Articles in Category: Imports

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Before we head into the weekend, let’s take a look back at the week that was.

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  • Holidays in India mean an uptick in gold buying — our Sohrab Darabshaw covered India’s holiday gold surge.
  • The fourth round of renegotiation talks focused on the North American Free Trade Agreement (NAFTA) concluded earlier this week. We covered the latest round of talks, which by all accounts have the three negotiating teams at an impasse.
  • As the fallout continues from Kobe Steel’s quality data falsification scandal, our Stuart Burns wrote about what exactly might have gone wrong at Japan’s third-largest steelmaker.
  • The World Steel Association’s Short Range Outlook came out this week, predicting solid, albeit moderated growth for the global steel market.
  • Precious and base metals have been behaving similarly, our Irene Martinez Canorea wrote this week.
  • The U.S. International Trade Commission launched a new Section 337 probe related to automation systems.
  • The value of the U.S. dollar has a significant impact on the fortunes of a number of metals, our Stuart Burns explained.
  • And how about palladium? Burns also touched on the rise of the platinum group metal and its leapfrogging of platinum (for the time being).
  • It’s third-quarter earnings report time. Alcoa and Nucor were among the latest companies to announce their earnings for the latest quarter.

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Aluminum industry officials restated a long-held stance that in the U.S. Department of Commerce’s Section 232 investigation into aluminum imports, China should be the primary focus of any trade action.

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During a roundtable conference Wednesday, Oct. 4, in Washington D.C., Michelle O’Neill, Alcoa’s senior vice president for global government affairs and sustainability (and newly elected chairwoman of the Aluminum Association); Ganesh Paneer, vice president and general manager of Automotive North America for Novelis; and Garney B. Scott, president and CEO of Scepter, answered questions about the state of the aluminum industry and outstanding trade legislation in the Department of Commerce.

O’Neill said the Aluminum Association will soon release a new statistical review of the aluminum market through 2016.

Citing shipment figures, O’Neill said overall demand is high, with shipments of aluminum from the U.S. and Canada up 40% from the trough of the recession in 2009 and “within striking distance “of record shipment numbers in 2005-2006. In that same vein, Paneer noted aluminum’s growing market share in the automotive market as another indicator of the versatile metal’s strength.

Despite these figures, however, the officials reiterated concerns about leveling the global trade playing field.

Scott, O’Neill’s predecessor as chairman of the Aluminum Association, said one of the Association’s biggest efforts is ensuring U.S. aluminum producers, recyclers and fabricators get to operate in a “predictable regulatory environment” and in a “rules-based global trading system internationally.”

In that vein, Scott referred to the levels of aluminum coming into the U.S.

“We continue to have a serious issue with the aluminum supply coming into the U.S.,” he said. “Last year saw record levels of imported aluminum into North America and more specifically the United States. The 13.1 billion pounds of imports accounted for more than half of U.S. supply.”

Scott further zeroed in on the problem, noting that while imports in general aren’t always a negative, the volume of imports from China continues to be a problem for the U.S. aluminum industry.

“While this industry has many responsible trading partners and does not view all imports as a problem, we do take issue when we see imports surg2ing from a country like China that operates outside the bounds of our global system of rules-based trade,” Scott said.

Imports from China have increased 200% since 2012, Scott said, and in the year to date are up 30%.

“These imports are a direct result of metal overcapacity,” he said.

He added that a negotiated agreement between the U.S. and Chinese governments is needed.

Recently, the Commerce Department opted to defer the issuance of a preliminary antidumping duty determination in its investigation of aluminum foil from China. Underpinning the deferral was a desire to incorporate information regarding the ongoing study of China’s non-market economy status. According to a Commerce Department release, rulings on China’s status and on aluminum foil will come no later than Nov. 30.

As for Section 232 — the administration’s investigation into the national security implications of aluminum (and steel) imports — there hasn’t been much chatter since the early summer, when an announcement appeared to be coming, but the administration’s self-imposed June deadline came and went.

“We’re in wait-and-see mode,” Scott said regarding the Section 232 investigation.

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According to the law, once a Section 232 investigation is launched, the secretary of commerce has 270 days to present findings and recommendations to the president, which makes for January deadlines for both the pending aluminum and steel investigations.

As for the ongoing talks geared toward renegotiating the 23-year-old North American Free Trade Agreement (NAFTA), Scott emphasized the industry’s trade ties with Mexico and Canada, adding that the industry isn’t looking for a “significant amount of changes” with respect to NAFTA.

Trade negotiators from the U.S., Canada and Mexico recently met in Ottawa in late September for a third round of negotiations focusing on NAFTA.

The October GOES M3 moved up by one point to 194. Meanwhile, as MetalMiner reported last month, imports have increased throughout 2017, largely due to higher Japanese import levels.

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This trend continued in September with a noted overall import increase of nearly 11.5% from August import levels while Japanese import levels increased by nearly 18%, according to the latest International Trade Administration data.

Last month, this publication noted that Japanese imports accounted for 55% of total monthly GOES imports. However, this number jumped in September to nearly 70% of total imports. Japanese mills primarily produce the higher grades of grain oriented electrical steel, including H1-B, as well as laser quality materials.

According to a recent TEX Report, Japanese mills will likely begin negotiations within the next week or two for 1H 2018 volumes. Many producers of these H1-B and laser quality materials have obtained price increases but at the same time, the price spread between conventional grades and high-grades has increased.

Whenever the market creates a spread wider than the historical average, buying (and selling) organizations can take advantage of arbitrage opportunities. Though we tend to see these types of trends more typically in other steel markets, such as hot-rolled coil or cold-rolled coil, market anomalies for GOES create buying opportunities.

Therefore, we could expect the Japanese mills to pay very careful attention to price levels so as not to exacerbate the current price spread between the two types of materials and to prevent buying organizations from considering alternatives.

From a U.S. import perspective, we can see that average prices from Japan have increased to the U.S.

Source: International Trade Administration

When ATI left the GOES market here in the U.S., the industry needed to reconfigure its supply chains for standard or conventional materials. Power equipment manufacturers moved production elsewhere and/or secured new sources of supply offshore.

Clearly, the demand for high-grade materials continues to rise.

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This morning in metals news, U.S. steel imports dipped in September, car sales in the U.K. fell last month and the U.S. International Trade Commission (USITC) launched a new Section 337 investigation.

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Steel Imports Drop, Still 19.3% Up on the Year

Using the Commerce Department’s most recent Steel Import Monitoring and Analysis (SIMA) data, the American Iron and Steel Institute (AISI) reported yesterday that U.S. steel imports dropped 15.7% in September from the previous month.

For the first nine months of the year, however, imports are up 19.3% to 29,587,000 net tons.

According to the data, through the first nine months of 2017 the largest offshore suppliers were South Korea (2,963,000 NT, down 1% from the same period in 2016), Turkey (1,919,000 NT, up 4%) and Japan (1,224,000 NT, down 15%).

The estimated steel import market share for the year to date is 27%, according to the data.

U.K. Car Sales Slow Down in September

New car sales in the U.K. dropped 9.3% in the month of September, marking the sixth consecutive month of drops, according to data from the Society of Motor Manufacturers and Traders.

There were 426,170 new units registered in September in the U.K. The September decline marked the first time September sales in the U.K. have dropped in six years.

USITC Launches Investigation into Thermoplastic-Encapsulated Electric Motors

The USITC announced a new investigation Thursday into thermoplastic-encapsulated electric motors, components, and products and vehicles using those motors.

According to the USITC release, “the products at issue in the investigation are automotive coolant pumps, water pumps, power steering motors, actuators, drive motors, transaxle assemblies, and other thermoplastic-encapsulated electric motors, and automobiles that contain such components.”

The investigation stems from a Sept. 5 complaint filed by Intellectual Ventures II LLC of Bellevue, Washington.

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“The complaint alleges violations of section 337 of the Tariff Act of 1930 in the importation into the United States and sale of certain thermoplastic-encapsulated electric motors, components thereof, and products and vehicles containing same that infringe patents asserted by the complainant,” the release continues. “The complainant requests that the USITC issue a limited exclusion order and cease and desist orders.”

The U.S. Department of Commerce. qingwa/Adobe Stock

The U.S. Department of Commerce has recently issued preliminary determinations in countervailing duty (CVD) and antidumping investigations of imports from Japan, China, Romania, Kazakhstan and others.

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Last week, the department added Canada to the list, dropping a major countervailing duty on imports of large civil aircraft. The move, coincidentally, came just before the third round of North American Free Trade Agreement (NAFTA) renegotiation talks, which wrapped up Sept. 27 in Ottawa.

The Department of Commerce issued a preliminary determination early last week in its CVD investigation of imports of 100- to 150-seat large civil aircraft from Canada, resulting in a whopping 219.63% tariff on the CSeries of planes exported to the U.S. by Bombardier, Inc.

“The U.S. values its relationships with Canada, but even our closest allies must play by the rules,” Secretary of Commerce Wilbur Ross said in a prepared statement. “The subsidization of goods by foreign governments is something that the Trump Administration takes very seriously, and we will continue to evaluate and verify the accuracy of this preliminary determination.”

According to the Department of Commerce’s preliminary ruling, exporters of the aircraft received countervailable subsidies of 219.63%.

The Commerce Department will instruct U.S. Customs and Border Protection (CBP) to collect cash deposits from importers of 100- to 150-seat large civil aircraft based on these preliminary rates.

The Boeing Company was the petitioner in the case. Petitions were filed April 27.

The ruling is a big win for Boeing — if it holds, that is — which as Bloomberg reported late last week, has developed an unlikely positive relationship with President Donald Trump.

However, as NAFTA negotiations unfold, such a move is sure to increase tensions. According to a recent Ipsos poll, just 33% of Canadians said renegotiating NAFTA was a good thing, compared with 48% of Americans and 46% of Mexicans — indicating, to an extent, that Canada is happy with the current order of business (of course, it’s just one poll).

Naturally, imposition of a nearly 220% tariff on any product, let alone large aircraft, is going to be a big deal. Bombardier’s stock dropped $0.07 from Sept. 28 to Oct. 1, from $1.82 to $.175 (a 3.7% drop). Boeing, meanwhile, closed at $253.70 on the New York Stock Exchange Sept. 26, compared to a closing price of $256 on Monday.

According to a Reuters report, threats of retaliation from Quebec were already being heard late last week.

Quebec Premier Philippe Couillard took the Commerce Department’s preliminary ruling very seriously.

“Boeing may have won a battle but, let me tell you, the war is far from over. And we will win,” Couillard said, according to the Reuters report.

The ruling is only preliminary, but it certainly ratchets up tensions in what has already been a NAFTA dialogue fraught with tension, in large part a result of the accelerated negotiating schedule.

In addition, the ruling is not the first one this year to target Canadian imports. On June 26, the department issued a preliminary ruling calling for duties of 30.88% to 17.41% on imports of softwood lumber from Canada.

Free Download: The September 2017 MMI Report

The Department of Commerce has launched 68 antidumping or CVD investigations this year between Jan. 20 and Sept. 20, representing a 45% increase in cases from the same time frame last year, according to the department’s release.

A final CVD determination in the investigation is scheduled for Dec. 12.

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It’s been five months and a day since President Donald Trump signed a memorandum calling for Secretary of Commerce Wilbur Ross to prioritize the Section 232 investigation that would assess whether steel imports posed a national security risk.

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Many expected an announcement of the investigation’s findings in June or July, but it never came.

As the delay drags on, the U.S. steel industry has expressed its desire for the Trump administration to act vis-a-vis the 232 probe.

The United Steelworkers (USW) union was the latest group to urge the administration to act.

“The time to act is now, and workers are telling politicians their first-hand stories of the devastation in the industry and the critical importance of providing relief,” USW International President Leo W. Gerard said in a prepared statement.

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This afternoon in metals news, steel imports are up 21.4% through the first eight months of the year, a report considers whether copper’s run will last and China has agreed to loan Guinea $20 billion in exchange for concessions on the country’s bauxite reserves.

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Steel Imports Up 21.4% This Year

The American Iron and Steel Institute (AISI) released steel import data earlier this week showing that total steel imports have risen 21.4% through the first eight months of this year compared with the same time frame in 2016.

According to the report, steel import permit applications in August totaled 3,572,000 net tons (NT).

The largest finished steel import permit applications for offshore countries in August were for: South Korea (418,000 NT, up 24% from July preliminary), Germany (141,000 NT, down 5%), Turkey (132,000 NT, down 48%), Taiwan (115,000 NT, down 4%) and Japan (107,000 NT, down 22%).  Through the first eight months of 2017, the largest offshore suppliers were South Korea (2,683,000 NT, down 1% from the same period in 2016), Turkey (1,855,000 NT, up 9%) and Japan (1,044,000 NT, down 18%).

Can Copper Keep Up the Pace?

Copper has been on a tear, earlier this week hitting a three-year high.

But can it last? Is the metal due for a market correction?

A report on nasdaq.com speculated about the future of the metal.

“While copper has lately been enjoying a stellar run, analysts are skeptical about the sustainability of the recent price rally,” the report states. “Many believe that prices of the metal will come under pressure as the market remains adequately supplied and demand is not strong enough.”

China Makes Deal on West African Nation’s Aluminum Ore

On Wednesday, China agreed to loan Guinea $20 billion over 20 years in exchange for concessions on the country’s bauxite reserves, Reuters reported.

Guinea is Africa’s leading bauxite producer.

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According to Guinean Mines Minister Abdoulaye Magassouba, the revenues generated from the mines would be used to pay for infrastructure in the country.

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Before you get into your planned Labor Day festivities, let’s take a look back at some of the stories here on MetalMiner from the past week:

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  • After a somewhat stagnant run, aluminum had a strong August — why? Our Stuart Burns covered aluminum’s upward momentum last week.
  • Ah, the North American Free Trade Agreement (NAFTA), the deal that’s stayed in the news for much of the year. President Donald Trump recently renewed rhetoric threatening the 23-year-old trade agreement on the heels of the completion of the first round of negotiating talks held in Washington, D.C. We recapped the recent developments in the ongoing talks held by trade representatives of the U.S., Canada and Mexico.
  • Speaking of trade agreements, talks are also underway between the U.S. and South Korea on KORUS, the free trade deal the two countries began in 2012.
  • China was reportedly amenable to making further significant cuts to tackle excess capacity, which has been a major talking point, not just for the U.S., but the global market. However, President Trump rejected China’s proposal. Burns offered his analysis on the situation.
  • It’s been a mostly good year for base metals — but not every metal has joined in on the fun, as our Irene Martinez Canorea wrote last week.
  • Hurricane Harvey inflicted a severe toll on the people of southeast Texas and southwest Louisiana. Now, there’s a long road ahead to recovery, both in terms of the humanitarian and economic impacts of the storm.
  • Burns looked to the the so-called “lucky country” of Australia, which is rich in iron ore. But what happens when iron ore reserves are exhausted? Answering the question briefly: look to the sun.

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Hurricane Harvey touched down in Texas late last week — in the ensuing days, thousands were displaced as record rainfall of more than 50 inches blanketed some areas of Houston (the fourth-most populous city in the U.S. with a population of about 2.3 million).

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According to a USA Today report citing preliminary research from the firm AccuWeather, Harvey could become the costliest disaster relief effort in U.S. history, with a potential price tag of $160 billion.

It should of course be noted that, before anything else, the natural disaster’s human impact is of utmost importance. The New York Times reported the death toll has hit at least 30, according to Texas officials.

In addition to widespread flooding, property damage and displacement suffered by residents in the hurricane’s path, Harvey has also left an economic impact that will be felt for the foreseeable future.

Among other things, metals prices, oil prices and shipping have all been, or will be, impacted by Harvey.

Trade Impact

The Port of Houston is one of most important trading locations in the U.S. As a result of Harvey, the port was completely closed as of last Friday. According to the Port of Houston website, it will remain closed on Thursday.

“We will continue to work alongside local agencies and the USCG to determine when operations can safely resume,” an alert on the Port of Houston website read Wednesday.

According to data on the Port of Houston website, the port is ranked first in total foreign tonnage and ranks second in total tonnage. As the largest Gulf Coast container port, it handled 68% of U.S. Gulf Coast container traffic in 2016.

So, a total shutdown of the port is a big deal.

On the export side, 3% of total container volume exported last year came from steel and other metals (27,127 TEUs).

A larger percentage of total imports come in steels and other metals — 8.6%, or 76,853 TEUs, last year.

Meanwhile, the Port of Corpus Christi, the fourth-largest port in total tonnage, was also closed as of Tuesday.

The affected areas have an immediate need for supplies of all kinds, but transportation modes are at a general standstill for the moment.

Steel Stocks

Much of Houston has been hit by record rains, leading to flooding and stranding locals without food or supplies.

Although it won’t happen overnight, eventually the area will begin to rebuild in the wake of the damages caused by Harvey.

According to a report on the Nasdaq website, Houston receives between 30% and 35% of all U.S. steel imports, making it a pivotal point of access.

In the wake of Harvey, some U.S. steel companies saw their stocks rise. According to the report, shares of United States Steel Corporation jumped by over 2.5% on Tuesday, while Olympic Steel rose more than 1.5%.

Nucor and AK Steel Holding Corporation both saw their stock prices rise by over 0.5%.

However, it’s still early to determine the true damage to the steel industry caused by Harvey.

According to a Platts report, Harvey could have a similar impact to that of 2012’s Hurricane Sandy, particularly with respect to steel scrap.

Freight Service Disrupted

In addition to the disruption of port activity, rising water levels have taken a bite out of freight service.

As a result, a rise in trucking rates can be expected, according to freight analyst firm FTR Transportation Intelligence.

“Look for spot prices to jump over the next several weeks, with very strong effects in Texas and the South Central region,” said Noel Perry, a partner at FTR. “Spot pricing was already up strong, in double-digit territory. Market participants could easily add 5 percentage points to those numbers.”

According to Steel Market Update, FTR predicted 10% of freight activity will be disrupted over the next two weeks.

Gas Prices Rise

As a result of an overall glut in global production, gas prices have come down significantly since 2014, when the gas price in some metropolitan areas exceeded $4 gallon.

However, the average national gas price has increased as a result of Harvey and shutdowns of refineries in Corpus Christi and Galveston. As of Wednesday afternoon, the average national gas price stood at $2.40 gallon, up from $2.37 on Monday, according to AAA. The average price had already risen $0.04 to $2.37, which AAA said Monday was one of the largest one-week surges this summer.

According to AAA, about one-quarer of Gulf Coast refining capacity was taken offline, according to forecasts by Oil Price Information Service (OPIS), which equated to about 2.5 million barrels per day.

“Despite the country’s overall oil and gasoline inventories being at or above 5-year highs, until there is clear picture of damage and an idea when refineries can return to full operational status, gas prices will continue to increase,” said Jeanette Casselano, AAA spokesperson, in a prepared statement.

Time to Rebuild

Rescue missions continue in the Houston area, as officials move residents in flooded areas to shelters. According to the Washington Post, 32,000 people have taken refuge in 231 shelters, with many volunteers need to help clean out damaged homes.

“We expect a many-year recovery in Texas, and the federal government is in this for the long haul,” said Elaine Duke, acting secretary of the Department of Homeland Security, to the Washington Post.

The damage won’t be contained to Texas, however. According to the National Hurricane Center, Harvey touched down again, this time in southwestern Louisiana at 4 a.m. today.

More than 12,400 employees from more than 17 federal departments and agencies are working together in support of the ongoing response to damages resulting from Hurricane Harvey and subsequent flooding across Texas and Louisiana, according to the Federal Emergency Management Agency (FEMA).

When all is said and done, affected communities will have a long road to recovery. Many will eventually return to homes either damaged beyond habitability or totally destroyed.

Houston is the largest U.S. market for newly constructed homes, and demand for materials used in home construction will surge as communities transition from rescue and recovery mode to begin the arduous rebuilding process.

The question is: When will that transition happen?

For now, government agencies on the ground are prioritizing the primary disaster relief effort, and it’s unclear when resources can eventually be shifted to construction.

The pipe and tube market, in particular, is well represented in the Houston area, which offices for the multinational firm Vallourec. The Port of Houston took in nearly 40% of iron and steel pipe and tube imports through the first six months of the year, according to ustradenumbers.com.

Earlier this week, the Committee on Pipe and Tube Imports sent a letter, obtained by CNBC, to the Trump administration, urging it to move forward with trade remedies in the Section 232 investigation of steel imports. According to the letter, over 60% of current U.S. demand for pipe and tube materials is supplied by foreign producers.

The request tied into the ongoing situation in Houston.

“Based on the amount of imports flooded into America now we will not be able to help rebuild Houston,” Robert Griggs, president and CEO of Trinity Products, told CNBC.

“Not one U.S. pipe company will get a lick of work in rebuilding Houston. It will all go to China. The president needs to level the playing field and make it fair. The way it is now, American steel pipe companies will lose the opportunity to rebuild Houston.”

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Several sources are leading on news that President Trump has twice rejected a Chinese proposal to cut steel overcapacity, despite the endorsement of some of his top advisors.

An agreement reached between U.S. Commerce Secretary Wilbur Ross and Chinese officials last month agreed a cut of 150 million tons per annum of capacity by 2022 was vetoed by the president, apparently because he preferred a more “disruptive strategy,” according to Reuters and the Financial Times.

The articles suggested the 22% rise in steel imports through July of this year compared to a year ago, reported by the American Iron and Steel Institute (AISI), spurred calls for action from U.S. steel producers to apply tariffs. Those calls may have influenced Trump’s position, as may the input of Steve Bannon, since fired, and Peter Navarro, an economic assistant to the president on trade matters.

The rejection of a deal brokered by Ross’ team seems to have undermined his position and probably leaves little room for further negotiation. The Chinese have gone away to consider their options, but rumors reported in the Financial Times suggest retaliatory action seems the most likely.

But while picking a fight with China probably makes for good headlines, at least as far as U.S. imports are concerned, is it the primary antagonist?

Not if you look at the AISI data.

Their findings suggest Taiwan and Turkey were the countries making up much of the increase. There was a sizeable increase from other countries, too, meaning Germany, up nearly 60%, and Brazil, up 80%, on three-month rolling average measures.

At 83,000 tons, China’s share of finished steel imports is a fraction of South Korea’s 352,000 tons, Turkey’s 245,000 tons or Japan and Germany’s about 138,000 tons.

Unless the administration plans on tackling these suppliers, picking out China seems a bit like fiddling while Rome burns.

We would hope that Trump’s presidency ends much better than Nero’s both for the man and the country, but picking fights that have a pragmatic strategy rather than catching headlines would be a good first step.