Articles in Category: Global Trade

First, some good news. Congress approved a week-long spending measure today, narrowly preventing a government shutdown from occurring tomorrow, which also happens to be President Donald Trump’s 100th day in office. Phew.

And talking about nail-biters, this week kicked off with the first round of French presidential elections. Advancing to the May 7 runoff are independent centrist Emmanuel Macron, who had come out on top with 23.75% of the votes, and controversial far-right candidate Marine Le Pen, who won 21.53%.

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The results “may not have matched Britain’s Brexit referendum of last year or the United States of America’s presidential election of Donald Trump in upsetting the pollsters,” wrote MetalMiner co-founder Stuart Burns, “but it does say a lot about the mind set of French voters all the same.”

Over in the U.S., this week the Trump administration announced plans to slash individual and business income tax rates. The proposal will have businesses, big or small, paying 15% (the current corporate tax is 35%). As for a border adjustment tax on imports, the latest news reports are saying Trump has abandoned the idea. This past week, Jeff Yoders spoke with Americans for Prosperity and Freedom Partners on this very topic of a BAT.

“AFP sees the BAT as very similar to a VAT and [AFP thinks] that its overall impact would be similar,” Yoders wrote. “I, myself, have been known to a be a VAT conscientious objector, as well. I do think, though, that the idea of a BAT, while it certainly has VAT similarities, is intriguing in that it uses the corporate income tax to encourage manufacturing in the U.S.”

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To send off our (erstwhile) colleague Jeff Yoders, let’s end this Week-in-Review with another article from him. This week, he published the final part of an interview with Dean A. Pinkert, former International Trade Commission vice chair, on issues facing metals producers and manufacturers; the Trump administration; and tax policy. Don’t miss it!

The launch of the London Metal Exchange‘s new precious metals contracts will be delayed until July 10, more than a month later than previously announced, it said on Monday.

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The new gold and silver contracts, a mix of daily and monthly contracts designed to enable industrial users to hedge specific dates, were due to go live in early June.

Lighthizer Clears Committee for Confirmation as US Trade Rep

President Donald Trump’s nominee for U.S. trade representative cleared a Senate committee on Tuesday, bringing the administration closely to enacting its full trade policy.

Washington lawyer Robert Lighthizer’s nomination cleared the Senate Finance Committee 26-0. Lighthizer is seen as an ally of the manufacturing industries. The panel also voted to approve a legal waiver for Lighthizer from a 1995 law that prohibits people who did work on behalf of foreign governments from serving as the top U.S. trade negotiator.

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“Bob Lighthizer understands the issues that the U.S. steel industry faces today and we are certain he will make an outstanding United States Trade Representative (USTR),” said Thomas Gibson, president and CEO of the American Iron & Steel Institute, the largest trade group of North American steelmakers. “We thank Senator Hatch and the other members of the Senate Finance Committee for holding an executive session to progress Bob’s nomination. American manufacturers need a qualified USTR and we urge the Senate to promptly confirm Bob Lighthizer.”

Lighthizer’s confirmation now moves on to the full Senate.

Oil prices slipped nearly 1% on Monday, extending last week’s decline, on lack of confirmation that OPEC will extend output cuts until the end of 2017 and as Russia indicated it can lift output if the deal on curbs lapses.

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Russian oil output could climb to its highest rate in 30 years if the Organization of the Petroleum Exporting Countries and non-OPEC producers do not extend a six-month supply reduction deal beyond June 30, according to comments by Russian officials and details of investment plans released by oil companies.

Freeport Gets Copper Export License

Freeport-McMoran Inc. has secured a permit to resume copper exports from Indonesia on Friday after a hiatus of more than three months, hours after a state visit by U.S. Vice President Mike Pence, who discussed the copper miner’s dispute with Jakarta.

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Indonesia’s trade ministry issued Freeport with a permit to export 1.1 million metric tons of copper concentrate up to February next year, although it was unclear how long shipments would last.

France’s first round presidential run off may not have matched Britain’s Brexit referendum of last year or the United States of America’s presidential election of Donald Trump in upsetting the pollsters, but it does say a lot about the mind set of French voters all the same.

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Novice centrist candidate Emmanuel Macron and Far Right leader Marine Le Pen advanced to the second round presidential run-off on Sunday and in the process achieved a historic wipe out of the two principal political parties that have traded power in France since World War II.

Neither Benoit Hamon of the Socialists, whose popularity had dwindled to single figures under the bungling of outgoing president Francois Hollande, nor the centre-right candidate — Francois Fillon, a former front runner — came close to challenging the two eventual victors. France has clearly had enough of the established order and much like Britain almost exactly 20 years ago cho0sing a young and charismatic Tony Blair,  the new favorite Macron is young, dynamic, charismatic and unquestionably clever. Read more

Dean A. Pinkert is a partner in Hughes Hubbard’s International Trade practice. He is a former Commissioner of the U.S. International Trade Commission. Pinkert was nominated by President Bush and confirmed by the Senate in 2007, and was designated Vice Chairman by President Obama in 2014.

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As a commissioner, Pinkert participated in numerous anti-dumping, countervailing duty, and safeguard investigations, including the special safeguard investigation of passenger tires that resulted in import relief for the domestic tire industry and was upheld by the World Trade Organization. He participated in an unprecedented number of final determinations in Section 337 investigations during his tenure, notably dissenting in an electronic devices case that went to President for policy review. President Obama, relying on many of the factors cited in the dissent, overruled the commission for the first time since 1987.

Dean Pinkert

Former ITC Vice Chair A. Dean Pinkert. Source: Hughes Hubbard.

Pinkert spoke with MetalMiner Editor Jeff Yoders by phone about several issues facing metals producers and manufacturers, including global steel and aluminum overcapacity and how the new Trump administration can approach trade and overcapacity issues. This is the final post in our three-part series that covers border-adjustment and tax policy.

JY: The reason you might want to avoid a VAT is that it would apply to all transactions, right? It would be on individuals and not companies.

DP: Think of it as the difference between a sales tax in the United States and an income tax. They are completely different. A VAT is essentially a national sales tax. We have sales taxes but the issue we’re talking about is the corporate income tax. If the U.S. adopted a VAT it would be a huge change so the idea here is to stay within the corporate income tax concept, but make some tweaks so that U.S. companies aren’t disadvantaged relative to foreign companies. Because we’re not talking about a VAT, though, you might get a different outcome at the World Trade Organization when it’s challenged by another country.

A VAT would be a big change. We are getting into some areas of policy that I’m not an expert on here, but there are all sorts of other issues that go way beyond the issue, but from a trade perspective the idea of a border adjustment is supposed to neutralize the advantage that VAT tax countries might have in international trade. The WTO may come to the conclusion that, even though a border-adjustment does have some features of a VAT, it’s still not acceptable because it might be viewed as an export subsidy. Read more

This week, President Donald Trump and the Department of Commerce used executive orders, new anti-dumping investigations, memoranda invoking national security concerns and other executive branch tools to get tough on foreign steel imports.

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Although Trump or Commerce Secretary Wilbur Ross never overtly stated it, the target is clearly China and the global steel overcapacity that it’s the main culprit in creating. China’s steel exports hit a record 112.4 million metric tons in 2015, then dropped slightly to 108.49 mmt last year, as Chinese mills have been chastened by threats of a trade dispute.

Fre trade

The Trump administration is using every tool in the box on steel overcapacity. Source: Adobe Stock/Argus.

To date, the Global Forum on Steel Overcapacity hasn’t caused overcapacity to come down very much. Can a section 232 investigation or other U.S.-only actions change that? The U.S. steel industry certainly seems to think so. Or it’s at least saying, “why not try?”

Steelmaker executives such as U.S. Steel CEO Mario Longhi and SSAB Americas President Chuck Schmitt flanked Trump and Ross at the memorandum-signing ceremony calling for the Section 232 investigation yesterday. The praise was universal from steel producers as one might expect, too. Still, Trump’s latest salvo on trade will renew concerns that China may retaliate.

China’s Foreign Ministry spokesman Lu Kang said today the country needed to ascertain the direction of any U.S. investigation before it could make a judgment. There’s also the fact that Trump now claims that he and Chinese President Xi Jinping are the best of friends.

Chinese steel executives also repeated their mantra that overcapacity is not just China’s problem and it needs global coordination to resolve it, but also said it would be tough to rein in the sector.

“The Chinese government will not set export limits for the steel mills and could not keep track of every mill,” Li Xinchuang, vice chairman of the China Iron and Steel Association, told Reuters.

What may be more effective is rising steel prices in China and what looks more and more like a very real crackdown on pollution and dirty air in China. An early-year surge in Chinese steel prices has lifted the prices of its export products and China has lost its competitiveness with other markets. With coking coal prices increasing, Chinese steel prices could increase even more, which our Lead Forecasting Analyst, Raul de Frutos, pointed out this week.

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On a personal note, this will be my last MetalMiner week-in-review. I have thoroughly enjoyed informing all of you wonderful readers and site users about the latest developments in metals markets these last three years. Thank you for taking advantage of our services. It has been an honor.

 

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.

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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.

Think of Indian automotive manufacturing and you may think of a Japanese auto parts hub for the southeast Asia region, like Thailand only less successful. Or, you may think of failed projects like the home grown Tata Nano, but one sector that has been a rip roaring success story is motorcycles.

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According to the Financial Times, more than 16 million motorcycles and scooters were sold in India during the 2016 financial year, far more than in any other country and nearly six times the number of passenger cars sold. For many people, the motorcycle is their first and often only form of motorized transportation.

It’s a motorcycle or nothing. A car is still too much of a financial stretch for millions. So, a strong home market is to be expected but it is the growth of domestic brands and manufacturers that is the most encouraging. Those same manufacturers have been far more successful than their automotive peers in export markets. Indian motorcycle exports in that same 2016 period reached 2.5 million, up from 1.5 million five years before.

Venu Srinivasan, chairman of TVS, a particularly innovative and successful Chennai-based manufacturer, is quoted by the FT as saying “We’re hoping that within the next three years, exports should be 35 to 40% of our sales,” up from 20% today.

Image courtesy of www.bikepanthi.com.

Siddartha Lal — chairman of Eicher Motors, owner of motorbike producer Royal Enfield — has overseen the opening of showrooms in London, Paris and Madrid, hoping to capitalize on the retro appeal of the world’s oldest surviving motorcycle brand. The first Royal Enfield motorcycle was made in the U.K. in 1901, and while production in the U.K. ceased in 1970, it thankfully continued at the company’s Indian joint venture.

Royal Enfield image courtesy of www.motorivista.com.

Royal Enfield’s international ambitions have been fueled by surging sales at home of its relatively expensive (by Indian standards) bikes. The popular Classic 350 retails for about $2,000 (Rs130,000), compared with the even-less-expensive Hero Motocorp Splendor, the Indian market leader. Royal Enfield sold 60,113 motorcycles last month, compared with fewer than 52,000 in the whole of 2009. As the technology used in Royal Enfields improves, particularly the reliability of the electric motorcycles, the iconic brand is appealing to retro buyers in mature markets looking for something different, as much as poorer buyers looking for a rugged if simple motorcycle.

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But the TVS range is appealing to an altogether different buyer. Price is key, but in order to compete with its more sophisticated Japanese competitors, such as Honda Motor Co. and Yamaha, in its home market TVS has invested heavily in product development, outsourcing design to the U.K. and made extensive use of robots on the production line. Even BMW has outsourced production to TVS for motorcycles to be sold under the BMW brand in Europe. That’s confirmation, if any was required, that motorcycles are becoming one of an increasing number of industries in which India is making its mark as a global, not just domestic, player.

The Department of Commerce started investigations of imports of carbon and alloy steel wire rod from Belarus, Italy, South Korea, Russia, South Africa, Spain, Turkey, Ukraine, the United Arab Emirates, and the United Kingdom, and companion countervailing duty investigations of imports of carbon and alloy steel wire rod from Italy and Turkey. The investigations cover hot-rolled products of carbon and alloy steel.

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The alleged dumping margins range from 18.89% (Italy) to 756.93% (Russia) and both of the alleged countervailing subsidies are above de minimis (less than 2%). The U.S. International Trade Commission is scheduled to make its preliminary injury determinations on or before May 12, 2017.

The petitioners are Gerdau Ameristeel US Inc. in Florida, Nucor Corporation based in North Carolina, Keystone Consolidated Industries of Texas, and Charter Steel in Wisconsin.

India’s renewable energy sector just got bigger thanks to an investment from U.K.-owned CDC Group  of up to $100 million to support renewable energy projects.

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The announcement was made by the U.K.’s Secretary of State for Business, Energy and Industry Strategy Greg Clark at the inaugural India-U.K. Energy for Growth Dialogue in New Delhi on April 6. He also met with India’s Minister for Power, New & Renewable Energy, Coal and Mines, Piyush Goyal, to talk about large-scale, private sector investments between the two countries in the area of energy.

The two ministers agreed that on the power and renewables front, the focus will be on the introduction of performance-improving smart technologies, energy efficiency and accelerating the deployment of renewable energy.

For some time now, CDC Group Plc, the U.K. government’s development finance institution, has made its known that it seeks to set up its own renewable energy platform focused on the eastern part of India, and even neighboring countries such as Bangladesh.

The finance institution is contemplating leveraging its experience in running Globeleq Africa, a company in which it acquired a majority stake in 2015, for green energy investments in Asia. Globeleq has a 1,200-megawatt gren power generation capacity spread across Côte d’Ivoire, Cameroon, Kenya, South Africa and Tanzania.

As reported by MetalMiner, India aims to generate over half of its electricity through renewable and nuclear energy by 2027. The world’s largest democracy published a draft 10-year national electricity plan in December, which said it aimed to generate 275 gigawatts of renewable energy, and about 85 gw of other non-fossil fuel power such as nuclear energy, by the next decade. This would make up 57% of the country’s total electricity capacity by 2027, more than meeting its commitment to the Paris Agreement of generating 40% of its power through non-fossil fuel means by 2030.

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India has been taking massive forward strides in the renewable energy sector. Already, as per one estimate, it is set to overtake Japan as the world’s third-largest solar power market in 2017.  Taiwanese research firm EnergyTrend predicted that the global solar photovoltaic demand was expected to remain stable at 74 gw in 2017, with the Indian market experiencing sustained growth. The country was expected to add 14% to the global solar photovoltaic demand, the equivalent of the addition of 90 gw over the next five years.