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This morning in metals news, exports from China to the U.S. took a dive in December, India will drive global steel demand in the coming years and Serbia has requested an exemption from the E.U.’s imminent quotas on steel imports.

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December Exports to the U.S. from China Drop

While the U.S. and China have kickstarted the new year with trade talks that have some feeling optimistic of a resolution, U.S. tariffs on $250 billion worth of Chinese imports appear to have had an effect on trade flows last month.

According to a report by the Associated Press, China’s exports to the U.S. fell in December, down 3.5% compared with December 2017.

For the year as a whole, however, China’s exports to the U.S. in 2018 were up 11.3%, according to the report.

Indian Steel Demand

India last year overtook Japan as the No. 2 steel producer in the world, according to data from the World Steel Association last month.

And per a recent post by Adam Szewczyk, head of data management for the World Steel Association, Indian steel demand will likely continue to drive production growth.

“According to worldsteel’s October Short Range Outlook, it is likely that India will also become #2 in steel use by the end of 2019 as its steel demand is expected to grow by 7.3%,” Szewczyk wrote.

“The Indian steel industry, after recovering from the twin shocks of demonetisation and the Goods and Services Tax (GST) reform, is one of the few bright spots for the world’s steel industry in what is forecasted to be a lower growth era.”

Serbia Requests Exemption From E.U. Steel Quota

With E.U. member states set to vote on new steel quotas Wednesday — in response to the U.S.’s implementation of a 25% steel tariff last year, pursuant to Section 232 of the Trade Expansion Act of 1962 — one country has already asked for an exemption.

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According to a Reuters report, Serbia, home to the Chinese-owned Zelezara Smederevo mill, has asked for an exemption from the quotas, which is expected to be approved by E.U. member states and will cover 26 product categories.

If approved, the safeguard measures would replace provisional measures passed in July 2018.

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This morning in metals news, China is eyeing improvements to its steel capacity structure, China’s 2018 aluminum exports surged and Shanghai rebar futures hit a two-month high.

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China’s Steel Structure

According to Reuters, China is looking to shift the focus of its steel industry in 2019 from one of fast growth to more optimized, high-quality development.

The report cites Yu Yong, chairman of the China Iron and Steel Association, who said a major push in 2019 will come in the form of “optimising production structure, adjusting layout of steel mills and pushing merger and acquisition.”

China’s Aluminum Exports Surge

China’s exports of unwrought aluminum and aluminum products jumped 20.9% in 2018 year over year, S&P Global Platts reported.

Per the same report, December exports were up 19.8% on a year-over-year basis.

Shanghai Rebar Price on the Rise

The Shanghai rebar price hit a two-month high Monday, Reuters reported.

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According to the report, rebar futures rose 1.6% to reach $528.44 per ton.

The new year for India started on a positive note where trade with the United States is concerned.

On Jan. 7, U.S. President Donald Trump called up his Indian counterpart, Prime Minister Narendra Modi to discuss, among other things, reducing the trade shortfall — a move that seems to have gone down well in Indian circles.

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The White House later issued a statement that said the two leaders had decided to strengthen the Indo-U.S. strategic partnership in 2019, and “exchanged perspectives on how to reduce the US trade deficit with India.”

Trade between the two nations hit a sour note in March 2018 after Trump imposed tariffs on imported steel and aluminum, seen as part of the U.S. president’s move to reduce the U.S. trade deficit and boost American manufacturing jobs.

Since then, a miffed India has threatened to retaliate, but has put off retaliatory tariffs four times, the most recent postponement now pushing the date to the end of January 2019.

Indian Steel Secretary Binoy Kumar told reporters in late December that India was in talks with the U.S. regarding exemptions to the steel tariffs. Similar relief would also be sought from Canada soon, he also revealed. His remarks came on the heels of demands made by India’s domestic steel industry.

India wants to meet the target of producing 300 million tons of steel by 2030-31, which means an increase in the per-capita demand of steel from the present 69 kg to about 167 kg.

But the Indian Steel and Commerce Ministries do not seem to be seeing eye-to-eye on trade tariffs.

A recent report in the Hindu Businessline said the steel ministry refused to accept any quantitative restrictions on exports of steel and aluminum to the U.S., which made it tough for the Commerce Ministry to ask the U.S. to remove the duties imposed in 2018.

The news report quoted an unnamed government official as saying the U.S. was unwilling to look at options other than the quantitative restrictions on imports at levels it suggested. But since the Indian Steel Ministry was not willing to accept any such restrictions, there could be no forward movement.

One source of apprehension stemming from a tit-for-tat penalty imposition was the potential fallout in diplomatic relations between the two nations.

Government calculations have shown India’s steel exports to the U.S. were down, but not so much with respect to its aluminum exports.

Besides India, the U.S. had imposed the tariffs on Japan, China, South Korea, Mexico and the E.U. members, among others.

India has to also now face a counter levy of import quotas from the European Union, further impacting its exports.

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According to a new U.S. Congressional report, if India were to go on with its retaliatory tariffs against U.S. agricultural products, it would adversely impact American exports to the tune of U.S. $900 million.

Many countries had imposed tariffs on American agricultural products to retaliate against Trump’s metals tariffs.

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This morning in metals news, the U.K.’s steel export levels to the U.S. have come down this year, China’s steel output surged through the first 11 months of the year and 2018 proved to be a down year for a number of commodities, including copper.

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U.K. Steel Exports to the U.S. Down 20%

According to a report by The Daily Mirror, the U.K.’s steel exports to the U.S. have dropped 20% since the U.S. imposed a Section 232 steel tariff.

Like Canada and Mexico, the U.K. — and the E.U. at large — was subject to the tariff after a temporary exemption was allowed to expire.

Chinese Steel Production

Despite winter season cuts, Chinese steel production from January to November rose 8.3% year over year, according to the Hellenic Shipping News.

The winter heating season in the country began mid-November, during which the government mandates production curbs in an effort to mitigate pollution. This year, however, Beijing opted to delegate the cuts to local authorities, as opposed to the previous season’s blanket cuts.

Copper Continues Downward Trend

Dr. Copper has been trending downward since hitting a peak over $7,200/mt in June.

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The metal closed the year on a down note, falling 18% on the Comex, according to Bloomberg.

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This morning in metals news, the U.S., Canada and Mexico formally signed the trade deal that will serve as the successor to the North American Free Trade Agreement (NAFTA), aluminum associations in several countries sent Group of 20 (G20) leaders a joint letter asking them to tackle overcapacity, and President Donald Trump and President Xi Jinping are set to meet this weekend at the G20 summit in Argentina.

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U.S., Canada, Mexico Sign UMSCA

After a Sept. 30 announcement that the U.S., Canada and Mexico had concluded talks on the trade deal —dubbed the United States-Mexico-Canada Agreement (USMCA) — set to replace NAFTA, the parties involved made it official this morning.

Trump, Canadian Prime Minister Justin Trudeau and Mexican President Enrique Peña Nieto, on his last day in office, signed the trade deal this morning during the G20 summit in Buenos Aires, Argentina.

However, despite the signing, dialogue over trade among the three countries is not yet at an end. Mexican and Canadian leaders have indicated they will continue to push for the U.S. to remove its Section 232 steel and aluminum tariffs on the two countries’ metals.

The first round of talks focusing on renegotiation and modernization of NAFTA kicked off in August 2017. The U.S. initially pushed for a resolution by the end of 2017, but the negotiations continued into the new year. Elections in the three countries — including Mexico’s July 1 presidential election — came and went without a deal.

Among the key topics of negotiation were automotive content rules of origin and wages for Mexican workers — in the USMCA, the regional content benchmark jumps to 75% from 62.5%, while also requiring that 40-45% of auto content be produced by workers making at least $16 per hour.

The country’s leaders delivered comments at the USMCA signing ceremony in Buenos Aires, with Trump calling the NAFTA successor the “largest, most significant, modern, and balanced trade agreement in history.”

“All of our countries will benefit greatly,” Trump said. “It is probably the largest trade deal ever made, also. In the United States, the new trade pact will support high-paying manufacturing jobs and promote greater access for American exports across the range of sectors, including our farming, manufacturing, and service industries.”

Trudeau, meanwhile, said the new deal “maintains stability” for Canada’s economy and praised the negotiating teams involved, but was less effusive in his praise of the USMCA than Trump and Peña Nieto.

The Canadian prime minister also reiterated sentiment regarding the removal of the U.S.’s steel and aluminum tariffs.

“As I discussed with President Trump a few days ago, the recent plant closures by General Motors, which affects thousands of Canadian and American workers and their families, are a heavy blow,” he said. “Make no mistake: We will stand up for our workers and fight for their families and their communities.

“And, Donald, it’s all the more reason why we need to keep working to remove the tariffs on steel and aluminum between our countries.”

In addition, Chapter 22 of the USMCA includes provisions on state-owned enterprises (SOEs).

“We have dramatically raised standards for combatting unfair trade practices; confronting massive subsidies for state-owned enterprises; and, currently, if you look at it, currency manipulation that hurt workers in all three of our countries,” Trump said. “The currency manipulation from some countries is so intense, so bad, and it would hurt Mexico, Canada, and the United States badly.”

Aluminum Associations Want Focus on Overcapacity

Aluminum associations from several countries sent a joint letter to G20 leaders asking them to commit to addressing global overcapacity.

“We urge the G20 to again commit to tackling the issue of market-distorting aluminium overcapacity that stems from state interference and puts aluminium producers across the entire value chain at a profound disadvantage,” the letter said. “Free trade is an engine of prosperity, social mobility and peace – but free trade is only possible and meaningful when businesses are able to operate on an equal footing across the globe.”

The letter was signed by the heads of the aluminum associations in the U.S., Europe, Brazil, Japan, Canada and Mexico.

Trump, Xi Meeting Could Be U.S.-China Trade Flashpoint

Sticking with the G20 summit in Argentina, President Trump and President Xi are set to meet at the event, which will continue through tomorrow, Dec. 1.

The U.S. imposed tariffs, at a 10% rate, on $200 billion worth of Chinese goods in September. However, that rate is set to make a sizable jump to 25% as of Jan. 1. The U.S. had previously imposed a total $50 billion in tariffs on Chinese goods.

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Trump has also threatened to impose tariffs on all remaining Chinese imports — approximately $257 billion worth — although no moves have been made yet on that front.

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.

MetalMiner’s Annual Outlook provides 2018 buying strategies for carbon steel

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.