Articles in Category: Exports

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This morning in metals news, the world’s top copper producer expects a moderate rise in the metal’s price going forward, the Aluminum Association announces new leadership and Kobe Steel continues to reel from its data falsification scandal.

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Copper on the Rise

The price of copper is set to experience moderate increases, according to the mining minister of Chile, Reuters reported.

Aurora Williams, the mining minister of Chile (the world’s top copper producer), said Wednesday that there will be moderate increases in the metal’s price, but not enough to push it above $3/pound for the year.

According to the Reuters report, copper exports reached $3.18 billion in September, their highest level in nearly three years.

Changing of the Guard

The Aluminum Association announced new leadership on Wednesday.

Michelle O’Neill, senior vice president of senior vice president of global government affairs and sustainability at Alcoa, was elected as Aluminum Association Chair, becoming the first woman in the association’s 84-year history to hold the position. She replaced Garney Scott, president and CEO of Scepter, Inc., following a two-year term.

Kobe Steel Data Scandal Continues

It’s difficult to quantify lost trust, but it’s a problem Kobe Steel, Japan’s third-biggest steelmaker, is dealing with now on the heels of a data falsification scandal.

Now, the chief executive of the company is admitting the scandal is a serious hit on the company’s image, one that leaves it with “zero credibility,” The Guardian reported.

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According to The Guardian’s report, General Motors is the latest manufacturer to check whether its cars contain falsely certified parts or components sourced from Kobe Steel.

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This morning in metals news, a Japanese steelmaker is mired in scandal after admitting to falsifying inspection data, copper exports by Sicomines have been halted by the Congolese government and Shanghai zinc hits a 9 1/2-year high.

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Kobe Steel Hit by Scandal

The third-largest steelmaker in Japan, Kobe Steel, admitted to falsifying inspection data, according to the Financial Times.

The falsified data was for about 20,000 tons of metals used in aircraft and automobiles.

Copper Exports Halted for Sicomines

Export of copper by Sicomines in the Congo have been halted by the Congolese government, according to a Bloomberg report.

The Congolese government order Sinohydro Corp. and China Railway Construction Corp.’s local mining venture to stop exporting unprocessed copper and instead exporting “high-value products.”

Shanghai Zinc Hits 9.5-Year High

Zinc on the Shanghai Futures Exchange jumped 4% on Monday, reaching its highest point in 9 1/2 years, according to Reuters.

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According to Reuters, the metal rose on both supply concerns and “expectations for improved liquidity in markets in China.”

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

The U.S. Department of Commerce has recently issued preliminary determinations in countervailing duty (CVD) and antidumping investigations of imports from Japan, China, Romania, Kazakhstan and others.

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Last week, the department added Canada to the list, dropping a major countervailing duty on imports of large civil aircraft. The move, coincidentally, came just before the third round of North American Free Trade Agreement (NAFTA) renegotiation talks, which wrapped up Sept. 27 in Ottawa.

The Department of Commerce issued a preliminary determination early last week in its CVD investigation of imports of 100- to 150-seat large civil aircraft from Canada, resulting in a whopping 219.63% tariff on the CSeries of planes exported to the U.S. by Bombardier, Inc.

“The U.S. values its relationships with Canada, but even our closest allies must play by the rules,” Secretary of Commerce Wilbur Ross said in a prepared statement. “The subsidization of goods by foreign governments is something that the Trump Administration takes very seriously, and we will continue to evaluate and verify the accuracy of this preliminary determination.”

According to the Department of Commerce’s preliminary ruling, exporters of the aircraft received countervailable subsidies of 219.63%.

The Commerce Department will instruct U.S. Customs and Border Protection (CBP) to collect cash deposits from importers of 100- to 150-seat large civil aircraft based on these preliminary rates.

The Boeing Company was the petitioner in the case. Petitions were filed April 27.

The ruling is a big win for Boeing — if it holds, that is — which as Bloomberg reported late last week, has developed an unlikely positive relationship with President Donald Trump.

However, as NAFTA negotiations unfold, such a move is sure to increase tensions. According to a recent Ipsos poll, just 33% of Canadians said renegotiating NAFTA was a good thing, compared with 48% of Americans and 46% of Mexicans — indicating, to an extent, that Canada is happy with the current order of business (of course, it’s just one poll).

Naturally, imposition of a nearly 220% tariff on any product, let alone large aircraft, is going to be a big deal. Bombardier’s stock dropped $0.07 from Sept. 28 to Oct. 1, from $1.82 to $.175 (a 3.7% drop). Boeing, meanwhile, closed at $253.70 on the New York Stock Exchange Sept. 26, compared to a closing price of $256 on Monday.

According to a Reuters report, threats of retaliation from Quebec were already being heard late last week.

Quebec Premier Philippe Couillard took the Commerce Department’s preliminary ruling very seriously.

“Boeing may have won a battle but, let me tell you, the war is far from over. And we will win,” Couillard said, according to the Reuters report.

The ruling is only preliminary, but it certainly ratchets up tensions in what has already been a NAFTA dialogue fraught with tension, in large part a result of the accelerated negotiating schedule.

In addition, the ruling is not the first one this year to target Canadian imports. On June 26, the department issued a preliminary ruling calling for duties of 30.88% to 17.41% on imports of softwood lumber from Canada.

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The Department of Commerce has launched 68 antidumping or CVD investigations this year between Jan. 20 and Sept. 20, representing a 45% increase in cases from the same time frame last year, according to the department’s release.

A final CVD determination in the investigation is scheduled for Dec. 12.

A Reuters report last week suggests relief is in sight for Western manufacturers of aluminum semi-finished products under pressure from growing Chinese exports.

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Headlining how China’s semi-finished aluminum exports fell for a third straight month in August, the article cites punitive duties imposed by the United States and India on Chinese aluminum foil as a reason for the decline. Semi-finished exports stood at 360,000 metric tons last month, Reuters reported, quoting revised customs data. That figure is down 3.2% on the same month a year ago and down 7.7% from 390,000 tons in July.

Although the monthly export figure is the lowest since February 2017, the first eight months of this year still showed a 5.2% increase versus the same period in 2016. Further data seemed to conflict with the argument that the foil duties were the cause of the decline in recent months. January to August foil exports were up 10.1% at just under 800,000 tons. Although they have dropped in recent months – down 4.9% year-over-year and down 6% from July, those drops only account for 5-6,000 tons per month of lost semis exports. The vast majority, 30,000 tons per month of reduced exports, are coming from extrusions.

Quoting Paul Adkins of AZ China, the report identified a substantial 29% slump in exports of extruded aluminum bars, rods and profiles as the main cause for the overall falls in semis exports despite an increase in flat rolled numbers. The main culprit appears to be U.S. tariff action against extrusions and helps explain why Chinese extrusion mills have been so aggressive in Europe in recent weeks, dropping conversion premiums for extrusions (possibly in an attempt to make up for lost sales to the U.S.).

With Chinese extrusion mills on less than 30-day delivery schedules they are clearly not overly busy. This suggests that although domestic demand has been steady, it has not been as strong an influence on primary metal prices as investor appetite for bidding up the futures markets would suggest. That has more to do with environmentally motivated capacity curtailments creating a narrative of shortages — resulting in speculators building strong net long positions and substantial primary metal prices rises — than it does any genuine tightness in supply.

An Aluminium Insider article discussing the findings of a report called the China Beige Book by a private, China-based analyst raises questions about the sustainability of recent rapid price rises and if they are based purely on the premise of reduced supply.

The study states that, despite numbers released by Beijing, overall capacity in the aluminum market has experienced a net rise over the last six consecutive quarters. At the same time, the economy is experiencing a slow-down. “Sector-wide growth took a dive across the board—revenue, profits, output, export orders, volumes, hiring, capex, borrowing, wages, and sales prices,” explained the report, suggesting perceptions of tight supply are misplaced and speculator-driven.

Free Download: The September 2017 MMI Report

If that is the case, European extruders may not be alone in facing increased competition this winter from China’s semi-finished product mills, as they seek to secure markets for a wide range of semi-finished products propelled by a cooling domestic market.

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Before you get into your planned Labor Day festivities, let’s take a look back at some of the stories here on MetalMiner from the past week:

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  • After a somewhat stagnant run, aluminum had a strong August — why? Our Stuart Burns covered aluminum’s upward momentum last week.
  • Ah, the North American Free Trade Agreement (NAFTA), the deal that’s stayed in the news for much of the year. President Donald Trump recently renewed rhetoric threatening the 23-year-old trade agreement on the heels of the completion of the first round of negotiating talks held in Washington, D.C. We recapped the recent developments in the ongoing talks held by trade representatives of the U.S., Canada and Mexico.
  • Speaking of trade agreements, talks are also underway between the U.S. and South Korea on KORUS, the free trade deal the two countries began in 2012.
  • China was reportedly amenable to making further significant cuts to tackle excess capacity, which has been a major talking point, not just for the U.S., but the global market. However, President Trump rejected China’s proposal. Burns offered his analysis on the situation.
  • It’s been a mostly good year for base metals — but not every metal has joined in on the fun, as our Irene Martinez Canorea wrote last week.
  • Hurricane Harvey inflicted a severe toll on the people of southeast Texas and southwest Louisiana. Now, there’s a long road ahead to recovery, both in terms of the humanitarian and economic impacts of the storm.
  • Burns looked to the the so-called “lucky country” of Australia, which is rich in iron ore. But what happens when iron ore reserves are exhausted? Answering the question briefly: look to the sun.

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Hurricane Harvey touched down in Texas late last week — in the ensuing days, thousands were displaced as record rainfall of more than 50 inches blanketed some areas of Houston (the fourth-most populous city in the U.S. with a population of about 2.3 million).

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According to a USA Today report citing preliminary research from the firm AccuWeather, Harvey could become the costliest disaster relief effort in U.S. history, with a potential price tag of $160 billion.

It should of course be noted that, before anything else, the natural disaster’s human impact is of utmost importance. The New York Times reported the death toll has hit at least 30, according to Texas officials.

In addition to widespread flooding, property damage and displacement suffered by residents in the hurricane’s path, Harvey has also left an economic impact that will be felt for the foreseeable future.

Among other things, metals prices, oil prices and shipping have all been, or will be, impacted by Harvey.

Trade Impact

The Port of Houston is one of most important trading locations in the U.S. As a result of Harvey, the port was completely closed as of last Friday. According to the Port of Houston website, it will remain closed on Thursday.

“We will continue to work alongside local agencies and the USCG to determine when operations can safely resume,” an alert on the Port of Houston website read Wednesday.

According to data on the Port of Houston website, the port is ranked first in total foreign tonnage and ranks second in total tonnage. As the largest Gulf Coast container port, it handled 68% of U.S. Gulf Coast container traffic in 2016.

So, a total shutdown of the port is a big deal.

On the export side, 3% of total container volume exported last year came from steel and other metals (27,127 TEUs).

A larger percentage of total imports come in steels and other metals — 8.6%, or 76,853 TEUs, last year.

Meanwhile, the Port of Corpus Christi, the fourth-largest port in total tonnage, was also closed as of Tuesday.

The affected areas have an immediate need for supplies of all kinds, but transportation modes are at a general standstill for the moment.

Steel Stocks

Much of Houston has been hit by record rains, leading to flooding and stranding locals without food or supplies.

Although it won’t happen overnight, eventually the area will begin to rebuild in the wake of the damages caused by Harvey.

According to a report on the Nasdaq website, Houston receives between 30% and 35% of all U.S. steel imports, making it a pivotal point of access.

In the wake of Harvey, some U.S. steel companies saw their stocks rise. According to the report, shares of United States Steel Corporation jumped by over 2.5% on Tuesday, while Olympic Steel rose more than 1.5%.

Nucor and AK Steel Holding Corporation both saw their stock prices rise by over 0.5%.

However, it’s still early to determine the true damage to the steel industry caused by Harvey.

According to a Platts report, Harvey could have a similar impact to that of 2012’s Hurricane Sandy, particularly with respect to steel scrap.

Freight Service Disrupted

In addition to the disruption of port activity, rising water levels have taken a bite out of freight service.

As a result, a rise in trucking rates can be expected, according to freight analyst firm FTR Transportation Intelligence.

“Look for spot prices to jump over the next several weeks, with very strong effects in Texas and the South Central region,” said Noel Perry, a partner at FTR. “Spot pricing was already up strong, in double-digit territory. Market participants could easily add 5 percentage points to those numbers.”

According to Steel Market Update, FTR predicted 10% of freight activity will be disrupted over the next two weeks.

Gas Prices Rise

As a result of an overall glut in global production, gas prices have come down significantly since 2014, when the gas price in some metropolitan areas exceeded $4 gallon.

However, the average national gas price has increased as a result of Harvey and shutdowns of refineries in Corpus Christi and Galveston. As of Wednesday afternoon, the average national gas price stood at $2.40 gallon, up from $2.37 on Monday, according to AAA. The average price had already risen $0.04 to $2.37, which AAA said Monday was one of the largest one-week surges this summer.

According to AAA, about one-quarer of Gulf Coast refining capacity was taken offline, according to forecasts by Oil Price Information Service (OPIS), which equated to about 2.5 million barrels per day.

“Despite the country’s overall oil and gasoline inventories being at or above 5-year highs, until there is clear picture of damage and an idea when refineries can return to full operational status, gas prices will continue to increase,” said Jeanette Casselano, AAA spokesperson, in a prepared statement.

Time to Rebuild

Rescue missions continue in the Houston area, as officials move residents in flooded areas to shelters. According to the Washington Post, 32,000 people have taken refuge in 231 shelters, with many volunteers need to help clean out damaged homes.

“We expect a many-year recovery in Texas, and the federal government is in this for the long haul,” said Elaine Duke, acting secretary of the Department of Homeland Security, to the Washington Post.

The damage won’t be contained to Texas, however. According to the National Hurricane Center, Harvey touched down again, this time in southwestern Louisiana at 4 a.m. today.

More than 12,400 employees from more than 17 federal departments and agencies are working together in support of the ongoing response to damages resulting from Hurricane Harvey and subsequent flooding across Texas and Louisiana, according to the Federal Emergency Management Agency (FEMA).

When all is said and done, affected communities will have a long road to recovery. Many will eventually return to homes either damaged beyond habitability or totally destroyed.

Houston is the largest U.S. market for newly constructed homes, and demand for materials used in home construction will surge as communities transition from rescue and recovery mode to begin the arduous rebuilding process.

The question is: When will that transition happen?

For now, government agencies on the ground are prioritizing the primary disaster relief effort, and it’s unclear when resources can eventually be shifted to construction.

The pipe and tube market, in particular, is well represented in the Houston area, which offices for the multinational firm Vallourec. The Port of Houston took in nearly 40% of iron and steel pipe and tube imports through the first six months of the year, according to ustradenumbers.com.

Earlier this week, the Committee on Pipe and Tube Imports sent a letter, obtained by CNBC, to the Trump administration, urging it to move forward with trade remedies in the Section 232 investigation of steel imports. According to the letter, over 60% of current U.S. demand for pipe and tube materials is supplied by foreign producers.

The request tied into the ongoing situation in Houston.

“Based on the amount of imports flooded into America now we will not be able to help rebuild Houston,” Robert Griggs, president and CEO of Trinity Products, told CNBC.

“Not one U.S. pipe company will get a lick of work in rebuilding Houston. It will all go to China. The president needs to level the playing field and make it fair. The way it is now, American steel pipe companies will lose the opportunity to rebuild Houston.”

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The North American Free Trade Agreement (NAFTA) isn’t the only trade deal the Trump administration is eyeing for changes.

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Last week, United States Trade Representative (USTR) Robert Lighthizer and Korean Trade Minister Hyun-chong Kim discussed the U.S.-Korea free trade agreement, referred to as KORUS, via video conference, according to a USTR release.

Like NAFTA, the trade deficit is a central talking point for the U.S. In a statement from the Office of the USTR, Lighthizer summarized the administration’s goals with respect to trade with South Korea.

“The United States and Korea have an important economic relationship,” Lighthizer said in the prepared statement. “Unfortunately, too many American workers have not benefited from the agreement. USTR has long pressed the Korean government to address burdensome regulations which often exclude U.S. firms or artificially set prices for American intellectual property. This negotiation offers us an opportunity to resolve these and other barriers.”

“Since KORUS entered into effect, U.S. goods exports have decreased while the trade deficit overall with Korea has nearly tripled,” Ambassador Lighthizer continued. “American service exports have seen virtually no growth in the past four years. President Trump is committed to substantial improvements in the Korean agreement that address the trade imbalance and ensure that the deal is fully implemented.”

According to a release on the Korean Ministry of Trade, Industry and Energy website last Wednesday, Kim said no decision had been reached regarding the next step in the discussion.

“The Trade Minister said the Korean representatives had proposed a joint study to examine the effects of the trade pact before starting talks on a revision of the deal, and will await the USTR’s review of the proposal and response before deciding how to proceed,” the release said.

The Trade Deficit Rises

The U.S.’s trade deficit with South Korea has ballooned since implementation of KORUS in March 2012.

In 2011, the last full year before KORUS went into effect, the U.S. had a $13.2 billion trade deficit with South Korea, according to U.S. Census Bureau data.

That deficit has increased in size every year since: $16.6 billion (2012), $20.7 billion (2013), $25 billion (2014), $28.3 billion (2015) and $27.6 billion (2016).

Thought the first six months of 2017, the U.S. has a $11.2 billion trade deficit with South Korea.

The automobile sector is the source of much of the deficit, according to the USTR release. In 2016, 90% of the $27.6 billion deficit came from the auto sector alone.

Impact on Steel?

As for metals, South Korea is a leading steel exporter to the United States, as a recent American Iron and Steel Institute (AISI) report on steel imports showed.

Although South Korea’s steel exports in July to the U.S. dropped by 13% from June totals, South Korean steel still led the way with 337,000 net tons exported — ahead of Turkey, Germany, Japan and Taiwan.

South Korea is also the largest supplier through the first seven months of 2017, sending nearly 2.3 million net tons to the U.S., which is actually down 4.5% year-over-year.

While China has been the focus of the Trump administration’s Section 232 investigation into steel imports, countries like South Korea could also be impacted if Trump opts to slap tariffs on steel imports.

As our Stuart Burns wrote last week, it might be a faulty assumption to think that the trade imbalance is the direct result of the free trade agreement.

“Bilateral trade has surged since KORUS, as the Korean-U.S. trade deal is known, was implemented five years ago,” Burns wrote. “Although there is a trade imbalance, the reality is no two countries will have exactly balanced trade. Balances have more to do with relative competitiveness than a rigged system.”

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Whatever happens to KORUS, it appears the South Korean government is preparing to pursue alternative economic avenues.

Following a meeting on the country’s exports last Thursday, a release posted on the Ministry of Trade, Industry and Energy website the following day read: “Trade Minister Kim, who presided the meeting held in the Korea Trade Insurance Corp. (K-sure), said that the Korean government will actively respond to trade protectionism, strengthen economic cooperation with emerging markets, and help boost the link between trade and industrial development.”

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India’s aluminum production is expected to grow at a compound annual growth rate (CAGR) of 3.5% in the next 2-3 years to cater to a rise in domestic demand, according to a new report.

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CARE Ratings’ report titled “Aluminium Industry: The Silver Knight of the Economy,” said that what would propel this growth are the various initiatives taken up by the Indian government, and the ramping up of smelter capacities. Surplus stock will continue to be exported, owing to its low-cost advantage.

So what will drive the growth? According to CARE, the growth in consumption is likely to be driven by the growth in power transmission and the automobile sector. While the demand from the building and construction and consumer durable segment is likely to remain subdued, demand from the packaging sector is likely to support the domestic demand.

CARE has estimated the prices of LME aluminum to range around $1,800/ton to $2,000/ton in the short- to medium-terms.

India is among the lowest cost producers of aluminum in the world, owing to easy availability of raw materials and comparatively low labor costs. The growing demand for aluminum in the last decade, driven by India’s underlying growth story, has resulted in expansion of smelting capacities of the major domestic players.

With the addition of new aluminum capacities, India aims at not only satisfying domestic demand, but also playing a major role in the global aluminum market.

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Earlier this month, the U.S. Department of Commerce issued a preliminary determination on Chinese aluminum foil — one that could have a major impact on Chinese aluminum foil producers.

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On Aug. 8, Secretary of Commerce Wilbur Ross announced that Chinese aluminum foil has benefited unfairly from government subsidies ranging from 16.56 to 80.97%.

“The United States is committed to free, fair and reciprocal trade, and will continue to validate the information provided to us that brought us to this decision,” Ross said in a release. “The Trump Administration will not stand idly by as harmful trade practices from foreign nations attempt to take advantage of our essential industries, workers, and businesses.”

Well, China’s Ministry of Commerce had a response of its own last week.

Wang Hejun, director of the Ministry of Commerce’s Trade Remedy and Investigation Bureau, questioned the ruling, citing the Chinese government’s cooperation, according to a release on the Ministry of Commerce’s website.

The release also states Hejun said China urges the U.S. to act “prudently” to avoid negative impacts bad influence on the economic and trade relationship between the U.S. and China.

According to Reuters, the Ministry of Commerce posted a statement on its Wechat account, in which Hejun said the United States rebuffed the Chinese government’s offers to cooperate with the investigation before making its ruling.

The Department of Commerce’s Aug. 8 ruling was only a preliminary determination. However, at the conclusion of the countervailing duty investigation, duties of approximately 81% could be slapped onto Chinese foil imports.

According to the Department of Commerce release, barring any delays it is expected to announce its final determination on Oct. 24.

In 2016, imports of aluminum foil from China were valued at an estimated $389 million, according to the Department of Commerce.

The aluminum foil countervailing duty investigation is one of 64 initiated from Jan. 20 to Aug. 8 — a 40% increase from the same time period last year, according to the Department of Commerce.

In other aluminum investigations, the Department of Commerce’s Section 232 investigation of aluminum imports is still pending. The investigation was launched April 17 (along with a 232 investigation of steel imports). Although those investigations do not specifically target China, much of the discussion from the administration and those within the domestic steel and aluminum industries has focused on China and excess capacity. Other nations, however, including the European Union bloc, have expressed concern about the impact of Section 232 actions and their effects.

Free Download: The August 2017 MMI Report

According to Section 232 of the Trade Expansion Act, Ross has 270 days to present the president with a report outlining recommendations, which makes for January deadlines for the aluminum and steel cases.

Before we head into the weekend, let’s take a look back at the week that was.

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  • In case you missed it, our August MMI Report is out. Metals like copper and aluminum hit record highs, and nine of our 10 sub-indexes posted upward movement as a result of a strong July. Will that momentum continue? Check back next month for the September MMI report.
  • Many have predicted a decline for iron ore prices, but as our Stuart Burns wrote on Monday, reports of its demise have been greatly exaggerated. A weak U.S. dollar, combined with strong equities and global GDP, have helped keep iron ore performing well, not to mention Chinese steel and the wider metals market. Read through for Burns’ assessment of the iron ore market.
  • In India, a boom of bauxite production is expected, wrote our Sohrab Darabshaw. In fact, it is expected to more than double by 2021. How is that possible? One reason, Darabshaw writes, is “increased domestic demand for aluminium, which will largely be sourced from the quintupling of land under mining lease in the Odisha province (which has the bulk of India’s bauxite reserves).”
  • One commodity almost everyone is interested in is oil. On Tuesday, Burns wrote about the future of oil prices. But, since this is MetalMiner, after all, those prices also have an effect on metal markets.
  • Everyone loves a good M&A story, and Burns had one earlier this week on the ongoing talks between Indian steel giant Tata Steel and Germany’s ThyssenKrupp. Plus, he touches on ArcelorMittal’s takeover of Italy’s Ilva. Burns writes: “For the first time in years, steelmakers at least seem to have a plan and are actively pursuing it. Whether that plan is to the eventual benefit or detriment of consumers remains to be seen — but a healthier domestic steel industry must certainly be advantageous to all.”
  • How about zinc? Burns wrote about the metal’s rise to $3,000, and the reasons behind zinc’s price hitting its highest point since 2007.
  •  Last week was a busy one for the U.S. Department of Commerce, which handed down preliminary determinations in countervailing duty investigations for both Chinese aluminum and silicon coming from a trio of countries.
  • Back in India, steel exports are on the rise as the Indian government’s protectionist measures seem to be paying off for its domestic industry.
  • Lastly, representatives of the U.S., Canada and Mexico began talks on Wednesday regarding renegotiation of the North American Free Trade Agreement (NAFTA), the trade deal instituted in 1994. The U.S. is focused on, among other things, bringing down ballooning trade deficits with the two countries (particularly Mexico). The talks are scheduled to continue until Sunday, so check back for updates on the proceedings.

Free Download: The August 2017 MMI Report