The Commerce Department has delivered a final determination that imports of corrosion-resistant steel from China, India, Italy, South Korea, and Taiwan were illegally dumped in the U.S. The investigation found that countervailable subsidization of imports of corrosion-resistant steel products from China, India, Italy and South Korea occurred and that there were actually no countervailable subsidies of imports of corrosion-resistant steel from Taiwan.
Steel imports into the U.S. were down in April and, if the numbers are able to be believed, China is importing more nickel ore than ever before.
Steel Imports Down in April
Based on preliminary Census Bureau data, the American Iron and Steel Institute reported that the U.S. imported a total of 2,456,000 net tons of steel in April 2016, including 2,014,000 nt of finished steel (down 5.6% and 4.1%, respectively, vs. March final data).
Year-to-date through four months of 2016 total and finished steel imports are 9,982,000 and 8,442,000 nt, respectively, down 34% and 33% vs. the same period in 2015.
Annualized total and finished steel imports in 2016 would be 29.9 and 25.3 million nt, down 23% and 20% respectively vs. 2015. Finished steel import market share was an estimated 24% in April and is estimated at 25% on the year-to-date.
Key finished steel products with a significant import increase in April compared to March are line pipe (up 38%), hot rolled bars (up 35%), structural pipe and tube (up 27%), standard pipe (up 17%) and cold-rolled sheets (up 15%).
Chinese Nickel Imports
China is importing more nickel than ever before. Headline imports of refined metal hit a new all-time record high of 49,012 metric tons in April. The cumulative tally of 157,600 mt over the first four months of the year represents a 115,000-mt increase over the same period of last year.
12 Global steel trade associations today released a statement urging the leaders of the G7 nations to take steps to address the current global steel overcapacity situation which is negatively affecting economies, industries and workers around the world.
The American Iron and Steel Institute, the Japan Iron and Steel Federation, Eurofer (the European Steel Association), Canadian Steel Producers Association, UK Steel, the German Steel Federation (WV-Stahl), Alliance des Minerais, Minéraux et Métaux (A3M), Federacciai (the Federation of the Italian Steel Companies), the Steel Manufacturers Association (SMA), the Committee on Pipe and Tube Imports (CPTI), the Specialty Steel Industry of North America (SSINA), and the European Steel Tube Association said:
“Government support measures and other policies have contributed to significant global excess capacity in steel, unfair trade and distortions in steel trade flows around the world. Among other things, these market-distorting government policies have prevented adequate industry adjustment in some markets in response to changes in global demand. This is an issue of concern in countries where government policies encourage steel capacity growth without regard to market signals, or where government actions sustain uneconomic or consistently loss-making steel plants that otherwise would exit the market.
“Steel producers in the G7 nations, and elsewhere around the world, highly appreciate intergovernmental attempts so far to cope with the global overcapacity issue, and urge their governments to take urgent action to address this global problem, building upon the work program outlined by high-level government representatives in Brussels in mid-April to address the overcapacity and adjustment challenges facing the steel industry,” the statement, in part, read.
“It is critical that all major steel-producing nations participate in efforts to eliminate trade-distorting policies that are contributing to the current steel crisis,” it continued. “Otherwise, as was noted at the OECD Steel Committee meeting in May 2015, ‘a failure to address or halt market distortions will result in subsidized and state-supported enterprises surviving at the expense of efficient companies operating in environments with minimal government support.’
“In this regard, we urge the G7 summit in Japan to discuss the need to maintain effective remedial measures, consistent with their WTO rights and obligations, against exports from countries in which market economy conditions do not prevail.”
The CME Group is taking actions to more directly compete with the London Metal Exchange and China’s Ministry of Commerce has responded to tough U.S. tariffs and anti-dumping duties.
CME Group Will Take on the LME
The CME Group is talking to several warehouse companies to expand its metal storage network globally, three metal industry sources exclusively told Reuters, a move that could further challenge the London Metal Exchange‘s (LME) dominance.
The comments were posted on the ministry’s website following a decision on Friday by the U.S. International Trade Commission to continue probing imports of certain steel products from 12 countries, including China and Korea.
Crude inventories rose 1.3 million barrels in the week to May 13, compared with analysts’ expectations for a decrease of 2.8 million barrels and a 1.1 million-barrel drawdown reported on Tuesday by the American Petroleum Institute.
Miners Can’t Afford to Older Pits
Major miners are trying to avoid hundreds of millions of dollars in closure costs by selling off pits, as cash is tight due to a prolonged commodities price slump, but the crippling cost of environmental rehabilitation is making it tough to seal deals.
Oil prices gained further traction this week as prices climbed above $48 a barrel, the highest level in eight months. Goldman Sachs said in a report on Monday that the oil market has gone from nearing storage saturation to being in deficit much earlier than the bank expected, adding that the global oil market likely shifted into a deficit in May.
Oil prices acting strong although they could meet resistance near $50. Source: @StockCharts.com.
Goldman Sachs gave a bearish forecast just a few months ago, some other banks even predicted oil prices as low as $10/barrel this year. So, why were these predictions so off?
The answer is simple: predicting what the price of an asset will be in the future is not possible. Well, it’s as possible as winning in the roulette game, you need a bit of luck, but you can’t do it with consistency. A smarter way to look at the markets is to forget about predictions, have a strategy with rules and react to present information.
Right or wrong, Wall Street needs its prophets. They perpetuate the myth that there is somehow a way to predict the market every time. I guess individuals need these predictions to take less responsibility for their own investment decisions. At the end of the day, you wouldn’t feel too stupid if the expert was wrong too.
Market Shifting Into Deficit
Although there is still plenty of oil in the market, most analysts agree that the world’s crude oversupply is slipping into a deficit as the oversupply has narrowed in recent weeks thanks to supply outages in Nigeria, Canada and elsewhere combined with stronger than expected demand.
Oil prices are acting strong and we previously noticed that the Doha meeting marked an inflection point. The failed Doha meeting is an indication of how strong market sentiments currently are. On another day, this failure to reach a production cut deal between major energy producers would have translated into a big sell-off.
Another factor supporting oil prices is the number of bankruptcies we are witnessing in recent months. Last Sunday, Breitburn Energy Partners LP filed for bankruptcy and just a day after SandRidge Energy Inc. became the latest oil and gas company to file for bankruptcy after joining a growing list of producers that weren’t able to survive long enough to enjoy the recent rebound in oil. Sandridge was founded by former Chesapeake Energy co-founder Tom Ward who was eventually forced out of both companies.
Despite the rally this year, most industry analysts agree that oil prices remain too low for many producers to make money, so expect widespread pain in the U.S. oil industry and elsewhere to continue. In theory, this is also a good indicator that oil prices might have hit a floor this year.
Despite the more bullish forecast from Goldman Sachs, the bank sees a surplus again in the first half of 2017 due to returning output from Nigeria and rising production in Iran and Iraq, among other reasons. That’s a prediction, sure, but we’ll stick with what we witness right now: Oil prices are acting strong, supported by a more positive sentiment on commodity markets. On top of that we have a weakening dollar, which is bullish for oil and other commodities.
The situation could reverse, but right now there is no reason not to take this rally seriously. Oil prices might need to consolidate/pull-back after rising for three consecutive months but they could continue to climb during the rest of the year which would favor higher metal prices, too. Oil prices climbing above $50/barrel would be a signal that this uptrend is due to continue.
Architecture billings are up, a good sign for the consumption of construction metals here in the U.S., while the American Petroleum Institute has some problems with the new EPA proposed ethanol standards.
Architecture Billings Rate of Gain Declines
The American Institute of Architects’ Architecture Billings Index fell in April to 50.6 from March’s 51.9 but still remains in positive territory. Any score above 50 reflects an increase in architecture billings which, themselves, reflect an approximate one-year lag between design work and actual construction projects breaking ground.
Southern states showed the most strength, and the multifamily and commercial/industrial sectors saw the most billings.
API Calls on EPA to Limit Ethanol
The Environmental Protection Agency must do more to ensure Americans have access to fuels they want and can safely use in their vehicles until Congress changes the Renewable Fuel Standard (RFS) program, American Petroleum Institute Downstream Group Director Frank Macchiarola said following EPA’s proposal for the 2017 RFS mandates.
“Consumers’ interest should come ahead of ethanol interests,” said Macchiarola. “EPA is pushing consumers to use high ethanol blends they don’t want and that are not compatible with most cars on the road today. The administration is potentially putting the safety of American consumers, their vehicles and our economy at risk.”
Higher ethanol blends, such as E15, can damage engines and fuel systems, the API said, potentially forcing drivers to pay for repairs, according to extensive testing by the auto and oil industries. The Congressional Budget Office found that consumer gas prices could rise by 26 cents per gallon unless EPA lowers RFS mandates. API is urging EPA to set the final ethanol mandate at no more than 9.7% of gasoline demand to help avoid the 10% ethanol blend wall and meet strong consumer demand for ethanol-free gasoline.
The world may have never encountered a more crucial Year of the Monkey than 2016.
That is, at least as far as global trade between China and the Western world is concerned. At the end of this year, China believes it ought to receive Market Economy Status (MES). This would allow China to enjoy the same market status as the U.S. and European Union when it comes to anti-dumping investigations before the World Trade Organization.
Recently, China’s Ministry of Commerce responded to questions from the Financial Times with this: “China is firmly against any misinterpretation or delay in performance of the [WTO] clause [that “automatically” grants China MES on December 11, 2016]. We call on members, such as the U.S. and E.U., to take necessary measures as soon as possible in order to ensure ending the [current methodology used in anti-dumping cases] before the due time.”
However, since China’s economy — and the role of its government within it — operates differently than much of the rest of the world, that country is effectively able to export and offer its products much more cheaply to many of its trading partners. Depending on the circumstances, this has spurred allegations of “dumping” over the past several decades, and has now come to a head.
Currently, China is considered a ‘non-market economy’ under WTO rules. Achieving market economy status would ultimately put China on the same level as the U.S. and E.U. in the eyes of the WTO, taking what some already consider a global trade war to new heights.
For a more in-depth investigation of the criteria China must fulfill to achieve MES, and what it could mean for its Western trading partners, start here.
The studies are a further step towards bringing onstream a deposit that holds more than 2 billion metric tons. The real cost of the project has yet to be revealed but it is tipped to reach $20 billion.
Finance Minister Says China Will Maintain Steel Tax Rebate
China will maintain its tax rebate policy for steel exports as part of its efforts to help the sector tackle its longstanding overcapacity problems, the country’s finance ministry said on Wednesday.
Today, the Department of Commerce affirmed anti-dumping duties on imports of cold-rolled steel flat products from China and Japan, and countervailing duties — levied due to foreign government subsidies — on imports of cold-rolled steel from China.
Commerce determined that imports of cold-rolled steel from China and Japan have been sold in the U.S. at dumping margins of 265.79% and 71.35%, respectively. Commerce also determined that imports of cold-rolled steel from China received countervailable subsidies of 256.44%. This brings the total duties on Chinese cold-rolled imports to a whopping 522%
These anti-dumping determinations were exactly the same as Commerce’s preliminary findings released in March.
As a result of the affirmative final determinations, Commerce will instruct U.S. Customs and Border Protection to continue to require cash deposits based on the final rates, which were the same as the preliminary rates for the anti-dumping duties. The countervailing duties rates will be added to Chinese cold-rolled imports.
Cold-Rolled Steel Petitioners
The petitioners for these investigations are AK Steel Corporation, ArcelorMittal USA LLC, Nucor Corporation, Steel Dynamics, Inc., and United States Steel Corporation.