European Union

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This morning in metals news: copper slides slightly but is still near its recent 11-week high; shares of a U.S.-based aluminum company fell after a Reuters report that the company knowingly supplied flammable panels for use in Grenfell Tower and the European Union is considering retaliatory measures if the U.S. places tariffs on steel and aluminum imports.

Copper Hovers Near 11-Week High

Copper fell on Monday but still hung around its previous 11-week high, Reuters reported, hanging tough amid good news about Chinese demand and potential supply shortages.

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On Friday, LME copper reached its highest price since April 7. According to a report cited by Reuters, a seasonal rise in electricity usage in China is likely to contribute to a rise in demand for the metal.

Arconic Shares Fall After Report Linking Company’s Products to Grenfell

On the heels of the deadly June 14 fire at Grenfell Tower in London, metal company Arconic‘s shares are falling after a report indicated the company knowingly provided flammable panels for use in the tower.

According to a Reuters report, emails sent to and from an Arconic sales manager include questions about why the company provided combustible cladding material for use in the building of the tower.

Arconic argued that while it knew the panels would be used for construction of the tower, it was not its role to decide what materials are or aren’t compliant with building codes, the Reuters report says.

Shares of Arconic dropped 6% early Monday, CNBC reported.

EU Considers Response to Potential U.S. Tariffs

While China is the primary target of the U.S.’s Section 232 investigations into steel and aluminum imports, other countries are preparing for the effects of potential U.S. tariffs.

EU nations are among those concerned about a trade policy readjustment from the Trump administration.

Cecilia Malmström, EU trade commissioner, said the bloc was “making preparations” to respond to the imposition of U.S. tariffs, USA Today reported. She added U.S. tariffs would “unjustifiably hit” EU nations.

The Trump administration launched the investigations in April. The U.S. Department of Commerce held public hearings on the subjects of steel and aluminum imports May 24 and June 22, respectively.

Chinese excess capacity has been the main talking point for U.S. producers, who argue that China is flooding the market with the metals and leading to depression of prices and, as a result, job losses and plant closures in the U.S.

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The trade commissioner also said the EU would study any actions by the Trump administration to determine if they are in line with World Trade Association rules.

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This morning in metals news, the biggest aluminum smelter in China is cutting back on outdated capacity, New York State’s governor and legislative leaders announced a “Buy American” deal for state purchases of iron and steel, and the European Union’s trade commissioner says the European bloc “will have to respond” if President Donald Trump imposes trade tariffs on steel imports from China, the EU and other nations.

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China Targets Aluminum Capacity

China Hongqiao Group Ltd. will be cutting back on outdated aluminum capacity, Bloomberg reported.

The cutback comes at the same time as the Chinese government focuses on illegal production, according to the report.

Chinese overcapacity is a main talking point for metals producers around the world, especially in the U.S. A Department of Commerce hearing on the government’s Section 232 investigation of aluminum imports is scheduled for 9 a.m. Eastern Time on Thursday, June 22.

Analysts expect further Chinese aluminum production cutbacks throughout the year.

N.Y. Pledges to ‘Buy American’

As the U.S. aluminum and steel industries await the Department of Commerce’s Section 232 investigation findings, New York politicians agreed on a proposal for buying American iron and steel.

New York Gov. Andrew Cuomo and other state leaders announced a “Buy American” agreement, which calls for the use of American iron and steel for some state road and bridge projects, Newsday reported.

According to the report, the proposal gives preference to American producers for iron and steel contracts worth more than $1 million.

Although the proposal is a scaled-down version of the initial bill — the result of objections from neighboring Canada — the bill fits well in a climate dominated by talk about the potential outcomes and ramifications of the Section 232 investigation.

European Union Strikes Back?

As the U.S. Department of Commerce gets set to announce the findings and recommendations of its Section 232 investigations, trading partners abroad are keeping tabs on the process.

EU Trade Commissioner Cecilia Malmström said the EU “will need to respond” if President Donald Trump places tariffs on steel from the EU (and other nations), POLITICO reported.

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She mentioned Chinese overcapacity and market distortions as sources of the U.S.’s concerns about steel imports. Even if tariffs applied to Chinese steel don’t directly affect EU nations, Malmström said they will still be hit “very hard.”

In an increasingly interconnected world, rarely does a trade policy targeting one country — whether formally or in spirit — only affect that country. As the U.S. is expected to take aim at China with any trade policy readjustments that come as a result of the Section 232 investigation, other nations could very well be affected.

The findings of the 232 investigation are expected to be announced in the near future. Thursday morning’s Department of Commerce hearing on aluminum should shed additional light on the government’s thinking.

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This morning in metal news, the European Union urges the United States to focus the scope of its national security probe — launched by President Donald Trump’s administration in April — into steel imports; nickel prices continue to tumble amid concern about global oversupply; and China’s attempt to tackle its debt could impact metal markets throughout the second half of 2017.

EU Officials Express Concern About US Steel Import Probe

On the heels of President Donald Trump’s first round of overseas visits, there remains uncertainty about the president’s stance on several issues, including whether or not Trump will pull the U.S. out of the 195-member Paris climate accord (the president is expected to make an announcement on that subject this afternoon). In addition, EU officials are concerned about the scope of the Trump administration’s national security probe into U.S. steel imports, Reuters reported.

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The probe would have negative effects on both U.S. steel producers and manufacturers which use steel, a written statement from the European Commission to the U.S. Department of Commerce argued. The EU is also hoping the probe will zero in on issues of national security and won’t broadly impact exporters around the world, should the Trump administration decide to adjust steel import policy.

Nickel Continues to Roll Downhill

The price of nickel continues to fall, this time to an 11-month low on Thursday, Reuters reported.

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Liquid steel.

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European steelmakers are coming together to fight a common enemy: EU carbon reforms.

According to a recent report from Reuters, steelmakers across the continent are writing EU leaders, emphasizing they not burden the industry with what they feel are superfluous carbon emission regulation costs. Such costs, they argue, would put them at a competitive disadvantage with their global peers as well as increase the risk of job cuts and plant closures.

“You can avoid burdening the sector with high costs that will constrict investment, or that will increase the risk of job losses and plant closures in the EU,” the CEOs say in an open letter, obtained by Reuters, dated May 28, to EU heads of state and government.

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This is part two of a two-part series on recent trade developments in the U.K.’s pending divorce with the European Union, read part one here if you missed it.

British Prime Minister Theresa May appears more wedded to a policy of not extending Brexit past the two-year deadline that was dictated by the outcome of the referendum. Possibly due to her years in office as Home Secretary, May seems desperate to reclaim control of the U.K.’s borders and to reject the jurisdiction of European courts, regardless of the economic consequences of taking such a hard-line position.

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Committed Brexit supporters have championed the establishment of free trade agreements with countries outside the European Union, almost as an extension of their rejection of Europe. But the reality is geography will dictate that the E.U. is likely to remain the U.K.’s biggest export market after Brexit whatever Brexiters’ global ambitions may be.

Who Loses More Post-Brexit?

According to a Financial Times article last November, U.K. exports to fellow E.U. countries accounted for 48% of total exports and, in the 18 months before that, the figure ranged from 38% to 51%. The U.S., by comparison, was just 22% and few beyond the hardliners give any credence to the benefits of a President Donald Trump-inspired U.S.-U.K. Free Trade deal, knowing that in Britain’s desperation for an alternative to Europe such a deal would likely be very one-sided in favor of the U.S. Read more

US Steel plant in Granite City wide

The U.S. Steel Granite City Works captured by Google Street View in September, 2014 — a year and two months before the latest idling of the mill.

See the latest multimedia version of this story here.

This is our final top-rated post of 2016. Chinese market economy status was a huge issue for the entire year and this interactive package, originally published in May, put all facets of the problem into one package. How China will change its economy to compete with the rest of the world without overproduction for export is still an open question and a major threat to market stability. — Jeff Yoders, editor

Dan Simmons has seen a lot during the 38 years he’s worked at U.S. Steel’s Granite City Works in Illinois, just outside St. Louis.

From starting out as a general laborer, to swinging hammers on the track gang, to “feeling like Mr. Haney from Green Acres” while trucking around the mill, Simmons took it all in. There were days “you were whistling when you came in, and whistling when you left,” he said.

But nothing compares to what he’s seeing now.

“I have grown men coming into my office, crying,” said Simmons. “You see the pain, the ‘what ifs,’ the blank stares…”

Simmons, who just turned 56, is now the president of the United Steelworkers Local 1899, and some of the grown men coming to him are pipefitters just like he had become during his long tenure, which began in 1978.

However, those men and women aren’t coming to him because they’ve been hurt on the job. They are coming to plead for help, because they have lost their jobs, and in many cases still don’t know when they’ll land their next one.

Cyclicality in steel production is nothing new, but it wasn’t until 2008 — when the global markets began crashing — that USS Granite City Works endured its first indefinite idling in its history.

“We had the unemployment office cycling 400 people through at a time,” Simmons told MetalMiner. “The biggest fear is not knowing. If I could have given them a definitive timeframe, they would’ve said, ‘OK, I can handle that.’ But after two to three months, people come to me and don’t know what to do with themselves.”

And now, after the mill went idle a second time in December 2015, some of those workers have been without a job for nearly half a year. Last December, 1,500 people were laid off — 75% of the mill’s total workforce. Across the country, a total of 13,500 steel workers have been laid off over the past year.

Simmons knows what it’s like to feel that fear firsthand. “I got a brother that works here, a brother-in-law that works here, so it’s personal. You worry about where your whole family will be.”

So what’s different today, compared to 2008?

For Simmons and scores of others in the country’s steel sector and other manufacturing industries, much of the pain can be traced back to one main source: China.

A History of Unfair Trade?

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.

In its quest to grow its economy over the past two decades, China has become the leading producer — by far — of steel, aluminum, cement and other industrial materials. Read more

Put the dragon fruit back on the shelf, guys; it’s still a bit too green — er, red.

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That’s the metaphor that U.S. Commerce Secretary Penny Pritzker forced us to take a step further, when she went on record stating that “at this moment, [the time is] not ripe for us to change our protocol,” regarding a decision on whether China has taken necessary steps to achieve market economy status (MES).

If China had its way, that time for the U.S. — and the whole gamut of WTO-member nations — came precisely yesterday, December 11, 2016. That’s the date that China claims it should be given MES automatically, according to a line item in the country’s WTO Accession Protocol made official exactly 15 years ago.

So what has happened? Do we all of a sudden live in a world where China is given free reign in trade, on equal footing with the U.S. and E.U.? Not so fast. Read more

President-elect Donald Trump’s recent announcement that he is “all for NATO” may have offered some comfort, but his repeated statements during the campaign regarding the North Atlantic Treaty Organization and Europe’s responsibility to look after its own defense have sent a shiver down the collective spines of E.U. countries, the likes of which they have not felt since the formation of NATO in 1949.

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While very few in Europe would agree, it is possible that the President-to-be’s  position on NATO may ultimately be to Europe’s greater good. A recent article in Carnegie Europe entitled “America’s European Allies” highlights not just the issue of underfunding, but the appalling state of European defense structures and the inherent inefficiencies that result mean that of the $214 billion (€200 billion) that EU member states collectively spend each year on defense, much is wasted.

StuartsF35_500

Would you rather a standing personnel group? Or an F35?

More troubling even than that failure of accounting is that some states don’t even spend the agreed-upon 2% of gross domestic product on defense, an egregious violation of the compact of being an E.U. member-state. These structural issues undermine the region’s ability to effectively mount a unified defense.

People vs. Weapons

The first issue is high personnel costs. According to the article, cash-strapped Greece spends some 2.38% of the country’s GDP on defense, significantly in excess of the 2% minimum agreed by NATO members summit in Wales in 2014. Unfortunately, out of its total defense budget of $4.6 billion (€4.2 billion), Greece spends almost 70% on personnel alone. No weapons. Read more

There were dire warnings in the run up to the June 23 referendum on Britain and overall U.K.’s future in the European Union (E.U.) and there have been dire warnings since.

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Prior to Brexit, the leaders around the world, including Barack Obama, lined up to issue warnings and even veiled threats of the consequences of an exit vote. The International Monetary Fund and World Bank warned of the risk of a stock market crash and sharp recession if the U.K. decided to leave.

Even the U.K.’s own Treasury issued a report and numerous briefing notes to warn of the same dire outcome. Well, for better or worse, the British people went ahead and voted to leave anyway, and guess what? The stock market soared and growth has continued.

The Forecast… Wasn’t Armageddon

This week, the IMF predicted 1.8% growth this year for the U.K. and 1.1% next against a softening global growth background. According to the BBC, Economists for Brexit, a group of eight influential economists which supported the Leave campaign ahead of the E.U. referendum, criticized even this relatively optimistic forecast from the IMF arguing that pre-Brexit forecasts had already been proven wrong. Read more

At least according to a European Union official familiar with the Union’s steel sector plans, says Reuters.

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The E.U. is certainly ramping up the pressure. This year, alone, the European Commission has 37 anti-dumping and anti-subsidy measures in place for steel products, 15 of them concerning China, slapping anti-dumping duties on products such as rebar, cold-rolled carbon steel and cold-rolled stainless steel, ranging between 18.4 and 25.3% for imports from China.

Everybody Gets on the Tariff Bandwagon

The E.U. is scheduled to rule on plate and hot-rolled coil from China in November and while rates haven’t been at the same level as the U.S. where up to 520% duties are have been applied, they are estimated by the industry to need to be in the 30-40% range in order to be effective.

Steel mills Molten iron smelting furnace production line

Can China’s zombie steel mills be shut down? Beijing is trying a new tactic. Source: Adobe Stock/ZJK.

Yet despite the unprecedented level of action, carbon steel imports in the year to May rose 21% with China now representing 27% of total E.U. imports, while stainless steel imports rose 17% over the period, E.U. data shows, even though demand remained almost flat. Read more