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This morning in metals news, European aluminum maker Constellium moves its U.S. offices from New York to Baltimore, copper and aluminum take a step back, and AK Steel announces a price hike.

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Constellium to Set up Shop in Baltimore

European aluminum firm Constellium announced it will move its U.S. corporate offices from New York to Baltimore, The Baltimore Sun reported Wednesday.

According to a statement from Constellium, at least 25 senior management and executives will be relocated to the new Baltimore office by the end of 2018.

Constellium, which has its corporate headquarters in Amsterdam and two additional corporate offices in Paris and Switzerland, produces aluminum products for a wide range of industries, including aerospace, automotive, transportation, defense and packaging.

Copper, Aluminum Fall Back

After recently hitting multi-year highs, copper and aluminum fell on Thursday.

According to Reuters, the drop is the result of investors who “locked in profits from a steep rally amid doubts about future demand in top metals consumer China.”

Speculator activity has seen the LME index rise 16% from early June, according to the report.

AK Steel Announces Price Hike

Effective immediately, AK Steel will raise the price for all carbon flat-rolled steel products by a minimum of $30 per ton, according to a report on Nasdaq.com.

Since last August, AK Steel’s shares have risen 5%, compared with 21.8% for the industry, according to the report.

Despite that disparity, AK Steel had a strong second quarter, topping earnings and sales estimates, according to the Nasdaq report.

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The company reported net income of $61.2 million (or 19 cents per share), up 253.7% from net income of $17.3 million (or 8 cents) recorded in the prior-year quarter, the report says.  The company also recorded net sales of $1,557.2 million for the quarter, up 4.3% from the year-ago quarter, exceeding the Zacks Consensus Estimate of $1,530 million.

The U.S. Department of Commerce. qingwa/Adobe Stock

The U.S. Department of Commerce’s ruling Aug. 8 on Chinese aluminum foil wasn’t the only determination it announced that day.

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On top of the foil ruling — in which the department ruled that Chinese foil imports benefited unfairly from government subsidies, and as a result could be subject to duties of up to 81% — the DOC also issued a preliminary countervailing duty determination regarding silicon imports from Australia, Brazil and Kazakhstan.

According to a DOC release, silicon exporters from Australia, Brazil and Kazakhstan benefited from countervailing subsides of 16.23%, 3.69 to 52.07%, and 120%, respectively.

“We will continue to review all information related to this preliminary determination,” Secretary of Commerce Wilbur Ross said in the release. “The Trump Administration remains vigilant against foreign actors that take advantage of American workers and businesses.”

Imports of silicon metal from Australia, Brazil, and Kazakhstan were valued at an estimated $33.9 million, $60.0 million, and $17.5 million, respectively, according to the DOC release.

The petitioner is Globe Specialty Metals, Inc., which has production facilities in Alabama, New York, Ohio, and West Virginia.

The DOC’s rulings on silicon and aluminum foil are representative of the Trump administration’s emphasis on antidumping and countervailing duty probes. According to the DOC release, the administration has launched 64 investigations between Jan. 20 and Aug. 8, marking a 40% increase from the same timeframe last year.

Last year, the U.S. collected $1.5 billion in duties on $14 billion of imported goods “found to be underpriced or subsidized by foreign governments,” according to the DOC announcement.

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This afternoon in metals news, supply-side reform in China is having significant effects on global markets, U.S. Senate Minority Leader Chuck Schumer calls for trade action to combat cheap imports of steel and aluminum from China and other countries, and scientists have resolved a long-standing mystery about a prehistoric copper smelting event.

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Chinese Supply-Side Reforms Leave Their Mark

There are many who question the impact of China’s efforts to curtail excess production, but according to a report by Platts, supply-side reforms in the country are having major impacts around the world.

China’s net steel exports through the first seven months of the year were down almost a third, according to the report. Hot rolled coil prices have also risen in the process, reaching their highest point since 2013.

“Given the current protectionist bent that seems to span the globe, it will be interesting to see how China’s metal exports will be perceived in a few years’ time,” the Platts report concludes. “In the US, for example, there is not enough steel capacity to deliver upon the infra-build being promised by President Trump, should Section 232 be imposed, and the build go ahead.”

Schumer Calls for Action on Cheap Steel, Aluminum Imports

The Trump administration launched Section 232 investigations into imports of steel and aluminum, with a particular focus on China.

On Tuesday, U.S. Senate Minority Leader Chuck Schumer, a Democrat, sounded a similar note, according to a report in the Watertown Daily Times.

“There are top notch manufactures like Alcoa and Nucor ready to provide high-quality aluminum and steel to businesses in and around the country, but China’s overproduction has resulted in a substantial threat to Upstate New York’s metal industry by making it almost impossible for companies that play by the rules to compete,” Schumer said in a statement.

According to the report, Schumer has sent letters to Secretary of Commerce Wilbur Ross and United States Trade Representative Robert Lighthizer on the matter.

Scientists Resolve Ancient Copper Smelting Mystery

For more than half a century, the origins of a copper smelting event at a prehistoric archaeological site has remained a mystery.

But recently, a team of scientists hit paydirt at the Late Neolithic site of Çatalhöyük in central Turkey.

“Scholars have been hotly debating the origins and spread of metallurgy for decades, mainly due to the relationship this technology had with the rise of social complexity and economy of the world’s first civilisations in the Near East,” according to a report in phys.org.

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According to the report, a study published Tuesday in the Journal of Archaeological Science concludes that that after “the re-examination of a c. 8,500-year-old by-product from metal smelting, or ‘slag’, from the site of Çatalhöyük presents the conclusive reconstruction of events that led to the firing of a small handful of green copper minerals.”

Unlike the steel mergers of the mid-noughties, the mergers currently in the news are born out of weakness, not strength, a recent Financial Times article suggests.

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According to the piece, profitability among the continent’s steelmakers plunged from a peak in the third quarter of 2008 — when each ton shipped delivered on average €215 in earnings before interest, tax, depreciation and amortization — to just €46/tonne in the first quarter of 2016, according to calculations by UBS.

The figure has recovered since to about €83/tonne in the first quarter of 2017, but at the cost of 86,000 job losses since the financial crisis and years of losses contributing to the bankruptcy of the continent’s largest steel production plant, Ilva, in Italy.

Source Financial Times

Despite years of suboptimal capacity utilization, there has been limited rationalization of production continentwide, with governments fiercly opposing job losses in their backyard and steelmakers hoping the other guy will make the cuts. Even Ilva is now being taken over by ArcelorMittal rather than closing completely, and following a major investment will be back in production next year.

Source Financial Times

Although the industry acknowledges Europe will never need as much steel as it once did, ArcelorMittal is quoted as saying the industry is looking to governments to do more to stem imports from Russia and China, and facilitate the planned and phased closure of persistently loss-making plants. Less foreign competition and more consolidation is the agenda in the hope fewer more-consolidated steelmakers can achieve greater clout with buyers in a more constrained market, forcing through higher prices.

Source Financial Times

When ArcelorMittal’s takeover of Ilva is complete, the combined entity will control some 30% of European flat-rolled steel production, up from 26.5% for ArcelorMittal now. While Tata Steel’s proposed and much-delayed merger with ThyssenKrupp’s steel division — currently Europe’s second-largest steel producer — would raise their combined market share for hot-rolled flat products to over 20%.

Steel prices are already up nearly 60% from the bottom in 2015 on the back of improved recovery in steel demand and a gradual increase in anti-dumping legislation restricting some types of steel imports into Europe. Producers would like to see this go a lot further, of course, but consumers are fighting to keep the import market open, fearing — with some justification — that more action will reduce competition and result in significantly higher prices.

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For the first time in years, steelmakers at least seem to have a plan and are actively pursuing it. Whether that plan is to the eventual benefit or detriment of consumers remains to be seen — but a healthier domestic steel industry must certainly be advantageous to all.

The U.S. Department of Commerce. qingwa/Adobe Stock

This afternoon in metals news, experts say that despite the delay in the Section 232 investigation of steel imports, they still expect President Donald Trump to impose tariffs, U.S. steel production is up 2.9% in the year to date and copper and steel output from Kazakhstan rose significantly from January to July.

Section 232 Tariffs Still Coming, Experts Say

The wait continues for the Trump administration’s announcement of what it is going to do at the conclusion of its Section 232 investigation into steel imports.

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The investigation was launched in April, and Secretary of Commerce Wilbur Ross has 270 days to present President Donald Trump with a report (making for a January deadline).

An announcement was expected to be made by the end of June, but that self-imposed deadline came and went without an announcement. However, despite the delay, some industry experts believe Trump still plans to impose tariffs, according to a report by Reuters.

Trading partners around the world, including the European Union, in recent months have warned of the possibility of retaliatory measures should the U.S. move forward with tariffs (or a quota system, or a hybrid tariff-quota measure).

A Trump administration official told Reuters the Section 232 review is active and is “still under the final stages of review within the administration.”

U.S. Raw Steel Production Up 2.9%

Per data released in the American Iron and Steel Institute’s weekly report, U.S. raw steel production in the year to date is up 2.9% compared with the same time frame in 2016.

Adjusted year-to-date production through Aug. 12 was 55,650,000 net tons, up 2.9 percent from the 54,106,000 net tons during the same period last year, according to the report.

For the week ending Aug. 12, production was up 1% from the week ending Aug. 5, up to 1,780,000 net tons from 1,762,000 net tons the previous week.

Copper, Steel Output Up, Zinc Output Down in Kazakhstan

Output of copper and steel rose significantly from January to July in Kazakhstan compared with the same time frame in 2016, according to Reuters.

Copper output rose 5.7% and steel output rose 10.1% for the first seven months of the calendar year.

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Meanwhile, zinc output dropped 0.9%.

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One of the top five regions in the world with the largest deposits of bauxite, India’s bauxite production is expected to increase from 22.08 million tons in 2016 to 49.4 million tons by 2021, according to new research.

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The BMI Research report says bauxite production is projected to hit 26.1 million tons this year, about 18% higher than 2016.

In the last two decades, India’s bauxite ore production has kept up with its aluminum output. As is the case with steel and other metals, bauxite production in the country, too, was estimated to go up in 2017 because of increasing domestic demand.

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This morning in metals news, China pressured iron ore traders not to buy from North Korea even before the newest round of U.N. sanctions were imposed, a Chilean copper company is preparing to invest in Mongolia and China produced a record amount of steel in July.

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China Puts Pressure on N. Korean Iron Ore Business

As the political situation on the Korean peninsula continues to intensify and President Donald Trump criticizes China for allegedly not doing enough to rein in North Korea, a Reuters report indicates China has taken some action against North Korean interests.

According to Reuters, China pressured its iron ore traders not to buy North Korea iron ore, pressure that even preceded the latest round of U.N. sanctions.

Per two traders Reuters spoke to, the Chinese government stopped issuing permits to bring in iron ore “several weeks ago.”

Codelco Looks to Make Investment in Mongolia

Chilean state miner Codelco is planing to make an investment in faraway Mongolia, Codelco’s chief executive told Reuters on Friday.

According to CEO Nelson Pizarro, the company is looking for medium-term investments in the country, which may have untapped copper deposits.

Chinese Steel Output Hits 74M Tons in July

Chinese steel producers had a prolific July, churning out  a record 74 millions tons, Reuters reported.

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The output bested the previous month’s then-record total of 73.23 million tons, reached in spite of government efforts to combat pollution.

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This morning in metals news, steel prices in China are up and the government is looking to strike a balance, German company Thyssenkrupp isn’t in a rush to forge a merger with the European business of India’s Tata Steel and China responds to the U.S. Department of Commerce’s ruling this week regarding Chinese aluminum foil, which the DOC determined was being unfairly subsidized by the government.

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Steel Prices On the Way Up in China

Rising steel prices have Beijing looking for ways to adapt, according to a CNBC report.

On the heels of efforts to cut excess Chinese steel production, prices are rising — but the government is looking to strike a balance.

“For Beijing, it’s a tough situation: tackle steel overcapacity, rebalance economic growth, control environmental pollution and also manage market stability — especially in advance of a leadership shuffle due in the fall,” CNBC’s Sophia Yan writes.

No Rush to Merge, Thyssenkrupp CFO Says

Talks of a merger between the European businesses of Thyssenkrupp and India’s Tata Steel have hung around since last year.

They even seemed to get a boost in light of news reported yesterday about Tata’s plans to separate its British pension scheme from its businesses.

Despite that step, Thyssenkrupp CFO Guido Kerkhoff says not so fast.

Kerkhoff told reporters Thursday that while they prefer a “fast solution” in potential merger talks, quality comes first.

China Warns U.S. After DOC’s Aluminum Foil Ruling

Unsurprisingly, the U.S. aluminum industry applauded the Department of Commerce’s preliminary determination Tuesday regarding Chinese aluminum foil.

Also unsurprisingly, China had something to say about it, too.

The Chinese Ministry of Commerce wrote in a statement on its website that the DOC’s claims were “without foundation” and urged the U.S. to “act cautiously and make a fair decision to avoid any negative impact on the normal economic and trade exchanges between China and the U.S.”

On Tuesday, Secretary of Commerce Wilbur Ross announced the findings of the countervailing duties investigation, declaring that Chinese exporters of aluminum foil received countervailing subsidies of 16.56 to 80.97 percent. As a result, the U.S. could impose duties of up to 81 percent on Chinese foil in return.

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Meanwhile, the outcome of the Section 232 investigation into aluminum imports, however, remains pending.

With the oil price under pressure from excess supply and a growing percentage of the North American market’s oil and natural gas demand being met from domestic sources, the last thing you would expect is a surge in oil and natural gas tanker construction.

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But according to the Financial Times, that is exactly what Hyundai Heavy Industries (HHI), the world’s largest shipbuilder, is experiencing.

HHI has reported a 70% jump in first-half operating profit, to Won 315 billion ($280 million) in the first six months of this year from Won 186 billion a year earlier.

Even more impressive is the surge in the order book.

The group won orders to build 81 vessels worth $4.5 billion so far this year, compared with 16 vessels worth $1.7 billion in the same period last year led by a rebound in oil tankers and gas carriers, the Financial Times reports.

Source: Financial Times

It may be counterintuitive that shipping demand is surging so dramatically. Demand is positive but hardly growing robustly.

One explanation is as older vessels are retired for oil storage, stimulated by the current relatively low oil price environment, demand is increasing for more efficient, new vessels to replace them.

Apparently, both Samsung Heavy Industries and Daewoo Shipbuilding and Marine Engineering are going through a similar uptick in demand.

Samsung Heavy’s first-half operating profit swung to Won 48 billion from an operating loss of Won 277.6 billion a year earlier. Daewoo Shipbuilding is also expected to report an operating profit of up to Won 800 billion for the first half after narrowly avoiding bankruptcy in April on a $2.6 billion bailout by state-run lenders, the Financial Times reports.

For the big three, this turnaround must be very welcome after years of losses and poor sales. The news will also bolster Korean steelmakers and the rest of the shipbuilders’ supply chain.

The only country building much the last few years has been China, a shipbuilding market served almost exclusively by its domestic steel mills.

However, Korean steel mills have a well-established positon as producers of high-quality, shipbuilding-grade steel.

According to Clarksons, the Financial Times reports new orders for ships worldwide rose more than 40% in the first half of this year, with South Korea taking  one-third of them, closely trailing behind China. Continued strength into next year will depend on global growth continuing in a broadly positive direction and the longer-term trend of greater reliance on liquefied natural gas for power and chemicals feedstock.

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Liquefied natural gas shipbuilding construction has been a speciality of the Korean shipyards and should remain a core offering, despite growing competition from China’s shipyards.

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This morning in metals news, the U.S. aluminum industry expressed support for the U.S. Department of Commerce’s ruling that Chinese aluminum foil is benefiting from government subsidies, Indian steel company Tata Steel is expected to detach its U.K. pension scheme from its business and, in consumer products news, a recent report says copper cocktail mugs may be causing food poisoning.

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DOC Rules Chinese Aluminum Foil Benefits From Government Subsidies

The U.S. aluminum industry came out in support of a U.S. Department of Commerce ruling Tuesday, which said that Chinese aluminum foil was benefiting from government subsidies.

According to the preliminary determination of the countervailing duty investigation, Chinese exporters of aluminum foil received countervailing subsidies 16.56 to 80.97%, Secretary of Commerce Wilbur Ross announced Tuesday.

Per a DOC release, the Commerce Department “will instruct U.S. Customs and Border Protection to collect cash deposits from importers of aluminum foil from China based on these preliminary rates.”

“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,” Ross said. “The Trump Administration will not stand idly by as harmful trade practices from foreign nations attempt to take advantage of our essential industries, workers, and businesses.”

Per the release, imports of aluminum foil from China last year were valued at an estimated $389 million.

The Aluminum Association applauded the DOC determination.

“The association and its foil-producing members are very pleased with the Commerce Department’s finding and we greatly appreciate Secretary Ross’s leadership in enforcing U.S. trade laws to combat unfair practices,” said Heidi Brock, President and CEO of the Aluminum Association, in a prepared statement. “This is an important step to begin restoring a level playing field for U.S. aluminum foil production, an industry that supports more than 20,000 direct, indirect, and induced American jobs, and accounts for $6.8 billion in economic activity.

“U.S. aluminum foil producers are among the most competitive producers in the world, but they cannot compete against products that are subsidized by the Chinese government and sold at unfairly low prices.”

The ruling stems from the March 9 filing of antidumping and countervailing duty petitions by The Aluminum Association’s Trade Enforcement Working Group. The petition marked the first time the Aluminum Association has filed unfair trade cases on behalf of its members in its nearly 85-year history, according to the Aluminum Association release.

Tata Steel Inches Closer to Potential Merger

According to a BBC report, an announcement from Tata Steel regarding the separation of its British pension scheme from its businesses could be coming within days.

The pension scheme has been a “significant barrier” in merger talks between Tata and German steel producer ThyssenKrupp, according to the report.

According to the BBC, Tata “has been in negotiations with pension regulators and trustees” of the £15 billion British Steel Pension Scheme.

Health Officials Say Copper Cocktail Mugs Could Cause Food Poisoning

A recent report might give drinkers of Moscow Mules pause.

CBS News reported health officials in Iowa made the declaration that copper cocktail mugs — often used to drink the popular Moscow Mule cocktail — might cause food poisoning “after examining the poisonous nature of copper and copper alloys mixing with food.”

Per an advisory bulletin from Iowa’s Alcoholic Beverages Division, the federal Food and Drug Administration’s Model Food Code prohibits copper from coming into direct contact with foods that have a pH below 6.0 — for example, vinegar, fruit juice or wine.

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The Moscow Mule, an increasingly popular cocktail, includes lime juice.