This Morning in Metals: Norsk Hydro Says Aluminum Demand to Rise 2-3% in 2019

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This morning in metals news, Norsk Hydro sees global aluminum demand picking up 2-3% next year, the Office of the United States Trade Representative (USTR) released a statement on China’s automotive tariffs and Steel Dynamics shares bounced back from a 14-month low.

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Aluminum Demand in 2019

Norwegian aluminum firm Norsk Hydro says aluminum demand is expected to tick up 2-3% in 2019, featuring a continued deficit in the market.

In addition, President and CEO Svein Richard Brandtzæg commented on the situation at Hydro’s Alunorte alumina smelter in Brazil, as it aims to return to full capacity there after running at 50% for nine months.

“We are aiming to establish a common platform with authorities and the court system to have an aligned way forward towards full production, utilizing the best available technology,” Brandtzæg said. “We have what it takes: the right people, the right technology and the right spirit.”

MetalMiner’s Take: Norsk Hydro’s announcement that aluminum demand is expected to rise by 2-3% in 2019 is conservative.

Demand has been rising at 5-6% since the financial crisis and Norsk Hydro’s lower numbers reflect a slowing global economy, which might be hard for those in the more buoyant U.S. to grasp. However, the rest of the world, though growing, is doing so at a slower pace than in recent years.

The issue for the aluminum price has not been lack of demand but surplus of supply. Irrespective of reports the world outside China is in deficit, exports of semi-finished products from China have more than made up for the Western world’s shortfall in primary metal. This is despite the LME forward curve providing sufficient incentive for the stock and finance trade to roll forward maturing contracts — Chinese exports are keeping the market amply supplied.

Lighthizer: China’s Automotive Tariffs Are ‘Egregious’

The USTR released a statement Wednesday commenting on China’s tariffs on U.S. automobiles, a couple of days before the G20 summit is scheduled to begin in Buenos Aires.

“As the President has repeatedly noted, China’s aggressive, State-directed industrial policies are causing severe harm to U.S. workers and manufacturers,” USTR Robert Lighthizer said in a release. “We are continuing to raise these issues with China. As of yet, China has not come to the table with proposals for meaningful reform.

“China’s policies are especially egregious with respect to automobile tariffs. Currently, China imposes a tariff of 40 percent on U.S. automobiles. This is more than double the rate of 15 percent that China imposes on its other trading partners, and approximately one and a half times higher than the 27.5 percent tariff that the United States currently applies to Chinese-produced automobiles. At the President’s direction, I will examine all available tools to equalize the tariffs applied to automobiles.”

MetalMiner’s Take: Lighthizer’s comments come at an interesting time — just before the G20 summit in Argentina.

Most trade agreements between countries do not include equal duties across categories of goods. The U.S. exports about 250,000 automobiles annually to China, while the U.S. imports only about 50,000 vehicles from China.

More likely, this announcement creates additional negotiating power for the Trump administration as it seeks to extract concessions from China, in general, over Section 301 tariffs, Section 232 and the trade deficit with China.

Steel Dynamics Bounces Back

Earlier this week, Steel Dynamics announced plans to build a new electric arc furnace (EAF) flat roll steel mill, expected to be located in the southwestern U.S.

According to a company release, the mill is expected to have an annual capacity of 3.0 million tons.

“The current estimated investment is $1.7 billion to $1.8 billion, with anticipated direct job creation of approximately 600 well-paying positions, and numerous opportunities for indirect job growth from other support service providers,” the release stated.

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Even so, the company’s share price plunged 9% Tuesday. However, Wednesday afternoon it jumped 3.2%, off of a 14-month low, following a congratulatory tweet by President Donald Trump, per a MarketWatch report.

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