Articles in Category: Anti-Dumping

After seeing a short-term bullish rebound in July, aluminum prices began to modestly decline again in early August. All in all, the rebound was insufficient to suggest a bullish reversal. As such, global aluminum prices remain within a macro downtrend despite recent directional uncertainty.

Aluminum August

Source: MetalMiner Insights

The Aluminum Monthly Metals Index (MMI) dropped by 2.4% month over month. 

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Aluminum Prices Move Sideways as Energy Costs Make Production Unprofitable

Before Russian energy giant Gazprom decided to cut Nord Stream 1 gas flows to 20%, Europe had already shuttered roughly half of its aluminum smelting capacity. According to Alcoa CEO Roy Harvey, high energy prices mixed with low aluminum spot prices in June made between 10% and 20% of global aluminum smelting operations unprofitable. In China alone, smelter unprofitability extended to around 50% that month. Meanwhile, Norsk Hydro ASA CFO Kildemo estimated that more than one-third of global smelters had operated at a loss.

Now that European countries face energy rationing as energy prices continue upward, aluminum production, especially in Europe, remains pressured. According to a survey conducted by the German Aluminum Association, 9 out of 10 companies would be unable to switch energy sources should gas become unavailable. Indeed, energy shortages could cause the roughly 900,000 tons worth of production cutbacks we’ve witnessed so far this year to double moving into 2023.

Europe’s energy crisis was enough to pause the 4-month downtrend in aluminum prices, if only temporarily. Since mid-July, prices appeared to hit a bottom, reaching their lowest point since April of 2021. Soon after reaching this grim milestone, they began to move sideways. It’s true that the crisis may not be enough to reverse the price trend, especially amid a worsening global demand outlook. Still, for now, it’s enough to add some visible friction to the downward momentum.

Source: Insights

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China is Filling Supply Gaps on Both Sides of the Sanctions

So far this year, Chinese products have increasingly filled the gaps left in the wake of the war in Ukraine. And while Western sanctions have avoided targeting Russian aluminum specifically, the downstream effects of Australia’s export bans on bauxite ore and alumina have disrupted Russian production nonetheless.

That said, China’s increased alumina production and its willingness to ship to Russia limits the effects of these shortages. These shipments have also helped turn China into a net exporter of alumina, a rank it achieved back in April. In Russian LNG exports once destined for Europe have now pivoted toward China.

In addition to alumina, China boosted both its primary aluminum production and exports. Specifically, primary unwrought aluminum exports rose by nearly 364% in the first half of the year over 2021, with a large portion of that material going to Europe.

Related article: The 5 Golden Rules for Sourcing Aluminum

Aluminum Ingots Hit Hardest, But Semis Also Impacted

While ingot production will suffer the brunt of Europe’s energy crisis, semis will also see an undeniable impact. For one, any reduction of primary metal and increase in physical delivery costs will support conversion premiums, especially if high prices are to blame. Secondly, European semis mills continue to face competition from Chinese imports.

It’s true that some Chinese-sourced products have quota restrictions and/or anti-dumping duties, but many do not. Beyond that, those duties become more easily surmountable as the cost of European-produced semi-manufactured products increases.

The return of European anti-dumping duties following a temporary suspension should stem at least some of the flow from China. Nonetheless, semis exports from the country continue to increase. Following an 18% year-over-year rise in 2021, semis exports have seen a 28% increase since the start of 2022.

Biggest Increases and Decreases in Aluminum Prices

  • The LME three-month aluminum price rose by 0.67% month over month to $2,437 per metric ton as of July 1.
  • Indian primary cash aluminum increased by 1.9% to $2.68 per kilogram.
  • Meanwhile, Chinese aluminum scrap decreased by 6.75% to $2,039 per metric ton.
  • Chinese primary cash aluminum fell by 4.59% to $2,713 per metric ton.
  • Chinese aluminum billet fell by 3.88% to $2,756 per metric ton.

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In desperate times, politicians turn to increasingly desperate policies to prop up support. This remains the case for British steel. Recently, the UK’s Boris Johnson has been dodging accusations that he repeatedly lied to parliament. This, combined with his seeming inability to admit his failings, has pushed political turmoil in the country to a fever pitch.

It’s worth noting that the allegations against Johnson stem from relatively petty infringements of his own draconian rules during the pandemic. Even so, his popularity among the UK populace is nearing rock bottom. So far, the part has lost two key by-elections in what are dubbed “Red Wall” seats. These are traditionally Labour Party areas that swung Tory in the last election. At the time, the desire for Brexit overcame historic socialist leanings.

Recent accusations state that Johnson used steel trade sanctions to shore up support for the seats, but failed in his efforts.

British Steel

Tariff Troubles Loom on the Horizon

On the plus side, the government is proposing a two-year extension on existing “safeguard” measures. These are tariffs on imports over a certain quota threshold instigated across the EU back in 2018 and later extended by the European Union.

But as Trump discovered back in 2018, imposing a 25% tariff on imported steel to bring back steelmaking and manufacturing jobs is no easy task. In the case of the US, it quickly became a bureaucratic nightmare. Instead of bringing jobs back to the Midwest rust belt, the government wasted countless government hours  trying to manage the exemptions and challenges from special cases.

In fact, despite those exemptions gradually being granted, specialty steels and other commodity products still get caught for months at a time. This deprives manufacturers of access to competitively priced steel for which no domestic equivalent supplier exists.

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British Steel and Possible Legal Infringement

As with the US, the UK’s move will surely run into trouble with the WTO. Indeed, lawyers on all sides have lined up to challenge the extensions as soon as they’re approved. Of course,  the UK is already on the brink of retaliatory action from the EU over changes to the Northern Ireland protocol. A trade war on steel tariffs is the last thing an economy heading into recession needs.

To make matters worse, protections rarely benefit the wider economy. It also sends a worrying signal to the world about Britain’s vaunted post-Brexit model as a global trading country. The country embraces the same protectionist measures as the rest of Europe. In fact, they’ve proved critical for years.

Steel Rolls

Industrial steel plant for the production of sheet metal.

UK Steel in Need of Anti-Dumping Policies

Anti-dumping duties are appropriate in many cases for British Steel. For supplying countries like China, the case remains crystal clear. However, indiscriminately applying such measures across a swath of developing countries poses a terrible threat. Sure, they produce steel at a lower price than the UK. However, these policies put a far greater number of steel consumers at a  global disadvantage in the interest of the few.

Should the government look closer to home? For example, they could re-appraise its headlong rush into ever-harsher environmental legislation. Perhaps closing energy supply options in the interest of dubious environmental goals have caused more problems for the steel industry than imports? After all, those goals are above and beyond those implemented by other countries.

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As an example of how trade disputes often have little to do with trade, the announcement this week that the US and UK would sit down for talks to resolve the Trump era “trade dispute” over steel and aluminium tariffs serves as a case in point.

Back in March 2018, when the former US president first imposed section 232 import tariffs of 25% on steel and 10% on aluminium imported from nearly everywhere, the UK belonged to the EU. While the application appeared heavy handed, strong arguments for action existed. Capacity utilization among the US steel industry had dropped to record lows and the industry as a whole had struggled to make a decent return since the financial crisis. But late last year, the EU successfully negotiated the removal of the tariffs in return for a quota agreement with the US.

UK and Europe no more

The UK, however, exited the EU on January 1, 2021, and so could not avail itself of that agreement. In fact, to make matters worse, clauses in the US-EU agreement make trade between the UK and EU harder because the US-EU agreement states steel originating in the UK will still attract the tariffs even if worked on and exported by EU companies.  This has the effect of making its use in components destined for the USA uneconomic for EU manufacturers.

Where does the UK rank?

Naturally, US steel producers remain opposed to any deal. And, likewise for Japan, with whom the US has opened discussions in parallel, arguably the industry has cause for anxiety. Japan ranked 5th in 2020 among suppliers to the US steel market at just under $1bn according to Statista.com. However, the UK doesn’t even feature in the top ten. Nor does it qualify as either a country that does not support free and fair trade or one that has lax environmental legislation. Both of these arguments do not support relaxing imports from countries like China. What the UK does have involves an unresolved thorny problem with the EU specifically, Northern Ireland, and its trade agreement with Eire, a member of the EU.

Possibly because the current President claims distant Irish ancestry, or possibly as a sop to the EU, the current Biden administration has exacerbated tensions in the province over resolution of the border issues. In addition, the administration has used issues like the steel and aluminium 232 tariffs as a lever that it perceives gives it influence over the EU-UK negotiations. In the meantime, countervailing action by the UK penalizes US exports of various products, some like whisky producers have seen volumes fall, others like Harley Davidson have seen profits vanish.

Too many jobs remain on the line and company futures at stake for politicians to play games with trade. The UK’s application for equivalent treatment to its European neighbors should address whether any additional UK tons poses a serious threat to US producers. It’s hard to see how it does with the EU industry ten times larger given free reign, but that’s the measure.

Before we head into the weekend, let’s take a look back at the week that was and the metals storylines here on MetalMiner:

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stainless steel rods

selenserger/Adobe Stock

Week of Nov. 15-19 (stainless steel base prices, infrastructure bill and more)

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This morning in metals news: the European Commission this week announced anti-dumping duties for stainless steel cold-rolled flat products from India and Indonesia; the Energy Information Administration forecast crude oil prices will decline in 2022; and, lastly, U.S. housing starts declined in October.

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European Commission imposes AD duties on stainless from India, Indonesia

E.U. flag

Andrey Kuzmin/Adobe Stack

On Thursday, the European Commission announced it is imposing anti-dumping duties on stainless steel cold-rolled flat products from India and Indonesia.

The duties range from 13.9-35.3% for the exporting producers from India. Meanwhile, the duties range from 10.2-20.2% for the exporting producers from Indonesia.

“This sector is critically important to the EU because it is a high value added product, with EU consumption totalling almost €7 billion,” the European Commission said Thursday.

The duties will protect 13,500 direct E.U. jobs in the stainless steel cold-rolled flat sector, the European Commission claimed.

EIA: crude oil prices to come down in 2022

Providing some relief, the Energy Information Administration forecast crude oil prices will soften in 2022.

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This morning in metals news: Merchants Fleet will expand its purchases of BrightDrop electric vehicles to 18,000; meanwhile, the Producer Price Index for metals and metal products increased in October; and, finally, the United States International Trade Commission issued a vote on freight rail coupler systems from China.

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Merchants Fleet to expand EV orders from GM’s BrightDrop

electric vehicle charging

kinwun/Adobe Stock

Fleet management company Merchants Fleet will expand its orders of BrightDrop electric vehicles to 18,000.

BrightDrop, a General Motors company, focuses on electrifying the commercial delivery and logistics industry.

“BrightDrop, the technology startup helping decarbonize last-mile deliveries, today announced that Merchants Fleet, the nation’s fastest growing fleet management company, plans to expand its purchase order to 18,000 BrightDrop electric vehicles with the addition of 5,400 EV410s – the recently unveiled mid-size electric light commercial vehicle (eLCV),” GM said in a release.

“The EV410 order adds to the 12,600 EV600s slated to be integrated into the company’s fleet starting in 2023.”

PPI for metals, metal products rises

The Producer Price Index for metals and metal products reached 323.7 in October, according to Federal Reserve Economic Data (FRED).

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This morning in metals news: U.S. steel capacity utilization dipped to 84.3% last week; the OECD reported global foreign direct investment (FDI) flows rebounded during the first half of 2021; and, lastly, the United States International Trade Commission conducted a five-year sunset review of duties on alloy magnesium from China.

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Steel capacity utilization down to 84.3%

steel production

photollurg/Adobe Stock

U.S. steel capacity utilization for the week ending Oct. 30 fell to 84.3%, the American Iron and Steel Institute reported.

Steel output during the week totaled 1.86 million net tons, or down 0.5% from the previous week.

Meanwhile, for the year to date, production is up 20.3% to 78.9 million net tons.

OECD: FDI flows recover in 2021

According to a report from the Organization for Economic Cooperation and Development (OECD), global flows of foreign direct investment (FDI) bounced back in the first half of this year.

FDI flows in H1 2021 reached U.S. $870 billion, more than doubling FDI flows in H2 2020.

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Before we head into the weekend, let’s take a look back at the week that was and some of the metals storylines here on MetalMiner:

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Week of Oct. 18-22 (steel demand, aluminum alloys and more)

Chinese steel factory

fanjianhua/Adobe Stock

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This morning in metals news: the United States International Trade Commission this week issued a ruling on imports of aluminum foil from five countries; Ford of Europe reported a decline in sales and European market share; and, lastly, job openings rates declined in 21 states in August, the Bureau of Labor Statistics reported.

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USITC rules on aluminum foil

aluminum foil

Alex/Adobe Stock

The United States International Trade Commission this week ruled imports of aluminum foil from five countries are being dumped into the U.S. and illegally subsidized.

The five countries are Armenia, Brazil, Oman, Russia and Turkey.

The Department of Commerce will now issue countervailing duty orders on imports of aluminum foil from Oman and Turkey. Meanwhile, the Department of Commerce will issue antidumping duty orders on aluminum foil from all five countries.

Ford of Europe reports drop in Q3 sales

Ford of Europe reported Q3 sales declined by 35.2% year over year, down to 194,460 vehicles.

In the year to date, however, its sales fell 1.9% year over year.

The automaker’s European market share fell 1.3 percentage points to 6.3% in Q3 2021.

Job openings rates down in 21 states

Job openings rates declined in 21 states in August, the Bureau of Labor Statistics reported.

Rates were flat in 28 states and increased in one state.

Rate decreases were the largest in Nevada, West Virginia and Hawaii.

Meanwhile, the number of hires declined in 17 states in August, with the largest drops coming in Illinois, New Jersey and Ohio.

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This morning in metals news: Nucor Corporation this week said it is evaluating locations for a new 3-million-ton capacity sheet mill; meanwhile, the Department of Commerce announced changes to its anti-dumping and countervailing duty regulations; and, lastly, British Steel warned about surging power prices.

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Nucor Corporation to build new sheet mill

Nucor logo

Postmodern Studio/Adobe Stock

Nucor Corporation this week said it is evaluating locations for a new sheet mill that will have a capacity of 3 million tons.

The steelmaker said it is looking at possible locations in Ohio, Pennsylvania and West Virginia.

“The new mill will be geographically situated to serve customers in the Midwest and Northeast markets and will have a significantly lower carbon footprint than nearby competitors,” Nucor said.

The steelmaker said the new mill will cost approximately $2.7 billion. The mill will produce hot-rolled sheet products with downstream processing. Furthermore, the facility will also have a tandem cold mill, annealing capabilities and two galvanizing lines.

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