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Editor’s Note: MetalMiner has recently partnered with Raistone Capital to help manufacturing organizations claim and quickly obtain access to cash refunds for Section 301 tariffs paid on products that are on the exclusion list. Tariff refunds help buying organizations add actual dollars to their bottom line.
Tariff exclusions are published in the Federal Register (there is also a search portal). You can also search through the lists with your HTS code:
The successor to the 1994 North American Free Trade Agreement, dubbed the United States-Mexico-Canada Agreement (USMCA), has now made its way through both chambers of the U.S. Congress.
In December, the White House and House Democrats reached a deal over revisions to the USMCA, yielding an overwhelmingly bipartisan 385-41 vote Dec. 19 that sent the deal over to the Senate.
On Thursday, the Senate voted 89-10 to approve the USMCA via the United States-Mexico-Canada Agreement Implementation Act. Sen. Pat Toomey was the only dissenting Republican vote.
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This morning in metals news, U.S. raw steel production in 2019 increased 1.9% over 2018, Rio Tinto announced plans to resume operations at its Richards Bay Minerals site in South Africa and the U.S. Department of Commerce made an affirmative preliminary antidumping duty determination related to collated steel staples from China.
U.S. raw steel production in 2019 (through Dec. 28) totaled 96.3 million tons, marking a 1.9% year-over-year increase, according to the American Iron and Steel Institute (AISI).
Capacity utilization rate for the period in question reached 80.2%, up from 78.2% for the same period in 2018.
Miner Rio Tinto recently announced plans to resume its operations at its Richards Bay Minerals site in South Africa.
“Rio Tinto has today started the process of resuming operations at Richards Bay Minerals (RBM) in South Africa,” Rio Tinto said. “This follows discussions led by the Premier of KwaZulu-Natal, Sihle Zikalala, involving all stakeholders focused on securing stability in order to address the issues in the community and provide the stable environment necessary for RBM to resume operations.
“A phased restart is now in progress across the operation, with RBM expected to return to full operations in early January, leading to regular production in early 2020. Rio Tinto is contacting customers who were advised of a force majeure in their supply that this has now been lifted. Rio Tinto will review the restart of the Zulti South project after normalisation of operations at RBM.”
Rio Tinto said titanium dioxide slag production for 2019 is expected to fall at the lower end of its previous forecast of between 1.2 million and 1.4 million tons.
The U.S. Department of Commerce (DOC) issued a preliminary antidumping duty determination related to imports of collated steel staples from China.
According to the DOC, the product in question has been dumped into the U.S. at a margin of 301.64%.
Imports of collated steel staples from China amounted to a value of $88.8 million in 2018, according to the DOC.
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This morning in metals news, President Donald Trump won’t go through with a previous tariff threat on Brazilian steel and aluminum, Chinese stainless steel production growth is forecast to drop in 2020, and a power outage impact Norsk Hydro operations last week.
After President Trump met with Brazilian President Jair Bolsonaro last Friday, Trump agreed not to follow through on a previous threat to impose steel and aluminum tariffs on Brazilian exports, the Wall Street Journal reported.
The news comes less than a month after the initial threat, which would have reversed an exemption granted to Brazil (and Argentina) when the Trump administration initially imposed Section 232 steel and aluminum tariffs in March 2018.
China’s stainless steel production growth is forecast to drop in 2020, according to the Hellenic Shipping News.
Growth is expected to hit 5% next year, down from 11% this year.
Norway’s Norsk Hydro saw power outages impact its operations at Alunorte and Paragominas last week.
“On December 18, a transmission tower overturned, ceasing power supply to Hydro’s Paragominas bauxite mine in Brazil, temporarily halting the production at the mine,” Norsk Hydro said. “Regular power supply to Paragominas is expected to resume within 5-10 days.”
The firm said capacity at the Alunorte alumina refinery will be temporarily reduced to 50-70% in order to extend the life of bauxite inventories there.
The U.S. Department of Commerce (DOC) issued five affirmative determinations in anti-dumping and countervailing subsidy circumvention investigations related to steel imports that had been shipped through Vietnam but originally produced elsewhere.
According to the Department of Commerce, the steel in question includes corrosion-resistant steel products (CORE) and cold-rolled steel (CRS) that is produced in Korea and Taiwan and then shipped to Vietnam for “minor processing.”
“As a result of today’s determinations, Commerce will instruct U.S. Customs and Border Protection to continue to collect AD and CVD cash deposits on imports of CORE and CRS produced in Vietnam using Korean- or Taiwanese-origin substrate,” the DOC said. “These duties apply to any unliquidated entries since August 2, 2018, the date on which Commerce initiated these circumvention inquiries.”
According to the DOC, cash deposit rates in the cases will be as high as 456.20%, depending on the “origin of the substrate and the type of steel product exported to the United States.”
The value of shipments of CORE from Vietnam to the U.S. skyrocketed 4,353%, from $23 million during the April 2012 to December 2015 period to $1.1 billion during the period from January 2016 to September 2019.
CORE and CRS producers whose petitions prompted the investigation were: Steel Dynamics, Inc.; California Steel Industries; AK Steel Corporation; ArcelorMittal USA LLC; Nucor Corporation; and United States Steel Corporation.
Last month, U.S. Secretary of Commerce Wilbur Ross met with Vietnam’s Minister of Industry and Trade Tran Tuan Anh to discuss strengthening trade ties between the two countries.
“Vietnam is taking many solutions to balance its trade with the US, such as stepping up cooperative ties with the federal government and state administrations in the fields of mutual interest and encouraging the import of goods and services from the US, the minister stressed,” a Ministry of Industry and Trade release regarding the Nov. 8 meeting stated.
“Regarding cooperation in the fight against goods origin frauds and illegal transshipment, Anh suggested that the two sides should further strengthen the coordination mechanism, especially after the Customs Mutual Assistance Agreement (CMAA) is signed in the coming time.”
U.S. trade with Vietnam totaled an estimated $62.6 billion in 2018, according to the United States Trade Representative.
The U.S. had a trade in goods deficit with Vietnam of $39.5 billion in 2018. Through the first 10 months of 2019, the U.S.’s trade in goods deficit with Vietnam was $46.3 billion, with import value already in excess of the 2018 full-year total.
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In a year full of stops and starts, false dawns and setbacks, it appears the world’s top two economic superpowers could have some form of a partial trade deal on the table.
According to Bloomberg, the tentative agreement would avert the imposition of approximately $160 billion in tariffs on Chinese goods in exchange for Chinese pledges to purchase more U.S. agricultural goods.
“Getting VERY close to a BIG DEAL with China,” Trump tweeted Thursday morning, sending stocks soaring. “They want it, and so do we!”
Talks between the two countries picked back up in October and have continued since. That same month, Trump outlined a potential phase one deal, but said the two side still had to work out details in the ensuing weeks.
In August 2017, the United States Trade Representative launched its Section 301 investigation into alleged Chinese trade practices, including forced technology transfers and intellectual property theft, among other U.S. grievances.
In 2018, the Trump administration rolled out initial tariff tranches of $34 billion and $16 billion. Those tranches were followed by an additional $200 billion in tariffs last September.
The Trump administration’s fourth tariff list encompassed $300 billion worth of Chinese goods —including a wide variety of common consumer goods, from toys to washing machines — at a 10% rate. Those tariffs were scheduled to go into effect Sept. 1; however, some of those tariffs were eventually delayed, leading to Sunday’s Dec. 15 deadline.
Through the first 10 months of the year, the U.S. has a trade in goods deficit of $294.5 billion with China, with exports worth $87.6 billion and imports worth $382.1 billion, according to Census Bureau data. The U.S. deficit with China came in at $419.5 billion in 2019.
The exact details of the reported agreement remain to be seen, particularly in light of the often topsy-turvy, back-and-forth nature of the negotiations to date; a deal in principle today might not be one tomorrow. In fact, during the NATO summit last week in London, Trump mused it might be better to wait to sign a deal until after the 2020 elections.
Nonetheless, the news marks another milestone in a busy week of trade news.
Earlier this week, the White House and House Democrats announced an agreement on revisions to the United States-Mexico-Canada Agreement (USMCA), the proposed successor to the North American Free Trade Agreement (NAFTA).
Stocks reacted positively to the U.S.-China trade news Thursday.
The S&P 500 index closed up 0.9% to 3,168.57. The NASDAQ Composite closed up 0.7% to 8,717.32, while the Dow Jones Industrial Average closed up 0.8% to 28,132.05.
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This morning in metals news, the European Steel Association (EUROFER) offered its reaction to the new European Green Deal, China’s steel output could fall next year and China’s imports of iron ore dropped in November.
This week, the E.U. unveiled the European Green Deal, which EUROFER largely supported in a statement Wednesday.
“We welcome the aims of the European Green Deal,” said Axel Eggert, EUROFER director general. “In charting a series of sectoral and specific policy plans, it is clear policymakers take seriously the need to transition to a carbon-neutral future with industry, rather than without it.”
EUROFER also highlighted the initiative’s carbon-neutral ambitions, particularly through the lens of steelmaking and competition against lower-lost, less “green” steel producers.
“It is now of utmost importance to develop a regulatory framework that creates markets for CO2-neutral products: these have significantly higher production costs, for example because of the use of highly-priced hydrogen instead of coking coal in the steelmaking process,” Eggert said. “Policymakers must establish – jointly with us – how ‘green’ steel can compete against carbon-intense, low-cost steel imports that have a significantly higher CO2 footprint than EU-made steel.
“The EU seeks to make Europe the first carbon-neutral continent by 2050, which is a high ambition. The steel industry is already working on a range of low- and carbon-neutral solutions that could lead to reductions in CO2 emissions from steelmaking by up to 95% in 2050 under an optimum regulatory framework. It is why a partnership on clean steel – as well as other means to ensure the steel industry remains competitive even as it becomes carbon-lean – is so essential.”
Despite mandated winter production cuts over the past few cold seasons, China’s steel output has continued to ascend.
Next year, however, the country’s steel output is expected to come down from its record high set this year, according to the China Metallurgical Planning and Research Institute.
According to Reuters, the institute forecasts steel output will fall to 981 million tons next year, down from 988 million tons this year.
In other China news, the country’s imports of iron ore fell in November, Reuters reported.
China imported 90.65 million tons of the steelmaking material last month, down 2.4% from the October import total, according to the report.
Talk about an own goal.
India, the fourth-largest iron ore producer in the world, could become a net importer next year, Cogencis reported recently.
In the April-September period this year, India imported 900,000 tons of iron ore and exported 17.18 million tons partly, due to an oversupply in the domestic market. However, even in 2018, India imported 12.8 million tons of the ore and exported 16.19 million tons, according to the article — a net export of over 3 million tons.
This spectacular own goal has come about because the tenure of 329 non-captive mining leases, including 24 working iron ore mines, is set to expire in March, which contributed roughly 30% to last year’s iron ore output of 210 million tons.
Though the mines would be up for auction from April, the article states, industry officials believe it could take at least 3-4 years for these mines to be operational again because of the time required for new environmental and planning consents.
In and of itself, India’s switch from exporter to importer isn’t going to move the global markets much.
But for a country struggling with its balance of payments, it is an unwelcome burden. For Indian steel producers, the need to import more will raise domestic iron ore prices and, as such, steel input costs for domestic steel mills.
The country generally imports higher-grade iron ore above 60% iron content and exports lower grade below 58% iron content to China, so it will be paying top dollar for Australian or Brazilian premium grade iron ore.
Estimates put domestic iron ore prices on track for a 15-20% cost increase next year. As a result, this will reduce Indian mills’ competitiveness on export markets at a time when Chinese steel mills are looking for more export sales if domestic demand weakens there as expected.
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This morning in metals news, U.S. steel prices have gained some upward momentum over the last month, the U.S. and Mexico are reportedly drawing closer to an agreement over revisions to the United States-Mexico-Canada Agreement (USMCA), and U.S. steel import permit applications declined in November.
After appearing to bottom out in mid-October through mid-November, U.S. steel prices have since been on the rise.
U.S. CRC has jumped 8.04% over the last month, while HDG is up 9.25%, according to MetalMiner IndX data.
U.S. HRC has surged 11.8% over the last month.
According to Reuters, the U.S. and Mexico are nearing a deal regarding revisions to the USMCA, the proposed successor to the North American Free Trade Agreement (NAFTA).
Leaders of the three countries signed the agreement late last year, but it still requires ratification by the countries’ legislatures.
This summer, Mexico’s legislature was the first of the three to ratify the agreement; however, ongoing revisions to the deal are being worked through, as the deal still requires Democratic support in the U.S.
Steel import permit applications in November declined compared with the previous month, according to the American Iron and Steel Institute (AISI).
Permit applications in November totaled 1.86 million net tons, AISI reported, down 28.1% from October’s recorded 2.59 million net tons.
President Donald Trump said last week that he would impose import tariffs on steel and aluminum from Brazil and Argentina, accusing them of manipulating their currencies and hurting American farmers.
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“Therefore, effective immediately, I will restore the Tariffs on all steel & aluminium that is shipped into the U.S. from those countries,” Trump tweeted — taking both countries and the markets by surprise.
Both Brazil and Argentina had been exempted from the 25% steel tariff and 10% aluminum tariff imposed in March 2018 following negotiations that settled in May of that year, which resulted in a quota system to limit imports to the previous year’s level.
The gist of the president’s case is both countries have devalued their currencies and, as a result, undercut American farmers looking to export agricultural products like soy beans to China and elsewhere.
It’s true to say both the Brazilian real and the Argentinian peso have fallen relative to the dollar, but Brad Setser, a senior fellow for international economics at the Council on Foreign Relations, is quoted in The New York Times as saying neither Brazil nor Argentina was manipulating its currency. In fact, both countries had been selling foreign exchange reserves to prop up the value of their currencies.
He added Argentina was in a “full-blown” economic crisis and was close to running out of such foreign exchange. The Argentinian peso has lost nearly 60% of its value against the dollar this year, the Financial Times reported, following the failure of populist politics and investor worries in the face of a rising debt burden.
To suggest either Brazil or Argentina have any control over their currencies is laughable.
Argentina faces debt repayments that it will struggle to pay, with more than $60 billion coming due in 2020, an earlier Financial Times article noted. The article reports the markets are rattled over concerns that Mr. Fernández may resort to printing money to cover some of the government’s spending commitments and to stimulate an economic recovery, with the country mired in recession.
The fear is that could fuel what is already one of the highest inflation rates in the world, running at around 50%. While the loss of steel and aluminum sales to the U.S. would be serious, the two products make up some 3% of Argentinian exports, paling in comparison to the agricultural sector, which dominates Argentina’s exports.
Like Brazil, Argentina is caught between a rock and a hard place.
Both economies are struggling. The Brazilian real recently fell to a record low against the dollar as the economy tries to tackle high unemployment and weak growth, while Argentina is in an outright recession.
Both countries need all the export dollars they can earn, but in many ways they need China more than the U.S.
Weaker currencies do help them win export business; it is true they have benefitted from the U.S.-China trade war, but it was not of their making.
As The New York Times states, China is a major purchaser of American pork, soybeans and other agricultural goods. As the U.S. and China have slapped tariffs on each other’s products, China has shifted to purchasing products from Brazil and Argentina instead, annoying Washington in the process.
Quite what they expect the two South American countries to do, though, is unclear. Both countries have been trying to support their currencies all year, to no avail.
Maybe Washington is hoping both countries will voluntarily limit sales to China? Would the U.S. do that if the roles were reversed?
Nor would the imposition of tariffs be a win-win for the U.S. steel industry.
Brazil exports some $2.2 billion of steel products to the U.S., but much of it is as semi-finished material, such as rolling slabs, the U.S. Department of Commerce reported this year. Raising costs for U.S. steel companies that import Brazilian slab and other semis will be the price for supporting American farmers — if this action is followed through as expected.
Nor has a grace period been suggested to allow material on the water to arrive and be cleared, as is normally the case with the imposition of such tariffs. The announcement said the tariff would be applied immediately, potentially imposing massive fines on companies with hundreds of millions of dollars of material on the water or in manufacture.
No doubt the tariff announcement is intended as a negotiating tactic to force parties to come to the table.
Similar moves elsewhere have met with mixed success — let’s hope this case is resolved sooner rather than later.