Articles in Category: Imports

Does your company strategy call for a European manufacturing base but you worry you have missed the boat in terms of accessing lower-cost opportunities created when eastern European countries like Poland and the Czech Republic came into the E.U.?

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Lower land and labour costs, aligned with ample financial support from the E.U. to the poorer parts of Europe created a fertile investment environment for new business growth in these eastern European states. With a good standard of education, generally good rule of law and a high work ethic, it is not surprising eastern Europe has gone through something of an industrial revolution over the last 20 years.

But for firms looking to set up in those markets now, they are the Johnny-come-latelies to a maturing investment environment.

But fear not — a new wave of entrants may be on the horizon.

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The Raw Steels Monthly Metals Index (MMI) increased one point this month, moving up to 89. Domestic steel price momentum seems slower than at the beginning of 2018, as domestic steel prices traded more sideways.

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Domestic steel prices remain at a more than seven-year high.

May 1 served as the most recent steel and aluminum tariff exemption deadline. The government announced that the country-specific exemptions would continue to remain in effect for another 30 days (until June 1). The exemptions will likely turn into quotas for several countries, following a similar trade agreement as the one reached with South Korea.

Quotas will weaken the impact of Section 232. The details of the trade agreements could come during May.

Source: MetalMiner data from MetalMiner IndX(™)

Meanwhile, Section 301 seems to have gone unnoticed by buying organizations, despite its potentially bigger effect. If applied, Section 301 contains a proposal for 25% tariffs on a list of products from China. These products include not only steel or aluminum, but also secondary products used in many industrial sectors.

The Section 301 Committee will convene a public hearing May 15. May 22 will serve as the due date for submission of post-hearing comments.

Domestic steel prices have found support. Although price momentum has slowed, steel prices have  not yet fallen.

Chinese Steel Pricing

Chinese prices have fallen since the beginning of 2018. In May, Chinese prices increased slightly. It is still too soon to see this slight increase as a change of trend. The latest price movement may have more to do with increased Chinese steel exports in April.

Source: MetalMiner data from MetalMiner IndX(™)

Despite U.S. tariffs, customs data shows higher Chinese steel imports arriving to U.S. ports. The 25% steel tariff on Chinese imports went into effect on March 23. Higher Chinese exports (and incoming imports in U.S. ports) come as a result of the divergence in U.S. and Chinese steel prices. U.S. steel prices skyrocketed, while Chinese prices fell.

MetalMiner’s Annual Outlook provides 2018 buying strategies for carbon steel

What This Means for Industrial Buyers

As steel prices remain high, buying organizations may want to closely follow price movements to decide when to commit to mid- and long-term purchases.

Buying organizations looking for more clarity on when to buy and how much to buy may want to take a free trial now to our Monthly Metal Buying Outlook.

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This morning in metals news, Germany is getting ready to face the 25% U.S. steel tariff when the current temporary exemption for the E.U. expires early next week, Canada’s foreign minister says NAFTA negotiators have made progress on automotive rules and the E.U. is keeping a close eye on aluminum imports in the post-Section 232 world.

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Preparing for Tariffs Time

The European Union is collectively bracing for the U.S.’s Section 232 steel and aluminum tariffs exemption to expire early next week, after which E.U. member states would be hit with the 25% and 10% tariffs on steel and aluminum, respectively.

Germany, of course, a prominent steel producer, is one of those member states preparing for the U.S. tariffs. 

According to a German official cited by the Financial Times, Germany is seeking a “long-term deferral” from the tariffs.

NAFTA Talks Drive Forward on Auto Rules

According to Canadian Foreign Minister Chrystia Freeland, talks on renegotiation of the North American Free Trade Agreement (NAFTA) have made some progress on automotive rules, Reuters reported.

The talks have focused on, among other things, the percentage of each vehicle required to be composed of components from NAFTA nations (by value).

E.U. Eyeing Aluminum Imports

The E.U. has begun to monitor aluminum import levels to determine if the U.S. Section 232 measures have diverted an increased amount of global supplies to the 28-member bloc, Reuters reported.

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According to the report, data collected on import levels will be used to determined whether or not the E.U. needs to implement measures to curb imports.

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The Aluminum Association sent a letter to President Donald Trump on Tuesday calling for quota-free tariff exemptions for all “responsible trading partners countries,” while also calling for specifically addressing Chinese overcapacity.

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“As you continue to evaluate and implement the Section 232 remedy, I urge you to grant permanent exemptions – without quotas – for our aluminum trading partners that operate as market economies,” said Heidi Brock, president and CEO of the Aluminum Association, in the letter. “I also encourage you to engage China to address structural aluminum overcapacity.”

The U.S. announced last month Section 232 tariffs of 25% and 10%, respectively, on steel and aluminum imports. Several countries have won temporary exemptions to date, including Canada, Mexico, Brazil, Argentina, Australia and the E.U. South Korea negotiated a long-term exemption as part of talks to revamp the U.S.-Korea Free Trade Agreement, with a quota imposed on South Korea  instead equivalent to 70% of average annual exports between 2015 and 2017.

In the past year since the U.S. launched its Section 232 probe in April 2017, the Aluminum Association has advocated for trade measures that do not hurt market-economy trading partners, instead calling for action to address Chinese overcapacity.

“The association’s member companies share the belief that China’s market-distorting behavior drives massive overcapacity in both primary aluminum production and downstream products,” Brock wrote. “Now that the United States is at a major turning point in trade negotiations with China, we see a historic opportunity for you to address this persistent problem once and for all.”

Brock argued 97% of U.S. aluminum production jobs are in mid- and downstream production, with many relying in some way on aluminum imports.

“We strongly believe that the Section 232 aluminum remedy should not disrupt current trading relationships with responsible trading partners,” Brock wrote. “Any quotas on these key partners will only further distort the market, particularly if new sanctions on Russian aluminum lead to tightened supply conditions.

“Quotas would paradoxically cause imports of semi-fabricated products from China to be more competitive in the U.S. market, as manufacturers scramble to find metal.”

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The full letter is available here.

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This morning in metals, steel imports rose in March, global steel output was also up in March and miner Antofagasta reported a 10.5% drop in production in Q1.

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U.S. Steel Imports Jump in March

Citing U.S. Census Bureau data, the American Iron and Steel Institute (AISI) reported the U.S. imported a total of 3,327,000 net tons (NT) of steel in March 2018, including 2,480,000 net tons (NT) of finished steel (up 34.2% and 23.0%, respectively, vs. February final data).

Through three months of 2018, total and finished steel imports are 8,690,000 and 6,831,000 net tons (NT), down 3.0% and 1.7%, respectively, vs. the same period in 2017.

The finished steel import market share was an estimated 26% in March, up from the estimated 25% in the year to date.

Global Steel Output Rises 4% in March

The world produced more steel in March, Reuters reported.

Global steel output rose 4% last month, powered by lifted winter cuts in China and U.S. steel producers enjoying a post-Section 232 boost, Reuters reported.

MetalMiner’s Annual Outlook provides 2018 buying strategies for carbon steel

Antofagasta Production Slides in Q1

Miner Antofagasta, which operates primarily in Chile, announced its Q1 production dropped 10.5%, Reuters reported.

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The E.U.’s steel safeguard mechanism should work to prevent a “surge of imports” but should not “close the market,” European Steel Association (EUROFER) Director General Axel Eggert said Monday.

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“The safeguard mechanism should be broad, but the purpose is not to close the market, as some steel importers have claimed. The EU safeguard mechanism explicitly serves only to prevent a further, sudden surge in imports resulting from deviated steel trade flows,” Eggert said.

European steel imports rose significantly between 2013 and 2017, according to EUROFER, up by 66%, with 18 million tons in 2013 and 30 million tons in 2017. In addition, steel imports in Q1 2018 rose 8% year over year, EUROFER reported.

In March, the European Commission launched a safeguard investigation in an effort to protect the European steel industry on the heels of the U.S. Section 232 tariffs on steel and aluminum. Last month, the U.S. imposed a 25% tariff on steel imports and a 10% tariff on aluminum imports. The E.U. won temporary exemptions from the tariffs, but the exemptions expire May 1 unless a deal to extend them is reached.

Eggert also addressed concerns expressed by some steel exporters regarding the potential for the safeguard measures to “close” the market.

“There have been claims made by some steel importers that the safeguard will close the EU market to imports,” Eggert said. “This is concretely untrue – these are claims made by undertakings that benefit from unsustainably low-priced, dumped imports. In practice, the safeguard will guarantee the open access of steel trade flows to the EU market at a nevertheless historically high level.”

On Monday, the E.U. requested to join the U.S.-China consultation on steel and aluminum at the World Trade Organization (WTO), Reuters reported. Hong Kong, Thailand, India and Russia have also filed requests to join the consultations, according to the report.

Earlier this month, China took the U.S. to the WTO over the tariffs, requesting 60 days of consultation on the matter, arguing the tariffs violated WTO rules.

MetalMiner’s Annual Outlook provides 2018 buying strategies for carbon steel

“The US practice severely violated the non-discrimination principle of the multilateral trading system and its commitments on tariff concession of the WTO and the rules and disciplines of safeguards, and harmed the legitimate interests of China as a WTO member,” a China Ministry of Commerce statement April 6 read. “As for that the US refused to have compensation negotiation with China according to WTO rules, China had to start the trade dispute settlement procedures, to safeguard its legitimate interests.”

The WTO process moves notoriously slowly, but the May 1 deadline for the Section 232 exemptions presents a far more near-term policy point for the E.U. steel industry.

As my colleague Sydney Lazarus reported yesterday, even though the European Union has a temporary exemption from the U.S.’s Section 232 tariffs on steel and aluminum, it is demanding compensation at the World Trade Organization as shown in a filing by that trade body two days ago, according to Reuters.

The EU is arguing that the U.S. tariffs were imposed only to protect U.S. industry, rather than for security measures.

MetalMiner Executive Editor Lisa Reisman took readers through how the U.S. Department of Commerce did its homework on the Section 232 steel investigation, in a top-read post originally published Feb. 23, 2018. Read the full text of Lisa’s article below.

By now most MetalMiner steel producers and steel buying organizations have pored over the Section 232 steel report published by the Department of Commerce. In case you missed it, here is a link to the full report.

At its core, the Section 232 investigations represent the only public policy solution put forward by any major government to address the fundamental crisis involving extensive and pervasive global overcapacity for steel, stainless steel and aluminum.

Section 232 buying strategies – download MetalMiner’s Section 232 Investigation Impact Report today!

This overcapacity, the Department of Commerce believes, threatens U.S. national security interests because unfairly traded imports have caused substantial financial harm to U.S. producers.

Before you scream “protectionism!”, read on.

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According to Census Bureau data reported by the American Iron and Steel Institute (AISI) last week, U.S. imports of steel were down 5.3% through the first two months of the year compared with the same time frame in 2017.

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Total steel imports through the end of February amounted to 5,245,000 net tons (NT), down 5.3% compared with the first two months of 2017. Finished steel imports in the year to date, meanwhile, amounted to 4,257,000 NT, down 3.5% year over year.

Finished steel market share stood at an estimated 24% in February and was at 25% for the year to date, down significantly from last summer when market share eclipsed the 30% mark.

Steel import market share. Source: American Iron and Steel Institute

Steel imports in February (2,363,000 NT) were down 18.0% from January, according to the report.

By product, several posted notable year-to-date increases: oil country goods (up 57%); hot rolled sheets (up 33%); line pipe (up 30%); hot rolled bars (up 27%); mechanical tubing (up 17%) and plates in coils (up 16%).

In terms of supply by country through the first two months of 2018, South Korea led the way with 616,000 NT, up 8% compared with the same time frame in 2017. Trailing South Korea were: Japan (232,000 NT, down 5%), Germany (206,000 NT, up 54%), Turkey (195,000 NT, down 61%) and Taiwan (192,000 NT, down 10%).

In related news, the U.S. and South Korea came to an agreement earlier this week vis-a-vis talks to reconfigure the U.S.-Korea Free Trade Agreement (KORUS). As part of the talks, South Korea was exempted from the Section 232 steel tariff, with the caveat of a 70% quota on exports to the U.S. (based on export averages from 2015-2017), amounting to a quota of about 2.68 million tons annually.

MetalMiner’s Annual Outlook provides 2018 buying strategies for carbon steel

Last week, several countries were granted temporary exemptions from the 25% steel tariff, U.S. Trade Representative Robert Lighthizer announced. In addition to the E.U., Brazil, Argentina, Australia and South Korea were granted temporary exemptions, Lighthizer said last Thursday (the South Korea exemption is now permanent, per Monday’s announcement).

President Trump’s announcement that he could impose 25% tariffs on $60 billion of Chinese imports is ostensibly about the massive and growing trade imbalance between the U.S. and China — but one senses that underneath is a deeper and even more significant power play going on.

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The move is a challenge to a foreign aggressor who, despite all protestations to the contrary, has used a mercantilist policy to support the blatant theft of intellectual property and centralist support to build strategic champions with the aim. It sounds alarmist, but it’s hard to draw any other conclusion.

The White House has said that after months of investigation it has found a systematic pattern of “forced technology transfer” and “cyber theft” by the Chinese regime, a policy it described as “economic aggression.” The resulting sanctions list covers 1,300 products — focusing on aerospace, robotics, electric vehicles (EVs) and biopharma — and tracking most of the 10 strategic sectors announced by the Communist Party in its “Made in China 2025” technology plan (a roadmap released by the State Council in 2015 to guide the country’s advanced industrial manufacturing).

The program comes with billions in state and regional financial support, government-funded research, tax breaks and subsidies to buyers to fast track manufacturing scale – think EVs and solar panels as just two examples of how China has created competitive domestic manufacturing scale in no time.

The three biggest U.S. imports from China are mobile telephones, laptops, and network equipment. In each case, China is the dominant global supplier with around 70% of the world market. Alternative sources are scarce. Although the U.S. is technically capable of manufacturing them – the technology was mostly American in the first place – U.S. manufacturing capability is not going to spring up overnight.

Investors will be wary in case tariffs are removed and a bright shiny new plant in the U.S. is suddenly uncompetitive again. Let’s face it — that’s why the plants went in the first place. It was cheaper to manufacture elsewhere.

Assuming there is some grand strategic plan behind Trump’s imposition of tariffs is misguided. The reality is his administration has multiple objectives. It genuinely wants to reduce a current account deficit with China that has mushroomed in recent years.

For China, to say its surplus with the U.S. has fallen from 6% to 2% over the last decade is to ignore the fact the economy is twice the size it was a decade ago. The surplus is still $375 billion, almost half of America’s $800 billion trade gap with the rest of the world.

The U.S. has run trade deficits with many countries over the decades – Germany, Japan, South Korea and more. But these countries are seen as allies; China, to be blunt, is increasingly being seen as an adversary.

The long-held view that economic growth and rising living standards would make China more open with the rest of the world have proved mistaken. If anything, China is more centrist, more manipulative of its economy and society than it was 10 years ago. President Xi’s recent change of the law to allow himself to be president for life is just one example of a return to old Maoist ways.

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So here is another major plank of the administration’s case against China: the U.S. genuinely fears for its future if China is allowed to continue on this mercantilist path, creating global champions with the intention of taking on the world.

Many doubt whether tariffs are a solution, but you can understand the frustration in Washington and the desire for action. It is to be hoped some form of negotiated outcome will, eventually, be achieved, but it’s hard to see how China will compromise its long-term strategic plan to appease the U.S. or anyone else.

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This morning in metals news, the U.S. and South Korea reach a revised trade agreement, the E.U. started a study on possible steel import limits and copper slides to a 3 1/2-month low.

U.S. Gives South Korea Steel Tariff Exemption

The U.S. and South Korea reached an agreement on steel tariffs, with the U.S. exempting South Korea from the tariff but also imposing a quota, according to reports.

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The quota is equivalent to 70% of South Korea’s average exports to the U.S. from 2015-2017.

E.U. Studies Possible Steel Import Limits

According to Reuters, the E.U. began a study Monday looking into whether the U.S. steel import tariffs will lead to a flood of steel into Europe from Asian producers.

The European Commission said total steel imports jumped from 17.8 million tons in 2013 to 29.3 million in 2017.

Copper Fall to 3 1/2-Month Low

Copper dropped to its lowest price since Dec. 8, falling to $6,532/ton, according to Reuters.

MetalMiner’s Annual Outlook provides 2018 buying strategies for carbon steel

Rising stockpiles and increasing U.S.-China trade tensions — amid President Trump’s announcement last Thursday, which could pave the way for $60 billion in tariffs on Chinese products — led to the depression of the copper price, according to the report.