Articles in Category: Anti-Dumping

The U.S. Department of Commerce. qingwa/Adobe Stock

This morning in metals news, the Department of Commerce issued an affirmative determination its investigation of imports of common alloy aluminum sheet from China, China boasted strong October exports despite the U.S. tariffs, and aluminum prices are too low for such a tight market, according to analysts.

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DOC Rules on Common Alloy Aluminum Sheet

The U.S. Department of Commerce announced a final affirmative determination in its anti-dumping and countervailing duty investigations of imports of common alloy aluminum sheet from China.

The case is particularly notable because it marked the department’s first self-initiated investigation since 1985.

China October Exports Chug Along

According to Reuters, China posted higher-than-expected exports to the U.S. in October.

The U.S. announced tariffs on Chinese goods worth about $200 billion in September at a rate of 10%, but that rate is set to jump to 25% in January.

A Tight Aluminum Market

According to another Reuters report, prices are too low for what is in fact a tight aluminum market.

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Citing analysts, the report states approximately 40% of the world’s aluminum production is losing money.

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Criticism of Donald Trump’s tariff action, particularly by archrival Sen. Elizabeth Warren, is too often cast as simply political maneuvering, but there is a very real issue underpinning this current argument. That is, to be successful tariffs need to block imports and support domestic production — otherwise, what’s the point?

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Unfortunately, the consequences of tariffs are not that simple.

Some domestic mills will object to imports of certain products on the grounds that they manufacture the same product. But as my colleague Lisa Reisman pointed out so eloquently in a recent post last month, quality comparisons are analogous to the quality of your steak joint: they all serve meat, but what do you want a Peter Luger or Ponderosa?

CNBC reports Warren’s criticism of the tariff waiver program, citing research done by her staff, that foreign-headquartered companies received more than 80% of all exemption requests (of 909 decisions posted by the Commerce Department in the first 30 days after the tariffs were announced).

The majority of waivers — almost 52% — went to Japanese-owned companies, and overall 84% of their requests were approved, the article states. The implication being the waiver program is in crisis and exemptions are being granted in favor foreign firms, undermining the objectives of the tariff program.

By way of background perspective, CNBC reported that as of of Oct. 29, 43,634 steel and 5,667 aluminum exclusion requests have been filed. Overall, 15,662 steel exclusion decisions have been posted (and 11,281 were approved), while 905 aluminum decisions have been posted (and 763 approved).

Yet, as Reisman pointed out, not all grades are equal, even if they are nominally manufactured to the same standard.

Taking her example, grain-oriented electrical steel (GOES) manufactured by a Japanese mill is superior, you cannot fault consumers for applying for tariff exemptions if the domestic product is below global standards. Of course, GOES and Japanese material in particular, is arguably a unique example (it is hardly vanilla HRC).

From a quality perspective, it is easy to understand why Japan has more exemptions than other countries: they simply make grades and materials that are not produced elsewhere in the world.

So, the number of exemptions by country doesn’t tell a complete story. By comparison, Turkey is having a tougher time because their products are, to put it bluntly, lower on the food chain and there are undoubtedly many top-quality producers in the U.S. of comparable material.

What does require further investigation, though, is why firms based in the U.S. but with foreign headquarters — essentially, subsidiaries of overseas firms — should be more successful than domestic consumers in achieving waivers.

As this graph from the Financial Times shows, Japan and Thailand have been by far the most successful in achieving waivers.

While material from Japan and Thailand has been the most successful, imports from Turkey, Canada and Brazil have been among the least successful.

There have been 135 requests decided for tariff exclusions for imports from Turkey, 32 from Canada and 23 from Brazil. The administration has granted just one request for Turkey, none for Canada and none for Brazil, the Financial Times reports.

These figures in themselves, though, do not explain why foreign-owned subsidiaries have had greater success in achieving waivers than U.S.-owned businesses.

The Commerce Department accuses Warren of misunderstanding the process — it wouldn’t be the first time a politician misunderstood a piece of legislation — but you would hope she was receiving expert advice, so let’s assume she has it right. If that is the case, the Commerce Department has a case to answer, and an audit is apparently underway.

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If these tariffs are to achieve the desired effect and if they are to be worth the cost to American firms and consumers (Ford Motor said it expects the steel and aluminum tariffs to cut $1 billion from its profits by the end of next year), then waiver decisions cannot be made in an arbitrary manner. These decision should work to an overall strategy that furthers the president’s aims, rather than hinders them.

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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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  • Nucor reported net earnings of $676.6 million in the third quarter.
  • Global zinc and lead demand is forecast to rise this year and next, according to the International Lead and Zinc Study Group.
  • MetalMiner’s Stuart Burns wrote about the power dynamics currently at play between Rome and Brussels, as Italy’s new ruling coalition has markedly different perspectives on the country’s economic direction.
  • The U.S. steel capacity utilization rate hit 77.7% as of Oct. 20, according to a recent American Iron and Steel Institute (AISI) report.
  • Palladium prices continue to rise.
  • The U.S. Department of Commerce issued preliminary determinations in its anti-dumping and countervailing duty investigations of steel propane cylinder imports from China.
  • The U.S.’s metals tariffs have had ripple effects around the world — India is among the countries looking to protect its steel sector in the tariffs’ wake.
  • Sticking in India, the gold buying during the country’s festival season isn’t quite as busy as it usually is, Sohrab Darabshaw explains.
  • Ford Motor Co. released its third-quarter earnings results earlier this week, which prompted a surge in its stock price yesterday.

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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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The U.S. Department of Commerce. qingwa/Adobe Stock

The U.S. Department of Commerce (DOC) announced late last week that it had initiated anti-dumping and countervailing duty investigations related to imports of aluminum wire and cable from China.

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According to the DOC, imports of the products from China in 2017 were valued at $157.2 million (up from $116.6 million in 2016).

The petitioners in the case were Encore Wire Corporation (of McKinney, Texas) and Southwire Company, LLC (of Carrollton, Georgia), which filed petitions with the DOC on Sept. 21.

The DOC calculated dumping margins of 53.54-63.47% with respect to the aluminum wire and cable imports.

The case now moves to the U.S. International Trade Commission (USITC), which is scheduled to make a preliminary determination on or before Nov. 5. If the USITC rules in the affirmative, the case moves back to the DOC, which would be scheduled to make a preliminary ruling in the countervailing duty probe by Dec. 17 and a preliminary anti-dumping ruling by Feb. 28, 2019.

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According to the DOC fact sheet for the case — citing the U.S. Census Bureau — the U.S. imported 42,788 metric tons of the product from China in 2017, up 48.4% from the 28,839 tons imported in 2016.

The markets appear strangely relaxed about the growing economic and political standoff between the U.S. and China.

Maybe because it has been a slow burn over the last six months or maybe because no one quite believes either side would be stupid enough to allow a full-blown trade war to develop, but markets are generally quite sanguine … so far.

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Yes, the Chinese stock market is down. In addition, commodity prices are depressed relative to where we would have expected them to be back in Q1, when global growth was strong and there appeared little to deflect both mature and emerging markets from enjoying another couple of years of robust growth.

Gideon Rackman, writing in the Financial Times, argues that we are being far too relaxed about this, that for a number of reasons the prospect of these initial $50 billion of tariffs escalating to $200 billion — or worse — is real and the consequences should worry us.

For a number of reasons, neither side is likely to back down.

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Just last year, the U.S. Department of Commerce kicked off an investigation of imports of aluminum foil from China; in February, it issued a final affirmative determination in its anti-dumping and countervailing duty cases.

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Last week, Mexico announced it was going in a similar direction.

The Mexican government launched an anti-dumping investigation of imports of aluminum foil from China. Mexican firm Almexa Aluminio was the petitioner in the case, according to the government release.

The products referred to in the company’s petition are “aluminum foil coils for domestic and/or industrial use with a thickness equal to or less than 0.080 millimeters (mm), without support, simply laminated, with an external diameter equal to or greater than 100 mm and weighing more than 5 kg,” according to the release.

The Aluminum Association, a U.S. industry group, expressed support for the Mexican government’s decision.

“The Aluminum Association is pleased by the Government of Mexico’s decision to launch an antidumping investigation on imports of certain Chinese aluminum foil,” said Heidi Brock, president and CEO of the Aluminum Association. “The North American aluminum market is highly integrated, and it is vital the region work together to combat unfair trade practices and enforce rules-based trade. The U.S. aluminum industry has already seen real results from targeted and durable trade enforcement actions, and we are glad to see trading partners like Mexico demonstrate their commitment to rigorous and timely enforcement of global trade rules.”

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Per the Mexican government release, “non-market economy conditions prevail in China” for some several reasons, including:

  • the artificial reduction of prices
  • the role of “industrial associations as tools of the state”
  • and the “control and state direction of foreign direct investment abroad and the direction and control of the State in the entry of investment and property”

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This morning in metals news, some steel stocks fell on the heels of President Trump’s proclamation on targeted tariff relief for quota countries, China looks to speak with its domestic aluminum foil makers as Mexico recently launched an anti-dumping probe and European Commission President Jean-Claude Juncker responds on the subject of automotive tariffs.

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Tough Thursday

U.S. steel stocks struggled yesterday on the heels of Trump’s proclamation affording “targeted relief” to three countries currently with steel quotas.

Companies in South Korea, Argentina and Brazil can apply for steel tariff exclusion requests, per the proclamation.

According to Markets Insider, U.S. Steel dropped 6%, AK Steel fell 4% and Steel Dynamics dropped 2%.

Beijing to Meet with Foil Makers

On the heels of Mexico’s announcement that it had launched an anti-dumping probe of aluminum foil imports from China, the Chinese government plans to meet with foil producers early next week, according to Reuters.

Back and Forth

The U.S. and E.U. remain at odds over automotive tariffs; the disparity in automotive tariff rates is a subject Trump has harped upon on numerous occasions.

Per a CNBC report, European Commission President Jean-Claude Juncker said the 28-member bloc would increase its automotive tariffs if Trump reneges on a previous reached agreement to not increase auto tariffs.

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MetalMiner’s Take: Not for the first time there appears to be contrarian positions, even within the European Commission.

Hours after European Trade Commissioner Cecilia Malmstrom offered to cut auto tariffs to zero if the US would do the same (see our post earlier this morning), cantankerous European Commission President Jean-Claude Juncker was issuing threats to reciprocate with higher auto tariffs if the U.S. went ahead with threats made last month to raise tariffs on E.U. cars coming into the U.S.

In practice, neither side should panic; the threat of tariffs on E.U. cars is a powerful bargaining tool the U.S. appears willing to use. But in reality a zero or tariff-free deal would be a major achievement for President Trump and could lay the groundwork for similar bilateral deals with Europe for other industries.

Turkey may not be a big cheese in many ways, but its currency has taken a hammering following President Donald Trump’s threats of doubling tariffs and dire sanctions against a select few individuals close to authoritarian President Recep Tayyip Erdoğan.

But apart from the impact on one or two other emerging-market currencies, like South Africa’s, the rest of the world has barely noticed.

In one industry, however, Turkey is a sizable player: steel.

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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-related storylines here on MetalMiner:

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