Articles in Category: Global Trade

This morning in metals news: the United Steelworkers union this week announced it had reached a tentative deal with Allegheny Technologies Inc. (ATI) to end a three-month strike; meanwhile, Ford China’s sales rose by 24% in the first half of the year; and, lastly, the U.S. and Mexico announced a course of remediation under the United States-Mexico-Canada Agreement (USMCA) Rapid Response Labor Mechanism.

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USW announces tentative deal to end ATI strike

strike

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The United Steelworkers union in late March announced a strike at nine ATI facilities, citing “unfair labor practices.”

About three months later, that strike appears to be at an end.

The union this week announced it had reached a tentative deal on a four-year contract with ATI to end the labor stoppage.

“Broadly, the proposed agreement provides lump sum payments, meaningful wage increases and maintains a premium-free health insurance plan for union members without establishing a permanent lower tier of benefits for new hires,” the USW said in a release earlier this month.

“If the proposed agreement is ratified, the recall process would begin immediately, and USW members are expected to return to work shortly after the ratification process is complete.”

Ford China touts sales rise

Ford China reported its first-half sales jumped by 24%.

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In one of its first tests as a free trading global economy after Brexit, Britain achieved a middling mark this past week.

Brexit

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Trade minister Liz Truss accepted its independent, newly established Trade Remedies Authority recommendation to scrap some quotas on imports that had been carried over from the European Union in 2019 prior to Brexit.

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Brexit Britain scrap import quotas

The rules set quotas on some 19 steels whereby a 25% anti dumping tariff is applied if imports exceed pre set quarterly quotas.

Detail have been sparse, however, on what is included and what isn’t.

However, a UK government website lists what remains under the quota and what is to be revoked.

The list includes extensions for: non-alloy and other alloy hot rolled sheets and strips; non-alloy and other cold rolled sheets; metallic coated sheets; organic coated sheets; and tin mill products.

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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.

This week, we touched on the USMCA (which turned 1 on Thursday), Stuart Burns covered the relationship between inventory levels and metals demand, and much more.

On the USMCA — which went into effect July 1, 2020, almost four years after NAFTA talks began — United States Trade Representative Katherine Tai offered some comments this week on the occasion.

“We should also celebrate the USMCA because of what it represents: a renewed commitment by our three countries to pursue negotiations that raise standards and create a race to the top,” she said.

Furthermore, USMCA trade ministers will meet in Mexico City on July 7 to commemorate the one-year anniversary of the trade agreement.

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Week of June 28-July 2 (USMCA, metal stock levels and more)

USMCA

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  • The global lead and zinc markets were in surplus through the first four months of 2021, the International Lead and Zinc Study Group said.
  • Meanwhile, GDP rose in all 50 states in the first quarter, the Bureau of Economic Analysis (BEA) reported.
  • In addition, Stuart Burns covered Russia’s plans to impose export taxes on key metals.
  • U.S. steel capacity utilization for the week ending June 26 reached 82.7%, the American Iron and Steel Institute reported.
  • The U.S. Court of International Trade made a ruling affirming duty levels set by the Department of Commerce with respect to heavy walled rectangular steel pipes and tubes from Korea.
  • Burns on the loss of support for the zinc price.
  • The E.U. voted to extend steel safeguards, originally imposed in 2018, for an additional three years.
  • The USMCA Labor Council convened for the first time, pursuant to the 1-year-old agreement’s chapter on labor.
  • Think stock levels are a reliable indicator of true metals demand? Think again.
  • Norsk Hydro has signed a letter of intent to build an aluminum recycling plant in Michigan.
  • Meanwhile, the United States-Mexico-Canada Agreement, or USMCA, hit the one-year mark this Thursday.
  • The U.S. goods and services deficit rose in May from the previous month.
  • Lastly, for subscribers, the MetalMiner Monthly Outlook for July is now available.

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This morning in metals news: the U.S. goods and services deficit rose by $2.2 billion in May; meanwhile, new orders for manufactured goods rose in May; and, lastly, Ford Motor Co. released its June sales results.

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US goods and services deficit increases in May

U.S. trade

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The U.S. goods and services deficit rose by $2.2 billion in May to $71.2 billion, the Census Bureau reported.

The deficit increased from $69.1 billion the previous month.

Furthermore, May exports reached $206.0 billion, or up $1.3 billion from the previous month. Meanwhile, May imports reached $277.3 billion, or up $3.5 billion.

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Back on July 1, 2020, the United States-Mexico-Canada Agreement (USMCA) went into effect.

The deal, reached during the Trump administration, began with negotiations aimed at the modernization of the 1994 North American Free Trade Agreement (NAFTA). Those negotiations kicked off in August 2017.

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A year on: USTR remarks on USMCA

USMCA

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Fast forward a year after the USMCA went into effect July 1, 2020, and United States Trade Representative Katherine Tai offered remarks on the trade deal.

“For years, there was broad consensus that the NAFTA needed to be updated and remedied to meet the needs of the 21st century and correct for flaws and breakdowns in the agreement that developed over time,” Tai said. “That view was shared by the business community, labor unions, and Members of Congress from both parties.

“The USMCA as originally negotiated made some important strides towards achieving the goals of updating and remedying the NAFTA, but still fell short of the standards required to win Congressional support. Only with close partnership with businesses and labor organizations, and after a most unlikely ‘collaboration’ between congressional Democrats and the Trump Administration, did the re-negotiated USMCA emerge as a better deal for workers and a new model for trade agreements able to secure a broad base of support.”

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This morning in metals news: as laid out in the United States-Mexico-Canada Agreement (USMCA), the USMCA Labor Council convened for the first time; meanwhile, the Energy Information Administration reported on potential electricity disruptions this summer; and, lastly, Rio Tinto declared force majeure at one of its operations.

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USMCA Labor Council convenes

USMCA

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Approval of the United States-Mexico-Canada Agreement (USMCA) included a provision for the formation of a Labor Council.

“The Parties hereby establish a Labor Council composed of senior governmental representatives at the ministerial or other level from trade and labor ministries, as designated by each Party,” the USMCA text states in Article 23.14.

Furthermore, the parties were scheduled to convene the Labor Council no later than one year after the agreement went into force (which it did July 1, 2020).

“Developing a worker-centered trade policy involves giving workers a seat at the table and utilizing all of our tools to ensure that trade agreements are more than just words on paper,” Acting Assistant U.S. Trade Representative Joshua Kagan said in a USTR statement Wednesday. “This first meeting of the USMCA Labor Council, including the public session, demonstrates our collaboration with Mexico and Canada to achieve shared goals and our commitment to holding each other accountable to the agreement.”

In a joint statement, the parties said they discussed “ongoing implementation of Mexico’s recent historic labor law reform.” In addition, the joint statement said the parties covered:

  • The agreement’s requirement that each party prohibit the importation of goods into its territory from other sources produced in whole or in part by forced or compulsory labor
  • Key labor policies for migrant workers
  • Areas for ongoing and future cooperation and technical capacity building

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The metals markets received a jolt late last week with the news that Russia is considering applying export tariffs to steel, aluminium, copper, nickel and ferro alloys from this August through to at least the end of the year in order to ease metal supply and prices for domestic consumers.

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Russia metals tariffs to cover copper, aluminum, nickel and others

tariff

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According to Bloomberg, the plans include a base duty rate across all products covered by the duties of 15%. However, it includes a specific minimum tariff for each metal, varying from $1,226 a ton for copper, $2,321 for nickel and $254 for primary aluminum. In addition, each steel grade would incur its own rate, starting with HRC at $115 per ton.

As Bloomberg states, the taxes could have far-reaching implications for global metals markets.

That is particularly true at a time of tight supply for products such as aluminum.

Rusal controls about 10% of the global aluminium sector. Meanwhile, Norilsk Nickel produces about 20% of the world’s nickel. Russia is the third-biggest steel exporter, with most sales going to Europe.

Just under 10% of the European market is serviced by primary aluminum imports from Russia. Europe is not alone, either. The U.S. and consumers in the Far East all receive primary aluminum supplies. Therefore, the tariff will have an impact on physical delivery premiums in the U.S., Europe and Japan.

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Global crude steel production in May rose by 16.5% compared with May 2020, the World Steel Association reported this week.

However, the gain marked a drop from the 23.4% year-over-year surge in April. In addition, as Stuart Burns noted yesterday, May output fell by 0.4% compared with April.

Production jumped to 174.4 million metric tons in May.

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China’s steel production surges

Steel production

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Top steel producer China churned out 99.5 million tons of crude steel in May.

China’s steel production continues to rise, despite production curbing efforts in the steelmaking hub of Tangshan.

However, earlier this month, Reuters reported the city of Tangshan might ease production restrictions.

In other steel-related news out of China, the country has filed a WTO complaint against Australia.

“China on Thursday lodged a dispute case under the World Trade Organization (WTO) dispute settlement mechanism over Australia’s anti-dumping and anti-subsidy measures against some Chinese imports, the country’s commerce ministry said,” state-run news agency Xinhua said today.

“The dispute involves Australian trade measures imposed or extended on imports of railway wheels, wind towers and stainless steel sinks from China in 2019 and 2020, the ministry said.

“China opposes abusing trade measures as it not only harms the legitimate rights of Chinese companies but also undermines the solemnity and authority of WTO rules, said Gao Feng, a spokesperson with the ministry.”

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The steel market is running two diverging narratives.

In the U.S., the market remains extremely tight. Mill lead times are out to the end of this year. Furthermore, prices are set to stay high into 2022.

The situation is not dissimilar in Europe. In Europe, the steel market is seeing a similar post-pandemic bounceback, supply chain restocking and constraints, like the U.S., by tariffs on imported material.

But in the rest of the world, global steel production seems to be slowing. Raw material prices — iron ore, in particular — are easing.

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Steel market narrative outside of US, Europe

China steel production

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According to Capital Economics, global daily steel production in May came in somewhat lower than April, as output in China dipped.

The World Steel Association reported global steel production rose by an impressive 16.5% year over year in May. However, this is against a 2020 reference point during which many countries were only starting to emerge from national lockdowns in May 2020.

But looking at the month-over-month growth rate, daily global steel output fell by 0.4% in May. That followed a 3.5% rise in April.

At the same time, Beijing’s combination of dire warnings about manipulative speculative pricing, restrictions on credit for construction and pressure on polluting industries to reduce emissions have combined to cause a sharp correction on the previously buoyant iron ore price, down 9% on the Dalian exchange to $173/ton this week.

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This morning in metals news: the U.S. Court of International Trade granted defendants’ motion for partial dismissal of a challenge to the U.S.’s Section 232 duties on Canadian steel; the Midwest is the heart of U.S. wind capacity; and, lastly, U.S. Steel released its second-quarter guidance.

Each month, MetalMiner hosts a webinar on a specific metals topic. Explore the upcoming webinars — including the next one scheduled for Thursday, June 24 — and sign up for each on the MetalMiner Events page.

Court of International Trade rejects Section 232 challenge

U.S. trade

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The U.S. Court of International Trade on Tuesday rejected a challenge to the Section 232 duties on Canadian steel.

Maple Leaf Marketing, based in Midland, Texas, filed the complaint. The company is the U.S. agent for EndurAlloy™ production tubing for Calgary-based Endurance Technologies Inc.

Maple Leaf challenged the “constitutionality and lawfulness of duties imposed on re-imported steel tubing” pursuant to Section 232. 

Midwest wind

Since 2011, most U.S. wind capacity has been built in the Midwest, the Energy Information Administration reported.

“The Texas, Midwest, and Central regions—home to some of the country’s most prolific wind resources—combined accounted for the largest share of U.S. wind capacity growth from 2011 to 2020 with 73% of additions,” the EIA reported. “At the beginning of 2011, the Texas region (which covers the area served by ERCOT) had 9.4 GW of wind capacity; by the end of 2020, capacity had grown to 27.9 GW.”

Furthermore, Midwest wind capacity tripled, from 8.6 GW in 2011 to 26.9 GW in 2020.

Meanwhile, in 2011, the Central region had about half the wind capacity of the Texas and Midwest regions, the EIA added. The Central region added 20.5 GW of wind capacity over the last decade, more than any other region.

U.S. Steel releases Q2 guidance

U.S. Steel released its Q2 guidance, estimating adjusted EBITDA of $1.2 billion.

In addition, the steelmaker projected net income of $880 million.

“Higher steel prices and strong flat-rolled steel demand coupled with well-run operations are expected to deliver adjusted EBITDA that more than doubles our first quarter performance,” U. S. Steel President and CEO David B. Burritt said. “Continued strong demand and low steel inventories are empowering today’s ongoing market improvements. These market fundamentals are showing no signs of slowing down and have us increasingly confident of another strong year in 2022.”

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