This morning in metals news, Rio Tinto downgraded its 2019 iron ore guidance, India is looking to combat Chinese steel imports with higher duties, and the copper price lost some gains late this week on the back of U.S.-Iran tensions and ahead of the G20 Summit in Japan.
Due to operational challenges, Rio Tinto this week announced it has downgraded its 2019 iron ore guidance down to between 320 million and 330 million tons (from between 333 million and 343 million tons).
“Rio Tinto Iron Ore is currently experiencing mine operational challenges, particularly in the Greater Brockman hub in the Pilbara,” the firm said. “This is resulting in a higher proportion of certain lower grade products, partly to protect the quality of our flagship Pilbara Blend.
“Around 1.5 million tonnes of these products were sold in the first quarter, as noted in the 2019 Quarterly Operations Review, 16 April 2019. Additional sales of these products will be made during 2019.”
Indian Steel Ministry Eyes Higher Steel Duties
The Indian steel ministry is targeting a duty increase on imports of finished steel products, Reuters reported, up to 15% from a range of between 7.5% to 12.5%.
According to the report, the Indian steel ministry cited concerns related to the U.S.-China trade war and resulting diverted supplies of steel away from the U.S. market.
Copper Price Falls
After making gains earlier in the week, the copper price slipped on account of tensions between the U.S. and Iran, Reuters reported.
This morning in metals news, U.S. steel mills churned out steel at a capacity utilization rate of 81.5%, the E.U. officially blocked the proposed joint venture of the European operations of Tata Steel and Thyssenkrupp, and the Aluminum Association is looking for a new CEO.
The U.S. steel sector reached a capacity utilization rate of 81.5% for the year through June 8, the American Iron and Steel Institute (AISI) reported.
Adjusted year-to-date production for that period reached 43.1 million net tons, up 6.0% from the 40.7 million net tons during the same period last year (the capacity utilization rate for that period was 76.7%).
E.U. Blocks Tata, Thyssenkrupp JV
Signs were pointing in a negative direction last month for the fate of the proposed joint venture of Tata Steel and Thyssenkrupp’s European operations.
The E.U.’s competition regulators made it official this week, rejecting the proposed JV.
“Steel is a crucial input for many things we use in our everyday life, such as canned food and cars,” Commissioner Margrethe Vestager said in a release. “Millions of people in Europe work in these sectors and companies depend on competitive steel prices to sell on a global level. Without remedies addressing our serious competition concerns, the merger between Tata Steel and ThyssenKrupp would have resulted in higher prices. So we prohibited the merger to avoid serious harm to European industrial customers and consumers.”
Competition regulators were concerned the merger would raise prices and result in fewer choices for steel consumers in the market, arguing the firms did not make enough concessions to assuage those concerns.
The proposed JV would have yielded the second-largest steelmaking entity in Europe, behind only ArcelorMittal.
Aluminum Association CEO Resigns
The Aluminum Association announced the resignation of President and CEO Heidi Brock, who is leaving the industry group to become president and CEO of the American Forest & Paper Association.
Brock led the Aluminum Association for eight years.
“I am grateful for the outstanding engagement and support I have received from the leadership, members and staff of the Aluminum Association for the past eight years,” Brock said in a release. “Working together, we have contributed to the growth of the U.S. aluminum industry and strengthened the communities in which it operates. It has been a privilege to serve in this role, and I will miss working closely with the exceptional team at the Aluminum Association and the wonderful representatives of our member companies. Given their talent, commitment, and strong industry story, I have every confidence in the Association’s continued success.”
The January import total marked a 20.7% increase from the January 2018 total. Imports were also up 83.3% compared with December 2018.
Finished steel import market share was an estimated 25% in January, according to the report. The 25% steel import market share for January marked a steep increase from December, when it stood at 19% (after four consecutive months at 21%). In 2018, import market share peaked at 29% in April.
By steel product, several posted significant import increases during the first month of 2019 (compared with December 2018):
reinforcing bars (up 241%)
oil country goods (up 148%)
cut lengths plates (up 127%)
structural shapes heavy (up 70%)
line pipe (up 61%)
standard pipe (up 58%)
sheets and strip all other metallic coatings (up 52%)
mechanical tubing (up 45%)
sheets and strip galvanized hot dipped (up 39%)
wire drawn (up 27%)
wire rods (up 27%)
plates in coils (up 23%)
tin plate (up 23%)
hot rolled bars (up 21%)
cold rolled sheets (up 13%)
hot rolled sheets (up 12%)
By country, South Korea was the biggest offshore exporter of steel to the U.S. in January, sending 361,000 net tons (up 298% from the December total).
In other steel news, the U.S.’s Section 232 tariffs on steel and aluminum remain in place vis-a-vis NAFTA partners Canada and Mexico. The tariffs are a sticking point for the Canadian and Mexican governments as the three countries work to push the new iteration of NAFTA, the United States-Mexico-Canada Agreement (USMCA), across the finish line. Some U.S. lawmakers have also called for removal of the tariffs before final approval of the deal.
The executives of the three countries signed the deal late last year during the G20 Summit in Buenos Aires. However, each country’s legislature must ratify the USMCA before it can go into effect.
For domestic businesses seeking to win product exclusions from the tariffs that went into effect March 23, the process has been slow going, to say the least.
Even now, exclusion requests and objections continue to roll in every day.
In June, the Department of Commerce (DOC) announced its first responses to a small percentage of exclusion requests — which then hovered around 20,000 — granting 42 requests (from seven companies), while also denying 56 requests from a total of 11 different companies.
Earlier this summer during a Senate Finance Committee hearing — during which Secretary of Commerce Wilbur Ross testified — committee members offered criticism of the exclusion request process, questioning if the DOC was prepared for the number of requests that have come in.
While some progress has been made since June, the DOC has still produced determinations for a relatively small percentage of the overall requests.
Naturally, with the exclusion request process under fire for its lack of pace, the DOC announced a change last week that it hopes will streamline the process.
According to a DOC release, it has implemented an updated rebuttal system, which is available to “all U.S. businesses which have not received a final determination.”
“The Department of Commerce and the Bureau of Industry and Security have made an unprecedented effort to ensure American businesses are not unduly harmed by Section 232 tariffs,” said Secretary of Commerce Wilbur Ross. “These updates will help perfect the process to ensure a fair hearing for all parties involved.”
“The revisions are informed by the comments received in response to the March 19 rule and the U.S. Department of Commerce’s (referred to henceforth as “the Department”) experience with managing the exclusion and objection process,” the rule document on the Federal Register states. “The Department understands the importance of having a transparent, fair and efficient exclusion and objection process. The publication of today’s rule should make significant improvements in all three respects, but due to the scope of this new process, BIS is publishing today’s rule as an interim final rule with request for comments.”
Per the DOC release, exclusion requesters have seven days to submit a rebuttal. Then, objectors will have seven days to submit a surrebuttal.
“To further assist industry moving through the process, the Department of Commerce is also cataloging the Objection, Rebuttal, and Surrebuttal Identification Number associated with each Exclusion Request,” the DOC release states. “The Aluminum Rebuttal & Surrebuttal Finder and the Steel Rebuttal & Surrebuttal Finder will be uploaded each day at www.commerce.gov/232.”
UPDATED 11:47 AM with Comments from President Trump, Commerce Secretary Wilbur Ross and the American Iron & Steel Institute.
President Donald Trump will sign a directive asking for a speedy probe into whether imports of foreign-made steel are hurting U.S. national security, two administration officials told Reuters on Wednesday.
Trump signed the memorandum related to section 232 of the Trade Expansion Act of 1962 at the White House with leaders of some domestic steel companies, such as U.S. Steel‘s CEO Mario Longhi and SSAB Americas President Chuck Schmitt in attendance. The law allows the president to impose restrictions on imports for reasons of national security. The order would only task the Commerce Department with starting a probe into the imports and if they, indeed, harm national security. Reuters reported that Commerce Secretary Wilbur Ross has already tasked Commerce personnel with starting the probe.
Trump said Ross and Commerce would be back “very, very soon” with recommendations about how to protect the American steel industry. He also repeated campaign trail criticism of the North American Free Trade Agreement and said that farmers in Wisconsin are also suffering from cheap imports of dairy products from Canada.
“Times of crisis call for extraordinary measures. Massive global steel overcapacity has resulted in record levels of dumped and subsidized foreign steel coming into the U.S. and the loss of nearly 14,000 steel jobs,” said Thomas J. Gibson, president and CEO of the American Iron & Steel Institute, the largest trade organization of North American steel producers. “The Administration launching this investigation is an impactful way to help address the serious threat posed by these unfair foreign trade practices, and we applaud this bold action.”
According to Ross, the investigation was “self-initiated” by Commerce and will consider “the domestic production (of steel) needed for the projected national defense requirement” and if domestic industries can meet that requirement. It will also look at “the impact of foreign competition on specific domestic industries and the impact of displacement of domestic product because of foreign imports.”
There are national security implications from imports of steel alloys that are used in products such as the armor plating of ships and require a lot of expertise to create and produce.
The Department of Commerce today announced its affirmative final determinations that steel producers in Austria, Belgium, France, Germany, Italy, Japan, the Republic of Korea (South Korea), and Taiwan are dumping imports of carbon and alloy steel plate in the U.S.
Margins in the dumping investigations ranged from 3.62% to 148.02%, and were, in certain instances, based on adverse findings against non-cooperative responding parties. Commerce also determined that critical circumstances exist in three investigations, allowing for collection of duties for a retroactive period of 90 days before the preliminary determination, spanning back to August 16. Commerce also found that South Korea is providing unfair subsidies to its producers of steel plate at a countervailable duty rate of 4.31%. As a result of these final affirmative determinations, Commerce will instruct Customs and Border Protection to collect cash deposits based on these final rates. Read more
The state-run Global Times newspaper said in a report, referring to India’s decision to award its first bullet train project to Japan, that India needed to have a “sober” look vis-a-vis China when it came to solutions for India’s proposed railway network revamp or its entirely new high-speed rail project.
The high-speed “bullet train” project is likely to commence in 2018 on a 315-mile (508-kilometer) route between Mumbai and Ahmedabad. It’s slated to be completed by 2023.
India has been waging a war against cheap steel imports into the country for some time now, with Chinese steel companies high on their bad guy list. The government imposed taxes in various forms not to protect its own steel industry, but to equalize import prices to production costs. Over 80% of the funding for the project is coming from Japanese investments. Read more
The general outlook at the conference for steel markets in the year ahead was notably optimistic, although each of the initial speakers differed in who and/or what the audience should pay attention to in the coming months and years.
Conference keynote speaker, Herb Black, CEO of American Iron & Metal Company had his eyes on Turkey and its burgeoning scrap market. Timna Tanners, Managing Director of U.S. Metals and Mining at Bank of America Merrill Lynch, encouraged the audience to focus on China, while Beth Ann Bovino, Chief U.S. Economist for S&P Global Ratings, spoke to present macroeconomic conditions with a watchful eye on the current administration and potential post-election policy changes. Read more
For the purpose of an anti-dumping investigation, dumping occurs when a foreign company sells an imported product in the U.S. at less than its fair value.
Commerce found dumping by mandatory respondent, Korvan Ind. Co., Ltd., at a final margin of 3.22%. Additionally, based on the application of adverse facts available, Commerce found that dumping has occurred by mandatory respondents, Fortune Metallurgical Group Co., Ltd. and Woojin Ind. Co., Ltd., at final margins of 54.69%. Commerce assigned a final dumping margin of 3.22% to all other producers/exporters in Korea.
As a result of the final affirmative determination, Commerce will instruct U.S. Customs and Border Protection to collect cash deposits based on these final rates.
The petitioners for this investigation are the Vanadium Producers and Reclaimers Association — a Washington DC-based trade group — and its members: AMG Vanadium LLC of Ohio; Bear Metallurgical Company in Pennsylvania; Gulf Chemical & Metallurgical Corporation of Texas; and Evraz Stratcor, Inc. in Arkansas.
The operating cost of rolling cold-rolled coil from hot-rolled coil is around $30-50 per metric ton depending on how efficient the steel mill is. Internal (or external) logistics cost to shift the coil between the HRC mill and a CRC mill could be as much as $40/mt but a single-site mill won’t have that cost.