Articles in Category: Imports


A little over two weeks ago, the MetalMiner team released its Section 232 Investigation Impact Report in response to President Trump’s initial announcement regarding the intention to impose tariffs of 25% and 10% on steel and aluminum, respectively.

Of course, time marches on and so, too, does the news.

Since then, the announcement became policy via proclamation (albeit with temporary exemptions throw in for NAFTA partners Canada and Mexico); the tariffs are set to go into effect March 23 as other countries and U.S. industry groups continue to lobby for exemptions of their own.

Thus, given the latest movements in the Section 232 news cycle, MetalMiner has updated its Section 232 report with new, fresh information on everything Section 232, including brand-new addendums on steel and aluminum.

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To access the MetalMiner team’s full breakdown of the Section 232 issue, visit our dedicated Section 232 Report Investigation Impact page to download the full report, complete with the new sections on steel and aluminum.

The U.S. International Trade Commission (USITC) issued a final affirmative determination in the ongoing anti-dumping and countervailing duty investigation of Chinese aluminum foil.

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The Department of Commerce made its own final affirmative determination Feb. 27.

“The United States International Trade Commission (USITC) today determined that a U.S. industry is materially injured by reason of imports of aluminum foil from China that the U.S. Department of Commerce (Commerce) has determined are subsidized and sold in the United States at less than fair value,” a USITC statement said.

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This morning in metals news, Canadian Prime Minister Justin Trudeau is confident in the ability to reach a North American Free Trade Agreement (NAFTA) deal, West Coast ports are preparing for the imposition of the Trump administration’s steel tariff, and Tokyo and Seoul are seeking exemptions from the tariffs.

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After Winning Tariff Exemptions, Canada Aims to Navigate Toward NAFTA Deal

Canadian Prime Minister is touring his country’s steel and aluminum country on the heels of exemptions gained from the newly approved U.S. tariffs.

Despite that victory, another big policy items remains on the docket: renegotiating NAFTA.

“The president has said as long as there’s a Nafta there won’t be any tariffs. We have a Nafta now, we will have a Nafta once we improve it. That sounds to me like we’re pretty good on not getting tariffs,” Trudeau said Wednesday in an interview with Bloomberg Television’s Michael McKee at a steel mill in Regina, Saskatchewan. “I’m very optimistic we’re going to be able to get to a win-win-win.”

Ports Prepare for Tariffs

West Coast ports, like the Port of Vancouver, are preparing for the impact of the U.S. tariffs set to go into effect March 23.

Abbi Russell, communications manager for the Port of Vancouver in Washington state, told NPR steel is tied to approximately a third of the port’s revenue.

The port is the second-largest importer of steel products on the West Coast, according to the report.

Japan, South Korea Angling for Exemptions

After Canada and Mexico secured temporary exemptions from the steel and aluminum tariffs announced by the U.S., other countries are seeking exemptions of their own.

Among those, according to the Nikkei Asian Review, are Japan and South Korea. Japanese Deputy Prime Minister Taro Aso called the tariffs “very regrettable” during a news conference earlier this month, according to the report, and Paik Un-gyu, South Korea’s minister of trade and industry said, during a March 9 meeting with steelmakers, “I am sorry that the U.S. government made this decision.”

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According to the report, the South Korean minister added the country plans to seek exemptions from the steel tariff and is also considering taking a case to the World Trade Organization (WTO) with other countries.

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This morning in metals news, Canadian Prime Minister Justin Trudeau says the Canadian steel industry can breath a sigh of relief after obtaining an exemption from the U.S.’s recently announced 25% steel tariff, the tariffs throw a wrench into India’s export plans and Reuters’ Andy Home opines on the way forward for the aluminum market in a post-U.S.-tariff world.

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Canadian Steel Industry Enjoys Tariff Exemption (For Now)

Canadian Prime Minister Justin Trudeau said members of the Canadian steel industry can breath a sigh of relief, CNN reported.

North American Free Trade Agreement (NAFTA) partners Canada and Mexico received temporary exemptions from the U.S.’s forthcoming tariffs of 25% and 10% on steel and aluminum imports, respectively. However, the key word is “temporary,” particularly as NAFTA renegotiation efforts continue and the U.S. hopes to win concessions from its NAFTA peers.

In an interview Monday with CNN’s Anderson Cooper, Trudeau addressed the notion that the temporary exemption would serve as a bargaining chip for the U.S. in the NAFTA talks.

“We’ll just respond the way we have, with focus on the work we do together and not too much worry about the rhetoric,” Trudeau told Cooper.

India’s Export Ambitions Complicated by Tariffs

Steel Minister Chaudhary Birender Singh said the U.S. tariff on steel could disrupt India’s efforts to become a major steel exporter, Reuters reported.

India expects a loss of $130 million due to the U.S. import tariffs, according to a note prepared by the steel ministry, Reuters reported.

What’s Next for the Aluminum Market?

Canada, Mexico and Australia have secured exemptions of some form from the U.S.’s announced tariffs, and other countries and trading blocs (namely the European Union) are lobbying for exemptions of their own.

So, given the climate of negotiations, both economic and inherently political in nature, what does that mean for the global aluminum market going forward?

Thus far, the LME price hasn’t changed much, Reuters’ Andy Home wrote, while the CME Midwest Premium has nearly doubled since the beginning of the year.

On a production level, already announced and forthcoming capacity restarts in the U.S. will inch the capacity utilization rate closer to the previously announced goal of 80%.

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The tariff, of course, will lead to a rise in costs for consumers. As Home writes, the beverage industry and can makers will seek exemptions on the grounds that domestic production won’t be able to meet their demand, while also arguing that imported aluminum for their purposes doesn’t constitute a national security threat.

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The Indian metal industry seems divided for now over the implications of U.S. President Donald Trump’s announcement of the intention to impose tariffs on steel and aluminum imports.

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News reports and statements by industry leaders, along with reports by research agencies, show no unanimity on how the decision by the U.S. government, if implemented, would affect trade in India aand other neighboring Asian countries.

A report by news agency Press Trust of India (PTI), quoting industry leaders, said India will not be impacted much.

President Trump said last week he had decided to impose a steep 25% import tariff on steel.

Quoting H Shivram Krishnan, Essar Steel commercial director, the PTI report said the U.S. decision was not compliant with World Trade Organization (WTO) regulations. Former Steel Authority of India Ltd (SAIL) chairman Sushil Kumar Roongta said that the move may impact some of India’s steel exports to the U.S.

On the other hand, Sanak Mishra, former managing director of SAIL’s Rourkela Steel Plant, told PTI the decision may not have a significant impact on India as of its total steel imports, U.S. imports only 2% from India.

Some experts in India believe if the U.S. President went ahead with his decision, it would spark off a retaliatory war between exporting nations and the US, disrupting the just-about-recovering global steel industry.

On the official front, the Indian government, without naming the U.S., has let it be known that it may not exactly be a wise move. In a nuanced statement, Indian trade envoy J S Deepak said the government shared the concerns that some members had expressed on recent developments that could lead to new tariff barriers and even a trade war.

The envoy added that application of tariffs must respect the ceiling of bound rates agreed to at the WTO.

Several countries, including the European Union, China and Japan, to name a few, have criticized President Trump’s announcement.

India has also cautioned about the threats posed by the U.S. to the WTO’s dispute settlement functions because of the continued delay in selection and appointment of members to fill vacancies in the Appellate Body, the highest limb for adjudicating global trade disputes.

The U.S. is India’s largest export destination with U.S. $42.21 billion worth of shipments sent in 2016-17. But India’s steel and aluminum exports to the U.S. remain low. While steel exports to the U.S. stood at only U.S. $330 million, export of finished steel products were U.S. $1.23 billion in 2016-17. Total exports of aluminum and aluminum products stood at $350 million.

But a report in the Business Standard said India may have to brace itself for more imports from China into India as a result of the U.S. action.

On the other hand, ratings agency Moody’s said in a report that Asia, which produced more than two-thirds of the world’s steel, would “be minimally affected” when compared to the rest of America’s trading partners. Asian exports of aluminum and steel to the U.S. typically amount to less than 1% of GDP or exports, Moody’s reported.

Moody’s said the direct impact on steel companies would be manageable for the steel sector and rated steelmakers in Asia, because steel is predominantly traded within the region.

The CEO of Japanese giant Nippon Steel, the world’s second-largest steel producer by volume, has already dubbed Trump’s decision “regrettable.”

The one area likely to be affected if Trump goes ahead is metallic scrap imports. The U.S.’s imposition of import tariff on primary metals, including steel and aluminum, was likely to hit India’s 10 million tons (MT) of metallic scrap import annually, according to this news report. The U.S. makes up 20% of this import.

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More use of scrap as raw material for metal producers in the Unites States will result into its lower availability for importers across the world. This means scrap price would move up outside the U.S., which would impact secondary metal producers into India, according to Sanjay Mehta of Material Recycling Association of India.

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This morning in metals news, Nucor CEO John Ferriola weighed in on President Trump’s tariffs proposal, embattled Kobe Steel admits that its data fraud traces back more than five decades and Shanghai zinc has a tough day.

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‘How They Treat Us’

As the world waits for this week’s expected implementation of the tariffs proposal announced by President Trump last week, Nucor CEO John Ferriola indicated the tariffs were only fair.

In an interview Monday on CNBC’s “Mad Money” program, Ferriola pushed back at the idea that the tariffs might be seen as unfair.

“I struggle with that concept,” Ferriola said. “Please bear in mind that particularly the European Union, but most countries in the world, have a 25 percent or greater VAT, value-added tax, on products going into their countries from the United States. So if we impose a 25 percent tariff, all we are doing is treating them exactly as they treat us.”

Kobe Steel Scandal Stretches Back

The hits keep coming for Kobe Steel, which last year became embroiled in the revelations of the company’s data falsification. According to a Reuters report, however, the falsification stretches back far longer than previously thought.

The company admitted the fraud had been going on for more than five decades, according to the report.

Kobe Steel CEO Hiroya Kawasaki has resigned, according to the report.

Shanghai Zinc Struggles

Shanghai zinc futures fell more than 2% today, according to Reuters, marking the metal’s worst day since December.

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According to the report, the most-traded April zinc contract on the Shanghai Futures Exchange dropped 2.1% to $4,011 per ton.

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

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This morning in metals news, China’s Ministry of Commerce expressed displeasure with the U.S. Department of Commerce’s ruling Tuesday on aluminum foil, the European Union will retaliate if the U.S. imposes steel tariffs and the copper price takes a dip.

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China Expresses Dissatisfaction with Aluminum Foil Ruling

The U.S. Department of Commerce announced a final affirmative determination in the anti-dumping and countervailing duty investigations of aluminum foil imports from China.

Unsurprisingly, the Chinese government is not pleased about the decision.

In a statement from China’s Ministry of Commerce, Wang Hejun, the head of the ministry’s Trade Remedy and Investigation Bureau, was quoted by CNBC as saying, “The U.S. has disregarded the WTO rules and seriously damaged the interests of China’s aluminium foil exporters. China is strongly dissatisfied with this.”

German Deputy Economy Minister Warns of E.U. Response to Possible U.S. Steel, Aluminum Tariffs

As nations around the world prepare for the U.S. decision on steel and aluminum tariffs (stemming from the Department of Commerce’s Section 232 investigations, launched in April 2017), some are warning the U.S. of retaliation.

Germany’s deputy economy minister, Matthias Machnig, said E.U. trade ministers agreed Tuesday to respond to U.S. steel or aluminum tariffs, according to a Reuters report.

Copper Takes a Dip

The copper price fell to a two-week low Wednesday on account of a strengthening dollar and disappointing Chinese data, according to a Reuters report.

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The price fell to $6,988 per ton, according to the report.

According to the latest monthly imports report from the American Iron and Steel Institute (AISI), steel imports jumped 17.3% in January from December totals.

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Compared with January 2017, however, imports were up 2.2%, according to the AISI report based on U.S. Census Bureau data.

The U.S. imported a total of 2,875,000 net tons (NT) of steel in January. The import market share for January rose to 26%, up from 22% in December.

U.S. steel imports market share. Source: American Iron and Steel Institute

By product, several items posted significant month-over-month leaps in import totals:

  • Sheets and strip all other metallic coatings (up 129%)
  • Reinforcing bars (up 82%)
  • Oil country goods (up 78%)
  • Line pipe (up 44%)
  • Standard pipe (up 30%)
  • Hot rolled sheets (up 27%)
  • Hot rolled bars (up 22%)
  • Wire drawn (up 14%)
  • Mechanical tubing (up 13%)
  • Plates in coils (up 11%)

By country, South Korea led the way, sending 339,000 NT in finished steel to the U.S., which was up 76.9% from the December total and up 8.8% from the January 2017 total.

Trailing South Korea in January exports to the U.S. were: Japan (141,000 NT, up 73% from December), Turkey (140,000 NT, up 141%), Taiwan (117,000 NT, up 188%) and Brazil (102,000 NT, up 6%).

As for China, it sent 72,000 NT to the U.S. in January, marking a 35.4% increase from the 53,000 NT sent in December. The January total made for a slight increase from the January 2017 total of 70,000 NT.

Of course, in the background is the Section 232 decision-making process.

Secretary of Commerce Wilbur Ross sent his Section 232 report to President Trump last month; Trump has until April 11 to act on the report and its recommendations.

In the conclusion of the steel report, it states that Ross concludes that “the present quantities and circumstance of steel imports are ‘weakening our internal economy’ and threaten to impair the national security as defined in Section 232.”

The stated alternative action options in the report included: 1) an at least 24% tariff on imports from all countries 2) an at least 53% tariff on imports from a list of 12 countries (which includes China), combined with a quota for all other countries equal to 100% of a country’s 2017 exports to the U.S. and 3) a quota on all countries equivalent to 63% of a country’s 2017 exports to the U.S.

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In case you missed it, MetalMiner Executive Editor Lisa Reisman broke down the Section 232 steel report, which the Department of Commerce made public earlier this month.

Although my colleagues have written in detail exploring the specifics of the Section 232 investigations in steel and aluminum, recently completed by the U.S. Department of Commerce, it is worth considering the likely outcomes.

This is particularly true for aluminum, because the production market is not as integrated as it is for steel. Often, primary producers and downstream are not vertically integrated, making decision-making more complex.

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One can understand why President Trump is taking his time to make a decision on the twin section 232 investigations.

Although the premise of both investigations is the same — namely that steel and aluminum imports threaten to impair the national security of the United States — the two industries and their respective supply chains differ considerably.

A Background of Decline

The U.S. aluminum industry has a primary smelting sector that has been in decline since the turn of the century, but particularly in the last five years, as this graph from Statista illustrates.

Today, the U.S. has just eight plants with a combined annual production capacity of 1.82 million tons. According to Reuters, actual production last year was 785,000 tons, translating into a capacity utilisation rate of 43.2%.

That’s dire by any industry standards and qualifies the Commerce Department’s argument that at such levels an industry cannot be profitable, cannot invest in the future, and cannot afford research, development or innovation.

Yet to get it to the 80% target espoused in the report would require only 669,000 tons of idled capacity to be brought back onstream. We will come back to that shortly, but not before we take a quick look as to where some 90% of U.S. primary aluminium imports are coming from.

Import Sources

Source: Reuters

As this graph from Reuters shows, Canada, Russia and Brazil are by far the largest suppliers of primary aluminum into the U.S. market. There is no suggestion as to clawing significant chunks of this production back to U.S. shores; 669,000 tons is just the tip of the iceberg.

Sector Snapshot

The major part of the U.S. aluminum industry is made up of downstream suppliers producing semi-finished products, from plate and bar down to sheet, foil, wires, tubular products, and cast and forged parts.

This downstream sector faces a different set of challenges from the primary producers.

Some semis manufacturers rely on competitively priced imports of primary metal or billets in order for them to compete in export markets or domestically against foreign suppliers for the same finished goods. Other semi-finished manufacturers, arguably more at the commodity end of the market, face intense competition from imported semi-finished products depressing domestic U.S. price levels. The supply base for semi-finished products is different from the primary market, as the below graph from Reuters shows.

Source: Reuters

Here China, despite previous anti-dumping actions, remains a major supplier and is likely the main target for the Commerce Department’s actions.

Winners and Losers

A blanket tariff increase across the board would clearly create massive winners and losers because of the complexity of the aluminium market.

The Commerce Department is proposing either an across-the-board import tariff of 7.7% or a quota system limiting imports to 86.7% of  last year’s levels. A third option would be to target five countries with a draconian 23.6 % tariff, with everyone else subject to a quota also set at last year’s imports. Clearly, in the primary market Canada is going to be given an exemption, so rather than across the board, any tariffs or quotas are more likely to be country specific.

Likewise, with semi-finished products China and its intermediary shipping points, such as Vietnam and Hong Kong, are also likely to be the principal targets. Not surprisingly, the prospect of China being partially shut out of the U.S. market is sending shivers through governments in other parts of the world, fearful of where those redirected trade flows will end up.

Of course, it’s entirely possible nothing will be done.

Blocking Russian and Venezuelan imports of primary aluminum will not immediately make U.S. smelters viable again. Smelter closures have more to do with power costs than solely foreign competition. In addition, as my colleagues Lisa Reisman and Irene Martinez wrote this week, to bring an idled smelter back onstream is a medium-term proposition. A decision in April would not see capacity come back onstream this year, so any action has to be timed carefully.

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The LME spiked on the release of the investigation’s findings and CME physical delivery premiums have climbed. For now that’s probably it, but be prepared for further volatility as the decision deadline of April 20 approaches.