Articles in Category: Company News

The decision by a provincial government in India to shut down a copper smelter plant may have serious repercussions on copper supplies, not only in India but also globally, experts claim.

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The Tuticorin-based plant was ordered shut by the government of the Tamil Nadu State after hundreds of angry local residents spilled out on the road to protest against the plant’s environmental impact on people’s lives. The protests turned bloody, as police firing led to the deaths of 13 protestors, Reuters report, and the permanent shutdown of the plant.

In its wake, the Tamil Nadu government, succumbing to continued public and political pressure, endorsed a closure order issued in May last year by the State’s pollution control board, effectively shutting down the plant.

Sterlite Copper is owned by the London-based Vedanta Group. The management clearly is not going to let go without a fight. The plant has been under a cloud for several years because locals have alleged that pollution from the smelter has led to health problems, including cancer.

But CEO P. Ramnath has been quoted as saying the closure of the plant would push India’s annual import bill by an estimated $2 billion.

The Tuticorin facilities include a custom smelter, a refinery, a phosphoric acid plant, sulphuric acid plants and a copper rod plant. In addition, there are a captive power plants located in Tuticorin.

As per one estimate, about 4,000 direct jobs and the livelihoods of another 20,000 people will be affected by the closure. Vedanta Sterlite is one of the largest copper producers in the country, and its closure means manufacturers in sectors ranging from electrical to defense will have to turn to imports.

In another move, the Tamil Nadu States Industries Promotion Corporation also canceled deal allotting land for the expansion of Sterlite Copper’s smelting plant.

In November 2017, Vedanta’s board approved the expansion of its copper smelter to 800,000 ton per annum from the present 400,000 tons per annum, with a capex of U.S. $717 million, of which U.S. $141 million has already been spent.

If that expansion were over, it would have made the smelter one of the world’s largest single-location copper smelting complexes.

On its part, Vedanta has termed the government’s order “an unfortunate development,” and said it would study it before deciding what to do next.

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India’s annual copper consumption is expected to almost triple to 2 million tons in the next decade, according to a projection from Hindalco Industries Ltd. Vedanta produced about 48% of the country’s total copper output of 842,961 tons in 2017-18, according to government data.

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This morning in metals news, despite a recent detente, the U.S announced it would continue trade actions against China; Canada launched a dumping investigation of steel imports from China, Vietnam and South Korea; and China’s Chinalco gets closer to equaling rival Hongqiao in production with a recent deal.

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U.S.-China Trade Relationship Steps Back From Recent Truce

The U.S. announced it would continue trade actions against China, Reuters reported.

According to the report, the U.S. plans to announce by June 15 a list of approximately $50 billion in Chinese goods that will be subject to a 25% import tariff.

Canada Launches Dumping Probe

Sticking with the China theme, Canada announced that it has launched a dumping inquiry of Chinese steel imports (in addition to Vietnam and South Korea), Reuters reported.

The inquiry will seek to determine if cold-reduced flat-rolled sheet products of carbon steel have harmed Canadian industry, according to the report.

Chinalco Closes in on Hongqiao

The state-owned Chinalco inked a deal with the Yunnan government to increase its smelting capacity, a move that will bring it closer to equaling top producer Hongqiao, Reuters reported.

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According to the report, Yunnan Metallurgical Group will be merged into China Copper Co, a joint venture between Chinalco and the Yunnan provincial government.

Steelmakers’ fortunes are up, and for that we should all rejoice; an industry fighting bankruptcy or suffering long-running losses is not an industry that invests in its products or services.

But questions remain about how long the current run of good fortune will continue for Western steelmakers.

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Source: Financial Times

Posting Profits

On the plus side ArcelorMittal has just posted its best quarter since 2011 with EBITDA quarterly core profits rising 17% year on year to $2.5 billion for the January-March period.

Analysts quoted in the Financial Times put the recovery down to rounds of cost-cutting and efficiency instigated after the downturn of 2015-16. Rising global GDP and, hence, demand has built on these improvements to raise prices for steelmakers and, in particular, the delta between raw material costs and finished steel prices, lifting profitability to the highest in a decade.

Source: Financial Times

ThyssenKrupp of Germany posted a tripling of half-year earnings on the back of better sales prices and reduced losses, having offloaded its South American slab mill to Siderúrgica do Atlântico (CSA) and its Calvert, Alabama carbon and stainless mills to ArcelorMittal/Nippon Steel and Outokumpo, respectively.

Some would argue it got out at the bottom of the market and would have lost less if it had held on for a better price when the market turned, but both plants were making losses and ThyssenKrupp was under pressure from shareholders to turn the group around.

ThyssenKrupp is not alone — many steel mills have demerged, shuttered, divested or otherwise re-structured in order to focus on their more profitable opportunities in recent years and are reaping the benefits.

Eyes on Chinese Exports

However, the extent to which this happy state of affairs can continue lies, at least in part, in China.

As the Financial Times points out, a combination of industrial reform in China and positive profit margins has lifted steelmakers’ focus on the domestic market and reduced exports. From a peak of 110 million tons in 2015, China’s steel exports have shrunk by one-third to 73.3 million tons in 2017. The Financial Times credits this restriction of supply as helping restore a sense of balance to the steel market, which is reflected in regional price rises in Europe and North America.

There remains dispute about the depth and speed of the steel market restructuring program in China, but even if it is not as radical as the authorities claim it has contributed to sentiment and supported prices. The questions the Financial Times poses is thus: how long will this new balance last and, with prices falling in China, will exports rise later this year?

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Making Moves

An indication of European concern is a new registration program started just this month that requires importers to register all incoming shipments by origin, value and tariff code.

At present, there is no requirement for a license or any cases of approval not being given, but many see it as a first step to Brussels more closely monitoring steel (and aluminum) imports from China, Russia, etc., with a view to introducing quotas or tariffs if volumes rise.

For once, Brussels can be said to be ahead of the game.

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This morning in metals news, the E.U. opened a new steel investigation, turnover at Russian aluminum giant Rusal and Novelis announces a major investment.

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E.U. Investigates Chinese Steel

According to Reuters, the E.U. has launched a new investigation of Chinese hot-rolled steel sheet piles coming into Europe.

The E.U. already has 17 anti-dumping or anti-subsidy measures in place on various forms of steel, according to the report.

Rusal CEO, Directors Quit

The Russian aluminum firm, recently in the news for being one of the Russian companies hit with U.S. sanctions, announced Thursday that its CEO and seven of its directors have stepped down, according to a CNN report.

According to the report, Rusal’s stock was up 7% after the announcement, but is still down significantly from its level before the U.S. sanctions were announced.

Novelis Plans New Investment in China

American aluminum firm Novelis announced it plans to invest $180 million to augment its Chinese automotive body sheet capacity, Reuters reported.

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Per the report, the investment would lead to an additional 100,000 tons of capacity at the firm’s Changzhou plant.

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This morning in metals news, U.S.-China trade talks have led to a tenuous truce, Nippon Steel says strong demand is easing the blow of the U.S.’s steel tariff, and shares of US Steel and AK Steel dropped on the heels of the latest developments in the U.S.-China trade talks.

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Trade Truce

On the heels of a visit from Chinese trade officials to Washington late last week, Treasury Secretary Steven Mnuchin over the weekend announced the two countries had reached somewhat of a truce, for now.

Of course, the longevity of that truce remains in question. According to the Washington Post, Mnuchin said on Monday that the president could still impose tariffs on Chinese goods if a deal can’t be reached to scale back the U.S. trade deficit with China.

Nippon Says Demand Working to Lessen Blow of U.S. Tariffs

Japan’s Nippon Steel & Sumitomo Metal Corp said strong demand for steel has cut the impact of the U.S.’s import tariff on the metal, according to a Reuters report.

“There has been no major impact from the U.S. tariffs thanks to solid global demand,” Katsuhiro Miyamoto, Nippon Steel executive vice president, told Reuters.

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US Steel, AK Steel Shares Down After China Truce Announcement

Shares of US Steel and AK Steel fell 1.1% and 2.6%, respectively, in premarket trade Monday, according to MarketWatch. The drop came on the heels of the weekend’s announcement regarding a truce between the U.S. and China on trade.

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

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  • In case you missed it, we updated our China MES microsite this week, covering the status of China’s quest for market-economy status and the U.S.’s pushback. Check out the updated page here.
  • MetalMiner’s Stuart Burns wrote about growth in India and the country’s new bankruptcy code.
  • Staying with India, the country went to the World Trade Organization (WTO) to express concern about the U.S.’s steel and aluminum tariffs.
  • Alcoa made a big announcement about its new Elysis joint venture and new technology promising a green aluminum smelting process, but that process might not be as green as it is being billed to be.
  • Secretary of Commerce Wilbur Ross addressed the National Press Club earlier this week in a speech that saw China, Europe and the WTO come in for criticism.
  • The U.S. claimed victory after an WTO Appellate Body ruling in the long-running dispute vis-a-vis subsidies for Airbus.
  • The rising oil price could have a far-reaching impact going forward.
  • With the U.S.-China trade relationship and the role of the WTO in the news quite a bit of late, Burns took a look at the state of the modern global trading system. (Part 1, Part 2)

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This morning in metals news, Tata Steel completed its buy of the bankrupt Bhushan Steel, Chinese steel mills are turning to scrap and Turkey is preparing to respond over the U.S. tariffs on aluminum and steel.

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Tata Steel Buys Bhushan Steel

Indian firm Tata Steel completed its purchase of the bankrupt Bhushan Steel for $5.2 billion, Reuters reported.

Bhushan has an annual steelmaking capacity of 5.6 million tons, according to the report.

Scrapping Plans

Amid environmental rules, Chinese steel mills are looking to use more scrap, according to a report by the South China Morning Post.

The recycling of material comes as the government continues to crack down on “smoke-stack industries,” according to the report.

Turkey Plans Response on Section 232 Tariffs

Turkey is among the many countries not to have won an exemption from the U.S.’s Section 232 tariffs on steel and aluminum; unsurprisingly, Turkey is planning a response, according to one report.

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Turkey plans to impose tariffs worth about $266.5 million on U.S. products, including coal, paper, walnuts, almonds, tobacco and unprocessed rice, among other items, according to a report by the Hurriyet Daily News.

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The World Trade Organization’s (WTO) dispute settlement mechanism is not known for its speed. As such, it took a while for a final ruling to come down with respect to the long-running dispute over the U.S.’s claim that European subsidies of Airbus have negatively impacted Boeing’s sales.

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The U.S. initially requested consultations with the U.K., France, Germany and Spain in October 2004, arguing that they had fallen afoul of the Subsidies and Countervailing Duties Agreement and the GATT 1994. In general, the U.S. complaint focused on five general categories: what the WTO report refers to as “launch aid” or “member state financing”; loans from the European Investment Bank; infrastructure and instrastructure-related grants; corporate restructuring measures; and research and technological development funding.

Fast forward more than 13 years to Tuesday, when the WTO’s Compliance Appellate Body ruled that the European states have fallen short of compliance with WTO rules by virtue of subsidies to Airbus, which the U.S. has argued have materially harmed Boeing.

According to the WTO’s appellate report released Tuesday, “the European Union had failed to comply with the recommendations and rulings of the DSB (Dispute Settlement Body) in the original dispute because the underlying subsidies continued to exist and cause adverse effects.”

According to a 2011 appeal, the European states argued they had taken steps to remove $18 million in subsidized financing, but the U.S. in 2016 filed a formal appeal disagreeing with that motion.

This week, the WTO ruled in the U.S.’s favor on appeal — albeit not on every single complaint —  arguing that the European communities are still out of compliance.

It didn’t take long after the report’s release for the threat of retaliation to surface.

“This report confirms once and for all that the EU has long ignored WTO rules, and even worse, EU aircraft subsidies have cost American aerospace companies tens of billions of dollars in lost revenue,” U.S. Trade Representative Robert Lighthizer said in a prepared statement on the verdict Tuesday. “It is long past time for the EU to end these subsidies. Unless the EU finally takes action to stop breaking the rules and harming U.S. interests, the United States will have to move forward with countermeasures on EU products.”

Subsidies to the A350XWB and A380 aircraft negatively impacted the sales of Boeing’s 787 and 747 aircraft, respectively, the Appellate Body’s decision said.

Boeing celebrated the ruling in a statement Tuesday.

“Today’s final ruling sends a clear message: disregard for the rules and illegal subsidies is not tolerated. The commercial success of products and services should be driven by their merits and not by market-distorting actions,” said Dennis Muilenburg, Boeing chairman, president and CEO. “Now that the WTO has issued its final ruling, it is incumbent upon all parties to fully comply as such actions will ultimately produce the best outcomes for our customers and the mutual health of our industry. We appreciate the tireless efforts of the U.S. Trade Representative over the 14 years of this investigation to strengthen the global aerospace industry by ending illegal subsidies.”

According to the Boeing statement, retaliatory tariffs could be scheduled as early as 2019.

The Boeing-Airbus saga, however, is far from over.

Another case on the WTO docket, in which Boeing is the respondent and the European states are complainants, looms on the horizon. The point in question involves tax reduction benefits from Washington state, which is expected to be ruled upon by the WTO later this year.

“Today’s significant legal success for the European aviation industry confirms our strategy which we have followed over all those years of the dispute,” Airbus CEO Tom Enders said in a prepared statement. “Of course, today’s report is really only half the story – the other half coming out later this year will rule strongly on Boeing’s subsidies and we’ll see then where the balance lies.”

E.U. Trade Commissioner Cecilia Malmström also addressed the Appellate Body decision in rosier terms for the Europeans.

“Today the WTO Appellate Body, the highest WTO court, has definitively rejected the US challenge on the bulk of EU support to Airbus, and agreed that the EU has largely complied with its original findings,” she said. “Significantly, it dismissed the vast majority of the US claims that this support had damaged Boeing’s aircraft sales. The EU will now take swift action to ensure it is fully in line with the WTO’s final decision in this case. Also, we look forward to the upcoming ruling by the Appellate Body on US compliance with the WTO findings of the massive and persistent government support to Boeing.”

Tuesday’s decision only contributes to the increasingly simmering cauldron of global trade relations.

The E.U. has yet to negotiate a long-term exemption from the U.S.’s Section 232 tariffs on steel and aluminum; the 28-member bloc initially won a temporary exemption until May 1, then received a 30-day extension less than 24 hours before the tariffs were set to go into effect.

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In comments at a National Press Club luncheon earlier this week, Secretary of Commerce Wilbur Ross focused largely on China, but the E.U. also came in for criticism, as he argued both China and the E.U. are “far more protectionist” than the U.S.

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This morning in metals news, the parent company of Japan’s second-largest steelmaker said the U.S. steel tariff on steel had yet to impact its exports, Novelis breaks ground on a new automotive aluminum facility in Kentucky and a NAFTA deal is unlikely to happen by the May 17 deadline put forth by U.S. House Speaker Paul Ryan, according to the Mexican economy minister.

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JFE President: U.S. Tariff Hasn’t Impacted Firm’s Steel Exports

According to Eiji Hayashida, president of JFE Holdings Inc. (the parent company of Japan’s second-biggest steelmaker), the U.S. tariff on steel has yet to impact its exports, but that U.S. trade policy in general poses the biggest risk to the Japanese economy, Reuters reported.

Hayashida said the biggest threat to Japan’s economy is “Trump risk,” according to the report.

Breaking Ground

Novelis broke ground on a new $300 million automotive aluminum facility in Kentucky, Business Facilities reported.

The facility is scheduled to open in 2020, according to a Novelis release, and will boast an annual nameplate capacity of 200,000 metric tons.

NAFTA Deal This Week? Unlikely, Says Mexican Economy Minister

Earlier this month, U.S. Trade Representative Robert Lighthizer said he wanted to see a deal on the North American Free Trade Agreement (NAFTA) this month, with House Speaker Paul Ryan setting a May 17 deadline for a deal in order for it to be approved by the current Congress.

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According to Mexican Economy Minister Ildefonso Guajardo on Tuesday, however, a deal is unlikely to happen this week, but that it could happen this year, Reuters reported.

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Full disclosure – I am an owner of an iPhone, iPad and Macbook — and I don’t mind admitting it, a  longtime fan of Apple’s products — but even I cringe when the firm claims to have “worked with other metal companies to develop the proprietary technique, which allows for the generation of ‘green’ aluminium for the first ever time.”

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The claim follows the announcement late last week that at its Pittsburgh research center, Alcoa has developed a replacement for the carbon anodes used in the smelting of alumina to aluminium.

The carbon anode has the important role of delivering a strong electric current through the melt, but in the process carbon is converted to carbon dioxide and considerable levels of greenhouse gas emissions are produced.

But although Apple is said to be investing C$13 million (U.S. $10 million) in the joint venture called Elysis, it is a drop in the ocean compared to the C$120 million of funding from the governments of Canada and Quebec and, further, the C$55 million invested by Alcoa and Rio Tinto in order to achieve commercialization of the technology over the next five years.

Indeed, Alcoa and Rio each have a 48% stake in the JV, with the rest owned by the government of Quebec, so quite how Apple can claim any fame in this venture is hard to see.

OK, Apple’s hubris aside: is this a step forward in lowering aluminum’s carbon footprint?

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