The American Iron & Steel Institute, a key lobbying force for the steel industry, is focused on two major policy issues for the remainder of the year: getting the G20-initiated “Global Forum” on steel overcapacity officially in motion before the Obama administration leaves office, and ensuring that the U.S. continues to refuse to recognize market economy status for China.

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“If China gets market economy status it will mean 400,000 to 600,000 lost jobs (in steel, other metals and services for the industries) the U.S.,” said Thomas J. Gibson, President and CEO of the AISI in a conference call with reporters yesterday.

When asked what the position of the AISI is, as opposed to that the U.S.-China Business Council, AISI Senior VP for public policy and general council Kevin Dempsey said, “what the Chinese are trying to present is sort of a legalistic argument that, regardless of the facts, they should be granted the status. I don’t think that legal argument stands up to scrutiny.” Read more


Kevin Dempsey

MetalMiner Managing Editor Taras Berezowsky recently sat down with Kevin Dempsey, Senior VP for public policy at the American Iron & Steel Institute. Dempsey leads the AISI public policy team representing the interests of North American steel producers and also serves as General Counsel to the Institute. Before that he was a practicing attorney who specialized in trade matters.

During his years on Capitol Hill and in the private sector, Dempsey has worked extensively on international trade negotiations, including the Doha Development Agenda and the original negotiations on the accession of China to the World Trade Organization. He also has considerable experience with U.S. and international law related to subsidies, trade remedies, market access, intellectual property rights, and product standards, as well as U.S. legislative procedures for authorizing and implementing trade agreements.

As such, he possesses a veritable wealth of knowledge about the issue of market economy status for China and how that would impact the U.S. steel industry.

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Taras Berezowsky: Just initially, I saw in your bio that you had worked on China’s original agreement of accession to the WTO. In what capacity did you work with them?

Kevin Dempsey: I was a lawyer, a trade lawyer, in private practice representing a number of U.S. industries that were interested in the question of China’s role in the WTO and making sure that the rules going forward were going to be fair ones that ensure fair competition with China.

A big issue at the time was the extensive state involvement in the Chinese economy and the need to make sure that we had effective laws, including the ability to continue to treat China as a non-market economy under the anti-dumping law.

Read more

A recent CRU note shined some useful light on how the reporting of aluminum inventory in China has been distorted by changes in the supply chain between smelters and downstream consumers. Our reporting of primary metal inventory generally measures exchange stocks of ingot, sows and t-bars, and adds in an estimate for off-market stocks held by trade buyers and the reported inventory held by smelters.

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It is a process that has generally held us in good stead for decades — with the one glaring omission of off-market stock and finance trade inventory running into millions of tons that we have no visibility on, but that’s another matter! Well add to that, says CRU, the changing nature of the Chinese aluminum manufacturing industry.

China’s Shadowy Aluminum Industry

Lured by cheap coal and, as a result, low-cost power, Chinese smelters have relocated in droves to the north and north east provinces, remote from traditional downstream clients on the east coast.

Liquid Molten Metal

Is the future of aluminum liquid? Source: Adobe Stock/kybele.

Transportation costs are high and can be unreliable, particularly in winter. So, Chinese customers have come to their metal suppliers, relocating cast-house and direct casting facilities adjacent to the smelters. The products they, in turn, produce are higher value and better able to absorb those transportation costs. So far, so good. Read more

A report in the Financial Times last week covered falls in metal prices due to recent Chinese trading data.

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The data showed a 10% fall in China’s exports last month and a greater than expected drop in imports sent copper down nearly 3% late last week before a slight recovery on Friday. The FT quotes Caroline Bein analyst at Capital Economics saying “ to drop in exports is negative for industrial commodities raising concerns about weakness in the manufacturing sector and import figures raise concerns about domestic demand.”

Broad Drop

Copper was not alone in reacting to the poor trade figures, although the Shanghai market seemed remarkably sanguine, European and U.S. stock markets dropped sharply, driving stocks lower and boosting gold, bonds and safe haven currencies like the Yen.

Are the trade figures quite as bad as they seem? And do they justify the markets sharp reaction? There are broadly two issues at work here. First, the wider issue of China’s trade data. Back to the FT, China’s trade data showed that the country’s exports last month were down 10% from a year earlier — following a 2.8% contraction in August — suggesting that global demand was decidedly weak. Read more

Tariffs were place on Chinese steel imported into the E.U. and the Commerce Department. placed more on phosphor copper coming into the U.S.

EU Tariffs on Chinese Steel

The European Union will impose duties on two grades of steel imported into the currency bloc from China to counter what it says are unfairly low prices.

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The duties are set at between 13.2 and 22.6% for hot-rolled flat iron and steel products and at between 65.1 and 73.7% for heavy-plate steel, according to a filing in the European Union’s official journal.

Anti-Dumping Duties on Phosphor Copper

Not to be outdone, The Department of Commerce placed tariffs on allegedly dumped imports of phosphor copper from the Republic of Korea yesterday.

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Commerce found, preliminarily, that dumping occurred by mandatory respondent Bongsan Co. Ltd. by a dumping margin of 3.79%. All other producers from South Korea also received 3.79% anti-dumping duties. U.S. Customs and Border Patrol will now collect cash deposits upon import of the copper. The petitioner is Metallurgical Products Company of Pennsylvania.

Much is being made of a mega merger between the publicly traded arm of Shanghai Baosteel Group Corp., the second-biggest Chinese steel mill by output, and the listed unit of Wuhan Iron & Steel Group Corp., its No. 6 steelmaker.

Profitable Baosteel will issue new shares to swap with the loss-making smaller firm. The Chinese press is full of the deal, saying it will rival ArcelorMittal in size and hailing it as an example of Beijing’s drive to consolidate the steel industry and tackle overcapacity.

Why the Urge to Merge?

ArcelorMittal, produced 97 million metric tons of steel last year and has a market value of $17.2 billion. Baoshan and Wuhan were worth $16.3 billion combined as of the June 24 close and produced about 60 mmt last year. Baoshan is a profitable enterprise and generally acknowledged to be well run. Wuhan, on the other hand, is loss making, carries too much debt and, probably in the newly combined group, ripe for plant closures and rationalization.

With 1.2 billion mt of crude steelmaking capacity but 803 mmt of steel production, China clearly has a massive overhang of unproductive capacity, causing some firms to be heavy loss makers. Estimates put combined losses for the industry at $10 billion last year.

But, for Beijing, it is as much a desire to clear up these loss-making companies before the market pulls them down into bankruptcy than it is to cut excess steel capacity. There is little doubt it has taken Beijing’s arm-twisting on profitable firms like Baoshan to take over loss makers like Wuhan that they would probably otherwise steer well clear of.

Beijing wants to avoid a domino collapse of lesser steel firms, like Dongbei Special Steel Group, owned by the Liaoning state government that finally filed for bankruptcy this month after eight, yes eight, defaults.

“If they can merge with others, they merge,”  Li Hongmei, an analyst at S&P Global Platts is quoted in the Financial Times as saying. “If not, they will ask the banks if they can change debt for equity. If that fails, then they will choose the last resort — that will be bankruptcy.”

But bankruptcy is bad for publicity, bad for workers, bad for the banks left holding the debt. Better, in a state-directed world, to have a profitable firm swallow them up and quietly rationalize the loss-making operations.

What’s China’s Real Plan for Loss-Making Steel?

The Economist reports on the wider trend, saying China aims to establish two major steel groups, one in the north and one in the south. The northern union of Hebei Iron & Steel Group with Shougang Group would be the nation’s biggest producer, with output of 76 mmt last year for a share of national production at 10%, topping Baosteel-Wuhan’s 8% share in the south, according to 2015 figures.

Meanwhile, there are rumors Ansteel Group Corp., the country’s fourth-biggest producer, could merge with regional peer Benxi Steel Group Corp. but, apparently, the firms are not confirming discussions are ongoing.

What About Those Steel Closures?

The aim is to close 150 mmt of capacity by 2025 but that will hardly put a dent in the 400 mmt of excess capacity in the country, more importantly for Beijing it may take the worst of the basket cases out of the public eye swallowed up by larger, state-directed groups.

The FT, though, offers a cautionary note: The drive to preserve and promote high-end, coastal steel production capacity while cutting off low-end, inland capacity is present throughout the restructuring plans, including the headline Bao-Wu merger.

“Coastal capacity is growing, and that’s the main trend of the next two years,” the FT reports. “Baosteel has a plant in Guangdong. Wisco has one in Guangxi, and they are ramping up to just under 10 mmt of capacity a year each by the end of 2017. What international steel producers really should be asking is what’s happening with the extra 50 mmt of capacity being commissioned on the Chinese coast in the next two years.”

That new capacity is better placed to service export markets than the plants being closed inland, how much of this drive is really to address overcapacity and how much is it to improve profitability and avoid the trauma of bankruptcies.

Let’s set aside Donald Trump’s one-track talk on China as a currency manipulator for just a sec, and focus on a slightly less understood, and arguably bigger, issue — the role of Chinese state subsidies and state-owned enterprises.

Using the steel industry as an example:

Top 10 Chinese Steel Companies in 2014

top 10 list china steel companies

With the exception of Shagang Group, China’s biggest steel companies are owned — therefore subsidized and otherwise supported — by Beijing. Courtesy of the American Iron and Steel Institute (AISI).

Because nine of the top 10 steel companies in China are SOEs, which get special support (read about it in our new project,China vs. the World,” here) — it ultimately spurs trends like these:


Almost immediately after China joined the WTO in 2001, the country’s steel industry began its exponential rise. Courtesy of AISI.


The Great Recession nipped Chinese exports a bit, but state-owned enterprises continued to be incentivized to produce by the Chinese government while domestic growth stagnated within the last few years, leading to a flood of Chinese steel being pushed outside the country’s borders. Courtesy of AISI.

A Special MetalMiner Project: Learn why China getting market economy status may just be the biggest trade issue of our time – and how it impacts the U.S. steel industry – in “China vs. the World.

china shipping port title

Copper has been on a bit of a roll this month. After a quiet summer, investors have been looking at growing concentrate imports in China and increased refining to pure copper as signs that Chinese demand is picking up.

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A recent article by Reuters throws some light on what is going on behind the scenes that suggests while demand from refiners is robust, it does not mean demand from China’s consumers is equally as strong and rising imports should not necessarily be seen as a bullish sign for copper.

Copper Price


The metal had hit a four-week high last week, approaching $4,800 per metric ton after better-than-expected Chinese data lifted sentiment. Read more

China is importing record numbers of North Korean coal in violation of international sanctions and the shipping industry is still suffering under its worst downturn ever.

China Ignores Sanctions, Imports Record North Korean Coal

It appears that China is interpreting the “people’s well-being” as meaning North Korea should be able to export record amounts of coal in defiance of sanctions against the rogue nuclear-armed state.

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China imported 2.465 million metric tons of coal from North Korea in August, the highest on record, and 61% above what was bought in April, the month sanctions were supposed to take effect.

Shipping Downturn Claims Hanjin

The shipping industry is suffering its deepest downturn ever as trade slows. Around 90% of world trade is transported by sea.

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South Korean container line Hanjin, which filed for receivership on Aug. 31, is the latest casualty in a crisis exacerbated by a glut of ships, many of which were built before the financial crisis when the global economy was healthier. It did, however, gain a reprieve when its ships were allowed to unload cargo that had been sitting around waiting for a resolution.

Welcome back to the MetalMiner week-in-review! This week we’ve got in-depth reporting on China and market economy status, India getting tough on aluminum imports and Canada… well, you’ll see what happened in Canada.

We Know Gold Prices Have Gone Up… Butt This is Ridiculous

The theft of about $140,000 worth of gold ($180,000 in Canadian dollars) from the Royal Canadian Mint, was supposedly an inside job… in more ways than one.

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After a trial that concluded in Ottawa on Tuesday, Leston Lawrence, a 35-year-old employee of the government mint in Ottawa, stood accused of foiling the facility’s high security and smuggling out 18 7.4-ounce pucks — this is Canada, after all — worth about $6,800 each. He sold most of the pucks, cooled into the size of a purity testing dipper used at the mint, to an Ottawa Gold Sellers retail store at a nearby mall. The accused criminal mastermind also had four more of the pucks in a safe deposit box.


“Go ahead, scan me with the wand. Nothing to see here.” Source: Adobe Stock/John Takai.

The question the Royal Canadian Mounted Police, or the Mint, couldn’t figure out is how he got past the state-of-the-art security that featured full-body metal detectors and secondary screenings with a wand for anyone that tripped the first scan?

Before Lawrence was fired from the Mint and arrested in 2015, investigators also found a tub of Vaseline in his locker. While the wand scanners can pick up even small pieces of metal in a person’s clothes, security officials from the Mint said they probably would not detect dipper-sized gold pucks that were forced between someone’s buttocks using the vaseline.

Ewww, Canada. Read more