This morning in metals news, U.S. senators are asking for an independent review of the Trump administration’s Section 232 tariff waiver process, LME copper is down for the third straight day and Chinese steel mills are preparing for difficult times ahead.
The review of Section 232 tariff exemption requests from domestic companies has been going on since June, and the process has come in for much criticism.
According to a Bloomberg report, a bipartisan group of senators have asked for an independent review of the tariff waiver process, noting that as of last month only about one-third of the approximately 50,000 requests had been addressed.
LME Copper Down Again
London copper has been on the slide of late, dropping Tuesday for the third straight day, Reuters reported.
According to the report, the drop comes after comments by President Donald Trump to the Wall Street Journal related to China. The president said it was unlikely the U.S. would agree to China’s request to delay the scheduled Jan. 1 tariff rate increase — up to 25% from 10% — on the previously announced $200 billion tariff package.
Chinese Steel Mills Hit a Rough Patch
According to another Reuters report, Chinese steel producers posted losses for the first time in three years.
Per the report, as a result of falling prices, some mills are looking to utilize more low-grade iron ore in the steelmaking process in an effort to tamp down costs.
MetalMiner’s Take: In markets in which profit margins erode, simple supply and demand fundamentals ought to take hold — producers ought to limit supply to boost profits.
In the U.S., producers did exactly that for years and years, operating at below 80% utilization rates (U.S. producers have only recently hit those production rates as a result of the tariffs, the bullish commodity market and a booming economy).
When Chinese producers start to run losses, those producers ought to take a lesson from their American peers — and limit production to shore up profits.
But Chinese steel producers won’t do that. In fact, they will do the opposite — continue to produce, even at a loss, to keep people employed.
And once again, that excess steel will flow to the rest of the world.
Too much steel always has and always will put a lid on prices. Therefore, steel-buying organizations will want to watch very closely how much steel China produces, as well as the price per ton, as Chinese steel production and steel prices lead the U.S. market.