Nucor

While US steel producers have reason to celebrate the signing of a trade package that includes Trade Promotion Authority (TPA) and Trade Adjustment Assistance (TAA), other manufacturing organizations will also benefit from the opening up of new markets. However, procurement professionals may perceive the legislation less favorably.

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MetalMiner asked Jennifer Diggins, Director of Public Affairs at Nucor, to explain why these trade initiatives are so important for all manufacturers and specifically how the legislation will positively impact metal buyers.

jennifer diggins nucor stillMetalMiner: A lot of your customers purchase imports. How is this legislation helpful to them in any way?

Jennifer Diggins: The legislation is not targeting fairly traded imports. The American steel industry does not have a problem with imports; imports will always be part of our market. But we do have a problem with unfairly traded imports, where governments break trade rules they agreed to and provide illegal subsidies that allow foreign steel producers to sell products below costs.

If a company cheats on price, it raises serious questions about other ways they may be cutting corners to gain an advantage, which could ultimately come back to hurt their customers. We know China has tried to evade duties on some of their steel products by routing them through third-party countries to hide the point of origin and avoid the trade duty. Steel producers in China have also added chemicals to products to avoid trade duties. Several years ago, China added boron to cut-to-length plate to avoid a duty. Nucor brought that case to the attention of the Department of Commerce who ruled that the boron added did not change the product and was subject to the trade duty.

Behavior like this should raise concerns for any customer. If China is willing to bend the rules like this, can you trust claims of product quality? Do you really know what you are buying? A free, transparent marketplace is best for both producers and consumers.

MM: Arguably the Chinese have done a lousy job curbing excess production and shutting down excess capacity. Do you think this legislation will provide the stimulus necessary for Beijing to finally shutter excess and obsolete production? Why/why not?

JD: The main goal of the legislation is to provide more effective tools to enforce our trade laws to ensure that countries sending products to our market are playing by the rules. The provisions in this legislation should create a disincentive to dump products in our market, but the legislation is not intended to address overcapacity issues in China.

The capacity problem is a much larger issue and won’t be meaningfully addressed until China gets serious about moving away from being a state-run economy to a market-based economy. Unfortunately, there are few signs they are serious about doing this. Earlier this year, China issued a draft of its Steel Industry Adjustment Policy, saying – as it has for years now – that this new policy will resolve its excess capacity problems. The major steel industry associations from North America, Latin America and Europe issued a joint response, expressing their disappointment that the Policy still shows that China insists on a top-down, state-controlled approach to the steel market. We are all in agreement that the Policy actually is less interested in eliminating excess capacity in China, but instead would seek to transfer capacity overseas through government-supported foreign investments and acquisitions.

It’s clear that China has no interest in letting market forces dictate the size of its steel industry. And so long as China maintains this state-supported approach to market competition, it’s hard to see how they can have a place in any free market economy. This legislation is an important step, and should help any company from any nation that fairly competes in the American marketplace. But so long as China can be successful dumping steel in other foreign markets, it is unlikely the Chinese government will get out of the steel business. We need more concerted action from our trading partners to force China to comply with WTO rules.

MM: Why, in general, is excess capacity (steel production capacity) a bad thing for steel buying organizations? Most might say it’s a good thing because buyers can get lower prices. How do chronically low prices harm the industry and eventually your customers?

JD: I think it’s important to note here that we are talking about artificially low prices – not competitively low prices. In a free market economy, overcapacity would be eliminated through the balancing of supply with demand. So in a situation of excess production, customers would buy steel from the companies that best meet their needs, and the other steel companies would go out of business. This kind of competition drives quality up and prices down. In a truly free market, efficient producers survive while inefficient ones go out of business.

However, the global steel market is not a true free market. Chinese steel companies are being artificially sustained by their government, creating the risk that efficient foreign steel companies will go out of business while inefficient Chinese companies survive. With state support, they can produce an overabundance of steel at absurdly low prices, and drive their competition out of the marketplace. The market will not be well served if inefficient steel producers survive at the expense of efficient ones. At some point, customers will have no choice but to buy product from those steel companies. There will be no diversity in the market place – no competition. Just one source of state-owned suppliers. And they won’t be accountable to their customers for their success. The only entity they will have to keep happy is their government’s bureaucracy. In that scenario, you can bet the absurdly low prices will disappear with no guarantee that customers will be getting a quality product.

China’s real goal is not only to dominate global steel production, but also to transfer the global downstream supply chain to China (in order to maximize job creation in China). To ensure the reliability and survival of the supply chain in the United States, including both suppliers and downstream consumers, we need to ensure that global supply chains are free from market distortions.

Disclaimer: Nucor is a sponsor of MetalMiner.

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Six steelmakers with major US operations filed a trade complaint Wednesday seeking punitive tariffs for alleged unfair pricing of imported steel from China, India, Italy, South Korea and Taiwan.

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The suit, which concerns corrosion-resistant steel used in automobile and construction industries, is the first salvo in the campaign this year by the beleaguered US steel industry to protect itself against a record flood of imports.

The steelmakers are U.S. Steel Corp. , Nucor Corp., Steel Dynamics Inc., ArcelorMittal USA, AK Steel Corp. and California Steel Industries. All are based in the US except multinational ArcelorMittal, the world’s biggest steelmaker, which is based in Luxembourg and London but owns big mills in Indiana and elsewhere in the country.

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The US steel industry is suffering because a barrage of imports has reached a record 34% of market share, steel executives said today at the American Iron and Steel Institute‘s press briefing in Chicago.

Nucor Corp. CEO John Ferriola said 4 million people whose livelihoods depend on the steel industry are at risk, but also that enforcing existing trade and anti-dumping laws consistently would make a wealth of difference for today’s producers.

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“The first step is enforcing existing law as written,” he said. “Legally and consistently enforcing the laws on the books would help immensely… The American worker is still the most efficient worker in the world. We have relatively inexpensive energy, we have the raw material available, we have the best market in the world. When you look at those natural advantages, it makes no sense we should be operating at 60-70% capacity while the rest of the world is overproducing.”

Chinese Dumping

“While many nations continue to engage in unfair trade practices, China is of particular concern,” Baske said. “Last year, China exported 101 million metric tons. A surge of 60% over the previous year and that increase continued at record levels in the first quarter of this year. Some estimates are as high as 468 million mt. Steel demand in China declined last year and is expected to decline this year, too, according to the World Steel Association. China also manipulates its currency to give its products an unfair advantage.”

Baske also noted the business decisions US steelmakers have had to make due to declining prices due to the import surge and they are still in a difficult position due to what the glut has done to prices on the London Metal Exchange.

“On Sept. 3, almost eight months ago, hot-rolled ran $676 a ton. Now it’s $440 a ton,” he said. “In any industry, a 35% to 36% price reduction in that period of time would put pressure on the business. Fair trade will correct it.”

WTO Relief

The executives also noted that while bringing anti-dumping cases with the US International Trade Commission and the World Trade Organization has been somewhat successful, the process has not always worked in the favor of US producers. Even cases that were won, such as last year’s rebar case against Turkey, have not had high enough tariffs to discourage dumping. Gibson said the standard in a safeguard case is higher than in a trade case and the AISI, and the industry as a whole, continue to evaluate all options under the law.

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U.S. Steel Corp. received approval for its Alabama electric arc furnace this week.

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Wouldn’t it be great to have your own backyard EAF? You could make your own steel products — such as big, giant swords — from scrap such as old appliances and discarded steel or tin cans. Even if you’re not reusing the metal, you could melt just about anything.

King of Random Grant Thompson explains how on YouTube. This lifehack shows how the electrodes from lantern batteries and an alumina-silicate refractory brick can be used to make your own mini EAF. There is also a nice tutorial on how to make your own zinc ingots here, too.

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MetalCrawler crawls the web for the latest metal news. Today in metals, Molycorp reports another loss, Detroit has gotten serious about stopping scrap metal theft and former Nucor CEO Dan DiMicco has a plan to get America working again.

Molycorp reported net revenues for the last quarter of 2014 were $116.2 million, a 6% decrease from the third quarter. Full year 2014 net revenues were $475.6 million, a 14% decrease as compared to 2013. The California-based rare earths producer reported a net loss of $1.43 per share for the quarter and a net loss of $0.39 per share for the quarter on an adjusted, non-GAAP basis.

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However, Molycorp did report higher production volumes in the fourth quarter at its Mountain Pass, Calif., rare earth facility, with 1,328 metric tons of rare earth oxide equivalent production. That compares to 1,034 mt in the fourth quarter of 2013 and 691 mt in the third quarter of 2014. Full year 2014 production at Mountain Pass totaled approximately 4,769 mt, compared to 3,473 mt in 2013.

For generations, scavengers have prowled Detroit with impunity, pouncing on abandoned properties and light poles to pilfer steel, copper and other metals they could trade for cash at scrapyards. The practice left tens of thousands of buildings so damaged that they could not be restored, turning places like the North End into grim cityscapes straight out of a Tim Burton movie. In recent years, the city has become serious about fighting back. It razed dozens of rickety homes — lucrative scrapping targets — in that neighborhood alone in the past year. Residents have become increasingly vigilant about chasing scrappers away from their blocks, lawmakers have enacted rules making it more difficult to turn a quick profit from scrapping, and the police and private and public agencies have stepped up enforcement. The New York Times examines the effect on the city and the destitute scrappers, themselves.

Former Nucor Corp. CEO Dan DiMicco writes in his new book “American Made: Why Making Things Will Return Us to Greatness” that it’s high time to kick up the pace of US manufacturing. To do that, America must enforce its trade agreements to clamp down on cheating (particularly by China), invest trillions of dollars in US infrastructure and cut the corporate tax to bring corporate investment back to these shores. “American Made” was released March 3.

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Morningstar‘s new report “Strike While the Iron is… Cold,” claims that iron ore’s new normal will mean lower steel prices and a flatter cost curve for the major steel producers.

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Morningstar Research Analyst Andrew Lane wrote that, relative to other industries in the basic materials space, the steel industry exhibits a very flat cost curve.

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Morningstar has published an in-depth research report, “Strike While the Iron is…Cold?” arguing that cheap iron ore will have profound implications for the steel industry. Iron ore’s new normal will mean lower steel prices and a flatter cost curve. At the company level, cheaper iron ore means different things for different players.

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Morningstar reports low iron ore prices will redefine how steelmakers compete. Input costs will remain a key driver of competitiveness but will diminish in relative importance.

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Fear not, trusty readers: MetalMiner is here for you. No, we won’t cuddle or spoon with you – but when it comes to metal spoons from foreign exporters coming into the picture, rest assured, we’re on it.

That’s because MetalMiner, operating within a media sector that loves acronyms, is AODW – Always On Dump Watch. Whether it’s tariffs, countervailing duties, anti-subsidy measures, value-add, value-subtract, you name it…we’re watching. And analyzing what it could mean for metal buyers.

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The US recently lost a case in front of a three-judge WTO panel concerning state-owned-enterprises from India and China. Does an SOE such as Baosteel really receive no international market advantage because it does not exercise government authority in China?

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The ruling further muddies the picture of an international trading system created without SOEs in mind.

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Cheap steel products have been flowing into the United States from China, South Korea, India and elsewhere, making it much tougher for any domestic steel producer price increases to stick – and it looks as though it may be impossible to stem the tide of flooding imports anytime soon.

Record steel import numbers are harming the likes of AK Steel, Nucor and other producers, and foreign producers such as Vallourec and Tenaris getting more capacity online in the US surely isn’t helping. According to reporting by John Miller of the Wall Street Journal, “First-quarter steel imports by U.S. companies rose 36% from a year earlier to 10.6 million metric tons, according to research firm Global Trade Information Services. That was the highest level since the record 13 million tons reached in 2006.”

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According to another recent report by the Economic Policy Institute and law firm Stewart and Stewart, some 583,600 total jobs, including more than 200,000 in related manufacturing sectors, are at risk of going “poof” if imports dethrone the competitiveness of domestic steel production.

The US steel industry is not the only one being hit – aluminum imports are also at record highs.

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