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This morning in metals news, the E.U. approved new steel import curbs extending until 2021 with a vote Wednesday, the copper price picked up as the U.S. dollar loses momentum and the United States Trade Representative (USTR) says it will set up a system for exclusions if the tariff rate increases on the $200 billion of duties imposed on Chinese imports in September (currently sitting at 10%).

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E.U. Moves Forward with New Steel Quotas

As expected, E.U. member states voted to impose new steel quotas, part of the ongoing response to the U.S.’s Section 232 tariffs imposed in March 2018 and fears of redirected steel supplies flooding Europe.

E.U. member states approved provisional measures in July 2018, but the approval Wednesday puts quotas into place that will extend to July 2021.

Copper Rises, Dollar Softens

The U.S. dollar was cruising ever-upward throughout the tail end of 2018, but that momentum has seemingly slowed of late.

The U.S. dollar and base metals like copper correlate inversely, meaning a drop in one typically presages a rise in the other.

As Reuters reported Wednesday, the LME three-month copper price jumped for a second straight day, moving up 0.8%.

The U.S. dollar index declined to start the year but has bounced back in the past week, sitting at 96.04 as Wednesday morning.

USTR to Allow for Exclusions if Tariff Rate Rises on Chinese Goods

According to a Bloomberg report, the USTR has promised two senators that there will be an exclusion request process on the previously announced $200 billion in tariffs on Chinese goods if the tariff rate rises to 25%.

The $200 billion tariff package, imposed in September, came at a 10% tariff rate, with a built-in increase to 25% as of Jan. 1, 2019.

That increase, however, was postponed, as the U.S. and China began a 90-day negotiating period to hash out trade differences.

Unlike the previous $50 billion tariff package announced last year, the larger tariff package was not looped into a tariff exclusion request process (that is, a process by which companies can make the case that they need exemptions from the duty).

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However, according to the USTR letter cited by Bloomberg, the U.S. will allow for exemption requests if the tariff rate is ultimately elevated to 25%.

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Around the time that the Trump administration’s Section 232 tariffs on steel and aluminum were implemented last year, U.S. Commerce Secretary Wilbur Ross noted the administration’s goal of lifting steel and aluminum capacity to 80% (the level reflecting a healthy industry).

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Following the implementation of the tariffs, that figure gradually increased as domestic producers got a boost, with some even announcing smelter restarts (U.S. Steel’s Granite City steelworks being a prime example).

So, how have production levels fared to start the new year?

According to data released by the American Iron and Steel Institute (AISI), the steel capacity utilization rate through Jan. 12 reached 79.5%, up from the 73.6% posted during the same period in 2018.

Production in the year through Jan. 12 reached 3,231,000 net tons, according to the AISI report.

Meanwhile, for the week ending Jan. 12, capacity utilization hit 79.8%, with 1,891,000 net tons of steel produced in the week. Production for the week marked a 10.2% increase from the same week in 2018. In addition, production was up 0.8% in the week ending Jan. 12 compared with the previous week.

Production by region for the week ending Jan. 12 broke down as such (in thousands of net tons):

• North East: 223
• Great Lakes: 731
• Midwest: 206
• Southern: 654 
• Western: 77 

U.S. steel prices across the board have seen their price momentum evaporate in recent months after hitting more than seven-year highs in 2018, buoyed by the Section 232 tariff. For instance, the U.S. HRC three-month price was $905 per short ton as of June 1, 2018. On Jan. 14, that price was $687 per short ton.

As MetalMiner’s Irene Martinez Canorea noted in her recent Raw Steels MMI report, steel prices appear to have entered a downtrend.

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“However, steel prices have showed slower momentum recently and prices appear to have started a sharp downtrend,” she wrote. “MetalMiner does not expect prices to increase in the short term, although mills may try to shore up prices with price increase announcements.”