sector exceeded, recording total 2016 cuts of around 85 mmt.

But the Geenpeace/Custeel report said that 73% of the announced cuts in capacity were already idle — in other words the plants were not operating. Only 23 mmt of cut capacity involved shutting down production plants that were operating.

At the same time, some 54 mmt of capacity were restarted, and 12 mmt of new operating capacity came online.

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That left China showing a net increase in operating capacity of 36.5 mmt last year, a figure that is consistent with a 3% increase in steel production in the second half of last year.

Such an increase is consistent with evidence of a deterioration in the air quality in Beijing in the second half of last year — the steel industry is a heavy consumer of coal and contributor to air pollution, and most of the restarted capacity came in the industrial provinces near the capital, Shanxi, Hebei and Tianjin.

The American Iron and Steel Institute reported that for the month of December 2016, U.S. steel mills shipped 7,173,245 net tons, a 6.7% increase from the 6,724,277 nt shipped in the previous month, November 2016, and a 9.4% increase from the 6,556,342 nt shipped in December 2015.  Shipments for full year 2016 are 86,533,341 nt – a slight change from shipments of 86,546,657 nt for full year 2015.

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A comparison of December 2016 shipments to the previous month shows the following changes: hot-rolled sheet, up 11%; cold-rolled sheet, up 4%, and hot-dipped galvanized sheet and strip, down 3%.

Manufacturing PMI Hits a 2-year High

The January 2017 Institute for Supply Management Purchasing Managers’ Index and Non-Manufacturing Index, released on February 1 and February 3, respectively, reveal a surging manufacturing sector in the U.S., with slowing growth in the services sector.

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The PMI® jumped 1.5 percentage points to 56.0, its highest level in more than two years. At 56.5, the NMI® declined by one-tenth of a percentage point, indicating slowing growth in the non-manufacturing portion of the economy.

The Trump administration is reportedly considering an executive order that would suspend the conflict minerals rule of the Dodd-Frank banking regulation bill.

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The conflict mineral rule requires reporting of supply chains to enforce a ban on tin, tantalum, tungsten and gold from the Democratic Republic of the Congo. It’s backed by human-rights groups but many businesses say the rule, as is, requires a swath of industries to investigate whether their products contain metals that could have been sold by armed groups so far down their supply chains that it’s impossible to tell where it came from. Reporting has been spotty even under the current rules.

The proposed executive action, drafted last week and reviewed Wednesday by The Wall Street Journal, would suspend the conflict-minerals rule for two years. Business groups have fought the rule in court, saying its requirements are costly and burdensome.

US Sells Crude Oil From Strategic Reserve

10 million barrels of crude from the U.S.’s strategic reserve are scheduled to be sold later this month, the Department of Energy said.

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The shipment is part of a total 25 million barrels, to be sold over a period of three years, as per the 21st Century Cures Act, signed in December last year.

Yesterday, the Department of Commerce placed final, affirmative anti-dumping and countervailing duties on imports of stainless steel sheet and strip from China.

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Commerce found that dumping  occurred by mandatory respondents Shanxi Taigang Stainless Steel Co., Ltd. and Tianjin Taigang Daming Metal Product Co., Ltd. Commerce also determined that the mandatory respondents are not eligible for a separate rate and, therefore, part of the China-wide entity.

Commerce calculated a final dumping margin of 63.86% for the non-China-wide respondents eligible for a separate rate. Commerce assigned a dumping margin of 76.64% based on adverse facts available for all other producers/exporters in China that are part of the China-wide entity due to their failure to respond to Commerce’s requests for information. Read more