Articles in Category: Global Trade

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This morning in metals news, Credit Suisse has downgraded the outlook for the U.S. steel sector, a Turkish steel company CEO is optimistic the U.S. will roll back the recently doubled Section 232 metals tariffs and Brazilian miner Vale posted record Q3 iron ore output.

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Credit Suisse Downgrades U.S.’s Steel Sector

Citing oversupply, Credit Suisse downgraded its rating of the U.S. steel sector, Reuters reported.

According to the report, Credit Suisse downgraded the sector’s rating from “overweight” to “market weight.”

Turkish CEO Optimistic on Rollback of Doubled Section 232 Tariffs

Earlier this year, the U.S. doubled its Section 232 metals tariffs vis-a-vis Turkey, bringing them to 50% and 20% for steel and aluminum, respectively.

But one CEO of a Turkish steel firm is hopeful the tariffs will return to their original levels this week.

Ugur Dalbeler, CEO of Colakoglu Metalurji, said he was hopeful the decision would come down this week, according to S&P Global Platts.

Vale Posts Record Q3 for Iron Ore Production

It was a productive third quarter for the Brazilian miner’s iron ore operations.

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According to a Reuters report, Vale reported its iron ore output jumped 10.3% in the quarter compared to the previous year.


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:

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  • Many are hoping for a return to a heavy mining presence in the Indian state of Goa.
  • Could we be 0n the brink of a new Cold War?
  • Norsk Hydro announced plans to restart its Alunorte alumina refinery, capping a topsy-turvy week for the aluminum price.
  • Razor blade maker Gillette received a positive response to its tariff exclusion request and Century Aluminum signed a new power contract that will see to its Charleston plant remaining open through at least 2020.
  • The Chinese city of Tangshan ordered steel mills to curb production over the next week, Novelis broke ground on an automotive aluminum plant in China and AK Steel won a $1.2 million award from the Department of Energy to help conduct research on lightweight steel for automotive use.
  • In case you missed it, we concluded this month’s round of Monthly Metals Index (MMI) reports this week, with coverage on:
  • The London Metal Exchange is introducing new contracts amid competition from the CME and SHFE.

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A new Cold War — does that sound ridiculous? Does it sound alarmist?

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It would have been a month or more back, but today it is a plausible statement.

A post by Edward Luce in the Financial Times refers to a Bloomberg expose reporting on how China’s People’s Liberation Army has installed secret micro-chips on motherboards that were used to operate big corporate data servers, giving them unprecedented access to American military and technology secrets on an epic scale.

The microchips are said to be smaller than a grain of rice and thinner than the tip of a sharpened pencil, yet could provide backdoor access into the most secret of American technology. We quote Luce when we say, according to Bloomberg, China may have infiltrated U.S. military hardware, including drones, fighter jets, and so on.

It must be said, major retail hardware providers like Apple vehemently denied the existence of such malicious chips, but Bloomberg’s investigation has been going on for three years and begs the old saying — no smoke without fire.

The investigation apparently is still ongoing. But the consequences, coming on top of an escalating trade war and recent military skirmishes in the South China Sea, herald a new superpower rivalry.

There may be some who scoff at the suggestion that China could rival the U.S. as a superpower, but that is to misunderstand the trajectory of history.

China is on the rise, faster in terms of technology than it is even economically.

Take these secret microchips. As Luce points out, the creation and clandestine inclusion of such sophisticated technology is so hard to pull off that it was likened by a professional hacker to getting a unicorn to jump over a rainbow. It would take years, the article suggests and the deepest knowledge of how to manipulate the most cutting-edge technology across the global supply chain, for China to do this — yet, it did.

Roughly 75% of U.S. smartphones and 90% of semiconductors are made in China; it is safe to bet that domination is set to decline, but it can’t happen overnight.

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In a heated and politically charged scenario, it is not unrealistic to think government will mandate or reward firms that reshore technologically sensitive supply chains, with profound implications for what has become a hugely interdependent world.

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This morning in metals news, the U.S. and Canada have reached a deal on the North American Free Trade Agreement (NAFTA) after several weeks of talks, Secretary of Commerce Wilbur Ross said the steel and aluminum tariffs on Canada and Mexico will remain in place, and copper prices are down on account of perceived drops in Chinese demand.

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Just in Time

In before a Washington-imposed deadline, Canada and the U.S. reached a deal on NAFTA late Sunday, which would keep the deal a trilateral arrangement (the U.S. and Mexico reached a preliminary agreement in August). The new deal is being called the United States-Mexico-Canada Agreement (USMCA).

“Late last night, our deadline, we reached a wonderful new Trade Deal with Canada, to be added into the deal already reached with Mexico,” President Donald Trump tweeted. “The new name will be The United States Mexico Canada Agreement, or USMCA. It is a great deal for all three countries, solves the many … deficiencies and mistakes in NAFTA, greatly opens markets to our Farmers and Manufacturers, reduces Trade Barriers to the U.S. and will bring all three Great Nations together in competition with the rest of the world. The USMCA is a historic transaction!”

United States Trade Representative Robert Lighthizer and Canadian Foreign Affairs Minister Chrystia Freeland released a joint statement on the deal.

“Today, Canada and the United States reached an agreement, alongside Mexico, on a new, modernized trade agreement for the 21st Century: the United States-Mexico-Canada Agreement (USMCA). USMCA will give our workers, farmers, ranchers and businesses a high-standard trade agreement that will result in freer markets, fairer trade and robust economic growth in our region.  It will strengthen the middle class, and create good, well-paying jobs and new opportunities for the nearly half billion people who call North America home.

“We look forward to further deepening our close economic ties when this new agreement enters into force.

“We would like to thank Mexican Economy Secretary Ildefonso Guajardo for his close collaboration over the past 13 months.”

Among the hangups for the U.S. in talks with Canada were dairy tariffs; however, the deal offers good news for U.S. dairy farmers, as it gives the U.S. greater access to the Canadian market.

Metals Tariffs Staying in Place

Even after the U.S. and Mexico reached their preliminary deal in August, questions remained regarding the U.S.’s Section 232 metals tariffs and whether they would remain in place with respect to Mexico (and Canada).

According to Secretary of Commerce Wilbur Ross, the new NAFTA — or USMCA, as it’s being called — will not result in the removal of the tariffs. Canada and Mexico initially had temporary exemptions to the steel and aluminum tariffs, but the exemptions were eventually allowed to expire June 1.

“There are problems specific to steel and aluminum relating to our national defense, and at this point of time, those stay the same,” Ross told Fox Business Network, as quoted by MarketWatch.

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Copper Slides on China Demand

Copper prices dropped on some not-so-positive news regarding Chinese demand, Reuters reported.

MetalMiner’s Take: A stream of bearish news out of China is having its impact on commodity prices.

For example, copper has shown weakness despite evidence from falling LME inventory that demand outside China remains firm.

Through the first five months of this year, China’s fixed-asset investment — a core driver of Chinese growth that includes spending on new buildings, machinery and infrastructure — grew at its slowest annual pace since at least 1995. Retail sales, an indicator of consumer demand, also increased at their slowest pace since 2003.

Investors are taking multiple data points indicating weakening demand and extrapolating slowing copper demand in the world’s largest consumer. Whether they are right depends in large part on the outcome of the current trade war with the U.S., to which an early resolution seems unlikely.

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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:

Need buying strategies for steel? Request your two-month free trial of MetalMiner’s Outlook

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Trade friction between the U.S. and China have continued apace, with the U.S. imposing an additional round of tariffs worth $200 billion and China responding with $60 billion in tariffs on U.S. goods.

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Despite attempts at dialogue, tensions have only increased throughout the year, as the U.S. has now imposed a total of $250 billion in tariffs on Chinese products. The most recent round imposes a 10% tariff on 5,745 tariff lines, with the rate increasing to 25% as of Jan. 1, 2019, according to the United States Trade Representative’s office.

Unsurprisingly, the rhetoric surrounding the issue has intensified, too.

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Overcapacity was the word of the day at the Global Forum on Steel Excess Capacity last week.

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The forum, which took place Sept. 20 in Paris, brought together the world’s biggest steel-producing nations.

“The global challenge of overcapacity has strained trade relations and the global trade architecture to its breaking point,” E.U. Trade Commissioner Cecilia Malmström said. “Progress in this Forum at this sensitive time demonstrates that multilateral cooperation is not only possible, but that it is actually the best tool to tackle global challenges. Putting this agreed package in place is something that the European Union will now follow closely. Our workforce and our industry depend on these commitments being carried out.”

Vice-President for Jobs, Growth, Investment and Competitiveness Jyrki Katainen added: “This sends a clear message: we will not repeat the costly mistakes of the past, and must tackle excess capacity and its root causes to avoid dire social, economic, trade and political consequences in the future. This will protect growth and jobs in an efficient, sustainable EU steel industry. A lot of work lies ahead though and all members of the Global Forum will have to continue implementing their commitments resolutely and report to G20 Leaders.”

The Paris meeting built on last year’s meeting in Berlin, during which members agreed to embark on a package of reforms to address global steel overcapacity.

According to the European Commission statement, the members will assess subsides contributing to overcapacity by the end of the year and “identify further reductions to be taken” in 2019.

In other steel news, the European Commission statement refers to the U.S.’s Section 232 tariffs, which impact steel and aluminum, calling them “unjustified.”

While a select few countries have negotiated exemptions and quotas with respect to the tariffs, the E.U. remains subject to the tariffs.

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“The Commission has acted among others through trade defence, imposing antidumping and anti-subsidy duties, to shield the EU’s steel industry from the effects of unfair trade,” the release stated. “The EU currently has an unprecedented number of trade defence measures in place targeting unfair imports of steel products, with a total of 53 anti-dumping and anti-subsidy measures. The EU has also activated all legal and political tools at its disposal to fight unjustified US 232 measures.”

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This morning in metals news, copper prices approached a 10-week high, trade tensions continue to rise between the U.S. and China, and an Australian coal miner boasts a $4.4 billion IPO.

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Copper Prices Hover Near 10-Week High

Even with trade tensions weighing on markets, copper prices reached nearly a 10-week high, according to Reuters, despite dropping on Monday.

The U.S. recently announced a new batch of tariffs on Chinese goods amounting to $200 billion, while China responded with $60 billion in tariffs on U.S. goods.

China Says U.S. is Acting Like a Trade Bully

As trade tensions took a big leap forward in recent weeks, China has accused the U.S. of trade bullying, according to a BBC report.

The U.S.’s $200 billion in tariffs and China’s retaliatory $60 billion in tariffs went into effect today.

Coal Miner Has $4.4B IPO

An Australian coal miner, Coronado Coal, boasted a $4.4 billion IPO listing, the highest since the mining boom, according to The Sydney Morning Herald.

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The company expects earnings before interest, taxes, depreciation and amortization (EBITDA) of $578 million for 2018, according to the report.

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Well, that didn’t go very well, did it?

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After a couple of weeks scurrying around European capitals and intense lobbying directly to E.U. leaders, Britain’s Prime Minster Theresa May received short shrift at an E.U. conference in Salzburg, Austria last week.

May sacrificed a lot internally in the run-up to the conference. She faced intense opposition from her own hard right against her so called Chequers plan (termed thus because it was presented at the prime minister’s grace-and-favor residence Chequers in the summer), she lost two cabinet colleagues who resigned over it and has faced opposition from just about everyone, inside her party and out.

May had hoped it would form the basis of a negotiated exit agreement encompassing a free trade deal on goods but not services, plus much more with the E.U.

The E.U., meanwhile, has problems of its own — granting the U.K. any kind of conciliatory deal would make matters much worse.

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By now, much has been written on U.S. trade tariffs, the latest being the 10% tariff on Chinese imports amounting to a value of $200 billion. While almost all the countries against whom the U.S. has imposed tariffs have chosen to retaliate and go in for a tit-for-tat policy, India, curiously, has decided to be cautious.

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MetalMiner has followed this story over the last few months. As late as August, we reported that for the second time, India deferred imposing a tit-for-tat duty on the import of over two dozen products from India, including certain flat-rolled stainless steel products. It was supposed to come into effect Aug. 8, but now the new date is Sept. 18.

Sept 18’s come & gone, and it is now being reported that the Indian government has postponed its decision yet again.

A report by Live Mint said India would not be imposing a “revenge tax” against 29 American products worth U.S. $235 million to oppose the move by the U.S. to raise import duties on Indian steel and aluminum.

The Live Mint report quoted a “person with knowledge of the development” as saying the two nations were engaged in arriving at a negotiated solution on the issue.

So when’s the next date? Nov. 3.

It was on June 20 that India had said it would raise tariffs on the U.S. products, including fruits worth $10.6 billion imports in retaliation.

So why is India dithering?

Political observers cite many reasons for India’s reluctance. One is that India is headed for a general election soon and the government does not want Indo-U.S. ties to deteriorate because it could then become a poll issue, giving the opposition a handy weapon.

The other could be that both countries were engaged in what’s known as the “2+2”  negotiations on many fronts, such as defense, so neither wants to ratchet up the heat. Also, U.S. President Donald Trump’s friendly relationship with his Indian Prime Minister Narendra Modi is well-known.

India has been demanding a waiver on tariff hikes similar to the ones the U.S. granted to Argentina, Brazil and South Korea. There were some unconfirmed reports here that the Trump administration had hinted that it was willing to waive off the tariff hikes on steel and aluminum if India were to cap the exports at 70% of its total exports to the U.S. last year. India, though, does not seem to be keen on doing this, though there’s no official word on it.

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India’s exports of steel items to the U.S. went down by 42% in the quarter ending June, mostly because of the sanctions.