Articles in Category: Global Trade

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This afternoon in metals news, renegotiation efforts focused on the North American Free Trade Agreement (NAFTA) appear to be at a standstill, Chile’s state copper commission boosts its 2018 copper forecast and a European agency advises plane manufacturers to suspended their use of products from embattled Japanese steelmaker Kobe Steel.

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NAFTA Deadlock

The fourth round of renegotiation talks regarding the 23-year-old NAFTA concluded yesterday, but the U.S., Mexico and Canada appear to be no closer to a consensus.

According to Bloomberg, initial hopes for a quick resolution have fizzled, as talks will now be extended into 2018 (which was previously hoped to be avoided, given the scheduled elections in each country next year).

The next round of talks is scheduled for Nov. 17-21 in Mexico.

Cochilco Forecasts Copper at Nearly $3/Pound in 2018

Chile’s state copper commission, Cochilco, on Wednesday put out a forecast for 2018 including a prediction of the average global copper price hitting $2.95/pound.

The new forecast is up significantly from Cochilco’s mid-year estimate of $2.68/pound. Greater Chinese demand is cited as a supporter of the global price.

Kobe Steel Saga Continues

The fallout from the Kobe Steel data falsification scandal continues, as the European Aviation Safety Agency (EASA) advised plane manufacturers to suspend their use of products from the firm, the third-largest steelmaker in Japan, according to CNN Money.

According to the report, EASA advised those manufacturers to find alternative suppliers and conduct a “thorough review of their supply chain.”

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A number of global heavyweights use Kobe Steel products, including GM, Boeing, Ford and Toyota, according to the report.

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Trade negotiators from the U.S., Canada and Mexico are back at it again, working to tweak — or in some cases, totally alter — the North American Free Trade Agreement (NAFTA).

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Representatives from the three countries came together beginning last week for the fourth round of talks focused on the renegotiation of NAFTA, the 23-year-old trilateral trade deal.

The talks started Oct. 11 in Arlington, Va., and are scheduled to continue until Oct. 17.

U.S. Trade Representative Robert Lighthizer issued a statement opening the fourth round of talks.

The officials are scheduled to work on two dozen discussion topics during this round of talks, and recently finished a chapter on competition. According to a USTR release, the updated NAFTA Competition Chapter “goes beyond anything the United States has done in previous free trade agreements.”

“I am pleased to welcome back Secretary Guajardo, Minister Freeland, and their teams to continue negotiations here in Washington,” Lighthizer said in the prepared statement. “Thus far, we have made good progress, and I look forward to several days of hard work.”

Even so, cracks seem to be forming in the dialogue that threaten the stability of the talks and, consequently, the agreement.

As has been mentioned before, President Donald Trump reportedly nearly withdrew the U.S. from the trade deal in April until talks with the Mexican and Canadian leaders convinced him otherwise.

In recent months, Trump has resumed with threats against the deal, which he once called possibly the worst trade deal ever. Renegotiating the deal has always been a primary goal for Trump, with the understanding that should a favorable deal fail to materialize, he would withdraw the U.S. from it.

So far, the threats to withdraw from the deal have been just that: threats.

However, those threats have seemed to pick up as negotiations have continued. And when it come to negotiations, reports indicate a number of the U.S. delegation’s proposals are not going to go over well with their fellow NAFTA partners.

On Thursday, Reuters reported that the U.S. negotiating team suggested any approved deal should include a five-year sunset clause, meaning the deal would have to be effectively re-approved by all three countries in five years or it dissolves.

Naturally, this has a number of stakeholders feeling nervous, as such a sunset clause, businesses argue, creates uncertainty. With increasingly interconnected and entrenched supply chains, business interests view a sunset clause as a non-starter, as do Canada and Mexico.

In other policy proposals, Reuters reported Friday that the U.S. is pushing stricter rules on automotive content, particularly with respect to aluminum, steel, copper and plastic resins, in an effort to up the level of automotive materials sourced in North America.

As the talks continue, United Steelworkers again urged the administration to consider workers.

“It’s no surprise that business groups are concerned that NAFTA’s outsourcing provisions may be dramatically altered, and that provisions might be included to develop an agreement that is fairer to workers,” a USW release last week said. “Organized labor is working with the Administration to advance proposals that will promote growth and opportunity for workers in all three countries. A deal that achieves those goals would be worthy of our support.

“Businesses have set the agenda for far too long and the result has been rising trade deficits, lost jobs, devastated communities and rising income inequality.”

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The talks are scheduled to wrap up tomorrow, Oct. 17. According to the USTR, a trilateral press event including Lighthizer, Canadian Foreign Affairs Minister Chrystia Freeland and Mexican Secretary of Economy Ildefonso Guajardo Villarreal.

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This morning in metals news, NAFTA renegotiation talks continued with the U.S. aiming to tighten automotive content rules in favor of North American-made metals, Allegheny Technologies Incorporated (ATI) commented on its Q3 earnings and Alcoa reached an early termination agreement for a power contract tied to one of its Texas smelters.

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U.S. Looks for Stricter Auto Content Rules

Trade negotiators from the U.S., Canada and Mexico are in Arlington, Va., until Oct. 17, engaged in a fourth round of talks focused on the North American Free Trade Agreement (NAFTA).

According to a Reuters report this morning, the U.S. is seeking stricter rules for automotive content, demanding a higher percentage of the materials — including aluminum and steel — that go into automotive manufacturing should come from North America.

According to the report, the proposal — which includes aluminum, steel, copper and plastic resins — would place those materials on the auto parts tracing list for the first time in the history of the 23-year-old trilateral trade agreement.

ATI Expects Q3 Results to Meet July Outlook

ATI commented on third quarter financial results on Thursday, and announced a non-cash net of tax charge of $114 million, or $(1.05) per share, for goodwill impairment related to the Cast Products business.

“Excluding the goodwill impairment charge, we expect our third quarter 2017 results to be in line with our outlook provided in July,” said Rich Harshman, ATI’s chairman, president and chief executive officer, in a company release.

Alcoa Announces End of Power Contract Agreement

On Friday morning, Alcoa announced power provider Luminant Generation Company LLC has terminated the electricity contract tied to Alcoa’s Rockdale Operations in Texas.

The smelter at Rockdale has been fully curtailed since the end of 2008, according to the Alcoa release. The termination of the contract was effective Oct. 1.

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Alcoa expects an annual improvement to net income and adjusted EBITDA of $60 million to $70 million as a result of the contract termination, beginning in the fourth quarter of 2017.

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This morning in metals news, the U.S. Department of Commerce has delayed ruling on whether or not to consider China a market economy, the Commerce Department also deferred a preliminary ruling on Chinese aluminum foil, and also issued a preliminary determination in an antidumping duty investigation of silicon from Australia, Brazil and Norway.

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Commerce Waits to Rule on China’s Market Economy Status

China officially became a member of the World Trade Organization in 2001, but its status as a market economy is still something of debate around the world.

In that vein, the U.S. Department of Commerce has elected to delay a ruling on whether to treat China as a market economy until after President Donald Trump’s upcoming trip to China, Bloomberg reported Thursday.

“In all cases, the Department conducts a full and fair assessment of the facts,” Secretary of Commerce Wilbur Ross said Thursday, as quoted by Bloomberg. “This extension will ensure that the highest standards are followed in this case as we seek to guarantee fair treatment for U.S. workers and businesses.”

Trump will travel to Asia from Nov. 3-14, making stops in Japan, South Korea, China, Vietnam and the Philippines.

For more information on China’s market economy status, make sure to visit our microsite on the issue.

Commerce Defers Aluminum Foil Ruling

In addition to the aforementioned, the Commerce Department announced it would defer a preliminary ruling in its antidumping investigation of aluminum foil imports from China.

“The deferral will allow the Commerce Department to fully analyze information pertaining to China’s status as a non-market economy (NME) country, which is being contemplated within the context of this AD investigation,” according to a Commerce Department release Thursday.

The Commerce Department announced it intends to issue a ruling on both China’s market economy status and Chinese aluminum foil imports no later than Nov. 30.

Commerce Issues Affirmative Determination in Silicon Investigation

The Commerce Department did, however, act in its investigation of silicon imports from a trio of countries.

On Thursday, Commerce issued an affirmative preliminary determination in its antidumping investigation of silicon imports from Australia, Brazil and Norway.

According to the Commerce Department announcement, exporters from Australia, Brazil, and Norway have sold the metal at rates ranging from 20.79%, 56.78% to 134.92%, and 3.74%, respectively, at less than fair value.

According to the Commerce Department, imports of silicon metal last year from Australia, Brazil, and Norway were valued at an estimated $33.9 million, $60.0 million, and $21.6 million, respectively.

The petitioner in the case is Globe Specialty Metals, Inc., which has production facilities in Alabama, New York, Ohio and West Virginia.

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A final determination in the case is scheduled to be announced Feb. 16.

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This afternoon in metals news, a former UBS metals trader was indicted for his alleged role in price rigging, NAFTA renegotiation talks could spill into next year and the palladium price topped platinum for the first time since 2001.

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Ex-UBS Metals Trader Indicted for Alleged Price Rigging

A former UBS Group AG metals trader was indicted for alleged price rigging, Reuters reported.

Andre Flotron was accused of placing so-called “spoof” trades from July 2008 to November 2013, in which he allegedly placed orders for metals futures contracts that he intended to cancel before they could be executed, according to Reuters.

Flotron was arrested two weeks ago in New Jersey and released on $4 million bond, according to court documents, Reuters reported.

NAFTA Talks Could Drag on Past December Deadline

The third round of talks focusing on the renegotiation of the North American Free Trade Agreement  (NAFTA) concluded Wednesday in Ottawa. Renegotiating the deal — or withdrawing entirely if a deal can’t be reached — has been a stated goal of the Trump administration. As such, the talks have progressed on an accelerated timeline, with a December deadline in place to avoid elections next year in Mexico, the U.S. and Canada.

Even so, the negotiations might continue on into next year, according to Mexican Economy Minister Ildefonso Guajardo, Reuters reported.

“We have the ambition, we have the strength to try to move forward with a view to closing a negotiation but no one can assure with total certainty that we will be able to do it,” Guajardo told reporters.

“That is our expectation and, therefore, it must also be considered that in this process dates will have to be considered, if necessary, for the start of the next year.”

Palladium Tops Platinum For the First Time in 16 Years

Palladium prices have topped platinum prices for the first time since 2001, according to Kitco News.

According to the report, as of 10:14 a.m. EDT Thursday, spot palladium was trading at $927.30 an ounce, while platinum was down to $918.70 an ounce.

Palladium’s higher price might not last, though, according to analysts cited by Kitco.

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“In the short term, we think platinum is undervalued for a whole host of reasons. Therefore, we think there is scope for platinum to move back to a slight premium in the short to medium term,” said Robin Bhar, metals analyst at Societe Generale. “We don’t see a sustainable premium of palladium over platinum…until about 2020 or 2021.”

An Ipsos poll released late last week offers a window into the varying perspectives of the populations of the U.S., Canada and Mexico with respect to the North American Free Trade Agreement (NAFTA).

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Negotiators from the three countries kicked off a third round of renegotiation talks on Saturday in Ottawa. Among other things, the ballooning deficit between the U.S. and Mexico has been a major talking point for the U.S. (The U.S. had a $64.4 billion deficit with Mexico in 2016, and a $41.2 billion deficit through the first seven months of this year, according to Census Bureau data.)

But how do the respective publics feel about the 23-year-old trilateral trade agreement?

According to the Ipsos poll, support for the free trade agreement is high across the board, albeit higher in Mexico and Canada than in the U.S.

However, the poll data show citizens of the United States have a different opinion on how much the free trade deal has actually helped their country.

According to the poll, 39% of Americans think the free trade deal has helped the U.S., compared with 57% of Canadians and 59% of Mexicans.

When it comes to identifying which NAFTA members are believed to have benefited the most, 35% of Americans went with Mexico. Meanwhile, a majority of Mexicans (64%) and just over a third of Canadians (34%) said the U.S. has benefited the most from the deal.

When asked if the deal benefited the three countries equally, 34% of Canadians and 32% of Americans said that was the case, while just 20% of Mexicans agreed that was the case.

When it came to whether or not renegotiation was considered to be a good thing, 48% and 46% of Americans and Mexicans, respectively, said that was the case. Canadians were less sure, however, with just 33% saying renegotiating the trade deal was a good thing.

Principle is one thing — what about execution?

The three countries each had varying levels of confidence in their negotiators.

Canadians had the most faith in their negotiating team (59%), compared with 50% of Americans and just 40% of Mexicans.

Setting aside President Trump’s public threats to pull the U.S. out of NAFTA should a negotiated deal favorable to the U.S. prove unreachable, 50% of Americans expressed they would want NAFTA to continue in its current form if talks fail. Meanwhile, 59% of Canadians and 60% of Mexicans indicated they would want the deal to continue in its current form if talks fail.

On the other side of the spectrum, 16% of Americans said they would want the deal dismantled if talks fail, compared with 25% of Mexicans.

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The third round of NAFTA renegotiation talks are scheduled to conclude tomorrow. Whatever happens — a revamped deal, maintenance of the status quo or a wholesale dismantling —  the citizens of each country will certainly have differing opinions on the favorability of the outcome.

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The Department of Commerce issued a preliminary affirmative determination Tuesday in the countervailing duty investigation of cold-drawn mechanical tubing from China and India.

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“The Trump Administration will not sit back and watch as American companies and workers are harmed by unfair government subsidies,” Secretary of Commerce Wilbur Ross said in a prepared statement. “The United States is committed to free, fair and reciprocal trade, and will continue to validate the information provided to us that brought us to this decision.”

The Department of Commerce determined that the form of tubing from China benefited from countervailable subsidies of 33.31-35.69%, and that Indian tubing benefited from subsidies of 3.04-8.09%.

In 2016, cold-drawn mechanical tubing from China and India were valued at an estimated $29.4 million and $25 million, respectively, according to the Department of Commerce.

The petitioners in the case were ArcelorMittal Tubular Products (OH), Michigan Seamless Tube, LLC (MI), PTC Alliance Corp. (PA), Webco Industries, Inc. (OK), and Zekelman Industries, Inc. (PA).

The Department of Commerce will instruct U.S. Customs and Border Protection to collect cash deposits from importers of cold-drawn mechanical tubing from China and India based on the aforementioned preliminary rates. The department collected $1.5 billion in duties on $14 billion of imported goods found to be underpriced, or subsidized by foreign governments, according to the department’s release.

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The Department of Commerce is scheduled to announce its final determinations in the case on Dec. 4.

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This morning in metals news, China gets called out with respect to its adherence to the rules of the World Trade Organization (WTO), the housing industry is slumping and Kazakhstan is the recipient of its first WTO complaint.

Aluminum Association, AISI Call Out China

The Aluminum Association recently filed comments with the United States Trade Representative (USTR) and the Trade Policy Staff Committee (TPSC) urging the Trump administration to press China on adherence to the rules of the WTO.

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In a release Wednesday, the Association said it “believes China has failed to adhere to the letter and spirit of its WTO accession.”

In a letter to TPSC Chairman Edward Gresser, Aluminum Association President and CEO Heidi Brock said China has regressed with respect to adherence to the rules set forth by the WTO.

“Despite initial progress after China’s WTO accession, the last decade has seen a major regression, which calls into question the underlying premises for the decision by the United States and other WTO members to welcome China into the WTO’s rules-based global trading system,” Brock wrote in the letter.

A filing from the American Iron and Steel Institute (AISI) signed by Kevin Dempsey, AISI’s senior vice president of public policy and general counsel, struck a similar tone.

“Now more than 15 years after it acceded to the WTO, China continues to fail to comply with its WTO obligations,” Dempsey wrote. “This trend continues to be a major problem for steel producers in the United States, other U.S. manufacturers, and the broader U.S. economy. AISI strongly urges the U.S. government to recognize China’s compliance failures and adopt a more aggressive strategy that is commensurate with the scope and severity of China’s failure to comply with its WTO obligations.”

Housing Market Down in August

U.S. home sales slumped in August as Hurricane Harvey devastated the Houston area, one of the most robust housing markets in the country.

According to the National Association of Realtors, existing-home sales in August dropped 1.3% and were at their lowest levels in a year.

According to Reuters, Texas and Florida (which was hit by Hurricane Irma earlier this month), comprise 18% of existing-home sales.

Ukraine, Kazakhstan Enter WTO Dispute

Ukraine is taking Kazakhstan to the WTO over a dispute regarding duties on steel pipes, Reuters reported. Ukraine argues that Kazakhstan is using antidumping duties on certain types of steel pipe imported from Ukraine.

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According to the report, the dispute is the first targeting Kazakhstan, which has been a WTO member since 2015.

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It’s been five months and a day since President Donald Trump signed a memorandum calling for Secretary of Commerce Wilbur Ross to prioritize the Section 232 investigation that would assess whether steel imports posed a national security risk.

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Many expected an announcement of the investigation’s findings in June or July, but it never came.

As the delay drags on, the U.S. steel industry has expressed its desire for the Trump administration to act vis-a-vis the 232 probe.

The United Steelworkers (USW) union was the latest group to urge the administration to act.

“The time to act is now, and workers are telling politicians their first-hand stories of the devastation in the industry and the critical importance of providing relief,” USW International President Leo W. Gerard said in a prepared statement.

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After two rounds of talks on the renegotiation and modernization of the North American Free Trade Agreement (NAFTA), uncertainty continues to loom.

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The 23-year old trilateral trade deal linking the U.S., Mexico and Canada has been the subject of talks between trade representatives of the countries in recent months.

An initial round of talks was held in Washington, D.C., with a second round coming earlier this month. A third round is scheduled for Sept. 23-27 in Ottawa.

Renegotiation of the deal, which President Donald Trump once referred to as possibly the worst trade deal ever, has not seemed to gain much traction through two rounds of talks.

In a closing statement after the recently concluded round of talks in Mexico City, United States Trade Representative Robert Lighthizer again laid out the U.S. delegation’s goals:

“The American delegation is focused on expanding opportunities for American agriculture, services, and innovative industries. But, as I alluded to in my opening round, we also must address the needs of those harmed by the current NAFTA, especially our manufacturing workers. We must have a trade agreement that benefits all Americans, and not just some at the expense of others. I am hopeful we can arrive at an agreement that helps.”

While Lighthizer said the parties “found mutual agreement on many important issues,” other reports indicate the negotiators are still far apart.

The New York Times reported that, during a question-and-answer session Monday at the Center for  Strategic and International Studies (CSIS), Lighthizer said negotiations were “moving at warp speed, but we don’t know whether we’re going to get to a conclusion, that’s the problem.”

During his opening statement prior to taking questions, Lighthizer said support for free trade in recent decades has been “eroding” among the electorate.

“There has been a growing feeling that the system that has developed in recent years is not quite fair to American workers [and] manufacturing, and that we need to change,” he said.

The ambitious timeline for the talks is further complicated by elections in the three countries next year: U.S. midterms, the Mexican presidential election and provincial election in Canada. Producing a mutually agreed upon and revamped trade deal by the end of the calendar year will require the negotiations to move at breakneck speed.

On Monday, Mexican Economy Minister Ildefonso Guajardo said rules of origin and the U.S. trade deficit with Mexico are the issues that will determine whether a new deal can be reached, Reuters reported.

The trade deficit has been a primary talking point for the U.S., one which Lighthizer referred to Monday at the CSIS.

“I think it is reasonable to ask, when faced with decades of large deficits, globally and with most countries in the world, whether the rules of trade are causing part of the problem,” he said.

The U.S. had a $63.4 billion trade deficit with Mexico in 2016. Though the first seven months of 2017, the U.S. has a $41.2 billion trade deficit with Mexico, up from approximate $37 billion through the first seven months of 2016.

Another idea that has come up in renegotiation talks that has generated pushback is that of a sunset clause.

According to The New York Times report, Secretary of Commerce Wilbur Ross said the administration was considering such a clause, which would mean that the trade deal would expire after five years unless all parties voted to continue it. (Lighthizer declined to expand on the idea of a sunset clause vis-a-vis NAFTA during the CSIS event.)

Aside from NAFTA, Lighthizer called China the biggest challenge for the global trading market, adding that the World Trade Organization is not equipped to tackle the challenges China presents.

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“We must find other ways to defend our companies, workers, farmers, and indeed, our economic system,” he said.

Following this coming weekend’s round of talks in Ottawa, four more rounds of talks remain on the negotiating agenda this year.