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This morning in metals news, a hearing on NAFTA and possible renegotiation of the 23-year-old trilateral trade agreement continues into its second day, the results of the Trump administration’s Section 232 investigations into steel and aluminum imports might be subject to readjustments and copper has proven to be as precious as gold in some ways.

NAFTA Talks Continue Into Day Two

The Office of the United States Trade Representative kicked off hearings on the subject of NAFTA, soliciting views on if (and how) the trade agreement should be renegotiated.

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Trump was was reportedly prepared to pull the U.S. out of the trade agreement in April before the Canadian and Mexican leaders convinced him otherwise.

For many, including those in metals industries, NAFTA has been mostly successful, but could be modernized.

The hearing continues today, having started at 9 a.m. ET and concluding at 6:30 p.m. ET. Yesterday’s hearing included comments from Hollie Noveletsky, CEO of Novel Iron Works, and Thomas Gibson, president and CEO of the American Iron and Steel Institute (AISI).

More than 1,400 public comments were submitted online ahead of the hearing.

A full list of scheduled speakers is available on the USTR website.

Malleable Situation: Prepping for 232 Recommendations

As the U.S. steel and aluminum industries await the announcements of the Trump administration’s policy recommendations following Section 232 investigations into imports of the metals, some industry organizations think the outcomes are subject to change.

Kevin Dempsey, senior vice president of public policy for AISI, told Platts there could be some fine-tuning of the administration’s announced course of trade actions.

As for retaliatory measures by other countries in the case of the Trump administration’s imposition of tariffs or quotas? Dempsey indicated to Platts the threat of retaliation in response to trade policy actions is always a possibility.

It has been 16 years since the last 232 investigation. What will happen this time around? Most are expecting tariffs, of course, but no one knows exactly what they will look like. In addition, the timeline for the announcement of the investigation’s findings is even murkier. According to Dempsey, the administration might even wait until after the G20 summit, which is scheduled to take place July 7-8.

Copper is Golden

When most people think of monetary stability, of safe-haven assets, they think of gold — and they’d be right to do so.

But when it comes to inflation, Bloomberg reports copper has actually kept up better.

According to a correlation analysis of total return commodity indexes compiled by Bloomberg, for every 1 percent annual increase in the consumer price index since 1992, copper jumped almost 18 percent, more than three times the 5.2 percent gain logged by gold.

Free Download: The June 2017 MMI Report

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Imports of steel and aluminum are under the spotlight these days, as the Trump administration in April opened Section 232 investigations into the metals to determine if they posed threats to national security.

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According to a recent report from the American Iron and Steel Institute (AISI), steel imports were up by 2.5% in May. According to the report, collected from U.S. Census Bureau data, the U.S. imported a total of 3,434,000 net tons (NT) of steel in May 2017, including 2,574,000 NT of finished steel — up 2.5% and 1.8%, respectively, compared with final data for April.

Comparing the first five months of the year with the same time frame in 2016, total imports jumped by 14.4%.

The top five countries sending the most steel to the U.S., in descending order, in May were: South Korea (329,000 NT), Turkey (154,000 NT), Germany (142,000 NT), Japan (127,000 NT) and India (86,000 NT). South Korea was also the biggest supplier in the year to date, despite export totals to the U.S. being down 3% from the same period in 2016. Japan (8%) and Germany (1%) also posted declines in their year-to-date export totals to the U.S. compared with 2016.

However, Turkey and Taiwan posted major increases. Steel imports from Taiwan saw a 67% leap compared with January-May 2016.

Meanwhile, domestically, the AISI’s monthly steel report noted domestic raw steel production was as estimated 1,729,000 new tons for the week ending June 24, good for a capability utilization rate of 74.2% (compared with 75.1% for the same week in 2016).

Zooming out a bit, year-to-date production is actually up compared with the same point last year, up by 2.3%. So far this year, there has been a capability utilization rate of 74.4%, up from the 72.6% rate to the same point last year.

Of course, the country that is at the center of the 232 investigations has not even yet been mentioned here: China.

The Trump administration launched investigations using Section 232 of the Trade Expansion Act, a little-used clause that gives the president authority to act if certain imports are deemed threats to the country’s national security. The last 232 investigation took place in 2001.

But as the recent Department of Commerce hearings regarding the steel and aluminum investigations — held May 24 and June 22, respectively — indicate, China is the main focus of the Trump administration, and the domestic steel and aluminum industries. Among other concerns, the U.S. says Chinese excess capacity has flooded the markets worldwide with cheap products subsidized by the Chinese government, making it difficult for U.S. producers to compete.

According to Section 232, the Secretary of Commerce has 270 days from an investigation’s announcement to provide the president with a formal report and recommendations. That 270-day mark is well down the road, but many reports have indicated the administration could be close to announcing its verdict in the two cases. While uncertainty is the only certain thing these days, many expect the administration to act by imposing tariffs, quotas, or a combination of the two against China.

Potential Blowback From Tariffs?

What effect will the imposition of tariffs have? Well, it might have some unintended consequences, namely negatively affecting trading partners like Canada and the European Union. In fact, EU Trade Commissioner Cecilia Malmström said Monday the 28-member bloc is preparing for retaliatory measures if the EU is unfairly impacted by prospective trade tariffs from the U.S. In other words, a series of trade wars could happen on numerous fronts.

As is often the case, this is not a situation of U.S. versus China — far from it. Many other nations, including those considered friendly to the U.S. and considered market economies, are caught in the web of the forthcoming 232 verdicts. The aforementioned top exporters — South Korea, Turkey, Germany, India and Japan — could also be affected by Section 232-related trade policy readjustments.

Free Download: The June 2017 MMI Report

Based on President Donald Trump’s rhetoric, both on the campaign trail and as president, it seems likely that tariffs or quotes are forthcoming — but, of course, they’re no sure thing. Less clear is what exactly would happen in the aftermath of the institution of tariffs or quotas.