Author Archives: Fouad Egbaria

The Construction MMI showed no movement for our July reading, checking in at 81, the same mark as last month’s reading.

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According to U.S. Census Bureau data released July 3 — which includes the most recently available construction spending data for the month of May — spending just about held flat from April to May. U.S. construction spending in April amounted to $1,230.4 billion and fell slightly to $1,230.1 billion in May.

The spending picture is more robust when considering the year to date. During the first five months of 2017, total construction spending amounted to $469.2 billion, 6.1 percent more than the $442.4 billion for the same period in 2016.

Total private construction ($943.2 billion) was down 0.6% from the previous month but up 6.2% compared with May 2016. Public construction, meanwhile, amounted to $286.9 billion, up 2.1% from the April total but down 0.6% from May 2016.

While the year-to-date numbers are encouraging, a pair of issues are causes for concern among those in the construction industry.

Despite Static Picture, Things to Build With

The Architecture Billings Index (ABI), put out by the American Institute of Architects, noted that billings for U.S. architecture firms increased for the fourth straight month in May.

The ABI report was mostly positive, but included concerns regarding labor shortages and rising prices of building materials. According to the report: “The US Labor Department’s Bureau of Labor Statistics recently reported that prices for construction materials like steel, copper, aluminum, and asphalt have risen at a double-digit percentage pace over the past year. Cement, lumber, and gypsum have risen at a high single-digit pace over this period.”

As the specter of the Trump administration’s Section 232 investigations into steel and aluminum imports continues to loom, construction outfits might have to deal with further price increases if tariffs are slapped onto imports.

By region, the South notched the strongest month. With a score of 50 as a midpoint (meaning no decrease or increase), the South region of the U.S. came in strongest in the most recent ABI, with a score of 56.1. The West (52.3), Midwest (50.4) and Northeast (46.5) followed.

Actual Metal Prices

As mentioned, domestic steel and aluminum prices could shift radically once Commerce Secretary Wilbur Ross announces his policy recommendations at the conclusion of the Section 232 investigations. Those topics are sure to come up at the G20 summit, which is being held from Friday-Saturday, July 7-8, in Hamburg, Germany.

The heavy hitters in this index were a bit of a mixed bag in terms of price fluctuations. Chinese rebar fell 2.7% to $540.93 per metric ton. Chinese H-beam steel, however, rose 2.9% to $499.66/mt. Chinese iron ore rose slightly, up by 0.4% to $77.38 per dry metric ton.

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U.S. shredded scrap steel fell to $295 per short ton, a 2% decrease from the previous month.

European 1050 aluminum sheet jumped up 1.6% to $2,768.38/mt.

After sustaining a one-point drop last month, the Automotive MMI regained lost ground during the one-month period ending July 1. The Automotive MMI — our sub-index of industrial metals and materials used by the automotive sector — increased by one point, from 86 to 87, via a 1.1% boost.

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Although the increase was small, the one-point jump is an encouraging sign, as it marked the first increase for the sub-index since early this year, when it jumped from 82 to the February reading of 92. After that 92 mark, the sub-index posted four straight months of decreases.

Overall, U.S. auto sales continue to drop after a record 2016. Auto sales to the midway point of the year were down 2.1% compared with the same point last year, according to Autodata Corp data released earlier this week. Standard passenger cars took a nosedive in the year to date, with an 11.4% drop in sales (from 3.64 million units to 3.22 million).

However, the news isn’t all bad. Consumers have taken a liking to trucks this year — trucks have seen a 4.6% increase in sales in the year to date (compared to the same point last year).

In the year to date, General Motors (GM) sales fell 1.8% (but leads the way with nearly 1.44 million units sold in the calendar year to date), Ford‘s fell by 3.8% and Fiat Chrysler fell by 6.7%.

On the positive end, Nissan sales were up 2.7%, Volkswagen sales were up 7.6% and Mitsubishi sales were up 5.1%. As for Tesla, the electric car manufacturer, sales were up 42.7% after a jump from 16,500 units sold to 23,550 units sold in 2017 to date.

Meanwhile, growth in Chinese auto sales is slowing, partially due to lower tax breaks for compact cars, according to the Nikkei Asian review.

GM, however, reported a strong June, according to a Reuters report Wednesday. After two consecutive months of sales drops, GM reported a 4.3% sales increase in June compared with June 2016, according to the report. However, GM’s year-to-date sales are down 2.5%.

Total vehicle sales from January-May are up 3.7%, according to Reuters, lower than the anticipated 5% growth predicted by the Chinese Association of Automobile Manufacturers.

The Political Backdrop: Section 232

The Trump administration was expected to announced the result of its Section 232 investigation of steel imports late last week. That announcement never came, but many in the U.S. steel industry expect the administration to introduce tariffs or quotas in an attempt to strike at Chinese excess capacity.

Those policies would lead to domestic steel producers to raise prices, which would, of course, have an effect on automobile prices.

President Trump is headed to Germany this week for a Group of 20 (G20) summit, where Section 232 is likely to come up.

Whatever the administration ultimately decides, the steel and aluminum industries — and by proxy, the automotive industry — are watching closely.

Actual Metal Prices

As for the materials that make these vehicles, U.S. hot-dipped galvanized (HDG) steel prices shot up 2.2% to $795 per short ton. U.S. platinum bars fell by 3% to $918 per ounce, while U.S. palladium rose by 3.8% to $847 per ounce. U.S. shredded scrap steel fell 0.3% to $295 per short ton.

Chinese primary lead rose by 1.1% to $2,608.83 per metric ton.

LME copper rose 5% to $5,920 per metric ton.

The price for Korean aluminum coil fell 2.9% to $3.37 per kilogram.

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This morning in metals news, LME copper bounced back Thursday after a down Wednesday, Saudi steel producers are happy about a cut in export tariffs and Volvo made a major announcement regarding the future of its vehicle inventory.

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Copper Rebounds Slightly After Hitting One-Week Low

After a Wednesday that saw a 0.9% drop for LME copper, the metal bounced back Thursday, ticking up by 0.1%, Reuters reported.

The metal moved up from its one-week low, which on Wednesday stood at $5,815 per ton.

In the backdrop was the recent release of the minutes of the Federal Reserve’s June meeting, revealing “policymakers were increasingly split on the outlook for inflation and how it might affect the future pace of interest rate rises,” according to Reuters.

Saudi Steel Gets Tariff Cut Relief

Steel producers in Saudi Arabia received good news this week as the government announced it would stop export duties on steel for two years, according to Reuters.

According to the report, the government also cut cement export duties by 50%.

While Saudi stocks overall were down early Thursday, stocks in the building materials sector showed well, including Al Yamaha Steel Industries, which surged by 2.1%, according to Reuters.

Volvo Looks to Go All-In on Green Rides

The traditional combustion engine took a hit this week when automaker Volvo announced it would build only electric or hybrid vehicles beginning in 2019, The New York Times reported.

While the “green” vehicle market is still relatively small, it is growing. As Autodata Corp numbers released this week show, sales of Tesla vehicles, for example, have surged. In the year to date, Tesla sold 23,550 vehicles, good for a 42.7% increase in sales from the same point last year.

Of course, those sales figures are tiny when compared with traditional automakers, like GM and Ford, which sold 1.41 million and 1.29 million units, respectively, in the calendar year to date. Sales for those giant automotive brands, however, are down (albeit down from a big 2016 in sales for automakers).

Clearly, battery-powered and hybrid vehicles are picking up steam. What does this green wave mean for metals? The boom presages increased demand for metals like cobalt, for example. Also, according to Seeking Alpha, the coming electric vehicle revolution bears bad news for platinum group metals (PGMs), like platinum and palladium.

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This afternoon in metals news, gold inches upward, partially stemming from concerns on the heels of a North Korean missile test; Germany, among others, waits to hear what the U.S. has to say about steel; and, in anticipation of protectionist policies from the Trump administration, U.S. Steel rose by 8% in June.

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Gold Up on N. Korea Concerns

After North Korea’s recent test strike of an intercontinental ballistic missile (ICBM), the price of gold ticked upward, a common reaction for the safe-haven metal.

“Safe-haven buying re-emerged in the gold market after the latest missile test in North Korea,” ANZ Research said in a note to Reuters.

Also looming over the gold price are the minutes of June’s Fed meeting, which many awaiting for news about the Fed’s plans for further interest rate hikes this year, Reuters reported.

Germany Anticipates Trump Administration’s Words on Steel

While China is the central focus of the Trump administration’s Section 232 investigations of steel and aluminum imports, other nations are interested in the investigations’ results.

Germany is among those nations, as a top exporter of steel to the U.S. The Germans are waiting to hear from President Donald Trump during the G20 summit, which begins on Friday in Hamburg, Germany.

When asked during a news conference Wednesday whether steel would be an issue discussed during the G20 summit, German government spokesman Steffen Seibert said, “That will become apparent. It also remains to be seen what the American president brings (to the meeting).”

U.S. Steel Up Big

Many expect the Trump administration to announce new tariffs or quotas, a result of the 232 investigations into steel and aluminum imports launched in April.

While the policy recommendations of those probes haven’t been announced, some U.S. businesses are feeling pretty good about what those protectionist policies might do for them. For example, U.S. Steel went up 8% in June.

But what happens next? A self-imposted Department of Commerce deadline came and went this past Friday with no announcement of the steel investigation’s conclusion. According to Section 232 of the Trade Expansion Act, the Secretary of Commerce has 270 days to prepare a submit a report to the president.

As such, the Trump administration still has plenty of time to think about the subject of steel imports. With that said, any momentum felt by the domestic steel industry as a result of talk of impending protectionist policies could begin to deflate the longer the process drags out. Many are looking to Trump’s participation at the Group of 20 summit later this week for more specific answers regarding the president’s thoughts on steel overcapacity.

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It’s hard to believe that 2017 is already more than halfway in the books. As we celebrate the Fourth of July, let’s take a brief look back at the top five most-viewed stories here at MetalMiner from January through June.

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Top 5 Stories of the First Half of 2017

  1. 3 Reasons Why Steel Prices Will Rise Well Into 2017. This piece was a hit with readers, raking in the most page views of any story through the first six months of this year. With the steel industry awaiting the Trump administration’s Section 232 verdict, prices are in a bit of a holding pattern (for now).

  2. The Land Rover Defender Will Rise From the Ashes… With an Aluminum Frame. Stuart Burns’ piece on the Land Rover Defender revved up interested with readers.

  3. Military Grade Aluminum? The Ford F-150 Debate Continues. What exactly does the term “military-grade” mean in the context of automobiles? This post from the tail end of 2016 continued to draw reader interest well into 2017.

  4. 2017 Steel Market Outlook: Strong Demand for Flat Products Expected. Everybody wants to know: What’s the deal with steel? After Donald Trump’s presidential election, many in the steel industry expected a boost accompanying a proposed uptick in infrastructure projects. Of course, much has happened since this post went live in early January — namely, the Trump administration’s announcement of an investigation into steel imports, using Section 232 of the Trade Expansion Act.

  5. 3 Reasons Why Aluminum Prices Will Rise in 2017. While steel has been the subject of much of the metal industry’s focus this year, aluminum is also being investigated under Section 232.  This post from January predicting a rise in aluminum prices was a popular one with readers.

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This morning in metals news, gold isn’t so golden, U.S. sheet steel prices held steady as the Department of Commerce’s self-imposed Section 232 announcement deadline came and went, and mining operations in Chile could open back up, as the price of the metal has rebounded.

Steady as Steel

Friday, June 30, was the deadline set by the Department of Commerce for the announcement of its Section 232 investigation regarding steel imports.

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That self-imposed deadline came and went without an announcement from Commerce Secretary Wilbur Ross.

Sheet steel prices held steady Friday, Platts reported, and price changes aren’t expected until the 232 investigation results are announced.

The steel industry has been waiting for the Trump administration’s policy decisions on the subject of steel imports. Apparently, the industry will have to wait a little while longer.

Gold Hits Seven-Week Low

Gold fell to its lowest spot price in seven weeks, Bloomberg reported.

Rises in the U.S. dollar and European stock markets led to decreased demand for so-called safe-haven metals (like gold), the outlet reported.

According to the article, June and July are typically “middling” months for the precious metal.

Chilean Copper Mines Could be Opening Back Up

With copper prices on the rise, mines in Chile may be ready to open back up, Reuters reported.

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Mines in Chile, a major copper producer, closed in recent years as a result of slumping prices. According to Reuters, copper prices have risen 7% in 2017.

The mines reopening is far from a sure thing, however. According to Reuters, some investment decisions will wait until after Chile’s presidential election in November.

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Before we head into the weekend, let’s take a brief look back at some of the news from the world of metals this week:

China’s Falling Steel Exports?

Earlier this week, our Stuart Burns wrote about the phenomenon of dropping Chinese steel exports:

“As we noted in a piece yesterday reviewing the 232 probe, China’s share of the U.S. import market for steel products has been falling for the last couple of years, mainly due to successful anti-dumping cases,” Burns writes. “China no longer appears even in the top 10.

So, what exactly is going on in China with respect to steel production and demand? Can we take it that Beijing’s actions to tackle excess steel production have finally resolved China’s deflationary impact on global steel markets?”

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In case you missed it on Monday, definitely give the story a read, especially as the Department of Commerce’s Section 232 steel investigation results will be announced any day now.

Indian Coal Faces Green Wave

Also earlier this week, our Sohrab Darabshaw wrote about coal mine closures in India, partially a result of the growth of the renewable energy sector:

“One estimate by the Energy and Resources Institute predicts if the cost of renewable energy and storage continue to fall, India may phase out coal power completely by 2050. Both solar and wind energy prices have been steadily decreasing over the last three years.

“In 2016-17, India added over 14,000 megawatts of new renewable energy power compared to almost 7,000 megawatts of new coal power capacity.”

Even so, the dependence on old energy sources won’t disappear immediately. Yesterday, Indian Steel Minister Choudhary Birender Singh announced India will ramp up its steel production significantly. That uptick in production will need energy, and Singh indicated Coal India Ltd. will be asked to provide the coal needed to back the steel-production operations.

In general, however, the interplay between older, dirtier sources of energy and clean, renewable energy sources is happening all over the world.

China-U.S. Back and Forth

Tensions have been building between the U.S. and China, as Reuters reported President Donald Trump was growing frustrated with China over its inability to rein in North Korea, while China expressed concern this week about the results of the Section 232 aluminum investigation.

The Department of Commerce investigations into steel and aluminum imports were announced in April.

Adding to the tension is China’s disapproval of a planned $1.42 billion arms sale by the U.S. to Taiwan, which the Chinese embassy denounced in a statement, Reuters reported Friday.

With many expecting tariffs or quotas (or a combination of the two) to be slapped on steel and aluminum imports (as an outcome of the 232 investigation), there’s no doubt the tension between the U.S. and China will only increase.

What’s Next For U.S.-India Ties?

President Donald Trump met with Indian Prime Minister Narendra Modi earlier this week in Washington D.C. Our Stuart Burns wrote about Modi’s visit and what could be in store for the U.S.-India relationship throughout the Trump administration.

During a joint press statement this week, Trump stressed India’s status as the world’s largest democracy and touted himself as a friend to India.

However, he also touched on thornier issues, like trade barriers.

“I look forward to working with you Mr. Prime Minister to create jobs in our countries, to grow our economies, to create a trading relationship that is fair and reciprocal. It is important that barriers be removed to the export of U.S. goods into your markets and that we reduce our trade deficit with your country.”

After the Tragedy

The Grenfell Tower fire earlier this month could have been prevented if safe building materials had been used. Burns wrote about that and more in his piece on the tragedy.

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This morning in metals news, India looks to boost its steel output, China expresses concern about the Trump administration’s Section 232 probe into aluminum and steel imports, and researchers have discovered a new, environmentally friendly way to extract copper.

India Prepares for Surge of Steel Production

India is looking to ramp up its steel output to 300 million tons, according to a report in the Press Trust of India.

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Steel Minister Choudhary Birender Singh announced today the steps that will be taken to ramp up production. Two new policies aim to boost production to 300 million tons by 2030, according to the report.

Self-sufficiency is the objective of the new national steel policy. Singh added the government has reached out to Coal India Ltd. to assure that there will be enough fuel to support the uptick in production.

China Awaits U.S. 232 Investigation Verdicts

According to the Chinese Commerce Ministry, China is “concerned” about the impending result of the Trump administration’s Section 232 investigation into aluminum imports — one for which China has been the central focus.

In a report from Reuters, Sun Jiwen, a spokesman for the Commerce Ministry, said the basis for the investigations — national security — is too broadly defined.

Yesterday, Reuters reported Trump was growing increasingly frustrated with China, particularly in reference to its handling of North Korea.

Unsurprisingly, there are tensions and concerns on both sides of the equation (although tariffs would affect other nations and not just China). Many expect the Trump administration to announce the Section 232 findings in the near future.

A New Way to Extract Copper

MIT researchers have discovered a way to separate pure copper from sulfur-based minerals while eliminating toxic byproducts in the process.

According to a report in MIT News, the research team identified the proper temperature and chemical mixture in order to “selectively separate pure copper and other metallic trace elements from sulfur-based minerals using molten electrolysis.”

The article notes: “Copper is in increasing demand for use in electric vehicles, solar energy, consumer electronics and other energy efficiency targets. Most current copper extraction processes burn sulfide minerals in air, which produces sulfur dioxide, a harmful air pollutant that has to be captured and reprocessed, but the new method produces elemental sulfur, which can be safely reused, for example, in fertilizers. The researchers also used electrolysis to produce rhenium and molybdenum, which are often found in copper sulfides at very small levels.”

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In addition to being a fascinating scientific discovery and process, a clean way to extract an increasingly important product like copper is a great development.

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Less than a week after the Department of Commerce’s hearing on the ongoing Section 232 aluminum investigation, the Office of the U.S. Trade Representative (USTR) kicked off three days of hearings Tuesday regarding renegotiation of the North American Free Trade Agreement (NAFTA).

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Renegotiation of NAFTA has picked up steam with Donald Trump’s ascension to the presidency. In fact, Trump reportedly was ready to remove the U.S. from the 23-year-old agreement in April, until calls from Canadian Prime Minister Justin Trudeau and Mexican President Enrique Peña Nieto convinced him otherwise. The episode came a few months after Trump signed an executive order to withdraw the U.S. out of the Trans-Pacific Partnership (TPP).

Lawmakers and business representatives had the chance to express their thoughts on renegotiating the trilateral trade agreement when the hearing began Tuesday. The hearing continued for a second day Wednesday and concludes Thursday.

Businesses represented included metals industries. Thomas J. Gibson, president and CEO of the American Iron and Steel Institute (AISI), spoke at Tuesday’s session. In a prepared AISI statement, Gibson said NAFTA has been largely successful, but could be modernized. He added that the agreement has “strengthened manufacturing supply chains, contributed to increases in intra-NAFTA trade and investment, and enabled a stronger relationship with Canada and Mexico.”

Gibson added NAFTA is the steel industry’s most important free-trade agreement, noting that 90% of steel mill product exports go to Canada or Mexico. In the time frame since the agreement went into effect in 1994, Gibson said exports to Canada and Mexico have increased threefold and the U.S. has moved from a steel trade deficit to a fairly even steel trade relationship.

However, like others in the industry, Gibson argued there is room for improvement, namely in the form of strengthening rules of origin, more effectively promoting trade enforcement cooperation and coordination, establishing disciplines on the conduct of state-owned enterprises (SOEs), establishing enforceable currency disciplines, and streamlining customs procedures and upgrading border infrastructure.

“While the Agreement has been beneficial, these approaches would improve it to make the American steel industry stronger, and create jobs in the process,” Gibson said.

In its submitted written comment, the Metals Service Center Institute (MSCI) agreed that while NAFTA has been successful, it can be improved.

“While we strongly agree with the Administration’s position that NAFTA can be modernized and improved, we also recognize that the Agreement has largely been successful,” the MSCI statement reads. “It has helped level the playing field and has created well-established, fully-integrated, market-driven trading mechanisms that allow for free and fair trade between the U.S., Canada and Mexico.

“The United States Trade Representative and the Trump Administration should take care not to upset the metal trade relationship between these countries.”

The Aluminum Association struck a similar tone in its submitted comment.

“It is vital, however, that the negotiations to modernize NAFTA strengthen and expand opportunities under the agreement, without diminishing its unquestionable benefits generated by the duty-free movement of aluminum and aluminum products throughout North America,” the statement, signed by Heidi Brock, president and CEO of The Aluminum Association, reads.

U.S. Rep. Daniel Lipinski, D-Ill., emphasized the importance of Buy America policies — particularly with respect to transportation — in his submitted comment.

“Any renegotiated NAFTA must not preclude Buy America policies from applying to Department of Transportation grants,” Lipinski wrote. “As our domestic manufacturing and steel sectors continue to be threatened, Buy America remains an important part of United States trade and manufacturing policy and should not be forsaken.”

What sorts of renegotiation proposals actually come forward remains to be seen. Trump mentioned NAFTA often on the campaign trail and his intent to renegotiate the deal, particularly citing U.S. trade deficits with Mexico. In 2016, the U.S. had a more than $64 billion trade deficit with its neighbor to the south, according to U.S. Census Bureau data. The U.S. last had a trade surplus with Mexico in 1994 ($1.3 billion) — the year NAFTA went into effect. The U.S. has had a trade deficit with Mexico every year since then.

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With its neighbor to the north, the U.S. had a trade deficit of $11 billion in 2016, according to the U.S. Census Bureau.

This year, from January to April, the U.S. had trade deficits with Mexico and Canada of $23 billion and $8.5 billion, respectively.

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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.

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