Articles in Category: Global Trade

A Department of Commerce hearing is underway Thursday morning on the subject of the Section 232 investigation into aluminum imports. qingwa/Adobe Stock

This morning in metals news, the Department of Commerce’s Section 232 hearing on aluminum is in progress this morning, the LME is expected to cut its trading fees and London copper rose Thursday as a result of data indicating a global supply deficit.

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Section 232 Hearing on Aluminum Underway This Morning

The U.S. Department of Commerce’s hearing regarding its ongoing Section 232 investigation into aluminum imports started at 8 a.m. CDT Thursday.

Those interested in watching can tune into the live streams on the Department of Commerce’s Facebook or YouTube pages. After a brief break, the hearing is reconvening as of 9:59 a.m. CDT and is scheduled to continue until just after 11 a.m. CDT.

As mentioned earlier this morning, Chinese overcapacity continues to be the primary talking point.

The hearing started with testimony from: Kentucky State Rep. Jim Gooch Jr.; Li Xie, director of Export Division One, People’s Republic of China, Ministry of Commerce; Talal M. Al Kaissi, representative from the Trade & Commercial Office from the Embassy of the U.A.E.; Lurii Stegnii, deputy trade representative from the Trade Representation of the Russian Federation in the United States; and Gerd Gotz, director general of European Aluminum.

Gooch Jr.’s state is home to Century Aluminum, which operates two smelters in the Bluegrass State (one in Hawesville, the other in Sebree).

LME Planning to Cut Trading Fees

The LME is planning on cutting its trading fees in the hopes of boosting volumes, Reuters reported Thursday.

According to the report, a 35% fee hike in January 2015 is a major reason cited by those in the industry to explain declining LME volumes.

Overall volumes in the five months to the end of May this year fell more than 5% from the same five-month period in 2016, according to the article.

LME Copper Ticks Up

LME copper rose Thursday, driven by data showing a global supply deficit, according to Reuters.

According to the data, the global world refined copper market showed a deficit of 5,000 tons in March, Reuters reported. That figure stands in stark contrast with the 102,000-ton surplus reported for February.

Free Download: The June 2017 MMI Report

Meanwhile, three-month LME copper was down 0.6%, according to Reuters.

China is far from alone in worrying about an investigation by the U.S. Department of Commerce into the impact of imported steel on the U.S. steel industry (due to be announced this week).

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The Section 232 investigation is the result of a campaign pledge by President Donald Trump to protect domestic steelmakers against foreign steel imports. Section 232 uses as its test whether imports have been detrimentally harmed the U.S. ability to produce steel for its defense industry, and while it is not country-specific there was little secret at whom it was primarily aimed.

The worry in Europe, generally, and in the U.K. in particular, is that supplies from the region will be caught up in a blanket Section 232 ruling, applying onerous duties that could hit some local steelmakers disproportionately hard.

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The findings of the Trump administration’s ongoing Section 232 investigation into steel imports have yet to announced, but American metal producers are clearly anxiously awaiting the probe’s findings.

Earlier this week, White House spokesman Sean Spicer said the findings of the investigation could be released as early as this week (they have not been released yet).

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

The investigation, launched by the Trump administration and announced in April, seeks to determine whether steel imports pose a national security threat. (For more background on the investigation, read our Lisa Reisman’s post earlier this week about the 232 investigation’s potential outcomes and impact).

Section 232 investigations are rooted in the authority of the Trade Expansion Act of 1962. At their conclusion, the president can either agree or disagree with the recommendations set forth by the secretary of commerce (Wilbur Ross, in this case).

It’s not yet clear what the investigation’s findings will be, or what practical impacts, in terms of enacted policy, they will have.

But it’s clear that U.S. companies are anxious for the Trump administration to make good on campaign promises to bolster American industry.

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Before we head into the weekend, let’s take a look back at a few of this week’s stories:

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A Surprise in the U.K.

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Our Stuart Burns wrote about the U.K. parliamentary elections, which surprised many and saw Labour outperform expectations against Prime Minister Theresa May’s Conservative Party.

What does the election result mean for business? Well, that will partially be determined by which path to Brexit the U.K. ultimately takes. Burns writes there is likely to be compromise and a search for alternate solutions — that is, a softer Brexit.

The 411 on 232

White House spokesman Sean Spicer announced Monday the findings of the administration’s Section 232 investigation into steel imports could be released as early this week.

Although the findings have yet to be released, our Lisa Reisman laid out the potential outcomes and impacts of the investigation on Wednesday.

How will the recommendations affect steel prices domestically? No one knows for sure, of course, but Reisman wrote we shouldn’t jump to conclusions about potential price increases.

“Some have speculated that the forthcoming recommendations would force prices higher, however, we would not necessarily rush to that same conclusion,” Reisman wrote.

Markets showing pessimistic side

Burns also wrote this week about commodities markets — and not just metals, but oil, too — which have seen a drop in optimism of late.

What’s the downtrend all about? Many reasons, Burns argues, including: oversupply, the Chinese government “squeezing investors by increasing shadow banking borrowing costs,” and waning optimism with respect to the Trump administration delivering on campaign promises regarding massive infrastructure projects.

But not to send you into your weekend on a down note — it’s not all cloudy skies.

“With that said, that doesn’t mean the U.S. or global economies are about to tank,” Burns writes. “European growth has been much better this year and Japan is expected to improve further, while the World Bank is predicting an unchanged 2.7% global growth this year in its latest report.”

June MMI Report Released This Week

In case you missed it, our monthly MMI Report was released this week; as always, it’s jam-packed with information.

The report covers markets trends in our 10 sub-indexes: Automotive, Aluminum, Construction, Copper, Global Precious, GOES (grain-oriented electrical steel), Rare Earths, Raw Steel, Renewables and Stainless Steel.

Want to know what’s happening in any of these categories? Get yourself up to speed by checking out the June report, which you can access by visiting the link below.

Free Download: The June 2017 MMI Report

Steel and stainless steel buying organizations have expressed concern to MetalMiner about the potential outcome of the current Section 232 steel investigation led U.S. Secretary of Commerce Wilbur Ross.

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According to a recent Reuters article, Ross, when discussing the Section 232 steel investigation told a Senate Appropriations Subcommittee last week that, “there is a genuine national security issue,” suggesting his agency would make recommendations that would potentially curb steel imports.

He went on to suggest several potential policy recommendations, including: “Imposing tariffs above the current, country-specific anti-dumping and anti-dumping duties on steel products; imposing quotas limiting the volume of steel imports; and a hybrid ‘tariff-rate quota’ option that would include quotas on specific products with new tariffs for imports above those levels,” and intimated that this last option would help mitigate price risk for steel consumers. Ross made several additional comments to allay consumers’ concerns regarding price increases.

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Editor’s Note: This is the first of two posts on the effects of the decision by several Gulf Cooperation Council (GCC) nations to sever diplomatic ties with Qatar. First, Stuart Burns expands on the political backdrop of the decision. On Monday, he’ll focus on the timing of the decision and its economic impacts. 

We tend to view Middle East politics as a simple rivalry between Sunni and Shiite sects — or, more recently, as a regional power play between predominantly Sunni Saudi Arabia and predominantly Shiite Iran.

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Although these regional differences are often portrayed in religious terms, they have as much to do with national politics as they do with religion.

Our simplistic view is probably not helped by the tendency for the powers that be to historically resolve their differences or arrive at solutions behind closed doors, with little or no public debate.

The complexity of Middle East politics is often lost on us in the West. Our understanding is maybe not helped by our politicians, who paint various parties as either with us or against us.

But action led by Saudi Arabia and the United Arab Emirates this week illustrates the complex nature of regional politics and brings into focus how rapidly alignments and priorities are changing.

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Beijing’s focus on supply-side reforms of China’s giant aluminum industry has been a prime mover for the metal price this year.

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But primary metal price rises aside, of more concern to aluminum consumers should be the nature and extent of China’s aluminum semi-finished product exports. There have been various facets to China’s product exports, as Andy Home of Reuters succinctly explained in an article last week.

On the one hand, the growing volume of product exports has ignited considerable trade tensions with the U.S. and Europe. In the case of the former, the article reports, it led to a formal complaint to the World Trade Organization (WTO) and, more recently, a Section 232(b) investigation under the Trump administration. In Europe, expiring duties have been rolled over on imports of aluminum wheels from China and further action sought by trade bodies on a range of aluminum products.

Meanwhile, rumours that an indeterminate but significant proportion of China’s semi-finished product exports were in fact primary metal being illegally classified as semi-finished product to circumvent export duties on unwrought aluminum have at least partially been vindicated, as a focus has been brought to bear on a massive stock of aluminum held in Mexico last year that appeared to originate from Vietnam but with links to China.

Home explained that China’s exports of commodity code 7604 (bars rods and extruded profiles) have mushroomed from just over 6,000 tons in 2012/2013 to 463,000 tons in 2015 and 510,000 tons in 2016. Some of that metal appeared in Mexico last year before media attention encouraged the metal to be recycled back to an obscure port in Vietnam. Read more

“Where next for oil prices?” Stuart Burns had asked on Monday. In the short term, that would be downwards.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

Yesterday the Organization of the Petroleum Exporting Countries (OPEC) met in Vienna and decided to extend supply cuts for another nine months, until March 2018. That is what was expected, but oil prices responded by dropping quite a bit, Reuters reported, by roughly 5%.

The price of oil has indications beyond, well, oil. “Oil prices are a proxy for energy prices, and a rising oil price can be supportive for energy intensive metals like aluminum,” Burns wrote. “A rising oil price is also taken as a proxy for rising industrial demand – a bullish indicator that global growth is strong. A falling price, on the other hand, should be good for consumer spending as it keeps more money in drivers’ pockets and lowers the cost of goods sold for companies far and wide.”

Where Next for the U.S. Dollar?

Another driver of metal prices is the dollar. This past week, Raul de Frutos looked at the movement of the U.S. dollar, which recently hit a seven-month low. What is the reason for this drop?

“First, the dollar had steadily risen for three consecutive months,” de Frutos wrote. “It’s not uncommon to see profit-taking after such an increase. But there are also some fundamental reasons behind this sell-off.” Read more

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What happens when an illegal business practice becomes so common and virtually accepted that it ultimately gets difficult to break?

Many U.S. manufacturers would argue that we’re in a period of global trade that features one such practice: trade circumvention. The most slippery aspect of ferreting out circumvention is first defining which segment of industry gets harmed the most, before even knowing what to do about it. Is it the upstream sector, including primary steel, textiles or plastics production? Or the downstream sector, such as the residential washing machine business?

MetalMiner Executive Editor Lisa Reisman makes the case that the lines between upstream and downstream manufacturing have blurred in this new report, Rules-Based Trade Remains Critical to Manufacturing Health.

But first we must understand the basics. Here’s an excerpt from that paper defining the landscape of trade circumvention in a short primer.

What is Trade Circumvention?

According to the Organization for Economic Cooperation and Development, circumvention refers to “getting around commitments in the WTO such as commitments to limit agricultural export subsidies. It includes: avoiding quotas and other restrictions by altering the country of origin of a product; measures taken by exporters to evade anti-dumping or countervailing duties.”

Four steel producers filed a petition last September, charging China with circumventing anti-dumping and countervailing duty orders for corrosion-resistant carbon steel and cold-rolled carbon steel by sending substrate materials to Vietnam for processing and re-export. The claim appears to be supported by trade data (as shown by an spike in Vietnamese cold-rolled and CORE imports after November 2015 while the same Chinese imports drastically decreased after duties were imposed on the latter, for example). Read more

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It isn’t an idle question. Oil prices are a proxy for energy prices, and a rising oil price can be supportive for energy intensive metals like aluminum.

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A rising oil price is also taken as a proxy for rising industrial demand – a bullish indicator that global growth is strong. A falling price, on the other hand, should be good for consumer spending as it keeps more money in drivers’ pockets and lowers the cost of goods sold for companies far and wide – but particularly for those in the transportation or more energy intensive sectors.

But despite rising last year following the agreement on the parts of OPEC and major non-OPEC oil producers to limit output, the price has since fallen back so consumers are not surprisingly wondering where it goes from here.

Just this month the two architects and key players in last year’s agreement, Saudi Arabia and Russia, announced they would continue with the agreement, set to shortly expire, until March 2018 and indeed will accelerate cuts to reduce near record inventories. It should be said the announcement still must be officially agreed at next week’s meeting of OPEC ministers in Vienna.

While initially slow to contribute, Russia has stepped up cut backs of late and combined non OPEC cuts are said to be some 255,000 b/d in April, but others such as Brazil and Canada are expected to increase output in Q2 and the USA has added substantially since last year. According to Oilprice.com, U.S. oil production has risen to approximately 9.3 million barrels a day and is projected by the EIA to reach 10 million barrels a day by 2018. Read more