Articles in Category: Global Trade

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The E.U.’s steel safeguard mechanism should work to prevent a “surge of imports” but should not “close the market,” European Steel Association (EUROFER) Director General Axel Eggert said Monday.

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“The safeguard mechanism should be broad, but the purpose is not to close the market, as some steel importers have claimed. The EU safeguard mechanism explicitly serves only to prevent a further, sudden surge in imports resulting from deviated steel trade flows,” Eggert said.

European steel imports rose significantly between 2013 and 2017, according to EUROFER, up by 66%, with 18 million tons in 2013 and 30 million tons in 2017. In addition, steel imports in Q1 2018 rose 8% year over year, EUROFER reported.

In March, the European Commission launched a safeguard investigation in an effort to protect the European steel industry on the heels of the U.S. Section 232 tariffs on steel and aluminum. Last month, the U.S. imposed a 25% tariff on steel imports and a 10% tariff on aluminum imports. The E.U. won temporary exemptions from the tariffs, but the exemptions expire May 1 unless a deal to extend them is reached.

Eggert also addressed concerns expressed by some steel exporters regarding the potential for the safeguard measures to “close” the market.

“There have been claims made by some steel importers that the safeguard will close the EU market to imports,” Eggert said. “This is concretely untrue – these are claims made by undertakings that benefit from unsustainably low-priced, dumped imports. In practice, the safeguard will guarantee the open access of steel trade flows to the EU market at a nevertheless historically high level.”

On Monday, the E.U. requested to join the U.S.-China consultation on steel and aluminum at the World Trade Organization (WTO), Reuters reported. Hong Kong, Thailand, India and Russia have also filed requests to join the consultations, according to the report.

Earlier this month, China took the U.S. to the WTO over the tariffs, requesting 60 days of consultation on the matter, arguing the tariffs violated WTO rules.

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“The US practice severely violated the non-discrimination principle of the multilateral trading system and its commitments on tariff concession of the WTO and the rules and disciplines of safeguards, and harmed the legitimate interests of China as a WTO member,” a China Ministry of Commerce statement April 6 read. “As for that the US refused to have compensation negotiation with China according to WTO rules, China had to start the trade dispute settlement procedures, to safeguard its legitimate interests.”

The WTO process moves notoriously slowly, but the May 1 deadline for the Section 232 exemptions presents a far more near-term policy point for the E.U. steel industry.

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This morning in metals news, Chinese steel futures have hit a 1.5-month peak, Mexico is optimistic about reaching a deal on the North American Free Trade Agreement (NAFTA) and miner Freeport-McMoran posted a down quarter.

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Chinese Steel Futures Rise

Chinese steel futures are up to a 1.5-month high as a result of falling inventories, Reuters reported.

According to the report, construction steel rebar contracts for October delivery on the Shanghai Futures Exchange closed 1.5% higher.

Mexico Hopeful for a NAFTA Consensus

With a presidential election on the horizon in Mexico on July 1, Mexico is still hopeful it can reach a deal on NATFA with the U.S. and Canada.

Alejandro Diaz de Leon, the governor of Mexico’s Central Bank, told CNBC: “We know that there have been ups and downs in the negotiation … (But) we do hope that the advantages for the three countries will prevail in some version of the agreement.”

Freeport Q1 Numbers Lower than Expected

Miner Freeport-McMoran shares fell as the firm reported lower-than-expected quarterly profit, Reuters reported.

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The firm’s shares dropped more than 4% and it adjusted its copper sales forecast for the year, according to the report. Freeport now expects to produce 3.8 billion pounds of copper this year, down from a previous forecast of 3.9 billion pounds.

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A new report in HSBC’s Navigator series focuses on the long-term ascendancy of the Asian region as it explores both anticipated and actual trends in India’s trade patterns with its nearby neighbors.

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India enjoys a balance of trade surplus in services but a deficit in goods with much of its services focused on Western tech and B2B markets. But that pattern is not changing, surprisingly, partly due to government encouragement and partly due to the relative size of the economies closer to home.

Largely as a result of fears of protectionism in the West, India’s policy has been to work closely with neighbors to develop regional trade opportunities.

However, despite the South Asia Free Trade Agreement (SAFTA) and the ASEAN-India Free Trade Area (AIFTA), progress in increasing trade with Asian neighbours has been slow. Now exporters are looking to the Regional Comprehensive Economic Partnership (RCEP), to which India is an intended signatory, in order to create opportunities in what will be the world’s largest trading block.

India’s exports are changing, partly under government encouragement but mostly in response to changing global demand. Traditional products like clothing and apparel are declining. Currently in third place, they are expected to slip to 10th over the next decade, as this table shows.

The reports estimates that by 2030, India will be increasingly exporting goods within the Asian region, with export growth to Asia Pacific outpacing India’s exports to Europe and North America. In terms of individual countries, the U.S. and UAE will remain the top two export destinations, but China will rise in importance and Vietnam will also join the top five list. The top 10 fastest growing exports destinations will almost all be in Asia up to 2020, with growth in some markets rising at 12-13% per year.

Firms looking to export to India will face growing competition from China. But with a rising middle class and strong demographics, India represents an important export market for Western firms in the decade ahead. Navigator estimates that the greatest opportunities will remain in machinery, as this graph illustrates:

Perhaps more surprising is the expected static nature of India’s exports. The report sees little change in the mix of destinations, with India’s top service exports destinations remaining largely unchanged between 2017 and 2030, with the U.S. and the U.K. occupying the top two spots. Read more

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This morning in metals news, European leaders plan to press President Trump on steel this week, the aluminum price could be heading back down after the U.S. opened the door to easing the recently announced Russian sanctions and Glencore is looking into options with respect to recapitalization of one of its DRC copper operations.

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Macron, Merkel Look to Press Trump on Steel

Cecilia Malmstrom, the European commissioner for trade, said Monday that German Chancellor Angela Merkel and French President Emmanuel Macron will meet with President Trump this week, when they are expected to discuss moving away from the looming steel tariff schedule.

The E.U. was temporarily spared from the Section 232 steel and aluminum tariffs imposed in March, having negotiated an exemption until May 1.

Aluminum Price Back Down?

The aluminum price has soared in recent weeks, in large part on the news regarding U.S. sanctions targeting Russian oligarchs and companies.

Among those companies was aluminum giant Rusal — but according to Bloomberg, aluminum’s price rally could come to an end if the U.S. eases the sanctions. As Bloomberg reported, the U.S. opened the door to a potential easing of the sanctions on Monday, which has already led to a plunge in aluminum prices.

Glencore Looks into Recapitalization of DRC Copper Unit

Glencore is considering recapitalization of its copper unit in the Democratic Republic of the Congo, the Financial Times reported.

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Glencore’s Katanga Mining subsidiary, which owns the Kamoto Copper Company, is looking into recapitalization to resolve a dispute with state-owned miner Gecamines. Gecamines, according to the FT, has started legal action to dissolve Kamoto.

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India found itself on the back foot in the first meeting of trade representatives from India and the United States in the Indian capital, New Delhi, last week. It was held to discuss the latest U.S. trade tariffs on steel and other metal imports.

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According to reports, while the Indian delegation did speak of the “harsh” tariff on aluminum, the U.S. team kept bringing up the need to have “a greater balance in bi-lateral trade,” which experts claim, was currently in India’s favor. The U.S. team was led by Assistant U.S. Trade Representative Mark Linscott.

A report in the Financial Express said the U.S. side also delved at length into India’s intellectual property regime, and sought a relaxation in its provisions on ever-greening of patents, which has been a longstanding demand of the U.S.

If the Indian trade delegation had thought that it would have an upper hand in the discussions, it did not seem so. The U.S. counterparts sought a better trade balance with India through greater access to American products, and the removal of restrictions on the pricing of medical equipment like bioresorbable stents.

The Indian side reiterated its demand that the U.S. should roll back the increase in import tariffs on steel and aluminum, announced last month, where India was concerned. The U.S. had imposed a 25% levy on steel and 10% on aluminum on a handful of countries, including India and China.

The Linscott team remained noncommittal to this request, according to reports, except for saying the sentiments would be conveyed to Washington.

Under the Generalised System of Preference (GSP) program, select developing countries are allowed to export specified products duty-free to the U.S. India has often been at the top of this list. Exports of select items in the textiles, engineering, gems and jewelry, and chemical sectors are allowed duty-free access to the U.S.

The GSP between the two nations expired recently, and now it’s seen as the U.S. wanting to link it to the trade balance. India has conveyed that this would not be a prudent step for trade between the two countries.

This first in a series of trade meetings will culminate in the trade policy forum meeting to be held later this year.

India’s imports from the U.S. in the April-February FY 2018 period were valued at U.S. $23.34 billion, which was 14.68% higher than imports in the comparable period of the previous fiscal. The country’s exports to the US during the period was at $43.32 billion, 13.34% higher.

Earlier in the month, Alice Wells, principal deputy assistant secretary for South and Central Asian affairs, told The Hindu newspaper that while America’s average tariff was a little over 3%, India’s was over 13%, and that this disparity was the source of the friction.

While India goes about trying to get some relief from the high tariff, it faces another salvo from another side on the same subject, this time from the European Commission (EC).

The latter had initiated “safeguard investigation” on steel products to ascertain whether import tariffs imposed by the U.S. need to be countered to prevent Asian producers from flooding the European market. Analysts claimed this would have a significant bearing on India’s steel exports.

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The investigation, the notice for which was issued recently, will cover India as well, though it is targeted primarily at the U.S. India is estimated to have shipped around 3.0-3.5 million tons of steel to Europe so far this fiscal year. The EC investigation was initiated on a suo moto basis, and covers about 130 items in all grades of steel.

Several aluminum associations around the world penned a joint letter in which they urged G20 leaders to hold a forum on global aluminum overcapacity.

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“In light of the conclusions reached last July at the G20 Summit in Hamburg, Germany, and the publication of the Global Forum on Steel Excess Capacity Report, we are writing to urge G20 leaders to apply this framework to a similar global forum on aluminium excess capacity,” the letter read. “We believe the Global Forum on Steel Excess Capacity is a useful model for tackling these persistent issues with a coordinated effort also for aluminium.”

The letter was signed by: Heidi Brock, president and CEO of The Aluminum Association; Milton Rego, executive president of the Aluminium Association of Brazil; Jean Simard, president and CEO, of The Aluminium Association of Canada; Gerd Götz, director-general of European Aluminium; and Yoshihisa Tabata; executive director of Japan Aluminium Association.

The associations called for a forum at the next G20 Summit in Buenos Aires to “endorse market economy principles and transparent methods to create an adequate level playing field in the global aluminium market.”

The letter emphasized global, collaborative action as being critical in tackling the issue of overcapacity, with specific reference to China. The U.S. last month imposed tariffs on aluminum imports of 10% (in addition to steel imports of 25%).

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The G20 Summit is scheduled to take place Nov. 30- Dec. 1 in Buenos Aires, Argentina.

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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 headlines here on MetalMiner:

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This morning in metals news, China filed a complaint at the World Trade Organization (WTO) over the U.S. steel and aluminum tariffs, the president of the China Baowu Steel Group says the tariffs would have a limited impact on Chinese exports and LME aluminum prices jumped more than 7% after the U.S. sanctions on Russian individuals and businesses.

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China Looks to WTO to Combat U.S.’s Section 232 Tariffs

China has filed a trade complaint at the WTO over the U.S.’s Section 232 steel and aluminum tariffs.

The complaint includes a Chinese request for 60 days of consultations with the U.S. over the tariffs.

Steel Group President Downplays Effect of Tariff on Chinese Exports

China Baowu Steel Group President Chen Derong said Tuesday that the U.S.’s tariff on steel would have limited effect on Chinese exports, Reuters reported.

Aluminum Prices Get a Boost

Aluminum prices rose on the heels of the recently announced U.S. sanctions of Russian oligarchs and business, MarketWatch reported.

Russian aluminum giant Rusal was among the targets of the sanctions.

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LME aluminum jumped from $1,966/mt on Friday to $2,112/mt on Monday, a 7.4% increase.

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This morning in metals news, Rusal saw its stock tumble after being hit with sanctions by the U.S., President Trump criticizes China’s auto tariffs and the U.S. Department of Commerce issued a final affirmative determination in its countervailing duty probe of stainless steel flanges from China.

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Russian Aluminum Firm Hit With Sanctions

Rusal, the world’s second-largest aluminum producer, saw its stock drop more than 40% after it was included on a U.S. sanctions list targeting Russian companies and their owners, Reuters reported.

According to the report, the sanctions list targeted seven Russian oligarch, including Oleg Deripaska, the former president of Rusal.

Trump Hits Back at China Tariffs

As the specter of a trade war grows, so too does the war of words.

President Trump castigated China’s tariffs on automobiles, calling the gap between U.S. auto tariffs and Chinese auto tariffs an example of “stupid trade” in a tweet Monday morning.

The president tweeted: “When a car is sent to the United States from China, there is a Tariff to be paid of 2 1/2%. When a car is sent to China from the United States, there is a Tariff to be paid of 25%. Does that sound like free or fair trade. No, it sounds like STUPID TRADE – going on for years!”

DOC Issues Final Affirmative Determination on Stainless Steel Flanges

In other trade news, the U.S. Department of Commerce issued a final affirmative determination in its countervailing duty investigation of stainless steel flanges from China.

The DOC concluded the products received countervailable subsidies of 174.73%.

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The case now moves to the U.S. International Trade Commission, which is scheduled to make a final determination on or around May 21. If it rules in the affirmative, a countervailing duty order will be issued.

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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 stories here on MetalMiner:

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  • Joseph Kabila, president of the Democratic Republic of Congo, is looking to rip up a 2002 mining charter in order to secure a larger piece of the revenue from the country’s vast natural resources.
  • Copper prices have been trending down since a December surge (when the LME copper price reached $7,215/mt).
  • There’s a battle going on between two rival manufacturers of the famous London black cab.
  • Hong Kong’s housing market is overstretched, MetalMiner’s Stuart Burns writes.
  • In case you missed it, it’s Monthly Metals Index (MMI) Week! We kicked our off monthly round of subindex reports this week, which are available at the following links: Construction, Rare Earths, Renewables, and Automotive. Look for the remaining six MMI reports next week.
  • India is among the list of countries still lobbying for exemptions from the U.S.’s Section 232 tariffs on steel and aluminum imports.

MetalMiner’s Annual Outlook provides 2018 buying strategies for carbon steel