Articles in Category: Anti-Dumping

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

Last week, the U.S. Department of Commerce announced it had launched anti-dumping (AD) and countervailing duty investigations of steel rack imports from China.

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The alleged dumping margins in the AD case are 130.0-144.5%, according to a DOC release.

The DOC added there 28 alleged subsidy programs for steel racks, “including five preferential loan and interest rate programs, one debt-to-equity swap program, six income tax and other direct subsidy programs, two indirect tax programs, seven less than adequate remuneration (LTAR) programs, as well as seven grant programs.”

The petition in the case was filed by the Coalition for Fair Rack Imports, which estimates that imports of steel racks in 2017 were valued at approximately $200 million.

Products covered in the investigation includes “steel racks and parts thereof, assembled, to any extent, or unassembled, including but not limited to, vertical components (e.g., uprights, posts, or columns), horizontal or diagonal components (e.g., arms or beams), braces, frames, locking devices (i.e., end plates and beam connectors), and accessories (including, but not limited to, rails, skid channels, skid rails, drum/coil beds, fork clearance bars, pallet supports, column and post protectors, end row and end aisle protectors, corner guards, row spacers, and wall ties).”

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The U.S. International Trade Commission is scheduled to make a preliminary ruling by Aug. 6, with the DOC following suit Sept. 13.

Steel giants Tata Steel and thyssenkrupp have been talking about it since 2016, but now they have finally managed to reach an agreement to merge their European operations into a 50-50 joint-venture, according to the BBC.

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The merged business, to be called thyssenkrupp Tata Steel, will have annual sales of about £13 billion (U.S. $17 billion) and be able to produce 21 million tons of steel per year. The delays in reaching an agreement have in part been due to intense union lobbying to protect the two companies’ 48,000 workers.

The agreement is said to protect jobs with no compulsory redundancies for the next eight years, according to The Telegraph. While no compulsory redundancies have been agreed upon, the tie-up is expected to lead to about 4,000 voluntary redundancies as overlaps are eliminated between the three main hubs of the combined group – IJmuiden in the Netherlands, Duisburg in Germany and Port Talbot in South Wales — with the head office based in the Netherlands.

It is hoped the merged group will make cost savings of between £350-£440 million a year (approximately U.S. $520 million), although unions have secured an agreement for the first £200 million of operating profits to be reinvested back into the business. thyssenkrupp Tata Steel will be the second-largest steel producer in Europe after ArcelorMittal and it is hoped its size will help it compete against rising competition from Chinese imports (made worse by President Donald Trump’s recent imposition of a 25% import tariff on steel made in the European Union).

Heinrich Hiesinger, thyssenkrupp CEO, is quoted by the BBC as saying even prior to the U.S. import duty the two companies needed to consolidate and become more efficient because of increasing pressure from imports and an overcapacity within the industry. The loss of the two companies’ largest export market just makes matters worse.

The consequences for the combined group’s profitability in the event of Brexit have not, at least publicly, been discussed, probably because no one knows what the impact will be on moving products and people across borders post-Brexit. The only comment from the company came from Tata Steel UK CEO Bimlendra Jha who said it would be a “sorry state of affairs” when asked what a hard Brexit would mean.

Importantly, it gives the two companies an increased scale and opportunity to achieve some economies as a result.

Steel prices have picked up this year. Generally, Europe’s steelmakers are doing better, but they face considerable uncertainty as to the impact and duration of the current U.S.-European trade conflict, the level of increased Chinese imports and the possible impact of Brexit.

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All in all, the merger may prove timely; the challenges ahead are many.

The president’s assertion that trade wars are easy to win is — at this stage, at least — looking a little less certain than it was at the outset.

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Not surprisingly, exporters to the U.S. impacted by actual and proposed import tariffs are threatening to retaliate with tariffs of their own.

The Financial Times reports comments from global automakers warning that plans to impose tariffs on auto imports could raise prices of imported vehicles by as much as $6,000 per car and raise the cost of locally made cars, most of which include some foreign content.

The most alarmist comments are, not surprisingly, from the Alliance of Automobile Manufacturers, which is quoted as saying that buyers of imported vehicles would face an average $5,800 price rise from a 25% tariff.

“Nationwide, this tariff would hit American consumers with a tax of nearly $45bn, based on 2017 auto sales. Not included in this figure are costs from tariffs on auto components,” the industry group said.

In reality, such a significant price increase on imported cars would push the market in favor of domestic manufacturers. So, 2017 auto sales are probably not an exact benchmark; however, even the cost of the Honda Odyssey produced in the U.S. would rise by $1,500-$2,000 because of its imported content, the Financial Times reports.

Should, as seems likely, overseas markets impose retaliatory tariffs, this could have a significantly negative impact on U.S. auto exports, which totaled $99 billion last year.

Not surprisingly, figures vary widely as to the likely impact on U.S. vehicle production and the potential for loss of American jobs.

The Alliance of Automobile Manufacturers, citing data from the Peterson Institute, suggests a 25% tariff on imported vehicles and components would result in a 1.5% decline in U.S. vehicle production and a loss of 195,000 American jobs over a period of one to three years; if other countries retaliate, job losses could increase to 624,000.

Economists at Oxford Economics, on that other hand, said new U.S. auto tariffs would have a modest direct impact on the economy, suggesting a 0.1% reduction in GDP in 2019 and 0.2% in 2020, representing 100,000 job losses in the first year.

Either way, outside of political circles there seem to be few suggesting it will be good for jobs or auto production in the short to medium term. Should tariffs remain in place in the medium to long term, they would almost certainly boost prospects for domestic automakers and hasten the realignment of supply chains to domestic component suppliers.

So far, of course, it is unclear if the president really intends tariffs to be a long-term feature or rather a tactic he has deployed as part of a negotiating strategy to force changes in the terms of trade with America’s partners. Should the strategy be successful, it’s possible some tariffs will never be applied or could be rescinded within a matter of months. Businesses, of course, can only afford to sit and wait so long before they have to take action after the point at which tariffs are actually applied.

After the president’s unprecedented tariffs on steel and aluminum, few are doubting his resolve. Component suppliers throughout the supply chain are no doubt busy evaluating the implications for their business.

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Tariffs or no tariffs, that process alone will encourage the reshoring of component supplies over the coming years.

Supply chain vulnerability has taken on a whole new urgency.

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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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This morning in metals news, Canada could respond to the U.S. steel tariff with a broad global tariff of its own, the governor of Texas says the metals tariffs could harm the oil and gas sectors, and India could be the recipient of a flood of redirected Chinese steel.

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Canada Weighs Broad Tariff Option

The Canadian government is considering slapping tariffs or quotas on some steel imports from all of its trading partners, the Wall Street Journal reported.

The measures would seek to protect the Canadian industry from materials flooding the market as a result of the U.S.’s 25% steel tariff and subsequent redirected supplies.

Texas Gov. Warns of Tariffs’ Impact on Oil, Gas

Texas Gov. Greg Abbott, in a letter to President Trump, argued the steel and aluminum tariff enacted by the current administration will negatively impact the oil and gas sectors, the Texas Tribune reported.

“Our country’s steel and aluminum workers are a vital part of the national workforce, and creating jobs in that industry must be a top priority,” he said in the letter, according to the report. “But attempting to protect these jobs through the new tariffs could jeopardize the livelihoods of hundreds of thousands of Texans and other Americans employed in the oil and gas industry.”

Tariff Fallout

The U.S. tariff on steel only discourages imports — of course, it doesn’t make those physical totally disappear into the ether.

With that in mind, one asks: where will steel products previously destined for America now go in this post-Section-232 world? Particularly, where will Chinese inventory go?

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According to Bloomberg, India could be the destination for much of that supply. According to the report, as much as 80 million tons of steel (17% of global supply) could be diverted to other markets, including the fast-growing India.

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This morning in metals news, it might not be long before the European Union imposes new measures to curb steel import levels, the zinc price continues its slide and Chinese President Xi Jinping warns that China is not afraid of fighting back on trade.

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E.U. Preparing Measures to Stem Flow of Steel Imports

At a news conference Tuesday, E.U. Trade Commissioner Cecilia Malmstrom said the E.U. could begin measures to slow the flow of steel imports into the 28-member bloc by mid-July, Reuters reported.

According to the report, Malmstrom said the investigation would likely take the rest of the year, and that the measures targeted for application next month would be provisional.

Zinc Price Slides

The zinc price has been on a tough run, dropping for the ninth consecutive day and falling to its lowest price in 10 months, Bloomberg reported.

Increasing LME inventories and dropping Chinese demand have contributed to the price drop, according to the report.

Xi: ‘We Punch Back’

As trade tensions between the U.S. and China continue to intensify, Chinese President Xi Jinping reiterated that China will strike back in defense of its interests.

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“In the West you have the notion that if somebody hits you on the left cheek, you turn the other cheek,” Xi said, as quoted by The Wall Street Journal. “In our culture, we punch back.”

It may seem like we are on the brink of a trade war Armageddon.

Certainly, stock markets have reacted negatively to the threat of a trade war between the world’s two largest economies, the U.S. and China.

But the reality is we are in the midst of a crude, clumsy and haphazard negotiating process — one that ultimately will be settled.

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The process of threat, bluster and bullying is typical of a property mogul’s approach. It likely works well in that market, but is anathema to diplomats and industrialists who prefer a more nuanced, thoughtful and largely (although not exclusively) collaborative approach.

Unconventional as President Donald Trump’s approach is (though it does not mean it may not be successful), if just seen from the current stage of the “negotiations” it looks pretty appalling.

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The U.S. Department of Commerce (DOC) issued an affirmative preliminary ruling this week in its anti-dumping investigation of imports of common alloy aluminum sheet.

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“The association and its member companies that produce common alloy aluminum sheet are very pleased with this finding that again underscores the Commerce Department’s commitment to combatting unfair trade,” said Heidi Brock, president and CEO of the Aluminum Association, in a prepared statement. “For too long, the Government of China has been unfairly and illegally subsidizing its aluminum industry, leading to massive market overcapacity and challenging producers across the value chain.  Today’s action by the Commerce Department is exactly the kind of strong, targeted trade enforcement we need in support of the rules-based global trading system.”

The DOC announced in November that it would self-initiate anti-dumping and countervailing duty investigations of common alloy aluminum sheet imports from China (typically, cases are initiated after a domestic producer files a petition with the Department of Commerce). The move marked the first self-initiated investigation by the DOC in over 25 years.

The DOC calculated preliminary antidumping margins of 167.16% of the value of the imported aluminum sheet.

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A final determination from the DOC in the anti-dumping probe is expected in late October or early November.

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

The U.S. Department of Commerce last week announced it had launched a new anti-dumping probe with respect to steel propane cylinders from China, Taiwan and Thailand. The DOC also launched a countervailing duty probe of the steel propane cylinders from China.

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The DOC calculated dumping margins of:

  • 55.41-108.60% for China
  • 27.19-66.20% for Taiwan
  • 47.67-122.48% for Thailand
“There are 18 alleged subsidy programs for China (two loan programs, three export credit/guarantee programs, five tax programs, three provision of goods for less than adequate remuneration programs, and five grant programs),” the DOC release covering the announcement states.
According to the DOC, the value of 2017 imports of the product from China, Taiwan, and Thailand were valued at an estimated $89.8 million, $10.1 million, and $14.1 million, respectively.
Petitions in the case were filed May 22 by Worthington Industries (of Columbus, Ohio) and Manchester Tank & Equipment Co. (of Franklin, Tennessee).

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Imports of the cylinders from the countries in question surged last year.

According to Census Bureau data included in the DOC fact sheet, imports from China in 2017 were up to 4,006,413 units from 2016’s 1,613,360 units. Imports from Taiwan and Thailand also increased significantly year over year.

The next step in the case is a preliminary ruling by the U.S. International Trade Commission, which is due to make a preliminary decision by July 6.

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This morning in metals news, India has plans to impose tariffs on U.S. goods in response to the latter’s steel and aluminum tariffs, workers at the Port Talbot facility in Wales are wary of the impacts of the U.S. steel tariff and copper approaches a two-week low.

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India Strikes Back With Retaliatory Tariffs

India announced that it plans to impose tariffs on U.S. goods, a move that strikes back against the U.S. for its tariffs on steel and aluminum, CNN reported.

According to the report, the proposed tariffs would impact 30 U.S. goods at a value of $241 million.

Port Talbot Workers Apprehensive of Tariff Repercussions

Workers at the Port Talbot Steelworks plant in Wales are worried the U.S. tariff on steel will lead to even more steel being dumped from China, The Guardian reported.

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According to the report, the Port Talbot plant sells 10-12% of its output to the U.S.

LME Copper Draws Near a Two-Week Low

The price of LME copper slipped to near a two-week low, Reuters reported.

Copper fell 0.2% Monday to $7,006.50 per ton, according to the report.