Articles in Category: Global Trade

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Before we head into the weekend, let’s take a look back at the week that was with some of the stories here on MetalMiner:

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This morning in metals news, the Office of the United States Trade Representative (USTR) dished out criticism for a global steel forum and its efforts toward curbing excess steel capacity, Chinese steel rebar prices are up and Walmart warns tariffs could result in price increases.

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USTR Criticizes Global Steel Forum

Following the Global Forum on Steel Excess Capacity ministerial meeting held in Paris yesterday, the USTR released a statement questioning the forum’s efficacy in efforts to curb global steel capacity.

“The United States thanks Argentina for its chairmanship of the Global Forum and for its efforts to achieve meaningful outcomes from the Forum process this year,” the statement begins. “The United States has been an active and committed partner in this process, working to seek prompt implementation of the Forum’s past policy recommendations, which are aimed at reducing excess capacity as well as restoring balance and market function in the global steel sector.”

However, the USTR argued the forum has not done enough to realize its goals.

“Unfortunately, what we have seen to date leaves us questioning whether the Forum is capable of delivering on these objectives,” the statement continued. “We do not see an equal commitment to the process from all Forum members. Commitments to provide timely information critical to the proper functioning of the Forum’s work, for example, have gone unfulfilled. More importantly, we have yet to see any concrete progress toward true market-based reform in the economies that have contributed most to the crisis of excess capacity in the steel sector.”

Chinese Rebar Prices Rise

Chinese construction steel rebar prices were up Friday, according to a Reuters report.

According to the report, the most-active contract on the SHFE rose 0.1% on Friday.

Walmart Warns of Price Increases as a Result of Tariffs

On the heels of Washington’s announcement this week of the forthcoming imposition of tariffs worth $200 billion on imports of Chinese goods, Walmart wrote a letter to USTR Robert Lighthizer warning that it may have to raise prices, Reuters reported.

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According to the report, the letter cited products which could be hit with price increases, which included gas grills, bicycles and Christmas lights.

At a recent forum for business leaders, I was surprised the topic of conversation was not Brexit or Donald Trump’s latest tweet, or even cricket, but when the next recession would hit.

That hasn’t been the case for many years now. Since 2009, we have experienced a more or less constant bull market, giving us the longest run of positive growth for a hundred years. Business leaders have been cautiously optimistic growth would continue for the foreseeable future; only recently has the tone changed.

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Not that it has felt quite that joyous — markets have been volatile, particularly commodities, and in Europe government-imposed austerity aimed at balancing excess state spending needed to nurse sick economies back to growth has meant many have felt life has been tough up until the last few years.

But now many in government, industry, academia and even the media are asking the question: when will the next recession hit?

Typically, the media, as here in The Telegraph, are being somewhat more sensationalist about the issue. For example, “The next downturn could rival the Great Depression and wipe $10 trillion off US household assets,” the headline of The Telegraph article reads.

But even so, the article in question makes some sound observations.

Martin Feldstein, president of the U.S. National Bureau of Economic Research and a former chairman of the White House Council of Economic Advisors, was quoted as saying “We have no ability to turn the economy around, fiscal deficits are heading for $1 trillion dollars and the debt ratio is already twice as high as a decade ago, so there is little room for fiscal expansion.”

The worry is that after years of sluggish growth, ultra-low interest rates and the buildup of a massive Federal Reserve balance sheet of assets the world’s major economies lack the fiscal, monetary, and emergency tools to fight the next downturn.

Source: St. Louis Fed

Nor is the U.S. the worst-placed. The economy is still experiencing good levels of growth, the Fed is gradually putting up interest rates (which will allow it to cut later if needed) and the country is blessed with a strong central bank.

But Europe has no fiscal backup, rates are still at record lows and the ECB has committed to holding its reference rate at minus 0.4% until the end of next year, the article states, by which time the end of the cycle could be almost upon us.

Another Telegraph report is suggesting there is a one-in-three chance of a U.S. recession within the next two years, citing the most probable catalyst as the Federal Reserve overtightening monetary policy.

Two economists from the CME Group are quoted as predicting the next recession was unlikely to be caused by mortgage debt or financial panic, as in 2008. Instead, Bluford Putnam and Erik Norland predict the recession will be triggered by U.S. interest rates being raised too high, which will cause trouble in emerging markets and overvalued technology stocks.

Certainly, technology stocks are a concern we all like to ignore when we look at our latest portfolio revaluation. The S&P 500, which is 25% tech stocks, is up 300% since March 2009, while the Nasdaq, which is majority tech stocks, is up 600% — those seem sustainable today based on current earnings, but are they long term?

The stock market, tech stocks included, remains remarkably solid and earnings remain robust such that, at least on current numbers, valuations are not ridiculous.

But economies outside of the U.S. are already showing signs of distress from the modest Fed tightening we have seen so far.

Some emerging-market currencies — like those of Turkey, South Africa and Argentina — already fragile, have taken a pounding this year, dramatically raising local currency costs for dollar-denominated debt.

The biggest gorilla in the room is China, facing a combination of long-term structural issues, such as a shaky shadow banking sector, non-performing debt and a slowing economy due to a trade war with the U.S. that is getting out of control.

The U.K.’s former prime minister Gordon Brown is quoted as saying the world is “in danger of sleepwalking into a future crisis,” adding the next crisis could well start in Asia because of the amount of lending through the shadow banking system.

Unfortunately, the climate of international cooperation is not the same as it was in 2008; today, the focus would be on apportioning blame instead of fixing problems. “Countries have retreated into nationalist silos and that has brought us protectionism and populism. Problems that are global as well as national and local are not being addressed,” Brown is quoted as warning.

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For now there is not much buying organizations can or should be doing. Most expect the next crisis could be 12-24 months away, but the sheer number of parties that are talking about it could herald its arrival by sheer dint of expectation.

The World Trade Organization (WTO) came to be in January 1995, and has since served as a global body for mediation of trade disputes between nations.

But much has changed since 1995.

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Now, nearly a quarter of a century later, some are asking how the WTO can be modernized for the 21st century while also addressing challenging currently facing the system.

The European Commission published an outline of its proposals to modernize the WTO, which will be presented Wednesday, Sept. 20, during a meeting of E.U. members in Geneva.

“The multilateral trading system has for the past decades provided a stable, predictable and effective framework for companies across the world, helping many economies to grow rapidly,” E.U. Trade Commissioner Cecilia Malmström said in a release. “Also today, the WTO is indispensable in ensuring open, fair and rules-based trade. But despite its success, the World Trade Organisation has not been able to adapt sufficiently to the rapidly changing global economy. The world has changed, the WTO has not. It’s high time to act to make the system able to address challenges of the today’s global economy and work for everyone again. And the EU must take a lead role in that.”

According to the European Commission release, the concept paper outlining the proposals focuses on three main areas:

  • updating the rule book on international trade to capture today’s global economy
  • strengthening the monitoring role of the WTO
  • overcoming the imminent deadlock on the WTO dispute settlement system

Rising trade tensions have put pressure on the WTO in the last year, particularly vis-a-vis the escalating tariffs levied between the U.S. and China (earlier this week the Trump administration announced it would impose an additional $200 billion worth in tariffs on Chinese goods). President Trump has been a vocal critic of the WTO, even threatening to withdraw from the global trade body during an interview with Bloomberg News last month.

The E.U. concept paper argues the WTO is up against the “deepest crisis” it’s faced since its inception, but remains committed to its purpose.

“The EU remains a staunch supporter of the multilateral trading system and firmly believes that the WTO is indispensable in ensuring free and fair trade,” the paper states. “The multilateral system has provided the basis for the rapid growth of economies around the world and for the lifting of hundreds of millions of people out of poverty. It has been the guarantor of trade at times of growing tensions and the backbone of the international system of economic governance.

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“Even at a time of the harshest economic conditions during the great recession, it has helped avert recourse to the trade wars that have fuelled economic decline in the past. As such the health and centrality of the multilateral system needs to be preserved. Its marginalisation, weakening and decline have to be prevented at all costs.”

In the paper, the E.U. warns the crisis could get worse.

“The crisis is set to deepen further in the coming months, as more unilateral measures are threatened and imposed, leading, in some cases, to countermeasures, or to mercantilist deals,” the paper states. “In parallel, as more Appellate Body members leave office while the new appointments are being blocked, the dispute settlement system will soon fall into paralysis, rendering enforcement of the rules impossible.

“That would equate to a 20-year step backward in global economic governance. It would mean going back to a trading environment where rules are only enforced where convenient and where strength replaces rules as the basis for trade relations.”

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This morning in metals news, India is considering upping its steel import duty, China’s spending on subways could assist its steel sector and an update in the Rusal sanctions saga.

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Supporting the Rupee

In order to give support to its currency, the Indian government is considering increasing its import duty on some steel products, according to a Reuters report.

Current duties range from 5% to 12.5%, according to the report, while the government is considering raising the duty to 15%.

Steel and Subways

China’s push toward subway investment could be a boon for its steel sector, Reuters reported.

Last month, the cities of Suzhou and Changchun announced plans to spend the equivalent of billions of dollars to add approximately 1,000 miles to their underground subway systems, according to the report.

A Little Leeway

With the Oct. 23 deadline approaching, many are wondering if the U.S. will in fact rescind the sanctions imposed back in April on Russian companies (including aluminum giant Rusal).

Even so, a new development could help to mitigate the type of market reaction seen in April, when aluminum prices skyrocketed on the news of the sanctions.

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According to Bloomberg, the U.S. Treasury Department is allowing Rusal’s existing customers to negotiate new contracts.


This morning in metals news, China went to the World Trade Organization to file a complaint regarding the U.S.’s $200 billion worth of tariffs announced Monday, Nucor resumes operations in the Carolinas following Hurricane Florence and copper prices rally.

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China Goes to the WTO

Following the U.S.’s announcement Monday of its intention to slap $200 billion worth of tariffs on imports from China as of Sept. 24, China has gone to the World Trade Organization (WTO) to file a complaint, Reuters reported.

The U.S. announced plans to impose a 10% tariff on $200 billion worth of Chinese imports on Monday.

Nucor Operations Restart in North Carolina, South Carolina

After halting its operations in the Carolinas last week ahead of Hurricane Florence, Nucor’s plants in the two states are back up and running, S&P Global Platts reported.

Copper Prices Rise

Despite an escalation in trade tensions between the U.S. and China, the price of copper rallied Tuesday, Reuters reported.

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LME copper jumped 1.4% Tuesday, according to the report.

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The Trump administration announced after markets closed Monday that it would go through with the imposition of a 10% tariff on $200 billion worth of Chinese goods.

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The tariffs — stemming from the United States Trade Representative’s (USTR) Section 301 investigation of Chinese trade practices — will go into effect Monday, Sept. 24, and will escalate to 25% as of Jan. 1, 2019.

Taking into account the $50 billion in tariffs that have already gone into effect, the additional $200 billion means about half of the value of Chinese exports to the U.S. is now subject to tariffs (in 2017, the value of U.S. imports of Chinese goods hit just over $505 billion).

However, the tariffs don’t stop there — the U.S. will add $267 billion in tariffs if China responds with retaliatory tariffs, according to a statement from the White House.

“For months, we have urged China to change these unfair practices, and give fair and reciprocal treatment to American companies,” the White House statement read. “We have been very clear about the type of changes that need to be made, and we have given China every opportunity to treat us more fairly. But, so far, China has been unwilling to change its practices.

“To counter China’s unfair practices, on June 15, I announced that the United States would impose tariffs of 25 percent on $50 billion worth of Chinese imports. China, however, still refuses to change its practices – and indeed recently imposed new tariffs in an effort to hurt the United States economy.”

According to a USTR release, the finalized list of products in this $200 billion tranche of tariffs includes 5,745 full or partial lines out of the originally proposed 6,031 tariff lines.

“Included among the products removed from the proposed list are certain consumer electronics products such as smart watches and Bluetooth devices; certain chemical inputs for manufactured goods, textiles and agriculture; certain health and safety products such as bicycle helmets, and child safety furniture such as car seats and playpens,” the USTR release states.

U.S. Rep. Kevin Brady (R-TX), chairman of the House Ways and Means Committee, in a statement expressed support for measures aimed at addressing alleged unfair trade practices by China, but offered a cautionary note vis-a-vis the impact of tariffs.

“Any time tariffs are imposed I worry that Americans will be forced to pay extra costs – in this case on nearly half of U.S. imports from China,” Brady said. “I continue to emphasize that the ultimate means to create an effective outcome is for President Trump and President Xi to engage constructively to develop a long-term and profound solution that levels the playing field for American manufacturers, farmers, and workers.

“Until China comes to the table, one way to relieve pressure on Americans is establish an effective and timely process to allow products to be excluded from these additional tariffs if tariffs would make it harder for us to sell more ‘Made in America’ products globally.”

Thomas J. Donohue, president and CEO of the U.S. Chamber of Commerce, disapproved of the decision.

“The U.S. economy runs on pro-growth policies, but that’s not what tariffs on $200 billion worth of Chinese goods deliver,” he said in a statement. “The administration has serious issues to resolve with China on market access, unfair subsidies, technology theft, and cybersecurity. But there are less harmful ways to truly achieve free and fair trade with China.

“Today’s decision makes clear that the administration did not heed the numerous warnings from American consumers and businesses about rising costs and lost jobs on Main Street, in factories, and on farms and ranches across the country. Both countries should stay at the negotiating table, and the U.S. should continue working with its allies to seek alternative solutions.”

On the other hand, Alliance for American Manufacturing President Scott Paul supported the move to put additional pressure on China.

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“Strong trade enforcement against China’s persistent violations of trade laws, including the theft of American trade secrets, is long overdue,” Paul said. “These tariffs should compel China to finally address unfair trade practices. America has the leverage in this economic relationship, and it’s about time we use it to defend our workers and businesses who can compete with anyone on a truly level playing field.”

The full list of Chinese products included within the latest round of tariffs can be found here.

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This morning in metals news, President Donald Trump again expressed support for imposing tariffs on imports (as the U.S. considers further tariffs on Chinese goods), shares of the Chinese aluminum giant China Hongqiao fell, and base metals prices are down on the prospect of escalating tariffs between China and the U.S.

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Tweeting for Tariffs

On Monday morning, President Trump expressed support yet again for his administration’s strategy of tariffs:

Tariffs have put the U.S. in a very strong bargaining position, with Billions of Dollars, and Jobs, flowing into our Country – and yet cost increases have thus far been almost unnoticeable. If countries will not make fair deals with us, they will be “Tariffed!”

He also made direct reference to the steel industry:

Our Steel Industry is the talk of the World. It has been given new life, and is thriving. Billions of Dollars is being spent on new plants all around the country!

The U.S. has already slapped a total of $50 billion worth of tariffs on Chinese goods, and, according to The New York Times, the president is expected to announce an additional $200 billion in tariffs on Chinese goods this week, which would mark a significant escalation in tensions between the two countries.

China Hongqiao Shares Fall

Shares in Chinese aluminum maker China Hongqiao dropped on the news of new fees announced by Shandong province, Reuters reported.

Shares fell by as much as 8.5% Monday after falling nearly 16% Friday, according to the report.

Base Metals Prices Drop

Speaking of trade tensions, said tensions have had a depressive effect on base metals prices, according to Reuters.

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Base metals prices fell across the board Monday in anticipation of an expected announcement this week from the U.S. regarding an additional $200 billion in tariffs on Chinese goods.

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This morning in metals news, July shipments by U.S. steel mills were up compared to last year, U.S. raw steel production for the week ending Sept. 8 was up 9.8% compared with the same week last year and the Aluminum Association asked the Trump administration to provide quota-free tariff exemptions for Canada and Mexico.

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Steel Shipments Surge in July on Year-Over-Year Basis

U.S. steel mill shipments in July were up 5.8% compared with July 2017, according to a report by the American Iron and Steel Institute (AISI).

Mills shipped over 7.9 million net tons of steel in July 2018. However, shipments were down 1.0% from the previous month.

Steel Production Rises

For the week ending Sept. 8, U.S. raw steel production hit 1.88 million tons at a capacity utilization rate of 80.2%, according to an AISI report, marking a 9.8% increase from the same week in 2017 (when the capacity utilization rate was 73.4%).

In addition, production jumped 0.5% from the week ending Sept. 1, 2018.

Aluminum Association Asks for Quota-Free Tariff Exemptions for Canada, Mexico

As the U.S. continues a second leg of negotiations on NAFTA — this time with Canada after having reached an agreement in principle with Mexico — the Aluminum Association sent a letter to the Trump administration calling for quota-free tariff exemptions on aluminum for Canada and Mexico.

The two countries were hit with the Section 232 tariff after their temporary exemptions expired June 1.

“Even more importantly, though, I encourage the Administration to use this negotiation process to address any national security questions specific to Canada and Mexico raised in the Commerce Department’s Section 232 report,” wrote Heidi Brock, president and CEO of the Aluminum Association, in the letter to U.S. Trade Representative Robert Lighthizer. “A successful negotiation for a modernized NAFTA should resolve these concerns, and I encourage you to recommend that President Trump provide a full exemption – without quotas – for aluminum imports from Canada and Mexico.

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“As the U.S. aluminum industry is in a deficit market, limiting access to aluminum suppliers in the NAFTA region will be a barrier to continued U.S. growth and investment.”

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This morning in metals news, Nucor announced plans late last week to invest $650 million in its Kentucky sheet mill, ArcelorMittal put in a revised bid for Essar Steel and China warns it will retaliate if the U.S. imposes further tariffs.

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A Big Investment

The Nucor Corporation announced Friday that it planned to invest $650 million in to expand the production capability of Nucor Steel Gallatin, its flat-rolled sheet steel mill in Ghent, Kentucky.

“This investment is another major component of our planned strategy for long-term profitable growth,” said John Ferriola, chairman, CEO and president of Nucor. “Together with the new galvanizing line, this expansion increases our presence in the important Midwest market, specifically in the automotive, agriculture, heavy equipment, and energy pipe and tube sectors.”

According to the release, Nucor acquired the former Gallatin Steel Company in late 2014 for approximately $780 million.

ArcelorMittal Revises Essar Bid

ArcelorMittal submitted a higher bid for the bankrupted Essar Steel, the Economic Times reported.

According to the report, the new bid is higher than the bid submitted by another suitor, Numetal.

China Warns of Tariff Retaliation

As the U.S. mulls whether to impose tariffs on Chinese goods worth approximately $200 billion, China warned it would retaliate against additional tariffs, ABC News reported.

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In addition, President Donald Trump indicated Friday he was considering tariffs on an additional $267 billion worth of goods (in addition to the aforementioned $200 billion currently under review).