Articles in Category: Global Trade

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This morning in metals news, the U.S.’s trade deficit with China reached an all-time high in 2018, one analyst says there’s a 35% chance U.S.-China trade talks will break down and aluminum maker Norsk Hydro’s technology pilot is up for a Green Award in the category of Innovation of the Year.

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U.S. Notches Record Trade Deficit with China

Among President Donald Trump’s oft-stated goals vis-a-vis trade talks with China is the reduction of the U.S. trade deficit with China.

However, despite a series of tariffs aimed at Chinese goods (the U.S. imposed a total of $250 billion worth of tariffs on goods from China last year), the deficit reached an all-time high in 2018.

According to U.S. Census Bureau data, the trade deficit rose from $375.6 billion in 2017 to $419.2 billion in 2018.

Communication Breakdown

Optimistic reports have come out of the White House of late with respect to the ongoing trade talks with China, with some media reports indicating a trade deal could be reached by the end of this month.

However, according to one analyst, there’s still a sizable chance talks could break down.

According to Eurasia Group analyst Jeff Wright, there is a 35% chance the talks will break down before a deal can be reached, Yahoo Finance reported.

“The current momentum behind a deal does not reduce the risk of major frictions once the two sides turn towards implementation,” Wright told Yahoo Finance.

In addition to the trade deficit, the U.S. has raised a bevy of allegations related to what it deems as China’s unfair trade practices, from intellectual property theft to forced technology transfer, among other complaints.

In August 2017, the United States Trade Representative, at the direction of the president, opened a Section 301 investigation into China’s trade practices; the investigation ultimately yielded the total $250 billion worth of tariffs imposed last year.

Norsk Hydro Nominated for Green Award

Aluminum maker Norsk Hydro was nominated for a Green Award in the category of innovation for its technology pilot in Karmøy, Norway.

“A lot of Hydro people have put so much effort into making the technology pilot a reality. They deserve this award,” said Thorvald Mellerud, head of technology in Hydro Primary Metal.

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The operation in Karmøy has been fully operational since June 2018 and “aims to verify at an industrial scale the world’s most energy and climate-efficient technology for aluminium production,” Norsk Hydro said in a release, adding that energy consumption will be reduced by 15%.

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This morning in metals news, the copper price picked up steam, the U.S. terminated the status of India and Turkey as beneficiaries of the Generalized System of Preferences (GSP) program, and Vale SA shares fell as the Brazilian miner’s CEO and other executives resigned over the weekend.

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Copper Price Rises on China News

The copper price made gains Tuesday, Reuters reported, after China announced new stimulus measures that included tax cuts and infrastructure spending.

Benchmark LME copper was bid up 1.2% to $6,487 per ton, according to the report.

U.S. Removes GSP Designation from Turkey, India

The Office of the United States Trade Representative (USTR) announced Monday that it is terminating the status of India and Turkey as beneficiaries of the GSP program.

The GSP program allows some products to come into the U.S. duty-free if the exporting countries meet certain eligibility criteria, including maintaining efforts to combat child labor and protect intellectual property rights, among others.

“India’s termination from GSP follows its failure to provide the United States with assurances that it will provide equitable and reasonable access to its markets in numerous sectors,” a USTR release stated. “Turkey’s termination from GSP follows a finding that it is sufficiently economically developed and should no longer benefit from preferential market access to the United States market.”

Vale CEO Resigns

The CEO of Brazilian miner Vale SA resigned over the weekend, CBC reported, sending shares down as the company struggles in the wake of a dam breach at its Corrego do Feijao mine in January that left more than 300 dead.

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“Vale informs that, at the end of Friday, March 1st 2019, its Board of Directors received from the Federal Public Prosecution Office (Ministério Público Federal), the Public Prosecution Office of the State of Minas Gerais (Ministério Público do Estado de Minas Gerais), the Federal Police and the Civil Police of Minas Gerais the Recommendation Nº 11/2019 with considerations and recommendations on the dismissal of some executives and employees at various levels of the company,” Vale said in a release.

Trade, trade, trade — that is the order of the day as the Trump administration pursues a trade accord with China and attempts to convince Congress to approve the United States-Mexico-Canada Agreement (USMCA).

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United States Trade Representative (USTR) Robert Lighthizer addressed Congress on Friday on the heels of the submission of the 2019 Trade Policy Agenda and 2018 Annual Report (which must be submitted by March 1 of every year, pursuant to the Trade Act of 1974).

In a statement, Lighthizer touted the administration’s trade actions as “more favorable to American workers.”

“In just two years, we have significantly re-written major trade deals with Korea, Mexico, and Canada,” he said. “We have undertaken dramatic new enforcement efforts to stop unfair trading practices by China and other countries. We are aggressively enforcing U.S. trade laws, including by bringing cases under trade agreements, relevant U.S. laws, and at the WTO. We are ensuring that countries receiving benefits under the GSP program live up to eligibility standards set by Congress. These actions and many others are contributing to a stronger U.S. economy, which has generated more jobs and higher wages for American workers.”

The USTR release also states that the Trump administration is “urging” Congress to approve the USMCA. The agreement, signed during the G20 Summit in Argentina late last year by the leaders of Mexico, Canada and the U.S., still needs to be ratified by the three countries’ legislatures before it can go into effect.

However, the outstanding hangup vis-a-vis ratification remains the U.S.’s Section 232 tariffs on steel and aluminum, which are still in place on U.S. imports of the metals from Canada and Mexico.

As reported previously, U.S. Agriculture Secretary Sonny Perdue has indicated he is attempting to convince President Donald Trump to remove the tariffs to ease passage of the USMCA, meant as the successor to the North American Free Trade Agreement (NAFTA) passed in 1994. Canada and Mexico have also indicated their legislatures may not approve the agreement unless the tariffs are removed.

That dialogue is perhaps complicated by the fact that the U.S. Department of Commerce last week launched anti-dumping and countervailing duty investigations of imports of fabricated structural steel from Canada, Mexico and China. The total value of the imports of the fabricated structural steel from Canada and Mexico in 2017 reached $1.1 billion, according to the Department of Commerce.

Meanwhile, the U.S. and China have continued trade talks this month, with media reports indicating a deal could be reached by the end of this month.

The two countries have traded a total of $360 billion in tariffs on each other’s goods, with the U.S. imposing a total of $250 billion as part of its Section 301 probe of China’s trade practices (including allegations of intellectual property theft, forced technology transfer and more).

The U.S. imposed a tariff package worth $200 billion on a wide range of goods from China in September at a tariff rate of 10%, which was was set to increase to 25% as of Jan. 1 until the two countries agreed to launch a new 90-day negotiating window (prompting Trump to delay the rate increase). More recently, Trump agreed to delay the March 1 deadline as talks continue.

The report also addresses the impact of China’s steel overcapacity.

“The domestic steel industry lost 14,100 American jobs in 2015 and 2016,” the report states. “Capacity utilization of American steel mills was only 69.4 percent in 2016, a level that inhibited efficient operations and discouraged American steel companies from investing in research and development. Meanwhile, China and other steel-producing nations dramatically increased their production capacity – despite growing evidence of global overcapacity. By 2016, China had enough capacity to produce as much steel as the rest of the world combined.”

The report touts the USMCA and the renegotiated trade deal with South Korea, the United States-Korea Free Trade Agreement, and lists negotiations underway for new trade deals with the U.K., E.U. and Japan.

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The full 373-page report is available on the USTR website.

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Not long ago, we at MetalMiner published a white paper on the “maker-to-user” movement — that is, the rise in local sourcing here in the U.S.

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The white paper, which makes reference to the agricultural “farm-to-table” movement, investigates some of the benefits of local sourcing and incorporates the impacts of the Trump administration’s tariffs on everything from steel and aluminum to a wide variety of other goods from China.

In that vein, MetalMiner’s sister site, SpendMatters, also took a look at the issue in a guest post from Jason Middleton, vice president of sales and development for Ray Products.

“The domestic companies evaluating reshoring are slowly discovering what some of their peers and competitors have known for more than a decade: Because of hidden costs, outsourcing has never been cost-effective in the long term,” Middleton writes.

Middleton uses British automaker Aston Martin as an example of how offshoring has long-term costs.

“In 2014, after receiving complaints about broken throttle pedals in certain vehicles manufactured after 2007, the company launched an investigation,” he continued. “Their engineers quickly uncovered the issue: The faulty pedals had been made with counterfeit material rather than the company-specified, injection-molded DuPont PA6 plastic.

“How counterfeit resin ended up in these pedals is the result of a complex web of supply chain dynamics.”

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Read the whole post over at SpendMatters.

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This morning in metals news, the Wall Street Journal reports the U.S. and China are approaching a deal to roll back tariffs imposed over the last year, the Steel Authority of India Ltd. (SAIL) boosted iron ore production last month and iron ore prices are on the rise.

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A Trade Resolution?

Global markets have followed every twist and turn in the ongoing U.S.-China trade talks with bated breath.

The two countries have imposed a total of $310 billion worth of tariffs on each other’s goods since last summer, injecting uncertainty into markets and raising concerns about the moves’ impact on growth.

However, this weekend the Wall Street Journal reported the two countries might be nearing a deal to roll back the tariffs, Reuters reported. According to a source cited in the report, the countries may ink the deal during a summit later this month.

SAIL’s Iron Ore Production Soars

The Economic Times reported SAIL’s February iron ore production jumped 11.62% year over year.

The state-owned steelmaker posted an all-time record in daily average output, producing 66,620 tons per day.

Iron Ore Prices

Iron ore prices are surging, Business Insider Australia reported, partially on policy news from China’s biggest steelmaking city.

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According to the report, the city of Tangshan issued a smog alert that curbed industrial activity, which thus offered price support to higher grades of iron ore.

This morning in metals news, U.S. Agriculture Secretary Sonny Perdue is looking to convince President Trump to use quotas instead of standard tariffs on Canada and Mexico, Chinese steel mills are holding off on iron ore restocking amid rising price, and an Italian aluminum plant will be coming back online soon.

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Metals Tariffs Remain USMCA Sticking Point

The leaders of the U.S., Canada and Mexico last year signed the United States-Canada-Mexico Agreement (USMCA) — meant to serve as the successor to the North American Free Trade Agreement (NATFA) — during the G20 Summit in Buenos Aires.

The signing came approximately 15 months after the formal commencement of talks among the three countries, geared toward revamping and modernizing the 1994 NAFTA.

However, the countries’ legislature still need to ratify the deal if it is to go into effect. While the leaders signed off on the deal, the U.S. maintained its Section 232 tariffs on steel and aluminum vis-a-vis imports from Canada and Mexico.

The fate of the tariffs remains a critical point if the deal is going to be nudged across the finish line.

Aa reported by Reuters, U.S. Agriculture Secretary Sonny Perdue is looking to convince the president that simple quotas are the way to go with respect to steel imports from Canada and Mexico.

Shopping Around

Per another Reuters report, rising iron ore prices have Chinese steel mills holding off on procuring supply.

As noted in the report, iron ore prices surged in February, in part a result of a dam breach disrupting supply from Brazilian miner Vale SA.

Italian Aluminum Plant to Restart

An Italian aluminum plant will be getting back to business in 2020, according to S&P Global Platts.

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According to the report, Swiss company Sider Alloys will restart Alcoa’s former Portovesme aluminum smelter next year.

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This morning in metals news, Chile’s Codelco announced its underground Chuquicamata mine will open later this year, United States Trade Representative Robert Lighthizer testified before the House Ways and Means Committee on Wednesday and the U.S. Department of Commerce issued an affirmative preliminary determination in an anti-dumping investigation related to China.

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Chuquicamata to Open this Year

Chilean state-owned miner Codelco announced the underground Chuquicamata copper mine will open for operations in the middle of the year, Reuters reported.

As the report notes, the miner last year announced plans to transform the mine site from an open cast setup to an underground mine, coming in at an investment of $5.55 billion.

Lighthizer at Ways and Means

As trade meetings between the U.S. and China continue, USTR Robert Ligthhizer offered testimony Wednesday before the House Ways and Means Committee.

“We are here to talk about China,” Lighthizer said during his opening remarks. “I agree with those who see our large and growing trade deficit and their unfair trade practices – including technology transfer issues, failure to protect intellectual property, large subsidies, cyber theft of commercial secrets and other problems – as major threats to our economy.  We can compete with anyone in the world but we must have rules – enforced rules – that make sure market outcomes, not state-capitalism and technology theft, determine winners.”

Lighthizer continued, saying the negotiating teams had made progress but that there is still much work left to do.

“Let me close by saying that we have engaged in a very intense, extremely serious, and very specific negotiation with China on crucial structural issues for several months now,” he said. “We are making real progress. If we can complete this effort – and again I say ‘if’ – and can reach a satisfactory solution to the all-important outstanding issue of enforceability as well as some other concerns, we might be able to have an agreement that helps us turn the corner in our economic relationship with China.

“Let me be clear: much still needs to be done both before an agreement is reached and, more importantly, after it is reached, if one is reached.”

DOC Rules in Steel Rack Case

The U.S. Department of Commerce issued an affirmative preliminary determination in its anti-dumping investigation of steel racks from China.

According to the DOC, exporters have been dumping the steel racks at margins ranging from 18.08- 144.50%.

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The value of steel rack imports from China in 2017 hit $200 million, according to an estimate by the Coalition for Fair Rack Imports (the petitioner in the case).

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When is a poor deal a bad deal?

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That may be the question we are asking in a few weeks time after U.S. President Donald Trump and China’s president, Xi Jinping, meet sometime in March at Mar-a-Lago, Trump’s Palm Beach resort.

Trump is tweeting a deal is making “substantial progress” and he expects a deal to be concluded face-to-face with Xi sometime in March.

But fears are growing the president’s enthusiasm for a “win” may overshadow the need for a comprehensive and enforceable agreement to a number of issues that have dogged U.S.-China trade relations for years.

Stock markets, oil prices and currencies have all moved positively in response to what is seen as progress to defuse trade tensions. In reality, no details have been given on what has been agreed to or what a final agreement is likely to achieve.

Drawing on a Financial Times analysis, we can identify several key objectives.

Read more

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This morning in metals news, President Donald Trump over the weekend announced he would delay the previously scheduled March 1 tariff bump on a wide range of Chinese goods, British Steel Ltd. could take a hit if a Brexit deal cannot be reached and Brazil’s iron ore sector could experience significant disruptions in 2019.

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Tariff Delay

Trade negotiations between the U.S. and China continued over the weekend, during which President Donald Trump announced he would delay a previously scheduled March 1 tariff rate increase.

Last year, the U.S. imposed tariffs on $200 billion worth of Chinese imports at a rate of 10%, which was then scheduled to rise to 25% as of Jan. 1. However, following further negotiations, the two countries agreed to begin a 90-day negotiating window and the U.S. delayed the tariff bump to March 1.

“I am pleased to report that the U.S. has made substantial progress in our trade talks with China on important structural issues including intellectual property protection, technology transfer, agriculture, services, currency, and many other issues,” Trump said in a tweet over the weekend.

He added that as a result of the “productive talks, I will be delaying the U.S. increase in tariffs now scheduled for March 1. Assuming both sides make additional progress, we will be planning a Summit for President Xi and myself, at Mar-a-Lago, to conclude an agreement. A very good weekend for U.S. & China!”

British Steel and Brexit

According to Bloomberg, British Steel Ltd. could take a hit of $130 million if Prime Minister Theresa May fails to orchestrate a Brexit deal with the E.U. before the March 29 deadline.

The financial hit comes as the E.U. earlier this year suspending free carbon permits in preparation for a no-deal scenario, according to the report.

Brazil Iron Ore Disruptions

The Brazilian iron ore market has already been disrupted this year, primarily as a result of the fatal tailings dam collapse at Vale SA’s Corrego do Feijao mine in January.

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However, excluding Vale, Brazil’s iron ore sector could see a disruption of 8 million tons of ore this year, according to a mining.com report citing Wood Mackenzie.

The association representing Europe’s automotive manufacturers recently weighed in on the latest developments in the U.S.’s Section 232 automotive probe.

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“Imports of cars and auto parts from the EU clearly do not pose a national security risk to the United States,” said Erik Jonnaert, secretary general of the European Automobile Manufacturers’ Association (ACEA). “Any trade restrictive measures in our sector will have a serious negative impact, not only on EU manufacturers but also on US manufacturers.”

On May 23, 2018, the Trump administration launched a Section 232 investigation into imports of automobiles and automotive parts. Section 232 of the Trade Expansion Act of 1962 is used to determine if certain imports are threats to U.S. national security. The Trump administration used Section 232 to impose tariffs on imported steel and aluminum last year.

Following the initiation of a Section 232 investigation, the U.S. secretary of commerce has 270 days by which to give the president a report with recommendations. The president then has 90 days to decide what to do with the findings, if anything.

Secretary of Commerce Wilbur Ross sent President Donald Trump his Section 232 auto report Sunday, Feb. 17, just hours before the deadline.

Unsurprisingly, European automakers are concerned at the prospect of new U.S. tariffs on imported automobiles. In its prepared statement, ACEA also posited the tariffs would have a deleterious effect on the U.S. economy.

“ACEA cautions that the application of additional duties on imports of passenger cars and parts would not only severely affect the EU industry, but also the US economy and consumers alike,” ACEA said in the release. “It would mean that all automobile manufacturers in the United States, whether domestic or international, would face a significant increase in costs.

“This cost increase would have to be mitigated by lowering margins, reducing production costs or passing additional purchase and repair costs on to consumers. Such measures would make American automobile manufacturing less competitive and hit US consumers in their pockets. In other words, the imposition of tariffs would have a counter-productive effect on the US economy.”

While the ongoing trade negotiations between the U.S. and China dominate much of the headlines, the U.S. and the E.U. are working through trade differences, too. For example, the U.S.’s Section 232 tariffs on steel and aluminum remain in effect for the trading bloc.

With the 90-day Section 232 window underway for Trump, the clock is ticking. According to Reuters, European ministers on Friday debated when to begin trade negotiations with the U.S.

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According to media reports last week, European Commission President Jean-Claude Juncker said Trump had promised him he would hold off on imposing automotive tariffs. However, Juncker added that if the U.S. went forward with the tariffs, the E.U. would retaliate in kind.

Currently, the E.U. has a 10% tariffs on imported U.S.-made vehicles, while the U.S. tariff on E.U.-made cars is 2.5%.