Articles in Category: Exports

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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This morning in metals news, the final two bidders for India’s Essar Steel have been chosen, businesses are grappling with the reality of no tariff exclusions vis-a-vis the most recent round of tariffs on China and trade ministers met in Ottawa to talk about strengthening the World Trade Organization (WTO).

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A Joint Effort

According to Reuters, ArcelorMittal, along with Nippon Steel & Sumitomo Metal Corp., have submitted the final bid for India’s Essar Steel, which entered bankruptcy proceedings last year.

According to the report, the joint venture marks the first attempt by global steel firms to operate in India without a local partner.

No Exemptions

Unlike previous tariffs, U.S. businesses have not been able to submit exclusion requests to the tariffs applied to about $200 billion worth of Chinese goods in September.

As previously noted in this space, the 10% tariff on that list of goods will jump to 25% in January.

A report from CNBC includes some reactions from the business community.

“Razor-thin margins give retailers very little room to absorb the tariffs without passing some cost on to consumers,” the Retail Industry Leaders Association said in a letter to the White House this week. “Tariffs must not be an end in and of themselves.”

A New WTO

A group of trade ministers met in Ottawa Oct. 24-25, where they discussed ways to improve and modernize the World Trade Organization (WTO).

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The ministers participating in the meeting issued a communique, concluding:

“The current situation at the WTO is no longer sustainable,” the communique states. “Our resolve for change must be matched with action: we will continue to fight protectionism; and we are committed politically to moving forward urgently on transparency, dispute settlement and developing 21st century trade rules at the WTO. We look forward to reviewing our progress when we meet again in January 2019.”

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This morning in metals, Ford Motor Co. says prices of U.S. steel are higher than anywhere else in the world, China’s alumina exports surged in September and the LME copper price dropped Tuesday.

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High Prices

U.S. automaker Ford has been vocal about what it views as the negative impact of the U.S.’s steel and aluminum tariffs.

According to a Detroit News report, Ford’s president of global operations on Monday said “U.S. steel is costing more than anywhere else in the world” as a result of the tariffs.

MetalMiner’s Take: It’s a bit difficult to understand what has driven the public complaints from Ford about steel and aluminum tariffs, particularly when most OEMs take long positions on their metal spend.

Some OEMs have locked-in contract prices that simply do not fluctuate, according to MetalMiner benchmark data. The manufacturing organizations that make stronger arguments against tariffs are those that remain subject to spot-price movements, have a corporate policy that forbids hedging or lack the buying power to demand fixed prices.

Perhaps the vocalization of the complaints have heated up because many OEMs have entered the fourth quarter contract negotiation season and the producers want to open discussions at much higher price levels. In defense of Ford’s complaints, the multi-tier extended supply chain remains far more exposed to metal price volatility than a company like Ford.

In this environment, OEMs will need to work double time to create programs and opportunities for aggregating volumes across supply chains, developing directed buy and enablement programs, aggregation opportunities and using technology to better support the entire extended global supply chain.

China’s Alumina Exports Rise in September

China’s exports of alumina hit a 2018 high in September, Reuters reported.

Exports of alumina in September hit 165,839 tons, up from 29,722 tons in August.

LME Copper Falls

The LME copper price fell 1.1% on Tuesday, Reuters reported.

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The drop comes a day after London copper had reached a one-week high.

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This morning in metals news, Canada plans to impose tariffs and quotas on seven categories of steel, the VIX surged this week to an eight-month high, and China’s steel and aluminum exports held relatively steady last month.

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Canada to Impose Steel Safeguards

The Canadian government announced Thursday it plans to impose quotas and tariffs on seven categories of steel, Reuters reported.

A 25% tariff will be applied beginning Oct. 25.

MetalMiner’s Take: Although the popular press will likely emphasize that Canada has now engaged in a trade war with the U.S. on steel, buying organizations should note that the 25% tariffs will be applied, “in cases where the level of imports from trading partners exceeds historical norms,” according to a government statement. Jerry Dias, the head of Canada’s plargest private sector union, said the tariffs will protect from subsidized steel from China and South Korea, according to Global News.

Fear Index Surges

The VIX, sometimes known as the “fear index,” has surged this week.

The index, which serves as an indicator of market volatility, reached its highest level since February.

MetalMiner’s Take: Stocks have since rebounded from a two-day rout. Although the VIX spiked to an eight-month high, these sharp moves in the past few days likely came as a result of the Federal Reserve’s actions on interest rates and the perception of rising inflation. Time will tell if the VIX blip portends any longer-term trend change or not.

Today, the VIX has flattened on news that consumer inflation remains in check. Commodities and stocks don’t have a strong correlation, meaning the movement in one may or may not impact the movement in the other. The only exception to that rule involves precious metals, which tend to increase when the stock market declines.

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Chinese Aluminum, Steel Exports

China’s exports of aluminum fell slightly in September while steel exports rose slightly, Reuters reported.

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This morning in metals news, copper and aluminum prices drop, Japanese steel exports fall and the U.S. and Canada still remain without a new deal vis-a-vis North American Free Trade Agreement (NAFTA) renegotiation efforts.

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Copper, Aluminum Prices Fall on Scaledown of China’s Winer Cuts

Copper and aluminum prices were both down Friday, partially stemming from news in China regarding its regimen of winter capacity cuts (aimed at reducing rampant pollution in the country).

According to Reuters, China’s decision to shy away from blanket winter cuts saw to a drop in copper and aluminum prices.

MetalMiner’s Take: LME copper prices decreased slightly this week.

However, LME copper prices have shown strength in September. Copper prices breached the $6,000/mt ceiling, back to July levels.

Meanwhile, LME aluminum prices traded more sideways this month.

China’s environmental curbs may create upward movement for the base metal, despite the decrease SHFE aluminum showed yesterday.

Winter cuts may reduce aluminum availability in a supply-concerned market.

Japan’s Steel Exports Drop

Japan’s August steel exports were down 0.9% compared with August 2017, according to S&P Global Platts.

However, exports were up 3.9% compared with July totals, according to the report.

NAFTA Standstill Continues

The U.S. and Canada have continued without having reached a deal on NAFTA, a month after the U.S. touted a preliminary deal with Mexico.

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According to Reuters, the U.S. plans on releasing the text of its trade agreement with Mexico, one that largely excludes Canada, according to lawmakers briefed on the text Thursday.

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Argentina is not exactly Venezuela, but you could be forgiven for shaking your head at the sheer ineptitude of Argentinian politicians who have presided over yet another economic crisis and have been forced to go to the IMF yet again for a $50 billion bailout.

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As Reuters observes, Argentina is struggling to break free from cyclical financial crises that have hit the country every decade over the past 60 years.

The most recent, in 2002, threw millions of middle-class Argentines into poverty and shook investor confidence in the commodities-reliant economy.

Not that the current administration caused the current morass — the fault for that lies with former President Cristina Fernández de Kirchner.

According to the BBC, her government, which was in power from 2007 until 2015, raised public spending, nationalized companies and heavily subsidized many items of daily life, ranging from utilities to football transmissions on television.

Worse, it controlled the exchange rate, which created all sorts of practical problems, such as giving rise to a black market for dollars and heavily distorting prices. The more conservative administration of President Mauricio Macri’s came into power promising fiscal responsibility and to stem the collapse of the newly freed up currency, but has consistently failed to lower inflation, which is the highest amongst G20 nations.

Since coming to power in 2015, Macri’s administration has failed to enact the economic reforms it promised the IMF, most of them aimed at curbing public spending and borrowing. The resulting spiral of inflation and draconian public spending cuts this year means wages are not keeping pace with prices, making most people poorer.

Source: Bloomberg via BBC

The country is facing inflation of over 31% by mid-2018, record unemployment and rapidly growing poverty marked by queues at soup kitchens, as the poor are unable to even feed themselves, which is leading to unrest.

Inflation is expected to end the year at over 40% despite stringent fiscal constraints the government is imposing. The government is following orthodox fiscal policies, partly under pressure from the IMF. Policies are in place to cut its ministries by more than 50% and decrease public spending by 4%. The goal is to advance the fiscal deficit reduction to zero next year, ahead of the earlier target of 2020. Even so, the peso has collapsed as investors have fled, devaluing by 52% just this year. In the last week alone, the currency lost 16% of its value.

So desperate is the situation that President Macri’s government has imposed a tariff on all exports — yes, you read that right, exports, including steel products.

Admitting it was a bad tariff and a desperate measure that ran counter to the normal intent to generate foreign currency through exports, Macri explained it was to avoid semi-finished products flooding out the country with the collapse of the peso. The government is fearful if it goes unchecked, the market will be devoid of raw materials and domestic manufacturing will collapse, adding to already rising unemployment and further dissuading investment.

According to Bloomberg, the tariff varies between primary products and finished products. For primary products, for every $1 exported, a duty of Argentinian Pesos 4 is charged (or about 10% at current exchange rates), while for finished products, for every $1 exported a duty of Pesos 3 is charged.

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It is hard to see a quick turnaround for Argentina; years of austerity and a harsh recession are likely on the table, with ongoing support from the IMF.

Following past real estate deals with the Macri family, President Trump is giving his verbal support to the Argentine president’s efforts, support that may prove vital if the current $50 billion does not prove sufficient to turn the economy around.

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Rare earth exporters in India have lodged protests after the government snatched their rights to send these precious elements abroad.

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Rare-earth metals are a group of 17 elements, which are found in geological deposits. Some of the most abundant metals in the world are neodymium, cerium, and lanthanum.

All rare earths are classified into two groups: light rare earths (LREs), and heavy rare earths (HREs).

Just 20 years earlier, the Government of India (GoI) allowed the private sector into beach sand mining. Now, it issued a notification, wherein the right to export these rare-earth metals have been taken away.

Instead, the GoI has introduced a canalization system.

The primary aim of canalization of exports through Indian Rare Earths (IRE), according to the Financial Express, is to curtail direct private sector export of beach sand minerals and derivatives like ilmenite, rutile and zircon.

Canalizing means putting quantitative restrictions on exports.

But the move has obviously not gone down well with rare earths miners. Miners have said these checks would curtail beach sand mining activities and deprive India of a developing sector.

According to a new research report by Global Market Insights, Inc, the rare earths market size will exceed U.S. $20 billion by 2024. It’s well known that the majority of the global rare earth production capacity is in China. However, China has not shown much inclination of sharing those resources with other nations.

Thus, the focus is on countries like India and Japan — specifically India, which has a sizable reserve.

Driving this sector is the demand for magnets in automobiles, and requirements in defense and energy generation. Electric cars, for example, rely on some of rare-earth metals.

Beach sand minerals and their derivatives find diverse applications in paints and other decorative materials, papers and plastics, and high-tech applications. At present, much of India’s share of domestic production, as well as exports, are done by private sector firms.

The GoI notification said export of beach sand minerals had been brought under the STE and shall be canalized through IRE. Beach sand minerals, permitted anywhere in the export policy, will now be regulated in terms of the new policy. One of the other sources of angst for private firms in the business is that they have already made huge capital investments by way of technology and production facilities.

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According to the Financial Express report, beach sand minerals mining activity commenced in India in 1908. In addition, until 1998, other minerals were restricted only to public sector companies (except for garnet), but just after that the GoI embarked on a path of liberalization that allowed participation by the private sector.

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This morning in metals news, Argentina sets exports tariffs, LME copper drops and China’s biggest aluminum-producing city is getting set to roll out high-end aluminum projects.

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Argentina Slaps Exports with Tariffs

Argentina added export tariffs to all products, including steel, according to S&P Global Platts.

According to the report, the country’s steel exports to the U.S. in the year to date are down 11.9%.

Copper Falls

LME copper reached a nearly two-week low Tuesday, Reuters reported.

However, the metal stabilized, ultimately trading flat on Tuesday, according to the report, while SHFE copper fell 0.4%.

High-End Aluminum

The Chinese city of Binzhou, home to aluminum major China Hongqiao Group, is planning projects to encourage growth in high-end aluminum production, according to a Reuters report citing a local government document.

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One of the projects includes an aluminum alloy plant of 10,000 tons per year, according to the report.

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This morning in metals news, U.S. energy companies haven’t had much luck in the steel tariff exemption request process, iron ore prices bounced back from a one-month low and Mexican steel exports to the U.S. plunged in June.

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U.S. Energy Companies Look for Tariff Exemptions

Per a Reuters report, some U.S. energy companies are not happy that their steel tariff exemptions requests are being denied by the Department of Commerce (DOC).

According to the report, the DOC approved a request by Chevron for an exemption on Japanese steel tubes, but others making similar requests have been denied.

MetalMiner’s Take: Clearly, the DOC does not have the resources to quickly and efficiently evaluate challenges. Speaking at the Steel Market Update steel summit in Atlanta, Nucor CEO John Ferriola reported his firm has objected to 8.2% of the 25,000-plus exclusion requests; only one was overturned by the government.

The tariffs are designed to both improve the trade balance and create jobs, according to Ferriola (not to mention address national security by bringing production back to the U.S.). Speaking to the SMU audience, Ferriola answered a question on imported steel slabs subject to 25% tariffs: “Countries that don’t produce slabs should figure out how to create jobs and build the capability to make slabs. Create the jobs … that’s what 232 investing is all about.”

Ferriola also commented on the impact of tariffs on his customers: “We watch the impact of the price on our customers and their earnings. Our customer’ sales are up, their earnings are up, and their sales are booming. We can see their order entry rate and frankly today when I see how our customers are doing, I don’t get the sense that they are being squeezed today.”

Iron Ore Prices Tick Up

After hitting a one-month low, iron ore prices were up Tuesday, according to Business Insider Australia.

The price of 65% fines jumped 0.5%, according to the report.

MetalMiner’s Take: Iron ore prices are mostly trading sideways this month, in the $65-$70 band.

Chinese iron ore imports rebounded in July. The increase in iron ore imports is being supported by higher Chinese steel prices. Chinese mills are trying to increase profits and steel output.

The recent environmental campaign in China is also boosting iron ore imports versus domestic iron ore, as the imported material has a higher grade. However, Chinese iron ore imports decreased by 1.6% in the first months of 2018 when compared to the same period in 2017.

Iron ore price movements generally correlate better with steel prices in bearish markets. This means steel prices tend to increase in a bearish market if the raw material price increase in that period. In bullish markets, iron ore price movements do not have a big effect on steel prices.

Mexican Steel Exports to U.S. Fall

Mexico’s steel exports to the U.S. fell 23.9% year over year in June, according to an S&P Global Platts report.

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Furthermore, June export totals were down 37.4% compared with the May total.

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On Monday, the U.S. announced an agreement in principle regarding aspects of the North American Free Trade Agreement (NAFTA), albeit in a bilateral sense, as Canada remained on the sidelines of the talks between the U.S. and Mexico.

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“The United States and Mexico have reached a preliminary agreement in principle, subject to finalization and implementation, to update the 24-year-old NAFTA with modern provisions representing a 21st century, high-standard agreement,” the Office of the United States Trade Representative (USTR) said in a release. “The updated agreement will support mutually beneficial trade leading to freer markets, fairer trade, and robust economic growth in North America.”

Talks to modernize the 24-year-old trilateral trade agreement began in August 2017 and underwent numerous rounds, encountering challenges along the way.

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