Articles in Category: Global Trade

Copper appears to be caught in the crosswinds.

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After months of steady declines from a peak of U.S. $6,600 per ton in April, the copper price had drifted down to well below $6,000 per ton on fears of what impact the ongoing trade war between the U.S. and China would have on top consumer China.

But while trade war tensions continue to provide significant headwinds, an extending strike at Codelco’s Chuquicamata copper mine is raising concerns about supply.

The copper market is considered to be in deficit, according to Reuters, saying the global refined copper market showed a deficit of 51,000 metric tons in March, compared with a 72,000-ton surplus in February. Bloomberg cited the International Copper Study Group, which forecast a deficit of 189,000 tons by the end of this year.

Codelco’s strike has been rumbling on for 12 days now. Chuquicamata is the company’s third-largest mine, producing 321,000 metric tons last year (so over 10,000 tons have been lost so far).

Some 3,200 workers at the mine are represented by three unions. Their grievance is focused on comparable terms of employment between retiring older workers and incoming new workers. The company is holding back on the more generous terms older workers enjoy as they negotiate the severance of some 1,700 workers due to the transition from open pit to underground mine in the next 12 months.

So far, Codelco says it has made the best offer it can.

Workers, however, are not satisfied.

Negotiations are at an impasse. The union is going back to the workers later this week for an extension to the strike. In and of itself, the loss of Chuquicamata’s production is not critical for the copper market, but it heightens concerns about where supply is going to come from, as investment in new mines has been depressed for some years by excess supply and low prices.

Perversely, though, inventory has been rising.

Both the LME and SHFE have seen increases in stocks this year, although they have fallen somewhat in the last month or so. Generally, inventory levels do not suggest a market in crisis.

So, what can we make of the recent price rises: are they purely a reaction to the Chuquicamata strike and a weaker dollar boost to commodity prices, or the buildup for a move higher?

Demand, while less robust than previous years, remains fairly solid. Much of the negativity is down to fears over the trade conflict between the U.S. and China, as is the case with much of the commodity and equity markets; a resolution to that squabble would see a return of optimism and higher prices.

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Without it, though, it is hard to see significant upside to copper this year — the fundamentals are not supporting that yet. In the meantime, sentiment is king.

MetalMiner’s Trade Resource Center (trade.metalminer.com)

This morning in metals news, MetalMiner now has a trade-centered news portal, the European steel sector is demanding tougher safeguards and the copper price posted gains.

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MetalMiner Trade Resource Center

Tariffs, trade deals and trade wars — the world is abuzz these days with trade news.

That is why MetalMiner has launched the MetalMiner Trade Resource Center, which will serve as a one-stop shop for trade news, analysis and data.

Visitors can find the Trade Resource Center under the “Research” menu tab, or by navigating to trade.metalminer.com.

The new page features all of the site’s news and analysis on trade and tariffs, from Section 232 and 301 to the ongoing negotiations with China. Visitors can also find MetalMiner’s library of trade-related podcasts, in addition to MetalMiner white papers and links to pertinent sources of trade data.

E.U. Steel Industry Wants Stronger Safeguards

Earlier this year, the E.U. imposed new steel safeguards aimed at protecting the bloc’s steel sector on the heels of the U.S.’s Section 232 steel tariffs.

The E.U.’s steel industry, however, argues Europe needs to do more.

According to a Reuters report, European steel executives Wednesday argued for stronger safeguards, claiming the European steel sector faces an existential threat. The executives argued the safeguards have not been effective and that a scheduled 5% increase in the quotas set under the safeguards will be detrimental to the sector.

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Copper Hits 5-Week High

The copper price rose to a five-week high Wednesday, buoyed by optimism related to U.S.-China trade talks, Reuters reported.

According to the report, U.S. Treasury Secretary Steven Mnuchin said a trade deal between the two countries is about 90% complete.

U.S. President Donald Trump and Chinese President Xi Jinping are scheduled to meet during the G20 Summit in Japan later this week. The two countries will aim to revitalize trade talks after May’s setbacks, when tensions escalated and the economic superpowers traded tariffs.

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This morning in metals news, stocks in Asia fell Tuesday, Chinese steel prices continued recent gains and U.S. Steel named a new chief information officer.

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Asian Stocks Slide

Shares in Asian companies fell Tuesday ahead of a meeting scheduled for later this week between U.S. President Donald Trump and Chinese President Xi Jinping, CNBC reported.

Trade talks between the economic superpowers fizzled last month when Trump raised tariffs on $200 billion in Chinese goods and China responded with tariffs on $60 billion in U.S. goods.

The Shanghai composite dropped 0.87%, while the Shenzen composite dropped 0.992%, CNBC reported.

Chinese Steel Prices Continue Gains

Chinese steel prices ticked upward for the fifth straight session, Reuters reported, while the steelmaking raw material iron ore slipped.

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The most-actively traded SHFE rebar October contract closed up 2.2%, while hot-rolled coil was up 1.7%, according to the report.

U.S. Steel Taps New CIO

U.S. Steel announced the appointment of Steven D. Bugajski to the position of chief information officer, effective July 1.

“Steve’s depth of experience has shown that his talents, strong knowledge of our systems, and insights into IT trends and opportunities that could benefit our company make him well-positioned to lead our Information Technology organization,” U.S. Steel CEO David Burritt said in a release.

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This morning in metals news, the Supreme Court will not hear a challenge to President Donald Trump’s Section 232 steel tariffs, Chinese steel prices made gains Monday and the U.S. is mulling a ban on 5G technology manufactured in China.

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Supreme Court Won’t Hear 232 Challenge

The Supreme Court has decided not to hear a challenge to Trump Section 232 tariffs on steel, CNBC reported.

The plaintiffs in the case, which includes the American Institute for International Steel, argue the tariffs have harmed the domestic steel sector and domestic steel companies.

Chinese Steel Prices Rise

Chinese steel prices have made gains this week, Reuters reported, with the most-traded SHFE October rebar contract closing up 2.3%.

Hot-rolled coil was up 3.7%, according to the report.

U.S. Considers Ban on China-Made 5G Technology

As the U.S. and China get ready to resume trade talks this month during the G20 Summit in Japan, the U.S. is reportedly considering a requirement that 5G technology used in the U.S. must be manufactured outside of China, CNBC reported (citing the Wall Street Journal).

The announcement continues the buildup of tension between the U.S. and Chinese telecommunications giant Huawei Technologies.

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The report notes that if such a ban were formalized, telecommunications firms like Nokia and Ericsson would have to move production outside of China in order to continue to be able to serve the U.S. market.

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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 metals storylines here on MetalMiner:

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This morning in metals news, Rio Tinto downgraded its 2019 iron ore guidance, India is looking to combat Chinese steel imports with higher duties, and the copper price lost some gains late this week on the back of U.S.-Iran tensions and ahead of the G20 Summit in Japan.

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Rio Tinto Downgrades Iron Ore Guidance

Due to operational challenges, Rio Tinto this week announced it has downgraded its 2019 iron ore guidance down to between 320 million and 330 million tons (from between 333 million and 343 million tons).

“Rio Tinto Iron Ore is currently experiencing mine operational challenges, particularly in the Greater Brockman hub in the Pilbara,” the firm said. “This is resulting in a higher proportion of certain lower grade products, partly to protect the quality of our flagship Pilbara Blend.

“Around 1.5 million tonnes of these products were sold in the first quarter, as noted in the 2019 Quarterly Operations Review, 16 April 2019. Additional sales of these products will be made during 2019.”

Indian Steel Ministry Eyes Higher Steel Duties

The Indian steel ministry is targeting a duty increase on imports of finished steel products, Reuters reported, up to 15% from a range of between 7.5% to 12.5%.

According to the report, the Indian steel ministry cited concerns related to the U.S.-China trade war and resulting diverted supplies of steel away from the U.S. market.

Copper Price Falls

After making gains earlier in the week, the copper price slipped on account of tensions between the U.S. and Iran, Reuters reported.

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Three-month LME copper fell 0.4% to $5,592 on Friday after hitting its highest level since May 21 on Thursday, according to the report.

Quite a bit has happened since late November, when the leaders of the U.S., Canada and Mexico signed the United States-Mexico-Canada Agreement (USMCA), the intended successor to the North American Free Trade Agreement (NAFTA) and sometimes dubbed “NAFTA 2.0.”

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More recently, President Donald Trump threatened to impose an escalating tariff, beginning at 5%, on all imports from Mexico as of June 10 if the countries could not reach an agreement on immigration enforcement. Days before the deadline, the U.S. announced it would back away from the tariffs amid a deal reached with Mexico.

The U.S. also recently lifted its Section 232 steel and aluminum tariffs with respect to imports from Canada and Mexico, one high-profile sticking point in the USMCA approval process.

The legislatures of all three countries must ratify the USMCA before it can go into effect; as such, the deal has been in a sort of limbo since the countries’ executive leaders signed the deal during the G20 Summit in Buenos Aires.

Until recently, none of the countries’ legislatures had approved the USMCA. That changed this week, however, as the Mexican Senate became the first to ratify the USMCA.

In a press conference Thursday, Mexican President Andrés Manuel López Obrador lauded the USMCA’s passage, saying the approval conveys confidence to national and foreign investors and is good for the Mexican economy.

In the U.S., President Donald Trump in public statements has continued to put pressure on the Democrat-majority House of Representatives to pass the USMCA.

The United States Trade Representative (USTR) lauded Mexico’s approval.

“The USMCA is the strongest and most advanced trade agreement ever negotiated,” USTR Robert Lighthizer said in a prepared statement. “It is good for the United States, Mexico, and Canada in a way that truly benefits our workers, farmers, and businesses. The USMCA’s ratification by Mexico is a crucial step forward, and I congratulate President López Obrador and the Mexican Senate on this historic achievement.”

In his opening statement during a Senate Finance Committee hearing Tuesday, Lighthizer called the USMCA the “gold standard.”

“It is the gold standard for rules on the digital economy, financial services, intellectual property, etc.,” he said. “It will help stop the outflow of manufacturing jobs and return many to the United States. Its labor and environmental provisions are the most far-reaching ever in a trade agreement. The agricultural chapter will lead to increased market access and eliminate unfair trading practices by our trading partners.”

Among other clauses, the USMCA includes language on labor practices (aimed particularly at lifting labor conditions in Mexico), automotive regional content rules (increasing to 75%, up from 62.5% under NAFTA) and activities of or dealings with state-owned enterprises.

Sen. Ron Wyden (D-Oregon), in testimony during the Senate Finance Committee hearing this week, applauded parts of the deal but questioned aspects related to enforcement.

“The president campaigned on ripping up existing trade deals, but the new NAFTA sure resembles the old one,” Wyden said. “That said, there are areas of meaningful progress. It goes further than before on digital trade and state owned enterprises. It takes a modernized approach to customs and duty-evasion. I commend Ambassador Lighthizer for obtaining some strong outcomes in the labor and environment chapters.

“But particularly when it comes to enforcement, there’s some hard work left to be done. Commitments from other countries aren’t any good if there’s no way of holding those countries to them. The new NAFTA retains a weak enforcement system from the old NAFTA, which was too easy on trade cheats. That’s a bad deal for American workers, particularly the enforcement of labor obligations.”

Senate Finance Committee Chairman Chuck Grassley (R-Iowa), meanwhile, touted the USMCA’s potential positive impact for U.S. farmers.

“American farmers, workers and businesses stand to benefit greatly from USMCA,” Grassley said.  “More market access for agriculture, new commitments in critical areas such as customs, digital trade, intellectual property, labor, environment, currency, and the lowering of non-tariff barriers will translate into higher wages, greater productivity, and more jobs.

“In fact, the U.S. International Trade Commission’s economic analysis found that USMCA will create 176,000 new American jobs. We shouldn’t squander this opportunity to update NAFTA, which is now a quarter century old but has been critical to the success of American farmers and businesses.”

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Now, the USMCA awaits approval from the legislatures in the U.S. and Canada.

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This morning in metals news, steelmaker ArcelorMittal has concerns over a new law Italy is set to approve later this month, Vietnam plans to impose anti-dumping duties on coated steel from China and South Korea, and a work stoppage continues at Codelco’s Chuquicamata copper mine in Chile.

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ArcelorMittal Looks for ‘Legal Certainty’ in New Italian Law

Steelmaker ArcelorMittal and its Italian subsidiary, ArcelorMittal Italia (AMI), have expressed concerns to the Italian government regarding its new Crescita law decree, which it is scheduled to be ratified later this month.

“If ratified as currently drafted, the provision concerning the Taranto plant would impair any operator’s ability to operate the plant while implementing the environmental plan approved by the Italian Government in September 2017, including for ArcelorMittal,” the steelmaker argued in a release. “The Taranto plant has been under seizure since 2012 and cannot be operated without legal protection until the environmental plan is implemented.”

The steelmaker continues added the Crescita law removes “legal safeguards.”

“However, the Crescita law decree removes the legal safeguards existing when ArcelorMittal agreed to invest in the Taranto plant,” the firm said. “These safeguards are necessary until the company has completed the environmental plan to avoid incurring liability for issues that it did not create.”

With the law set to be ratified by June 29, the steelmaker said amendments can be made.

“AMI remains hopeful that, as part of the amendment process, legal certainty will be restored in the interest of the Italian economy and of the stakeholders of ArcelorMittal Italia, enabling AMI to continue operate of the plant while completing the environmental requalification plan,” the firm said.

Vietnam Imposes Anti-Dumping Duties

Vietnam will impose anti-dumping duties on imports of coated steel from China and South Korea, S&P Global Platts reported.

According to the report, the duties are set to take effect June 25 and extend for about four months.

Work Stoppage Continues at Chuquicamata

The No. 1 copper producer in the world, Chile’s Codelco, is facing a work stoppage at its Chuquicamata mine, Bloomberg reported.

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The stoppage hit its seventh day Thursday, according to the report, after labor unions called the latest Codelco offer “irresponsible.”

India’s retaliatory tariff on 28 U.S. goods, including some finished metal products, has been dubbed the “fruit and nut tax” in trade circles. The facetious label, though, does not take away from the seriousness of the developing situation.

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In India and the U.S., exporters, importers, trade and industry are apprehensive about the turn this fresh step by India will take in the coming days, especially in light of the current U.S.-China trade war.

Will the move by India escalate into a similarly full-blown trade war? Or will it be used as a bargaining chip by the Indian side during the visit by U.S. Secretary of State Mike Pompeo to India later this month?

Last weekend, the Hindu Business Line reported the Indian government slapped tariffs on 28 U.S. products, including: almonds, apples, chemicals, flat-rolled stainless steel products, other alloy steel, tube, pipe fittings, screws bolts and rivets.

India’s Ministry of Finance said the decision was in the “public interest.”

Technically, it comes in retaliation to America’s imposition of a 25% tariff on steel and a 10% import duty on aluminum products in March 2018. That it took a year or so for India to go ahead with this counter was that despite announcing the counter-tariffs on June 21, 2018, the country had decided to go slow on implementing them for various reasons, one of them being general elections held earlier this year.

So why now?

The answer to that lies in U.S. President Donald Trump’s removing India from the list of nations with preferential trade treatment, just one day after a new government was sworn in in India.

Questions are already been asked in India – will the country lose more than it will benefit because of this new move?

The U.S. is India’s largest trade partner, and India sells much more to the U.S. than it buys. Last year, India imported U.S. goods worth U.S. $33 billion and exported goods worth $54 billion. Last year, trade equivalent to $54 billion was conducted between the two nations. The equation is slightly in favor of India only in the IT sector because of the outsourcing of services to Infosys and other firms.

All of this means the U.S., if chooses to do so, could hit back at India with fresh tariffs, which in turn would escalate the trade battle and, in turn, deliver a body blow to India’s already-suffering economy.

An editorial in Indian newspaper The Hindu said the Indian government has sent “a strong message that Indian is not going to be compelled to negotiate under duress.”

“To be sure, India has much at stake in ensuring that economic ties with its largest trading partner do not end up foundering on the rocky shoals of the current U.S. administration’s approach to trade and tariffs, one that China has referred to as ‘naked economic terrorism,” the editorial continues.

“The counter-tariffs have now lent the Indian side a bargaining chip that the US Secretary of State, Mike Pompeo, will have to grapple with during his visit later this month.”

To be fair, unlike countries like Canada and Mexico, India had extended the deadline for imposition of these duties eight times in the hope that some solution would emerge during a negotiation between the two nations. Earlier, India dragged the U.S. to the World Trade Organization’s dispute settlement mechanism over the imposition of import duties on steel and aluminum. India exports steel and aluminum products worth about USD $1.5 billion to the U.S. annually.

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All attention is focused on Pompeo’s India visit, even as backchannel dialogue continues in the hopes of reaching a solution in the interest of both nations.

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This morning in metals news, U.S. Steel announced it would idle some of its facilities, China has lowered its tariff rates on countries other than the U.S. and General Motors recently announced a $150 million investment in its Flint Assembly plant.

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U.S. Announces Plant Idlings

U.S. Steel announced this week it would continue a planned maintenance outage at one facility and would temporarily idle a blast furnace at its Gary Works facility.

“In response to current market conditions, we are taking actions aligned with our strategy by adjusting our global blast furnace footprint,” the steelmaker said in a release. “We are idling two blast furnaces in the United States and one blast furnace in Europe to better align our global production with our order book.”

The steelmaker will continue a planned maintenance outage at its Great Lakes B2 blast furnace, which started last week.

“Based on current market conditions, we expect the B2 blast furnace to remain idled after the completion of the planned outage,” the company said.

In addition, the steelmaker will idle a south blast furnace at its Gary Works facility.

“As a result of these footprint actions, we expect to decrease monthly blast furnace production capacity by approximately 200,000 – 225,000 tons beginning in July,” the company added. “If both furnaces remain idled for the remainder of the year, we expect full year Flat-Rolled shipments to third party customers to be approximately 11.0 million tons.  We will resume blast furnace production at one or both idled blast furnaces when market conditions improve.”

China Lowers Tariffs on Other Countries

As the U.S. and China move toward a resumption of trade talks this month, China has lowered its tariff rates for some other countries, CNBC reported citing an analysis by the Peterson Institute for International Economics.

According to the report, since the start of 2018 China’s tariffs on U.S. goods have increased to 20.7%, which tariffs on products from other WTO countries has fallen to an average of 6.7%.

The full Peterson Institute for International Economics analysis can be found here.

Last month, the U.S. raised tariffs on $200 billion of Chinese products, to which China responded with tariffs on $60 billion in U.S. goods.

GM Announces Flint Assembly Investment

Automaker GM recently announced plans to invest $150 million in its Flint Assembly plant aimed at expanding its full-size pickup truck production capacity.

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Last month, GM announced an expansion of pickup production at its plant in Fort Wayne, Indiana.