Articles in Category: Exports

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Not everyone agrees with the use of tariffs to achieve changes in trade relations.

However, a recent article in The New York Times article reports the threat of 25% import tariffs on the U.S.’s main automotive trading partners could prove to be spectacularly successful.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

Autos are the soft underbelly of major auto economies like Germany, Japan, South Korea and Mexico in their trade relations with the U.S. Although the first three have invested heavily in U.S. manufacturing facilities over the years, they still ship huge volumes into the U.S. from their home countries and have largely perpetuated an unfair reciprocal relationship in terms of tariff barriers.

The E.U., for example, exported $42.8 billion worth of motor vehicles to the U.S. in 2018 — more than one-fifth of the cars imported by the U.S. — at a tax rate of 2.5%. Meanwhile, the E.U. imposes a 10% tariff for cars exported in the reverse direction.

In response to the threat of 25% tariffs, the E.U. offered to scrap tariffs in both directions, a step it has resisted in all previous negotiations.

But with carmakers’ backs against the wall, the Trump administration was not about to let up with a simple scrapping of tariffs, long overdue as that may be.

The administration is in discussions with the E.U. and its carmakers about increasing their investment and employment in the U.S. The more cars foreign carmakers manufacture in the U.S., the less they will ship in from abroad, benefiting the balance of payments and creating employment stateside.

Consumers benefit from continued access to a wide range of manufacturers without the cost implications of the threatened tariffs being imposed, estimated to be between $1,400 and $7,000 per vehicle if applied at 25%, the article notes.

Even U.S. carmakers are in favor of removing all tariffs, as they see a reduction in overseas import tariffs as an opportunity worth the increased domestic competition that foreign carmakers setting up in the U.S. may pose.

The only losers, should the deal be agreed, could be said to be foreign carmakers who will lose domestic exports, an impact that Germany is expected to feel the significance of more than any other country. Germany runs the second-largest trade surplus after China, with autos making up a sizable portion of that mercantilist trade structure.

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Foreign carmakers are being asked to provide details of proposed investments and plans already in the pipeline.

The German car industry is promising to create 25,000 jobs at factories in the United States, according to The New York Times. However, the Trump administration is looking for new jobs and investments, not simply plans that were already in the pipeline before the current negotiations were started.

A deal has not yet been reached; unofficially, both sides are making encouraging noises, raising the prospects for some good trade news to lift the spirits of investors who have been disproportionately depressed by a barrage of negative media coverage on the topic in 2019.

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This morning in metals news, U.S. steel import permit applications surged in October, U.S. Steel has laid off workers at its Granite City operation and Port Hedland iron ore shipments to China dropped in October.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

Steel Import Permit Applications Surge

U.S. steel import permit applications for October jumped 34.6% compared with the September final import total, the American Iron and Steel Institute (AISI) reported this week.

Import permit applications for October totaled 2.56 million tons, according to AISI.

Meanwhile, steel import market share in October checked in at 17%.

U.S. Steel Lays Off Workers at Granite City

On the heels of news of layoffs at U.S. Steel’s taconite operations in Minnesota, the steelmaker has reportedly also laid off an unspecified number of nonunion workers at its Granite City, Illinois operation, the Belleville News-Democrat reported.

The Granite City operation famously received a boost after the Trump administration’s imposition of Section 232 tariffs on imported steel. Previously idled, in March and June of 2018, U.S. Steel announced it would restart two blast furnaces at the plant, welcoming back approximately 800 workers in the process.

Port Hedland Iron Ore Exports to China Drop in October

Exports of iron ore to China from Australia’s Port Hedland fell in October, Reuters reported.

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On a month-over-month basis, iron ore exports to China from the major port dropped 0.7% in October.

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This morning in metals news, No. 1 copper producer Chile saw its export levels drop 21% last month amid protests around the country, steel production in the U.S.’s Great Lakes region dropped last week and Shanghai Metals Markets forecast Chinese tin prices to rise back above $20,000 per ton by the end of the year.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

Chile Copper Exports Decline in October

Anti-government protests in several cities around Chile — including the capital, Santiago — have resulted in at least 23 deaths, according to Reuters, and had an impact on the country’s economy.

According to Reuters, while the protests have not significantly impacted copper mine production, Chile’s exports of copper dropped by 21% in October.

Great Lakes Steel Production Down

Steel production in the U.S.’s Great Lakes region declined by 26,000 tons last week, the Times of Northwest Indiana reported.

Production last week reached 676,000 tons, according to the Times, marking a 3.6% decline.

SMM: SHFE Tin Could Breach $20K Per Ton This Year

According to Shanghai Metals Markets, the SHFE tin price could bounce back this year and rise above $20,000 per ton.

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“In line with other analysts, SMM are positive on the tin market for the remainder of the year,” the International Tin Association said in a release. “While we are forecasting stable demand in Q4 and falling supply (particularly in China), we expect that any price increase this year will be resisted by the high stocks on the LME. In 2020, we also see demand returning to the market as economic growth recovers and uncertainty dissipates. However, currently idled production is likely to re-enter the market to cope with increased consumption. Next year, we see tin recovering from current uncharacteristic lows, but feel that average price forecasts of US$ 22,000/tonne are slightly optimistic.”

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This morning in metals news, South Korea will no longer seek to benefit from special treatment granted to developing countries vis-a-vis WTO rules, iron ore exports from Australia’s Port Hedland are surging and Rio Tinto has commissioned new press filter technology at its Quebec alumina refinery.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

South Korea to Give up Seeking Developing Country Treatment

According to a Reuters report citing South Korea’s finance minister, the country will give up seeking the special treatment afforded to developing countries.

“The government decided not to seek special treatment as a developing country from future negotiations at WTO,” Finance Minister Hong Nam-ki was quoted as saying.

Developing country status is self-designated; however, other WTO members can challenge a country’s claim to the status.

Earlier this year, the White House released a memorandum calling for reforms to developing country designations.

“While some developing-country designations are proper, many are patently unsupportable in light of current economic circumstances,” the memorandum stated. “For example, 7 out of the 10 wealthiest economies in the world as measured by Gross Domestic Product per capita on a purchasing-power parity basis — Brunei, Hong Kong, Kuwait, Macao, Qatar, Singapore, and the United Arab Emirates — currently claim developing-country status.  Mexico, South Korea, and Turkey — members of both the G20 and the Organization for Economic Cooperation and Development (OECD) — also claim this status.”

Through the first half of 2019, South Korea accounted for 9% of U.S. steel imports (1.3 million metric tons).

Port Hedland Iron Ore Exports Rising

Iron ore exports from Australia’s Port Hedland are expected to hit a record high this fiscal year, according to a Bloomberg report.

According to the report, iron ore volumes from the port last year reached 508.5 million tons.

Rio Tinto Announces New Press Filter Tech at Quebec Refinery

Rio Tinto has commissioned new press filter technology at its Vaudreuil alumina refinery in Quebec.

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“The new filter presses will deliver environmental benefits by moving the refinery to dry stacking of bauxite residue and extend the life of the operation, which supports 1,000 jobs in the Saguenay-Lac-St-Jean region,” the company said. “The presses will ramp up to being fully operational in early 2020.”

The new presses will be able to dry bauxite residue — preparing it for storage — in just 17 minutes, according to Rio Tinto, down from the three years it currently takes to dry the material.

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Before we head into the weekend, let’s take a look back at the week that was and some of the metals coverage here on MetalMiner, which included stories on: steel production and the falling steel price; a dip in aluminum production and the flagging aluminum price; U.S. oil exports; and a survey of U.S. electronics manufacturers regarding tariffs.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

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The U.S.’s rise as an oil producer is well-documented, but the U.S. Energy Information Administration’s (EIA) latest report marks another milestone for the domestic sector.

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According to the EIA, the U.S. now exports crude oil to more nations than it imports from.

In 2009, the U.S. imported oil from as many as 37 sources in a given month, according to the EIA. Meanwhile, through the first seven months of 2019, the largest number of import sources in a given month was 27.

In terms of exports, the U.S. exported oil to as many as 31 destinations per month through the first seven months of 2019.

“This rise in U.S. export destinations coincides with the late 2015 lifting of restrictions on exporting domestic crude oil,” the EIA said. “Before the restrictions were lifted, U.S. crude oil exports almost exclusively went to Canada. Between January 2016 (the first full month of unrestricted U.S. crude oil exports) and July 2019, U.S. crude oil production increased by 2.6 million b/d, and export volumes increased by 2.2 million b/d.”

Demand abroad for light-sweet crude oil has fueled the U.S.’s rise as an oil exporter.

“Several infrastructure changes have allowed the United States to export this crude oil,” the EIA said. “New, expanded, or reversed pipelines have been delivering crude oil from production centers to export terminals. Export terminals have been expanded to accommodate greater crude oil tanker traffic, larger crude oil tankers, and larger cargo sizes.”

As noted in MetalMiner’s Annual Outlook, in addition to the strength of the U.S. dollar and China’s economy, oil prices constitute a key price driver for metals.

OPEC’s daily basket price reached $59.50 per barrel on Monday.

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According to a Reuters report, OPEC and its allies are considering whether to extend previously agreed upon supply curbs in an effort to support flagging oil prices.

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

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

 

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Much was made during the U.K.’s Brexit referendum campaign from those eager for separation from the E.U. about the ease of reaching free trade deals with the rest of the world.

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Misguided as these promises have proved, those involved are not alone in seeing the theoretical benefits of forging free trade agreements, while also ignoring the practicalities of trade and countries’ relative industrial strengths and weaknesses.

The U.K., for example, along with the rest of Europe and the U.S., has a very powerful agricultural lobby that demands and receives considerable protections.

There is some argument in support of this. A country is dangerously exposed if it is totally reliant on imports of that most basic of needs – foodstuffs. We can maybe live without avocados, but could we live without our cereals and vegetables?

With the looming possibility of an exit from the E.U. on Halloween (Oct. 31) – either with some kind of framework deal or, more likely, without – the U.K. is finally, after three years of near-paralysis, making plans for what a post-Brexit tariff landscape it may go for.

It is an interesting situation, as countries are rarely faced with the opportunity for a wholesale change in tariffs; usually, such changes happen gradually and as part of bipartisan negotiations over many years.

Carolyn Fairbairn, director-general of the U.K.’s CBI business lobby group, was quoted as saying this is “the biggest change in terms of trade this country has faced since the mid-19th century, with no consultation with business, no time to prepare.”

But the U.K. may have to unilaterally decide what tariffs to impose (or not), as it will probably be bereft of its free trade arrangement with the E.U. and, at the same time, with the E.U.’s trade agreements with third countries, like Canada, in a matter of weeks.

When the U.K. exits the E.U., if it has no agreement in place it will automatically leave all of the E.U.’s trade agreements forged with countries around the world — marking a revision to so-called WTO rules.

Canada is a case in point.

Prime Minister Boris Johnson and his supporters breezily asserted during their campaign that they would rapidly roll over the E.U.’s free trade deal with Canada to apply to a newly separate U.K.

Well, when push comes to shove and faced with the choice, Canada has politely declined, according to the Financial Times.

The reason is because, as it stands, the U.K. is planning to remove all tariffs — or at least on some 87% of imports — making Canada’s terms with the U.K. in such a scenario better than the terms it enjoys with the E.U.

Tariffs are being periodically reviewed; for example, a proposed 22% tariff on heavy HGV trucks was recently revised to 10%, the same rate as cars, following fierce lobbying from the road transport lobby. With that caveat in mind, the U.K. would only impose tariffs on some 13% of goods, said to include meat and dairy products, vehicles, ceramics, and fertilizers. The sectors chosen are said to support farmers and certain manufacturers.

Interestingly, automotive parts would not face tariffs in a bid to support the continuation of just-in-time automotive supply chains between the U.K. and mainland Europe that have become so highly integrated over the last 20 years. As such, some fear the wholesale collapse of the U.K. automotive sector in the event of a hard Brexit.

There remain a few weeks for interested parties to lobby for special status or protection from such a zero-tariff policy — you can bet there will be plenty that do just that.

The government is set to increase tariffs on bioethanol after the domestic industry complained that low tariffs on imports could threaten its future. Likewise, ministers are also expected to increase the tariffs charged on imports of textiles; although the U.K.’s textiles industry is relatively small, it may be part of a wider policy to limit rises in costs for consumers as a result of Brexit.

Boris Johnson’s government is desperate for Brexit to appear a success to the general populace. As such, one of its top priorities is that voters should not experience a bruising rise in living costs, such as may result from tariffs being imposed on imports (Britain is a net importer of goods by a wide margin).

How long this status would be maintained remains to be seen — maybe the other side of an election, the cynic would suggest, but the proposal seems to be the tariff structure should last at least 12 months.

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For exporters selling to the U.K. who currently face E.U. tariffs, life could be about to get easier selling into a tariff-free, post-Brexit U.K. economy.

As a wider experiment on the impact of tariffs on an economy, it will be interesting to see whether a zero- and low-tariff mix environment has the galvanizing impact some free-trade economists have promoted.

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This morning in metals news, China announced some U.S. goods would be exempted from tariffs, steel production is down in the Great Lakes region and copper falls amid declining Chinese auto sales.

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China Announces Tariff Exemptions

The Chinese government announced Wednesday that it will exempt 16 types of U.S. goods from tariffs for one year as of Sept. 17, CNBC reported.

Among the products included in the list of exemptions are food for livestock, lubricants and cancer drugs, CNBC reported.

Steel Production Down in Great Lakes

Steel production in the U.S.’s Great Lakes region in the last week of August declined for the fifth straight week, the Times of Northwest Indiana reported.

Production for the week declined 1.17% from the previous week.

Copper Price Falls

Amid falling Chinese auto sales, the copper price approached a two-year low reached earlier this month, Reuters reported.

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LME copper was bid down 0.6% on Wednesday down to $5,793 per ton, Reuters reported.

The China Association of Automobile Manufacturers reported August automotive sales dropped 6.9% on a year-over-year basis.

GDP figures may be holding up well, but metal consumption in China suggests the global slowdown and the ongoing trade war with the U.S. are taking their toll on China’s manufacturing sector.

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Reuters reported top state primary aluminum producer Chalco is quoted as filing an 8% fall in output, with primary aluminum output of 1.89 million tonnes in the first half of the year, down from 2.06 million tons compared with the first half of 2018.

Overall, revenue actually rose 15% to 94.9 billion yuan, despite a 10% drop in the primary aluminum segment, helped by rising alumina output. Alumina output increased 3.2% year-on-year to 6.82 million tons, fueling a trading revenue increase of 23%.

But higher primary metal costs and weak prices in the primary sector hit profits. In the second quarter alone, Chalco’s net profit dropped 52.7% from a year earlier, while revenue was up 11.3% year on year.

In a separate Reuters article, the news source reported exports have also been hit, falling 4.3% in August from the previous month despite a weaker yuan. Unexpected production outages at two key smelters meant there was less metal available for overseas shipments following flooding at Hongqiao’s premises earlier last month and a separate outage in Xinjiang.

Last month, China exported 466,000 tons of unwrought aluminum, including primary metal, alloy and semi-finished products. The total was the lowest since February and was also down 9.9% from August 2018.

Supporting the aluminum picture, imports of unwrought copper — including anode, refined and semi-finished copper — products into China stood at 404,000 tons last month, Reuters reported, down 3.8% from the 420,000 tonnes in July and also down 3.8% year on year. The article went on to state the decline came despite copper prices in China being mostly high enough in August for traders to make a profit by buying on the London Metal Exchange, the global price benchmark, and selling on China’s Shanghai Futures Exchange (encouraging bookings of physical copper imports into China).

The blame for the drop in demand is laid at China’s bruising trade war with the United States, driving a fourth straight month of contraction in factory output in August, according to an official survey.

China is not alone, of course.

U.S. manufacturing output has remained positive, albeit slower than a year earlier. However, early indicators, like the Institute for Supply Management survey, showed a contraction in August — the first since 2016, according to Bloomberg. That suggests at least parts of the manufacturing landscape are facing rising headwinds; we would be complacent to think the consequences of the trade war are falling solely on China.

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Western Europe is also slowing fast. German manufacturing is arguably already flirting with recession as a consequence of a slowing Chinese economy.

Just as a rising tide lifts all boats, falling global GDP correspondingly depresses prospects for all.