Articles in Category: Commodities

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This morning in metals news, the United States Trade Representative USTR once again dished up criticism of the World Trade Organization’s (WTO) Appellate Court, China aims to mitigate the impact of rising iron ore prices on its steelmakers and India’s steel exports have plunged over the last year.

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‘Determined to Take All Necessary Steps’

The USTR took aim Tuesday at a WTO Appellate Court ruling on China’s countervailable subsidies.

“Today’s appellate report recognizes that the United States has proved that China uses State-Owned Enterprises (SOEs) to subsidize and distort its economy,” the USTR said in a prepared statement. “Nonetheless, the majority in the report says that the United States must use distorted Chinese prices to measure subsidies, unless the U.S. provides even more analysis than the hundreds of pages in these investigations.  This conclusion ignores the findings of the World Bank, OECD working papers, economic surveys, and other objective evidence, all cited by the United States.”

The Trump administration has often criticized the WTO; the USTR said the recent report “also illustrates the concerns the United States has been raising about the Appellate Body’s functioning.”

“The United States is determined to take all necessary steps to ensure a level playing field so that China and its SOEs stop injuring U.S. workers and businesses,” the USTR concluded.

China’s Steelmakers and Rising Iron Ore Prices

Steelmakers in China have been feeling the pressure this year amid a surge in iron ore prices.

The Chinese government hopes it can do something to reverse the upward trend in the steelmaking material’s cost.

According to Reuters, in a government meeting with steelmakers, the former promised to keep “order” vis-a-vis the iron ore market.

Indian Steel Exports Down

India’s steel exports fell 34% in 2018-2019 compared with the previous fiscal year, the Hellenic Shipping News reported.

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Exports fell to 6.36 million tons during fiscal year 2018-2019, according to the report.

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This morning in metals news, President Donald Trump is expected to sign an executive order calling for heightened steel content thresholds for federal projects, Japanese firm Nippon Steel is planning to offload $1.9 billion in assets in order to purchase India’s Essar Steel and Chinese iron ore prices are getting a boost from a positive demand outlook.

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Trump to Sign Executive Order

President Donald Trump will sign an executive order Monday calling for higher steel content thresholds for federal projects, according to White House trade adviser Peter Navarro in an opinion piece published by Fox News.

According to Navarro, the order will call for the raising of the domestic steel content threshold for federal projects from 50% to 95%.

The president also signed a proclamation hailing this week “Made in America Week.”

Nippon Steel to Buy Essar Steel

Japan’s Nippon Steel plans to offload $1.9 billion in assets toward its purchase of India’s Essar Steel, according to the Nikkei Asian Review.

According to the report, Nippon’s plans to sell approximately 200 billion yen in assets comes in at about twice the amount initially expected to be offloaded to finance the deal.

Chinese Iron Ore Price Gains

Expectations of rising demand boosted Chinese iron ore and coke prices Monday, Reuters reported.

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According to Reuters, the most-traded September iron ore contract on the Dalian Commodity Exchange surged 2.3% on Monday to 895 yuan ($130.22) per ton.

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This morning in metals news, China’s copper import levels fell in June, the U.S.-China trade war saw China’s imports of U.S. goods plunge in June and BHP has long-term designs on mine expansion over the next century.

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China Copper Imports Fall

Imports of copper in China fell 27% on a year-over-year basis, Reuters reported.

In addition, unwrought imports in 1H 2019 fell 12.5% compared with the same period in 2018.

Trade War Slows U.S.-China Trade

Unsurprisingly, ongoing trade tensions between the U.S. and China have seen trade between the two countries slow considerably.

Citing Chinese customs data, the Associated Press reported China’s imports of U.S. goods fell 31.4% in June on a year-over-year basis. Meanwhile, Chinese exports to the U.S. in June fell 7.8%.

Miner BHP Could Expand Significantly

According to Bloomberg, miner BHP Billiton says it could build as many as 11 more iron ore mines in Australia’s Pilbara region over the next 50-100 years.

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Iron ore prices have surged this year to five-year highs amid supply disruptions in Brazil and Australia.

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This morning in metals news, the Department of Commerce made preliminary affirmative determinations with respect to imports of steel from Vietnam, iron ore is powering Australia’s trade surplus and copper slipped for the second straight session.

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DOC Issues Circumvention Rulings

The Department of Commerce announced Wednesday it had made affirmative preliminary determinations vis-a-vis circumvention related to imports of steel from Vietnam.

According to the DOC, the products covered include steel originally produced in South Korea and Taiwan and sent to Vietnam for “minor processing.”

“These duties will be imposed on future imports, and also on any unliquidated entries since August 2, 2018 (the date on which Commerce initiated these circumvention inquiries),” a DOC release stated. “The applicable cash deposit rates will be as high as 456.23 percent, depending on the origin of the substrate and the type of steel product exported to the United States.”

Iron Ore Powers Australia Surplus

Iron ore prices, which have surged to a five-year high, have lifted Australia to a trade surplus in May.

According to the Australian Broadcasting Corporation, Australia tallied a record $5.7 billion trade surplus in May, with the value of its iron ore shipments jumping 13%.

Copper Price Drops

After Monday’s post-G20 optimism provided a shot of optimism to copper prices, the metal has slipped for two straight days.

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According to Reuters, LME copper fell 0.1% on Wednesday, down to $5,883 per ton.

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This morning in metals news, world leaders gathered in Japan this weekend for the G20 Summit, a deadline for bidding on the liquidated British Steel came and went June 30, and Australia’s iron ore exports are forecast to fall for the first time in 18 years.

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G20 Leaders Meet in Japan

Trade issues once again loomed over the proceedings at the latest G20 Summit, this time held in Japan over the weekend.

For the second straight summit, references to protectionism did not not appear in the summit’s communique, Reuters reported.

“We strive to realize a free, fair, non-discriminatory, transparent, predictable and stable trade and investment environment, and to keep our markets open. International trade and investment are important engines of growth, productivity, innovation, job creation and development,” the communique said.

The communique also offered support for the World Trade Organization (WTO), while also noting changes must be made to improve its dispute settlement system.

“Furthermore, we recognize the complementary roles of bilateral and regional free trade agreements that are WTO-consistent,” the statement said. “We will work to ensure a level playing field to foster an enabling business environment.”

British Steel Deadline Passes

Following the liquidation of the U.K.’s No. 2 steelmaker British Steel in May, a June 30 deadline was set for bidding on the embattled firm.

According to Yahoo Finance U.K., up to nine potential buyers have reported interest, but the challenge comes in finding a buyer willing to take up the entire firm, as opposed to just parts.

According to the Yahoo Finance U.K. report, Network Rail has made an offer for the “railway-critical parts of British Steel.

Australian Iron Ore Exports Down

This year could see Australia’s first drop in iron ore exports in nearly two decades, Bloomberg reported.

Australia’s Department of Industry, Innovation and Science cut its 2019 forecast for iron ore exports from 867 million tons to 814 million tons.

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Rio Tinto also recently downgraded its 2019 iron ore guidance.

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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, stocks in Asia fell Tuesday, Chinese steel prices continued recent gains and U.S. Steel named a new chief information officer.

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Asian Stocks Slide

Shares in Asian companies fell Tuesday ahead of a meeting scheduled for later this week between U.S. President Donald Trump and Chinese President Xi Jinping, CNBC reported.

Trade talks between the economic superpowers fizzled last month when Trump raised tariffs on $200 billion in Chinese goods and China responded with tariffs on $60 billion in U.S. goods.

The Shanghai composite dropped 0.87%, while the Shenzen composite dropped 0.992%, CNBC reported.

Chinese Steel Prices Continue Gains

Chinese steel prices ticked upward for the fifth straight session, Reuters reported, while the steelmaking raw material iron ore slipped.

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The most-actively traded SHFE rebar October contract closed up 2.2%, while hot-rolled coil was up 1.7%, according to the report.

U.S. Steel Taps New CIO

U.S. Steel announced the appointment of Steven D. Bugajski to the position of chief information officer, effective July 1.

“Steve’s depth of experience has shown that his talents, strong knowledge of our systems, and insights into IT trends and opportunities that could benefit our company make him well-positioned to lead our Information Technology organization,” U.S. Steel CEO David Burritt said in a release.

Chinese steel mills are caught between the proverbial rock and a hard place.

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Iron ore prices surged to their highest level in five years on the back of mine closures in Brazil and robust demand, the ABC reported.

Vale’s Feijao mine disaster, which killed around 250 people, has resulted in the loss of around 6% of seaborne supply since late January, the ABC reports.

The market is feeling the squeeze.

Iron ore inventories at Chinese ports have dwindled away to the lowest level in more than two years. The current price is approaching U.S. $120/metric ton, still well short of the record U.S. $191/ton in early 2011 or the $160/ton reached in the last big rally seven years ago. However, the current price is still rising inexorably and resulting in mill margins becoming so pressured that some producers have slipped into the red.

Chinese steel futures are reacting to the tight market with rebar prices hitting a near eight-year high and hot-rolled coil climbing to an all-time peak, Reuters reported. Steel demand from downstream sectors in China is reported to be very strong, yet finished steel prices are not rising fast enough to spare steel mills from becoming squeezed in the tight raw material supply market.

Needless to say, with delivered cost prices from Australian iron ore mines into China at around $30 per ton, Rio Tinto, BHP and their smaller brethren are making hefty margins. But in recognition of the probability that Brazil’s mine closure issues are more short term than long term, Australian miners are not investing in major new projects. Rather, they are spending cash paying down debt, making cost-saving investments and distributing surpluses to shareholders.

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Elevated iron ore prices are not expected to persist into next year. The consensus forecast is for prices to drop back into the $80-$90 range by next year, ABC reports, so Chinese steel mills’ pain is likely to be relatively short-lived.

Following consolidation in the industry and the closure of many illegal or unlicensed producers, the remaining behemoths will be able to ride out the few months of negative or poor margins in the expectation falling raw material costs and/or rising finished steel prices will come to their rescue later this year.

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This morning in metals news, Rio Tinto downgraded its 2019 iron ore guidance, India is looking to combat Chinese steel imports with higher duties, and the copper price lost some gains late this week on the back of U.S.-Iran tensions and ahead of the G20 Summit in Japan.

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Rio Tinto Downgrades Iron Ore Guidance

Due to operational challenges, Rio Tinto this week announced it has downgraded its 2019 iron ore guidance down to between 320 million and 330 million tons (from between 333 million and 343 million tons).

“Rio Tinto Iron Ore is currently experiencing mine operational challenges, particularly in the Greater Brockman hub in the Pilbara,” the firm said. “This is resulting in a higher proportion of certain lower grade products, partly to protect the quality of our flagship Pilbara Blend.

“Around 1.5 million tonnes of these products were sold in the first quarter, as noted in the 2019 Quarterly Operations Review, 16 April 2019. Additional sales of these products will be made during 2019.”

Indian Steel Ministry Eyes Higher Steel Duties

The Indian steel ministry is targeting a duty increase on imports of finished steel products, Reuters reported, up to 15% from a range of between 7.5% to 12.5%.

According to the report, the Indian steel ministry cited concerns related to the U.S.-China trade war and resulting diverted supplies of steel away from the U.S. market.

Copper Price Falls

After making gains earlier in the week, the copper price slipped on account of tensions between the U.S. and Iran, Reuters reported.

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Three-month LME copper fell 0.4% to $5,592 on Friday after hitting its highest level since May 21 on Thursday, according to the report.

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This morning in metals news, iron ore continues its hot streak, the Chinese government has summoned executives of 48 regional companies to demand they curb pollution from their facilities and a series of Section 301 public hearings kicks off today.

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Iron Ore Rises

The iron price has been ascendant so far this year, aided in large part by supply-side constraints.

According to the Australian Financial Review, the iron ore price last week posted its biggest weekly gain since February en route to a record high.

According to the report, the most-actively traded September Dalian iron ore contract jumped as much as 4% to $115.20/ton.

China Targets Pollution

The winter heating season in China officially ended in March, and steel production has ramped back up after the winter production curbs.

Despite the end of those curbs, the Chinese government is still asking companies to limit their pollution. According to Reuters, the government is summoning executives from 48 regional companies for a meeting in which they will order the firms to cut output.

Section 301 Hearings Begin

This week, a series of hearings will commence related to the ongoing Section 301 tariff saga, which now could see tariffs applied to the remaining $300 billion in Chinese goods that have yet to be slapped with duties by the U.S.

As such, the Office of the United States Trade Representative is hosting a series of public hearings on the subject, beginning today and concluding Tuesday, June 25.

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“The proposed tariffs are a supplemental action in response to China’s unfair trade practices related to technology transfer, intellectual property, and innovation, based on the findings in USTR’s investigation of China under Section 301 of the Trade Act of 1974,” the USTR said in a release. “Tariffs on $250 billion in goods from China are currently in effect under Section 301 trade action.”