This afternoon in metals news, European steel demand is expected to grow 2.3% this year, Bloomberg takes a look at the Trump administration’s “Made in America” pledge and Freeport-McMoRan is working with the Indonesian government to resolve a mining permit dispute.
Negotiators from the U.S., Canada and Mexico most recently met Oct. 11-17 for a fourth round of talks in Arlington, Virginia. Despite progress on some issues, the talks overall seem to have hit an impasse.
As a result, the talks appear set to extend into 2018, which was previously hoped to be avoided, as elections are scheduled next year in each country. Among other things, U.S. proposals of a sunset clause and tighter automotive rules of origin have led to friction, as the U.S. attempts to negotiate what it considers to be a more beneficial deal while Canada and Mexico hope to preserve the deal (while also modernizing it for the 21st century).
According to a trilateral statement released by the Office of the United States Trade Representative, the negotiating parties made some progress on a few issues.
“Building on the progress made in prior rounds, the United States, Canada, and Mexico have now substantively completed discussions in the Chapter on Competition,” the statement reads.
“Additionally, negotiators made progress in several other negotiating groups, including customs and trade facilitation, digital trade, good regulatory practices, and certain sectoral annexes.”
However, it’s clear the parties are still far apart on a number of other issues.
In Oct. 17 remarks, Ildefonso Guajardo Villarreal, Mexico’s economy secretary, cautioned that negotiations must yield a “win-win-win” result, and that none of the parties want to end the process “empty-handed.”
“Working together, we can find the necessary balances to achieve a NAFTA consistent with the reality of our economies and societies,” he said.
While a number of groups — namely, U.S. workers associations — have petitioned the Trump administration to point out the negative impacts of NAFTA, others have worked to tout the agreement’s positive impacts.
Auto associations are among the latest to petition the administration in that latter capacity.
According to a Reuters report, major automakers, suppliers and auto dealers are launching a coalition to convince President Trump not to withdraw from the trade agreement (a threat the president has made on more than one occasion this year).
According to the report, auto trade associations representing General Motors, Toyota Motor Corp, Volkswagen AG, Hyundai Motor Co and Ford Motor Co, among other major automakers, on Tuesday launched the “Driving American Jobs” coalition, which includes an advertising campaign that aims to showcase the positive impacts of NAFTA on the automotive sector and the American workforce.
“American automakers are driving the revival of American manufacturing,” said Governor Matt Blunt, President of the American Automotive Policy Council (AAPC), in a prepared statement. “When you examine the data there’s no question that NAFTA has helped advance the global competitiveness of the U.S. auto industry sector. Now we have an opportunity to strengthen North America as a manufacturing powerhouse with a modern NAFTA that maintains the features that are working and makes improvements to benefit American workers and jobs. We look forward to working with the coalition, the Trump administration, members of Congress and all stakeholders to ensure American autos remain competitive in our global economy.”
The effort includes a website, www.drivingamericanjobs.com, which touts the trade agreement’s benefits to the sector and the American workforce, including a section of “American worker stories.”
“The American worker is in the middle of the greatest manufacturing comeback of all time,” the website’s homepage reads. “We’re winning with NAFTA. Tell Washington: Don’t change the game in the middle of a comeback.”
“We look forward to working closely with you and your Administration to grow the economy and create jobs through free and fair trade,” the letter concludes. “To help facilitate that growth, we urge you to support America’s workers, farmers, ranchers, and businesses of all sizes by protecting and preserving the deep economic ties and benefits the United States continues to enjoy under NAFTA.”
“We’ve reached a critical moment, and the Chamber has had no choice but to ring the alarm bells,” Donohue said. “Let me be forceful and direct. There are several poison pill proposals still on the table that could doom the entire deal.
“The U.S. business community will stand up for an important agreement that makes North America stronger and more prosperous.”
This morning in metals news, the chairman of Chinalco says Chinese aluminum demand growth will stay ahead of the country’s GDP, a hedge fund is suing Barclays for over $850 million related to copper trading losses and a Chinese investor is placing big bets on copper.
According to Chinalco, China’s biggest state-run aluminum producer, consumption of the metal will grow 9-10% this year, Reuters reported.
According to the report, strong downstream demand is a primary factor behind the uptick.
Ge Honglin, chairman of Chinalco, told Reuters that demand growth is expected to rise faster than the country’s GDP in 2018. China is targeting GDP growth of around 6.5 percent this year, but has not yet set a 2018 goal, according to the report.
The fourth round of renegotiation talks focused on the North American Free Trade Agreement (NAFTA) concluded earlier this week. We covered the latest round of talks, which by all accounts have the three negotiating teams at an impasse.
As the fallout continues from Kobe Steel’s quality data falsification scandal, our Stuart Burns wrote about what exactly might have gone wrong at Japan’s third-largest steelmaker.
The World Steel Association’s Short Range Outlook came out this week, predicting solid, albeit moderated growth for the global steel market.
The company also posted $2.96 billion in third-quarter revenue, up from $2.86 billion in the second quarter.
The company raised its 2017 outlook for adjusted EBITDA — or earnings before interest, tax, depreciation and amortization — to $2.4 billion, up from a previous estimate of $2.1 billion to $2.2 billion.
“Alcoa continues to benefit from favorable commodity markets, and we’ve raised our projections for profitability in 2017 and global aluminum demand growth for the balance of the year,” said Roy Harvey, president and chief executive officer, in a company release announcing the third-quarter earnings. “We continued to execute on our three strategic priorities — our strong cash generation aligns with our priority to strengthen the balance sheet, while our recent Rockdale announcement advances our priorities to reduce complexity and drive returns.”
The company is approaching a milestone, having initiated its run as an independent, publicly traded firm on Nov. 1, 2016.
“As we approach our first anniversary as an independent, publicly-traded company, we’ll continue to be guided by our three strategic priorities to further strengthen our Company and Alcoa’s foundation for the future,” Harvey said.
The company’s EBITDA got a boost earlier this month when Alcoa announced the termination of a power contract tied to its Rockdale Operations — fully curtailed since 2008 — in Texas. According to the release, beginning in the fourth quarter the termination is expected to result in an additional $60 million to $70 million in annual net income and adjusted EBITDA.
Growth in the aluminum market has added wind to the firm’s sails. As for supply, Alcoa expects the global market to be balanced for 2017, departing from its second-quarter projection of a slight surplus surplus.
“The improvement is mostly due to planned and actual curtailments in Chinese smelting capacity as well as increased Chinese demand,” the Alcoa release states.
Nucor Earnings Drop From Previous Quarter, But YTD Earnings Highest Since 2008
Nucor, meanwhile, announced Thursday consolidated net earnings of $268.5 million, or $0.83 per diluted share, for the third quarter of 2017. In the second quarter of this year, Nucor reported earnings of $323.0 million, or $1.00 per diluted share. As for the third quarter of 2016, it reported earnings of $305.4 million, or $0.95 per diluted share.
However, earnings through the first nine months of this year exceed those of the same time frame of every year since 2008, according to Jim Frias, Nucor’s chief financial officer.
For the period of January-September, Nucor reported consolidated net earnings of $948.4 million, or $2.94 per diluted share, compared with consolidated net earnings of $636.6 million, or $1.99 per diluted share, for the first nine months of last year.
“Nucor’s disciplined strategy for profitable growth is working,” Frias said during Nucor’s third-quarter earnings call on Thursday. “During the steel industry’s protracted downturn, we have invested aggressively to increase our capabilities for delivering value to our customers and profitable growth for our shareholders.”
Frias added that the third-quarter earnings decline from the previous quarter is largely attributable to lower capacity utilization rates and metal margins in its steel segment, in addition to an unplanned outage at its Louisiana DRI plant, which began in late July before operations resumed earlier this month.
Looking ahead, Frias said they see stable or improving conditions in a number of markets for 2018, including non-residential construction, automotive, energy, heavy equipment and agriculture.
“Although illegally traded imports remain at unacceptable levels, we are encouraged by the cumulative benefits of the U.S. steel industry’s successful trade cases,” Frias added.
Similarly, Chairman and CEO John Ferriola touched on this year’s “renewed surge of illegally traded imports into the U.S.,” citing the 27% year-to-date market share for finished steel imports.
“Nucor continues to believe significant work remains to be done to achieve free and fair trade for U.S. manufacturers,” Ferriola said. “More specifically, it’s time for comprehensive and broad-based remedies that address the illegal foreign trade practices that have materially weakened our nation’s economic vitality.”
He also added that Nucor applauds the U.S. International Trade Commission’s affirmative ruling Oct. 5 regarding washing machine imports (stemming from a petition filed by Whirlpool). A public hearing on remedies with respect to the case was held yesterday, Oct. 19.
In other company developments, last month Nucor announced its board of directors had approved a new steel bar micro mill project. Nucor is considering the states of Nebraska, Kansas, Missouri, South Carolina and Florida for the project.
This afternoon in metals news, renegotiation efforts focused on the North American Free Trade Agreement (NAFTA) appear to be at a standstill, Chile’s state copper commission boosts its 2018 copper forecast and a European agency advises plane manufacturers to suspended their use of products from embattled Japanese steelmaker Kobe Steel.
The fourth round of renegotiation talks regarding the 23-year-old NAFTA concluded yesterday, but the U.S., Mexico and Canada appear to be no closer to a consensus.
According to Bloomberg, initial hopes for a quick resolution have fizzled, as talks will now be extended into 2018 (which was previously hoped to be avoided, given the scheduled elections in each country next year).
The next round of talks is scheduled for Nov. 17-21 in Mexico.
Cochilco Forecasts Copper at Nearly $3/Pound in 2018
Chile’s state copper commission, Cochilco, on Wednesday put out a forecast for 2018 including a prediction of the average global copper price hitting $2.95/pound.
The new forecast is up significantly from Cochilco’s mid-year estimate of $2.68/pound. Greater Chinese demand is cited as a supporter of the global price.
Kobe Steel Saga Continues
The fallout from the Kobe Steel data falsification scandal continues, as the European Aviation Safety Agency (EASA) advised plane manufacturers to suspend their use of products from the firm, the third-largest steelmaker in Japan, according to CNN Money.
According to the report, EASA advised those manufacturers to find alternative suppliers and conduct a “thorough review of their supply chain.”
The United States International Trade Commission last week announced it is launching an investigation related to the importation of something that is often considered the wave of the future: automation systems.
The USITC announced it launched a Section 337 investigation last Wednesday. Section 337 of the Tariff Act of 1930 determines whether there is unfair competition in the importation of products into, or their subsequent sale in, the United States, including the infringement of a U.S. patent, copyright, registered trademark or mask work.
“The products at issue in the investigation include components used in the complainant’s industrial automation systems that bear the complainant’s Allen-Bradley® trademarks and that use the complainant’s copyrighted software and firmware,” the USITC announcement reads.
According to the complaint, the respondents allegedly violated Section 337 with respect to the importation and sale of “certain industrial automation systems and components thereof including control systems, controllers, visualization hardware, motion and motor control systems, networking equipment, safety devices, and power supplies that infringe trademarks and copyrights asserted by the complainant.”
In addition, Rockwell is asking for a general exclusion order, and cease and desist orders.
The following firms were listed as respondents in the case:
Can Electric Limited of Guangzhou, Guangdong, China
Capnil (HK) Company Limited of Hong Kong
Fractioni (Hongkong) Ltd. of Shanghai, China
Fujian Dahong Trade Co., Ltd., of Fujian, China
GreySolution Limited d/b/a Fibica of Hong Kong
Huang Wei Feng d/b/a A-O-M Industry of Shenzhen, China
KBS Electronics Suzhou Co., Ltd., of Shanghai, China
PLC-VIP Shop d/b/a VIP Tech Limited of Hong Kong
Radwell International, Inc., d/b/a PLC Center of Willingboro, NJ
Shanghai EuoSource Electronic Co., Ltd., of Shanghai, China
ShenZhen T-Tide Trading Co., Ltd., of Shenzhen, China
SoBuy Commercial (HK) Co. Limited of Jiangsu, China
Suzhou Yi Micro Optical Co., Ltd., d/b/a Suzhou Yiwei Guangxue Youxiangongsi d/b/a Easy Micro-optics Co. LTD. of Suzhou, Jiansu, China
Wenzhou Sparker Group Co. Ltd., of Wenzhou, China
Yaspro Electronics (Shanghai) Co., Ltd., of Shanghai, China
This morning in metals news, U.S. raw steel production went up last week, aluminum is heating up as China prepares for winter cuts to excess capacity and Kobe Steel’s data falsification scandal could stretch back a decade.
According to the report, Kobe Steel will cooperate with the U.S. Department of Justice. A company executive quoted in the report told Bloomberg that data falsification at the firm has likely been happening for over a decade — stretching further than Kobe’s admission of falsification dating back to 2007.