Articles in Category: Global Trade

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Numerous companies have expressed concern over the U.S.’s tariffs over the last year and change, in many cases citing the tariffs when referring to gloomy earnings forecasts or workforce reductions.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

From beverage can makers to automobile manufacturers, numerous sectors have bemoaned the impact of the Trump administration’s tariffs on their bottom lines (whether it’s the Section 232 tariffs on steel and aluminum or the vast series of Section 301 tariffs on goods from China).

That tariff pain has also been felt by the electronics sector, according to recent survey results from the IPC.

In IPC’s recent research report titled “Tariff War Fallout: U.S. Electronics Manufacturers Worried About Higher Tariffs and Laboring to Mitigate Impacts,” 86% of manufacturers surveyed between Sept. 25 and Oct. 2 were concerned about tariffs.

“On average, companies report they have seen tariff increases on approximately 31 percent of the total dollar value of the products they import,” the IPC report said. “Twenty-five percent of companies report over half of the dollar value of the products they import are facing higher tariffs.”

Some respondents indicated the tariff climate had an impact on their decisions regarding investment. According to the IPC, 21% of survey respondents indicated they are reducing their investments in the U.S.

In addition 30% reported sales were down as a result of the tariffs.

“Some companies may choose to absorb the higher costs associated with tariffs to maintain sales levels,” the report states. “But this approach results in higher costs, which will inevitably hurt margins. Moreover, some companies report that even raising prices is not stopping margin compression and weaker sales.”

In terms of supply chains, the tariffs have also prompted a shift out of China.

“Some 51 percent of responding companies report they are sourcing from countries outside of China as a result of increased tariffs on Chinese imports,” the report notes. “Nearly one in five companies (19%) report they are moving manufacturing and potentially other business interests outside of China.”

Free Partial Sample Report: 2020 MetalMiner Annual Metals Outlook

The full report is available on IPC’s website.

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This morning in metals news, China wants the U.S. to remove tariffs before a final trade deal can be reached, U.S. Steel announced it would offer $300 million in senior convertible notes and Alcoa released its third-quarter financial results.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

China: Remove Tariffs for Final Trade Deal

As trade talks between the U.S. and China continued with another round of top-level negotiations last week, China indicated that tariffs must be removed in order for a final deal to be reached, CNBC reported.

“Both sides’ ultimate goal for the negotiations is to end the trade war, cancel all additional tariffs,” Ministry of Commerce spokesman Gao Feng was quoted as saying. “This is good for China, good for the U.S. and good for the world.”

U.S. Steel to Offer $300M in Convertible Notes

U.S. Steel announced Tuesday that it plans to offer $300 million in senior convertible notes “in a private offering made only to persons reasonably expected to be qualified institutional buyers.”

“U.S. Steel intends to use the net proceeds from the offerings for general corporate purposes, including, without limitation, for previously announced strategic investments and capital expenditures,” the steelmaker said.

Alcoa Releases 3Q Financial Results

Bauxite, alumina and aluminum producer Alcoa announced a net loss of $221 million in the third quarter of 2019, compared with a net loss of $402 million in Q2 2019.

The firm reported an adjusted net loss, excluding special items, of $82 million for the third quarter.

“In the third quarter, Alcoa reported adjusted EBITDA excluding special items of $388 million, down $67 million from the prior quarter, primarily due to lower alumina pricing that was partially offset by higher alumina sales volume and lower production costs,” the company said.

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In addition, third-quarter revenues of $2.6 billion were down 5% from the previous quarter “primarily due to lower alumina prices,” the company said.

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This morning in metals news, the U.S. steel sector’s capacity utilization rate inched down another tenth of a percentage point, the U.S. raised its steel tariffs on Turkey to 50% and Chinese iron ore futures fell Tuesday.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

U.S. Steel Capacity Utilization Rate Falls to 80.3%

The U.S. steel sector’s capacity utilization rate for the year through Oct. 12 reached 80.3%, down from 80.4% the previous week.

Steel production for the year through Oct. 12 reached 76.1 million tons, up 2.9% on a year-over-year basis.

Trump Raises Turkey Steel Tariffs

In yet another turn in U.S.-Turkey relations, President Donald Trump signed an executive order halting trade negotiations with Turkey and raising the tariff on Turkish steel imports to 50%.

Last year, the Trump administration raised its Section 232 steel tariff on Turkish steel to 50% amid a row over Turkey’s detention of American pastor Andrew Brunson; the U.S. eventually brought the tariff back down to the standard 25% rate.

However, after the U.S. announced a withdrawal of its forces from Syria, followed by Turkey’s military offensive in the region, Trump released a statement announcing the U.S. would sanction Turkish government officials and “any persons contributing to Turkey’s destabilizing actions in northeast Syria.”

Chinese Iron Ore Futures Down Amid Vale Production Uptick

Chinese iron ore futures dropped to an over two-week low amid Brazilian miner Vale’s announcement of elevated third-quarter production, Reuters reported.

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The most-traded iron ore contract on the Dalian Commodity Exchange fell 1.2% on Tuesday, down to 644 yuan ($91.05) per ton, according to the report.

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Faced with lobbying by the steel sector and some others, the Indian government is caught in a bind on whether to join the Regional Comprehensive Economic Partnership (RCEP) or not.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

Last week, none other than Indian Prime Minister Narendra Modi chaired a meeting of the key players on the RCEP to decide on this vexed issue.

The RCEP is a proposed trade pact between the Association of Southeast Asian Nations (ASEAN) and their six Free Trade Agreement (FTA) partners. On the list are Australia, China, India, Japan, Korea and New Zealand.

The countries in the proposed trade group account for 25% of global gross domestic product (GDP), 30% of global trade, 26% of foreign direct investment flows and 45% of the world’s population.

Time and time again over the last few months, Indian steel companies have expressed reservations over the RCEP, especially in the wake of cheap steel imports flooding the Indian market from China and South Korea.

The concluding talks for the signing of the RCEP are currently in the last phase.

The production cost of steel in India of U.S. $40 a ton is one of the highest in the world, according to Entrepreneur India.

There are several reasons for this – red tape, poor infrastructure, taxes and exorbitant capital cost. Indian steel producers maintain that becoming party to the RCEP would ease imports, but would also hurt Indian steel producers’ sales.

India’s steel export dropped by 7.5% in the first five months of this fiscal year. As compared to the last year, steel exports in August surged to 37% in 2019.

India’s major bugbear is China.

India’s trade deficit with China and RCEP in 2018-19 was $53.6 billion and $105 billion, respectively. India is currently high on its Make In India program, and steel companies say further liberalization in tariffs would lead to a surge in imports, harming the domestic industry.

According to the Financial Express, India is contemplating some measures to safeguard its producers’ interest. It plans to employ an “auto-trigger” safeguard mechanism for imports to protect domestic players.

This plan will come into play once imports of a particular sensitive product breach a stipulated limit. The concessional duty under RCEP will then be scrapped for that item and the normal, most favored nation (MFN) duty will apply. India wants this for at least 68 products for about 10 years.

Another plan is the flexibility of a “snapback,” transitional safeguard mechanism for all RCEP members.

All these safeguards will be in addition to mechanisms already in place, such as anti-dumping, countervailing and traditional safeguard duties — all aimed to act against any import spikes.

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India has decided to trim or remove tariffs on Chinese goods in phases over 25 years to protect its domestic producers.

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This morning in metals news, China could be pushing for a partial trade deal with the U.S., the Trump administration criticized the Louisiana governor over his characterization of the reasons for Bayou Steel Group’s closure and copper ticked up Wednesday.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

U.S.-China Move Toward Next Round of Talks

The road to the next round of U.S.-China trade talks, scheduled to begin Thursday, has been fairly bumpy.

In recent days, the U.S.’s National Basketball Association (NBA) has found itself in a PR crisis following a since-deleted tweet by Houston Rockets General Manager Daryl Morey, who expressed support for anti-government protestors in Hong Kong.

As a result, Chinese broadcasters have severed ties with the organization, which boasts a sizable Chinese following.

On Monday, the Bureau of Industry and Security announced it would add 28 Chinese organizations to its Entity List, calling out human rights abuses in Xinjiang.

However, according to a CNBC report, China is looking to make some concessions toward a partial trade deal. Among those concessions, according to the report, includes an agreement to increase purchases of agricultural products from the U.S.

Trump Administration Criticizes Louisiana Governor’s Bayou Steel Comments

On the heels of the bankruptcy of Bayou Steel Group, Louisiana Gov. John Bel Edwards indicated the closure of the business could at least in part be linked with the Trump administration’s tariffs.

Peter Navarro, Trump’s assistant for trade and manufacturing policy, struck back at the characterization.

“This is comically bad staff work: there are no tariffs on inbound recycled scrap and there is an abundance of cheap scrap on domestic soil,” Navarro was quoted as saying by “Bayou Steel folded like a cheap tent under the weight of a leveraged buyout by Wall Street vultures picking the carcass of a highly inefficient and antiquated plant. Ironically, the Trump steel tariffs actually kept Bayou Steel as a going concern longer than it otherwise would have existed.

Copper Moves Up

With the next round of U.S.-China trade talks set to begin Thursday, copper prices inched up Wednesday.

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LME copper moved up 0.3% to $5,691/mt, Reuters reported.

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The United States Trade Representative lauded the World Trade Organization’s (WTO) decision on U.S. countertariffs against the E.U., a Chinese steelmaker could enter the mix in bidding for British Steel and the WTO put out less than optimistic figures with respect to global growth levels in 2019 and 2020.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

USTR Praises WTO Decision

On Wednesday, a WTO arbitration panel ruled in the U.S.’s favor in its fight against the E.U. vis-a-vis Airbus subsidies.

The ruling opened the door for the U.S. to apply $7.5 billion in tariffs on E.U. goods.

“For years, Europe has been providing massive subsidies to Airbus that have seriously injured the U.S. aerospace industry and our workers. Finally, after 15 years of litigation, the WTO has confirmed that the United States is entitled to impose countermeasures in response to the EU’s illegal subsidies,” U.S. Trade Representative Robert Lighthizer said in a prepared statement.  “Accordingly, the United States will begin applying WTO-approved tariffs on certain EU goods beginning October 18. We expect to enter into negotiations with the European Union aimed at resolving this issue in a way that will benefit American workers.”

Chinese Steelmaker Could Join the Fray of British Steel Bidding

According to Sky News, Chinese steelmaker Jingye Steel is coming forward to potentially make a bid for British Steel.

British Steel went into liquidation earlier this year after it failed to secure a government loan, thus initiating a bidding process for the U.K.’s second-largest steelmaker.

Turkey’s Ataer Holding, a subsidiary of Turkey’s military pension fund, emerged as the favorite to take over the steelmaker earlier this year.

WTO Issues Gloomy Trade Forecast

Amid trade tensions and slowing growth, the WTO has lowered its trade forecast for 2019 and 2020.

The WTO forecast world merchandise trade volume is expected to grow 1.2% this year, down from an April forecast of 2.6%.

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“The darkening outlook for trade is discouraging but not unexpected. Beyond their direct effects, trade conflicts heighten uncertainty, which is leading some businesses to delay the productivity-enhancing investments that are essential to raising living standards,” WTO Director-General Roberto Azevêdo said. “Job creation may also be hampered as firms employ fewer workers to produce goods and services for export.”

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This morning in metals news, the WTO ruled in favor of the U.S. in its ongoing battle with the E.U. over Airbus subsidies, striking workers at General Motors rejected the automaker’s latest offer, a Louisiana steel group has gone bankrupt and copper prices are slumping.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

WTO Rules in U.S.’s Favor

As part of the ongoing saga between the U.S. and E.U., a World Trade Organization (WTO) arbitration panel was set this week to determine the level of countertariff measures the U.S. would be permitted to apply against E.U. goods (in retaliation against the E.U. for its subsidies toward aircraft manufacturer Airbus).

On Wednesday, the panel announced it had ruled in the U.S.’s favor, affording the U.S. the ability to wield $7.5 billion in tariffs on E.U. goods.

A proposed tariff list released earlier this year by the United States Trade Representative included copper alloys, among other items.

Union Rejects GM Offer

A GM offer to end the UAW strike — now in its third week — was sent back by the union because it did not adequately address workers’ demands, according to UAW Director and Vice President Terry Dittes.

“Last night, Monday, September 30, 2019, GM passed a comprehensive proposal at 9:40 pm across the bargaining table,” Dittes said in a prepared statement.

“This proposal that the Company provided to us on day 15 of the strike did not satisfy your contract demands or needs. There were many areas that came up short like health care, wages, temporary employees, skilled trades and job security to name a few. Additionally, concessionary proposals still remain in the company’s proposals as of late last night.”

Bayou Steel Group Files for Bankruptcy

A Louisiana steel group has filed for bankruptcy, reported, impacting 400 workers at the Bayou Steel Group facility.

According to the report, the company has as much as $100 million in outstanding debts.

The closing comes 40 years after the mill in LaPlace, Louisiana, first opened, according to the report.

Copper Price Falls

LME copper was bid down 0.5% on Wednesday, Reuters reported, down to $5,660 per ton.

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As MetalMiner’s Stuart Burns explained earlier today, copper prices are forecast to decline further in the year ahead.

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If there is a silver lining to the current trade war with China, it could be that it has focused the U.S.’s attention on the perilous state of its raw material supply chain.

This is particularly relevant for the U.S. military, but equally for a range of high-tech industries, from consumer electronics to automobiles, battery storage and wind turbines.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

Many will recall, and not a few lament, the failure to support California’s Mountain Pass mine, source of the country’s rare earth metals, as an example of how exposed the U.S. has become.

According to the Defense Visual Information Distribution Service (DFIDS), the U.S. was largely self-sufficient for most of the 20th century, with all of its rare-earth needs being met by the Mountain Pass mine.

However, following a free trade deal between the U.S. and China in the 1990s, lower labor costs and regulatory requirements meant China could undercut Mountain Pass. Combined with problems over water supply pollution and stricter regulations, Mountain Pass was forced to shut down.

The rest, as they say, is history.

China has gone on to dominate some 80% of mining and over 90% of refining this particular segment of metals.

But it wasn’t until the specter of China weaponizing its dominance of these minerals by suggesting it could restrict supply, first in 2010 with Japan and again this year over the trade dispute with the U.S., that the wakeup call was finally taken seriously.

Now, the U.S. is seeking cooperation from potential supply countries outside of China — notably Australia, but also Greenland, Botswana and Peru. The U.S. is looking to develop not just alternative raw material supply but, more importantly, to develop refining facilities, too.

A new body, the U.S. Development Finance Corporation, is set to play a significant role in facilitating the U.S. government’s efforts to take equity positions in mining projects and encouraging private sector investment, according to Frank Fannon, the U.S. assistant secretary of state for energy resources, according to Reuters.

The trade dispute has pushed the U.S. to reappraise China’s aggressive forays into mineral-rich countries around the world and wake up to the implications of allowing this to continue unchallenged.

DFIDS reports China has also become a significant player in Latin America. China-Latin America trade increased from almost negligible levels in 1990 to $10 billion in 2000 and $270 billion in 2012. In 2012, an $8.4 billion rare-earth deposit was discovered in Brazil; over the past few years, China has become Brazil’s undisputed top trade partner.

As the South China Morning Post reports, although China contains only a third of the world’s rare earth reserves, it accounts for 80% of U.S. imports of the minerals because it controls nearly all of the facilities to process the material.

Even MP Materials, the only existing U.S. rare earths facility, ships its ore to China for processing and has bizarrely been subject to a 25% tariff since the escalation of the trade war with China.

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A wholesale realignment of the U.S. critical metals supply chain would likely take a decade or more to achieve, while the mine development stage alone can take up to 10 years.

But the sooner the process starts, the more secure the U.S. will become.

Better late than never.

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Before we head into the weekend, let’s take a look at the week that was and some of the storylines on MetalMiner, which this week touched on steel prices, the potential opening up of Greenland’s resources and U.S.-India trade talks.

Looking for metal price forecasting and data analysis in one easy-to-use platform? Inquire about MetalMiner Insights today!

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

When you see the words “trade deal,” we instantly think of China, but the U.S. has embarked on a multitude of trade disputes with longtime trading partners.

To a greater or lesser extent, some progress is being made on most of them.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

One trade deal on which it was hoped there would be some progress before next year’s presidential elections is the not oft-covered but still meaningful deal with India.

According to the advisory firm Stratfor’s recent Worldview report, the U.S.’s bilateral trade with India totaled $142.1 billion last year.

But as with the U.S.’s trade balance with most emerging markets, the balance of trade is in favor of the developing nation.

India exported $83.2 billion worth of goods and services to the United States and imported $58.9 billion, resulting in a $24.3 billion surplus for India.

Rather implausibly, President Donald Trump has called Indian Prime Minister Narendra Modi the “tariff king,” demanding that New Delhi reduce its trade surplus with Washington and lower tariff barriers for U.S. commerce in India.

Expectations of a deal were boosted by comments Trump made and tweets about a meeting between U.S. Trade Representative Robert Lighthizer and Indian Commerce Minister Piyush Goyal on the sidelines of the U.N. General Assembly this month.

However, despite a mix of hype and threats, the two sides could not reach an agreement.

According to Stratfor, the U.S. is looking for concessions by India on information and communication technology, dairy, pharmaceuticals, agriculture, e-commerce, and data localization – a pretty full list. However, the U.S. failed to get much movement on any of these issues.

India, on the other hand, is anxious to avoid any escalation in tensions. In particular, India is looking to avoid a U.S. investigation under Section 301 of the Trade Act of 1974, which could bring even higher tariffs on Indian products and, potentially, over a wider range of goods.

Companies sourcing from or looking to source product from India will be disappointed that both sides look like they will retain high tariffs for now.

The article reports that in June, President Trump revoked India’s tariff benefits under the Generalized System of Preferences after receiving complaints from the U.S. medical devices and dairy sectors about difficulties in accessing the Indian market. That move prompted India to institute tariffs in June against 28 U.S. goods, hurting apple exporters from Washington state and almond exporters from California (among others).

Like most trade disputes, this will likely go through a series of tit-for-tat moves until such time as both sides are ready to make some compromises. While India is not known for stealing intellectual property in the way China has so blatantly done for much of this century, its policy of protecting domestic producers behind import tariffs is deeply entrenched.

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It will take considerable patience and time to achieve wholesale change to the current tariff structure.

For now, U.S. consumers should probably reconcile themselves to the current cost structure — at least until this side of the election.