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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

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India’s protectionist measures to safeguard its steel industry seem to be paying off.

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As reported consistently by AG Metal Miner, the Indian government, responding to the call of its steelmakers, had time and again imposed various forms of anti-dumping measures and fines to stop cheap imports of steel — especially from the world’s steel manufacturing leader, China.

Along with the U.S. and Brazil, India was said to be one of the world’s leading initiators of anti-dumping investigations, according to the World Trade Organization (WTO).

Well, now, all this has resulted in India’s steel exports doubling to 8.2 million tons and imports have been slashed by about one-third in 2016-17.

As per a report by the Press Trust of India (PTI), quoting from portions of the released Economic Survey, the rise in exports of steel could also wipe away the excess capacity built up in the steel sector. The mid-year survey by the government said steel imports had declined in 2016-17, while exports of steel had doubled.

Alloy imports dipped by 36.6% to 7.4 million tons in 2016- 17 against 11.7 million tons in the previous fiscal year. Exports doubled to 8.2 million tons last fiscal year, over 4.1 million tons in the corresponding year.

The news was welcomed by steel companies like Tata Steel. T.V. Narendran, managing director for Tata Steel India and South East Asia, told newsmen that steel demand in India was increasing, making it just right to make future investments. Stability was being witnessed in the steel sector globally, though it had faced some problem two years ago, Narendran told reporters.

Ironically, much of Indian steel joy stems from its traditional rival China, where there’s been a visible improvement in the economy — which meant much of its steel being produced was once again being used within the country. It was against the backdrop of China’s economic slowdown that the global steel industry had faced distress due to decline in global demand.

The Indian survey report said, in response to the dumping of cheap imports, the government in 2016 introduced a host of measures like raising Basic Customs Duty, imposition of Minimum Import Price (MIP) and anti-dumping duties in order to shield domestic producers. The government imposed the MIP for steel in February 2016 for a period of one year.

On April 12, 2016, India initiated countervailing duty investigation concerning imports of certain hot-rolled and cold-rolled stainless steel flat products originating in China.

According to the WTO, India’s share in total global steel exports increased from 1.1% in 2000 to 2.8% in 2016. During this period, China’s share in total steel exports rose from 3.7% in 2000 to 19.2% in 2016. Japan’s share in total steel exports in 2000 which was 12.2%, but fell to 9.1% in 2016.

Free Download: The July 2017 MMI Report

Meanwhile, the U.S. share in total steel imports was 17.0% in 2000, but has since come down to 12.1% in 2016.

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

This afternoon in metals news, experts say that despite the delay in the Section 232 investigation of steel imports, they still expect President Donald Trump to impose tariffs, U.S. steel production is up 2.9% in the year to date and copper and steel output from Kazakhstan rose significantly from January to July.

Section 232 Tariffs Still Coming, Experts Say

The wait continues for the Trump administration’s announcement of what it is going to do at the conclusion of its Section 232 investigation into steel imports.

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The investigation was launched in April, and Secretary of Commerce Wilbur Ross has 270 days to present President Donald Trump with a report (making for a January deadline).

An announcement was expected to be made by the end of June, but that self-imposed deadline came and went without an announcement. However, despite the delay, some industry experts believe Trump still plans to impose tariffs, according to a report by Reuters.

Trading partners around the world, including the European Union, in recent months have warned of the possibility of retaliatory measures should the U.S. move forward with tariffs (or a quota system, or a hybrid tariff-quota measure).

A Trump administration official told Reuters the Section 232 review is active and is “still under the final stages of review within the administration.”

U.S. Raw Steel Production Up 2.9%

Per data released in the American Iron and Steel Institute’s weekly report, U.S. raw steel production in the year to date is up 2.9% compared with the same time frame in 2016.

Adjusted year-to-date production through Aug. 12 was 55,650,000 net tons, up 2.9 percent from the 54,106,000 net tons during the same period last year, according to the report.

For the week ending Aug. 12, production was up 1% from the week ending Aug. 5, up to 1,780,000 net tons from 1,762,000 net tons the previous week.

Copper, Steel Output Up, Zinc Output Down in Kazakhstan

Output of copper and steel rose significantly from January to July in Kazakhstan compared with the same time frame in 2016, according to Reuters.

Copper output rose 5.7% and steel output rose 10.1% for the first seven months of the calendar year.

Free Download: The July 2017 MMI Report

Meanwhile, zinc output dropped 0.9%.

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This morning in metals news, a recent report predicts the precious metal catalysts market will reach $19.4 billion by 2022, Reliance Steel and Aluminum Co. posted strong second-quarter numbers and   China’s Ministry of Commerce says it is willing to work with the U.S. on global aluminum market issues.

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Precious Metal Catalysts Market to Grow to $19.4B

Precious metal catalysts will prove to be especially precious on the market in the near future, according to a report from Research and Markets.

The report indicates the market will grow from $14.37 billion this year to $19.41 billion by 2022, at a compound annual growth rate (CAGR) of 6.19%.

Why is this metal sector set to become even more precious? Advances in automobile technology and pharmaceutical applications will see a rise in demand for this subset of metals, according to the research report.

“The newly developed emission standards demand additional improvements in catalyst technologies to successfully remove toxic substances from car exhausts, which will, in turn, drive the precious metal catalysts market growth through the automobile sector,” the report states.

A Good Q2 for Reliance

Reliance Steel and Aluminum Co. — the largest metals service center operator in North America,  headquartered in Los Angeles — posted strong numbers for this year’s second quarter.

According to a report on the Nasdaq website, the company reported a bottom line of $103.1 million, ($1.40 per share), compared with $99.5 million, or $1.36 per share, for Q2 of 2016.

The company’s revenue total also rose in Q2 by 12.7% to $2.48 billion, up from $2.20 billion last year.

China Signals Willingness to Work on Aluminum Market Issues

Ever since announcing Section 232 investigations of steel and aluminum, the Trump administration and the U.S. Department of Commerce have made it clear that Chinese excess capacity is the primary focus (notwithstanding the fact that Chinese steel and aluminum represent relatively small portions of U.S. imports).

On the heels of the U.S. International Trade Commission’s (USITC) Section 332 report on competitive factors affecting U.S. aluminum, China’s Ministry of Commerce suggested a global approach to tackling problems within the aluminum market, Reuters reported.

According to the Reuters report, Ministry of Commerce spokesman Gao Feng did not agree with the assessment that the USITC report accused China of “sponsoring” its aluminum industry.

Free Download: The July 2017 MMI Report

The results of the aluminum investigation will likely not be coming for some time, as the steel report is expected to come first. However, June came and went without a steel 232 announcement. Plus, if President Donald Trump’s comments earlier this week are any indication, steel trade policy doesn’t seem to be a top priority at the moment, particularly as the health care debate continues to heat up.

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The U.S. steel industry upped its production levels during the week ending July 22.

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In total, U.S. raw steel manufacturers produced 1.77 million net tons for that week, according to weekly data from the American Iron and Steel Institute (AISI). Compared with the previous week (ending July 15), that figure makes for a 0.6% increase.

Meanwhile, compared with the same week in 2016, production was up 6.4%.

Production is also up when comparing the year to date (until July 22) with the same time frame last year. Thus far in 2017, U.S. steel amounts to 50.3 million net tons, a 2.5% increase from the 49.1 million net tons in 2016.

The weekly AISI report also breaks down production by region. Once again, the Great Lakes region came in first with 677,000 net tons, followed by the Southern region (637,000), Northeast (214,000), Midwest (166,000) and Western (79,000).

Of course, the elephant in the room continues to be the Section 232 investigation into steel imports.  The results of the Department of Commerce probe were expected to be announced by the end of June, but that has long come and gone.

Most have speculated that the administration will opt to slap tariffs on steel imports in an effort to combat excess capacity from China.

It remains to be seen when the administration will announce anything on Section 232. However, if tariffs come to pass, other steel-producing nations will likely have something to say about it. As reported yesterday, Kosei Shindo, chairman of the Japan Iron and Steel Federation, warned of the opening of a Pandora’s box — meaning, nations might retaliate by placing tariffs on other products.

Free Download: The July 2017 MMI Report

That is on top of comments made in June by European Commission Trade Commissioner Cecilia Malmstrom regarding the EU’s intent to retaliate in the face of U.S. steel tariffs.

According to preliminary data from the U.S. Census Bureau, the U.S. imported 3.1 million tons of steel, with a monetary value of about $2.6 billion. The preliminary May data show Canada leading the way in steel exports to the U.S. (514,488 tons). Mexico shipped 266,544 tons, while Germany (135,279), Turkey (139,728), Korea (298,527) and Brazil (513,889) featured near the top of the list. China, meanwhile, exported 73,594 tons, according to the preliminary May data.

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It didn’t take long for President Donald Trump to extricate the U.S. from one trade deal, the Trans-Pacific Partnership. Now, the Trump administration is looking to make good on a promise to revamp the North American Free Trade Agreement (NAFTA), the 23-year-old trilateral trade agreement with Canada and Mexico.

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On Wedesday, U.S. Trade Representative Robert Lighthizer announced the first round of negotiation talks will be held Aug. 16-20 in Washington, D.C.

A 90-day consultation period with Congress and the public kicked off May 18. Late last month, the Office of the USTR held public hearings over three days regarding NAFTA, welcoming comments from lawmakers, businesses and other stakeholders. Some U.S. industry sectors agreed NAFTA has been largely successful, but that the agreement forged in 1994 needs modernizing tweaks.

Lighthizer also announced John Melle, the assistant U.S. trade representative for the Western Hemisphere, will serve as the chief negotiator during the NAFTA talks. Melle has worked for the Office of the USTR since 1988.

The USTR also released its trade objectives for the negotiations on Monday. Perhaps not surprisingly, the primary goal for the Trump administration is a reduction of trade deficits with Mexico and Canada.

“President Trump continues to fulfill his promise to renegotiate NAFTA to get a much better deal for all Americans,” Lighthizer said in the prepared statement released Monday. “Too many Americans have been hurt by closed factories, exported jobs, and broken political promises. Under President Trump’s leadership, USTR will negotiate a fair deal. We will seek to address America’s persistent trade imbalances, break down trade barriers, and give Americans new opportunities to grow their exports. President Trump is reclaiming American prosperity and making our country great again.”

In 2016, the U.S. had a $64 billion trade deficit with Mexico and an $11 billion deficit with Canada. In 1994, when NAFTA went into effect, the U.S. had a $1.3 billion trade surplus with Mexico.

Free Download: The July 2017 MMI Report

According to a recently released study from the Boston Consulting Group (BCG), a border tax or the U.S. exiting the agreement could negatively impact U.S. automotive manufacturers. The study argues that a 15% border tax would cost U.S. automakers and suppliers $22 billion a year and a 20% tariff on Mexican imports would drive up production costs per vehicle by $650 on average.

Whatever happens, though, Mexico and Canada clearly would like to get the ball rolling.

Reuters reported today that diplomats from the U.S.’s NAFTA partners are hoping to reach a deal quickly to put an end to uncertainty in the business community regarding the trade deal’s future.

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Anxiety is rising among Europe’s steelmakers that a potential U.S. plan to levy steel tariffs, on national security grounds, could have a disastrous impact on the region’s sales into the market.

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Reuters reported that the European steel association Eurofer is worried that “….measures potentially stemming from the U.S. section 232 investigation may lead to a proliferation of disastrous global trade flow distortions.”

Eurofer is worried on two counts. First, it is worried that with China largely already cut out of the U.S. market by anti-dumping legislation, the axe will fall on imports from other regions, of which Europe is a major supplier. Many European countries are already experiencing steep declines in sales to the U.S. between 2015 and 2016 — in some cases of 50% — but the largest, Germany, remains the fifth-largest external supplier to the U.S. of flat-rolled products, according to International Trade Administration data.

The second worry is that should the investigation support bans or large duties, suppliers in the affected countries will look for alternative mature, high-value markets for their products, namely the EU. This would potentially flood an already overcrowded market with more low-priced material.

Having championed free trade in recent statements, Europe may have to eat its own words if it is forced to find ways to counter such a flood. Reuters reports that moves are already afoot, at the G20 summit in Germany last weekend, leaders from the world’s 20 leading economies set an August deadline for an OECD-led global forum to compile information about steel overcapacity. That also includes a report on potential solutions, due in November, which could result in the region acting of its own.

In reality, Europe may not be the primary target of the president’s 232 action. Supplies from Canada, Brazil, Mexico, South Korea, Japan and Russia dwarf those from Europe, but that will not necessarily stop the region from suffering considerable collateral damage.

The move would come at an unfortunate time for the European steel industry.

After prices rose nearly 50% last year, they have since fallen back some 10% this year, according to Reuters. Demand, however, is recovering with a 1.9% rise forecast for this year, according to Eurofer, suggesting prices could stabilize (although demand growth is expected to ease again next year, with only 1% growth forecast).

EU Strikes Back?

However, The Guardian reports Europe is also looking at retaliatory measures, should they suffer exclusion or tariffs because of the 232 action. The paper quotes the European Commission president, Jean-Claude Juncker, who is reported to have said that if the U.S. took measures against Germany and China’s steel industries, the EU would “react with counter-measures.”

The article says one industry in the Europeans’ crosshairs is Kentucky bourbon, worth $166 million to the state last year and directly employing some 17,500.

Kentucky was staunchly supportive of Trump during his campaign, with 62.5% of the electorate voting for him.

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“I am telling you this in the hope that all of this won’t be necessary,” Juncker said during the G20 summit. “But we are in an elevated battle mood.”

Bellicose talk, indeed.

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This morning in metals news, Chinese exports of steel are down to levels not seen in a few years, aluminum prices get a boost from talks of Chinese output cuts and a group of former White House economists wrote President Donald Trump in an attempt to convince him not to go forward with imposing tariffs on steel imports.

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Steel Exports Down in China

Chinese steel exports are down to three-year lows, according to a Bloomberg report.

Chinese excess capacity has been at the heart of the Trump administration’s Section 232 investigation into steel (and aluminum) imports, but it appears as if that oversupply is on the decline.

According to Bloomberg, China is “exporting a lot less of the metal as government-ordered closures of illegal plants tighten supply and improving local demand spurs mills to sell more at home.”

Aluminum Prices Get Good News

Sticking with China, aluminum prices surged 2.8% on news of Chinese production cuts, according to Reuters.

In related news, our Stuart Burns wrote about the issue of Chinese oversupply this morning, and whether announced measures to close plants — in efforts to cut production — are actually meaningful.

Former White House Economists on Section 232 Tariffs: Don’t Do It

When it comes to the the Trump administration’s Section 232 investigation of steel imports and the possibility it could hit foreign suppliers with tariffs, a number of former White House economists agree on one thing: It’s a bad idea.

According to a report in The Los Angeles Times and other outlets, 15 former White House economists sent a letter to the White House explaining why the tariffs would be a bad idea. According to the report, the letter is signed by economists from both sides of the aisle, and includes the signatures of two former Federal Reserve chairmen: Ben Bernanke and Alan Greenspan.

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It’s unlikely that such a letter will have much pull with Trump and his administration at large, but it is notable for the simple fact that a group of ideologically differing economists agree on a singular issue (in this case, whether or not to impose steel tariffs).

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Before we head into the weekend, let’s take a brief look back at some of the news from the world of metals this week:

China’s Falling Steel Exports?

Earlier this week, our Stuart Burns wrote about the phenomenon of dropping Chinese steel exports:

“As we noted in a piece yesterday reviewing the 232 probe, China’s share of the U.S. import market for steel products has been falling for the last couple of years, mainly due to successful anti-dumping cases,” Burns writes. “China no longer appears even in the top 10.

So, what exactly is going on in China with respect to steel production and demand? Can we take it that Beijing’s actions to tackle excess steel production have finally resolved China’s deflationary impact on global steel markets?”

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In case you missed it on Monday, definitely give the story a read, especially as the Department of Commerce’s Section 232 steel investigation results will be announced any day now.

Indian Coal Faces Green Wave

Also earlier this week, our Sohrab Darabshaw wrote about coal mine closures in India, partially a result of the growth of the renewable energy sector:

“One estimate by the Energy and Resources Institute predicts if the cost of renewable energy and storage continue to fall, India may phase out coal power completely by 2050. Both solar and wind energy prices have been steadily decreasing over the last three years.

“In 2016-17, India added over 14,000 megawatts of new renewable energy power compared to almost 7,000 megawatts of new coal power capacity.”

Even so, the dependence on old energy sources won’t disappear immediately. Yesterday, Indian Steel Minister Choudhary Birender Singh announced India will ramp up its steel production significantly. That uptick in production will need energy, and Singh indicated Coal India Ltd. will be asked to provide the coal needed to back the steel-production operations.

In general, however, the interplay between older, dirtier sources of energy and clean, renewable energy sources is happening all over the world.

China-U.S. Back and Forth

Tensions have been building between the U.S. and China, as Reuters reported President Donald Trump was growing frustrated with China over its inability to rein in North Korea, while China expressed concern this week about the results of the Section 232 aluminum investigation.

The Department of Commerce investigations into steel and aluminum imports were announced in April.

Adding to the tension is China’s disapproval of a planned $1.42 billion arms sale by the U.S. to Taiwan, which the Chinese embassy denounced in a statement, Reuters reported Friday.

With many expecting tariffs or quotas (or a combination of the two) to be slapped on steel and aluminum imports (as an outcome of the 232 investigation), there’s no doubt the tension between the U.S. and China will only increase.

What’s Next For U.S.-India Ties?

President Donald Trump met with Indian Prime Minister Narendra Modi earlier this week in Washington D.C. Our Stuart Burns wrote about Modi’s visit and what could be in store for the U.S.-India relationship throughout the Trump administration.

During a joint press statement this week, Trump stressed India’s status as the world’s largest democracy and touted himself as a friend to India.

However, he also touched on thornier issues, like trade barriers.

“I look forward to working with you Mr. Prime Minister to create jobs in our countries, to grow our economies, to create a trading relationship that is fair and reciprocal. It is important that barriers be removed to the export of U.S. goods into your markets and that we reduce our trade deficit with your country.”

After the Tragedy

The Grenfell Tower fire earlier this month could have been prevented if safe building materials had been used. Burns wrote about that and more in his piece on the tragedy.

Free Download: The June 2017 MMI Report