Articles in Category: Imports

If the aim of President Trump’s 10% import tariff on aluminum was to impact China or to encourage the reshoring of primary aluminum production into the U.S., it has, at least so far, been at best only a partial success.

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Just last month, Alcoa announced it will permanently close one of four potlines at the fully curtailed facility in Wenatchee, Washington, preferring to take a $62.4 million payment to the local energy provider Chelan Public Utility District (PUD) on the chin than invest in restarting the facility.

According to Alcoa, the potline planned for closure, Line 3, with a capacity of 38,000 metric tons per year, has not operated since 2001. Three other lines at the Wenatchee site, totaling some 146,000 metric tons per year, have been curtailed since December 2015. Another line at the Wenatchee site was permanently closed in 2004, underlining that not even significantly higher aluminum prices are enough to justify restarting.

Down in southwest Indiana, however, the firm is restarting its Warwick smelter, closed in March 2016 due to low aluminum prices. A local source advised Alcoa would reopen three of five smelter lines and add about 275 jobs at the complex, where its smelter feeds a rolling mill making aluminum for food and beverage packaging.

It would seem the U.S. will never (or not for years) be able to replace the 5 million tons it imports. Rather than generate American jobs, it will simply mean American consumers will have to pay more.

The CME spot contract tracking the U.S. Midwest physical aluminum premium is currently at 21.25 cents per pound ($468 per metric ton), Reuters reports. Now, admittedly there is a Russian premium in that premium, reflecting the sanctions applied to America’s second-largest supplier of primary aluminum, Rusal. But the Russian disruption is also being priced into higher premiums everywhere else and Japanese buyers are only paying a premium of just $160 per ton for the next quarter, the news source reports.

Source: Reuters

Meanwhile, Australia and Argentina, bizarrely exempt from the tariffs, will no doubt ship all they can up to their quota limits. Last year’s 100,000 tons and 250,000 tons, however, will not make much of a dent on Canada’s 2.5 million tons of metal supplied into the U.S. market.

Back to our opening question — if the intention on the other hand was to impact China, the strategy looks like it will have even less impact.

China exports no primary aluminum to the U.S. and precious little semi-finished metal following previous anti-dumping and tariff actions. Sadly, an opportunity for multilateral action at the G7 summit in Canada was missed, as the summit imploded amid infighting and disagreement.

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Multilateral action, Reuters proposes, had some effect in forcing China to rationalize its steel industry. A similar approach may bear fruit for aluminum if multilateral action were a strategy the U.S. embraced, but it does not.

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Rising trade tensions are all the talk these days, stemming from an increasingly complicated web of tariffs, counter-tariffs and World Trade Organization (WTO) disputes, not to mention the ongoing talks surrounding renegotiation of the 24-year-old North American Free Trade Agreement (NAFTA).

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On Wednesday, Secretary of Commerce Wilbur Ross testified before the Senate Finance Committee, during which he was grilled by committee members on the Trump administration’s current and proposed trade actions, including Section 232 steel and aluminum tariffs, the recently launched Section 232 automotive probe and the Section 232 exclusion request process. (The Department of Commerce this week announced it would grant 42 exclusion requests and deny 56. The total 98 requests in question represented less than 1% of the more than 20,000 requests received.)

The full video of the Wednesday hearing is available on the Senate Finance Committee website.

“Commerce has received more than 20,000 steel and aluminum exclusion requests (including resubmissions) and has posted more than 9,200 for public review and comment,” Ross said during his opening statement. “Commerce has also received more than 2,300 objections to exclusion requests. Review of exclusion requests and related objections is being conducted on a case-by-case basis in a fair and transparent process.”

In his opening statement, Senate Finance Committee Chairman Orrin Hatch (R-Utah) expressed concerns about the tariffs’ impact on domestic businesses.

“American manufacturers are already suffering the consequences of increased cost and decreased supply of steel and aluminum inputs,” Hatch said. “Take for example, Bish’s Steel Fabrication. Bish’s makes custom industrial equipment in my hometown, Salt Lake City, Utah, and sells to customers in the United States and around the globe. Bish’s has been in business since 1945, but because of the Section 232 tariffs, they are worried about their future. Steel prices are going up. Not just foreign steel subject to tariffs, but also U.S. steel.

“As a consequence, Bish’s has lost its competitive edge against foreign manufacturers and the company tells me that contracts for future work have all but dried up.”

Questions on the 232 Exclusion Process

Hatch also expressed reservations regarding the Section 232 tariff exclusion process.

“It should come as no surprise that many of us on the committee have concerns about the process, effects, and strategy behind these investigations and resulting actions,” he said. “That includes the serious problems that Senator Wyden and I raised in April about the product exclusion process, a process that still needs significant improvement.”

Ranking Member Ron Wyden (D-Oregon) also offered criticism of the process and its efficacy, and requested that Ross provide a specific timetable with specific fixes for the process so that “the small businesses and the workers who are contacting us can really have a sense of what’s going to happen.”

“It’s impossible to commit to a specific timetable when we don’t know how many requests are yet to come in,” Ross said. “That’s one big problem. As you can see, there are still requests coming in.”

Wyden, however, suggested the Department of Commerce was not prepared for the volume of requests that have come in.

Section 232 Auto Probe

On May 23, the Department of Commerce self-initiated a new Section 232 investigation into whether imports of automobiles and automotive parts threaten to impair the country’s national security.

In response to a question from Hatch regarding national security implications, Ross responded that it was still too early in the investigation to identify those factors. He added that as required by the law, he has sent a notification to Secretary of Defense James Mattis to seek his input on the investigation, as was done with the steel and aluminum cases.

In response to a later question from Sen. Chuck Grassley (R-Iowa), Ross added there is no decision yet as to whether to recommend tariffs.

“We are at the early stages of the process,” Ross said. “We have invited the various participants in the industry to make their submissions. They requested some extra time, so we gave them an extra week to do so.”

Production Restarts

In his opening statement, Ross argued for a positive effect of the tariffs, that being domestic manufacturers restarting previously idled capacity, listing a number of company announcements (including U.S. Steel’s announcements this year that it will restart two blast furnaces at its Granite City, Illinois plant).

Grassley asked Ross how long it will take for domestic plants to be able to ramp up production enough to bring prices of steel back down. Ross said he couldn’t identify exactly when the production restarts would come to fruition, but that they should happen in most cases by the end of the year.

He added, however, that certain “intermediary parties” withholding inventory from the market has contributed to price increases and that an investigation is being started to determine whether people “illegitimately are profiteering out of the tariffs.”

“So the price of steel and for a while the price of aluminum went up far more than is justified by the tariffs,” Ross said.

Canadian Steel

The Trump administration’s announcement late last month that it would let temporary exemptions from the Section 232 steel and aluminum tariffs expire for the E.U., Canada and Mexico have led to threats of retaliation from the intended parties and questions from some domestically about the purpose of such tariffs against market-economy trading partners and allies.

Sen. Michael Bennet (D-Colorado) asked Ross about Canada and how its steel industry is considered a threat to national security in the context of Section 232.

“What is the national security rationale for putting a tariff on the Canadian steel industry with whom we have a trade surplus?” Bennet asked.

Ross noted the remedy has to be a global solution, citing efforts by China, for example, to reroute exports through third-party countries in order to avoid tariffs.

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“The only way we’re going to solve the global steel overproduction and overcapacity [problem] is by getting all the other countries to play ball with us,” Ross said. “And while they’re complaining bitterly about the tariffs, the fact is they’re starting to take the kind of action, which if they had taken sooner, would have prevented this crisis.”

Sen. Pat Toomey (R-Pennsylvania), however, was not satisfied with Ross’ answer.

“What policy change would the Canadians have to make, what would they have to do so that the administration would stop taxing my constituents on the steel that they buy from Canada?” Toomey asked.

Ross suggested breakdown of talks on NAFTA contributed to the decision to lift the Section 232 exemptions for Canada and Mexico, and that the NAFTA talks could get a second wind on the heels of the July 1 Mexican presidential election.

“Our objective is to have a revitalized NAFTA, a NAFTA that helps America,” Ross said. “As part of that, the 232s would logically go away, both as it related to Canada [and] Mexico.”

Toomey followed up by arguing the proposed sunset clause suggested by the American negotiating team would lead to a “lesser” NAFTA and said the administration’s trade actions are based on “economic nationalism,” not national security considerations.

He also alluded to the recent bill he proposed along with Sen. Bob Corker (R-Tennessee), a bill which calls for giving Congress the authority to block the president’s tariff actions.

“I would urge my colleagues to support the legislation that Sen. Corker and I have, which would restore to Congress the authority to make the final decisions about the imposition of those tariffs.”

Sen. Rob Portman (R-Ohio) said he supported enacting trade remedies in the case of China, but that Section 232 should be used “very carefully and very selectively” and, more specifically, for national security reasons.

“Although the WTO has not yet adjudicated this case, if we’re pushing the envelope beyond national security, I think we lose a tool that could be very important for us in a true national security situation,” he said. “[I’m] deeply concerned about its application to Canada, as an example. … Mexico, the E.U., I don’t see the national security perspective there.”

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The European Union announced Wednesday that it will impose duties on a list of U.S. products, worth approximately €2.8 billion, in response to the U.S.’s steel and aluminum tariffs. The 25% duty will go into effect Friday, June 22.

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The U.S.’s 25% duty on steel imports and 10% duty on aluminum imports went into effect after the U.S. announced at the end of May that it would not continue the temporary exemptions from the tariffs for the E.U., Canada and Mexico.

The list of U.S. products that will be subjected to the tariffs includes steel and aluminum products, in addition to agricultural goods and a “combination of other various products.” Other products subject to the duty include bourbon, motorcycles and orange juice. (A full list of the products is available here.)

“By putting these duties in place the EU is exercising its rights under the World Trade Organisation (WTO) rules,” a release on the European Commission’s website states.

Echoing previous comments, E.U. Trade Commissioner Cecilia Malmstrom alluded to the rules of international trade in justification of the move.

“We did not want to be in this position,” Malmstrom said in a prepared statement. “However, the unilateral and unjustified decision of the US to impose steel and aluminium tariffs on the EU means that we are left with no other choice. The rules of international trade, which we have developed over the years hand in hand with our American partners, cannot be violated without a reaction from our side. Our response is measured, proportionate and fully in line with WTO rules. Needless to say, if the US removes its tariffs, our measures will also be removed.”

The E.U. duties on U.S. goods will be “effective for as long as the US measures are in place, in line with the WTO Safeguards Agreement and EU legislation,” according to the release.

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“The EU will rebalance bilateral trade with the US taking as a basis the value of its steel and aluminium exports affected by the US measures,” the statement continues. “Those are worth €6.4 billion. Of this amount, the EU will rebalance on €2.8 billion worth of exports immediately. The remaining rebalancing on trade valued at €3.6 billion will take place at a later stage – in three years’ time or after a positive finding in WTO dispute settlement if that should come sooner.”

The U.S. Department of Commerce (DOC) issued an affirmative preliminary ruling this week in its anti-dumping investigation of imports of common alloy aluminum sheet.

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“The association and its member companies that produce common alloy aluminum sheet are very pleased with this finding that again underscores the Commerce Department’s commitment to combatting unfair trade,” said Heidi Brock, president and CEO of the Aluminum Association, in a prepared statement. “For too long, the Government of China has been unfairly and illegally subsidizing its aluminum industry, leading to massive market overcapacity and challenging producers across the value chain.  Today’s action by the Commerce Department is exactly the kind of strong, targeted trade enforcement we need in support of the rules-based global trading system.”

The DOC announced in November that it would self-initiate anti-dumping and countervailing duty investigations of common alloy aluminum sheet imports from China (typically, cases are initiated after a domestic producer files a petition with the Department of Commerce). The move marked the first self-initiated investigation by the DOC in over 25 years.

The DOC calculated preliminary antidumping margins of 167.16% of the value of the imported aluminum sheet.

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A final determination from the DOC in the anti-dumping probe is expected in late October or early November.

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This morning in metals news, Trump announces $50 billion in tariffs on Chinese goods, China responds to warn retaliatory tariffs are imminent and E.U. members are supportive of retaliatory measures against the U.S.’s Section 232 tariffs.

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Trump Announces $50M in Tariffs on China

In line with media reports earlier this week, President Donald Trump announced Friday that the U.S. will impose $50 million in tariffs on Chinese goods, particularly related to technology, Reuters reported.

China Says Retaliatory Tariffs Coming

On the heels of the U.S. tariff announcement, China says it plans to impose tariffs of the “same scale,” according to a CNBC report.

E.U. Keen on Payback for Steel Tariff

Speaking of retaliation, E.U. nations are ready to retaliate agains the U.S. and its 25% steel tariffs, Reuters reported.

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E.U. countries unanimously voted in support placing import duties of $3.3 billion of U.S. goods.

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The U.S. imported 2.5% less steel through the first five months of 2018 compared with the same period in 2017, according to a recent report from the American Iron and Steel Institute (AISI).

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Citing data from the Department of Commerce’s Steel Import Monitoring and Analysis (SIMA), finished steel imports through the first five months of the year hit 15,379,000 net tons (NT), down 2.5% from the first five months of 2017.

According to the AISI report, the finished steel import market share for May settled in at an estimated 25%, just under the 26% share for the year to date.

By products, in the year to date several have posted significant import increases, including: hot rolled sheets (up 36%), plates in coils (up 36%), mechanical tubing (up 22%), line pipe (up 22%) and oil country goods (up 19%).

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By country, the largest finished steel import permit applications in May came from:

  • Germany (138,000 NT, up 15% from April preliminary)
  • Japan (123,000 NT, up 25%)
  • South Korea (113,000 NT, down 76%)
  • Italy (80,000 NT, up 34%)
  • Taiwan (76,000 NT, down 34%)

Through the first five months, however, South Korea led the way with 1,531,000 NT (down 1%), followed by Japan (615,000 NT, down 7%) and Germany (547,000 NT, up 13%).

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This morning in metals news, despite a recent detente, the U.S announced it would continue trade actions against China; Canada launched a dumping investigation of steel imports from China, Vietnam and South Korea; and China’s Chinalco gets closer to equaling rival Hongqiao in production with a recent deal.

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U.S.-China Trade Relationship Steps Back From Recent Truce

The U.S. announced it would continue trade actions against China, Reuters reported.

According to the report, the U.S. plans to announce by June 15 a list of approximately $50 billion in Chinese goods that will be subject to a 25% import tariff.

Canada Launches Dumping Probe

Sticking with the China theme, Canada announced that it has launched a dumping inquiry of Chinese steel imports (in addition to Vietnam and South Korea), Reuters reported.

The inquiry will seek to determine if cold-reduced flat-rolled sheet products of carbon steel have harmed Canadian industry, according to the report.

Chinalco Closes in on Hongqiao

The state-owned Chinalco inked a deal with the Yunnan government to increase its smelting capacity, a move that will bring it closer to equaling top producer Hongqiao, Reuters reported.

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According to the report, Yunnan Metallurgical Group will be merged into China Copper Co, a joint venture between Chinalco and the Yunnan provincial government.

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The first five months of 2018 have been quite busy ones for the world of metals.

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So, as we celebrate Memorial Day, let’s take a look back at the most-viewed posts on MetalMiner through the first five months of the year.

You’ll notice a particular theme: Section 232. The Trump administration’s every move related to 232, particularly its eventual imposition of tariffs on steel and aluminum, garnered a great amount of interest from MetalMiner readers.

Without further ado, here are the year-to-date’s top 10 most-viewed posts:

  1. Section 232 Steel Probe Report Moves on to President Trump

  2. How Has the Rest of the World Reacted to Trump’s Section 232 Announcement?

  3. Department of Commerce Releases Section 232 Aluminum, Steel Recommendations

  4. Copper Had a Big 2017, but What Does 2018 Hold?

  5. How Will Trump’s Proposed Tariffs Impact India?

  6. Section 232 Aluminum Report Moves on to President Trump

  7. Steel Prices Pick Up Momentum to Kick Off 2018

  8. Steel Price Trends: An Upcoming Top?

  9. Global Precious MMI: Will Drop in Platinum, Palladium Prices Continue?

  10. Breaking Down Section 232 Aluminum, Part 3: The Impact on U.S. Production

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This morning in metals news, the U.S. this week announced a new Section 232 probe investigating automotive imports, the specter of auto tariffs looms over Europe and Asia, and Mexico’s economy minister opines on the chances of a deal on the North American Free Trade Agreement (NAFTA) before the July Mexican presidential election.

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Section 232 Redux

If you decided you had heard enough about Section 232, well, buckle up.

Earlier this week, the U.S. Department of Commerce announced it had launched, at the direction of President Trump, a new Section 232 probe of automotive imports. The statute is pursuant to the Trade Expansion Act of 1962, which the administration used to investigate aluminum and steel imports (on which the administration ultimately placed tariffs of 10% and 25%, respectively, in March).

“There is evidence suggesting that, for decades, imports from abroad have eroded our domestic auto industry,” Secretary of Commerce Wilbur Ross said in a release announcing the decision. “The Department of Commerce will conduct a thorough, fair, and transparent investigation into whether such imports are weakening our internal economy and may impair the national security.”

According to Commerce, in the last two decades the percentage of cars sold in the U.S. that were imported has risen from 32% to 48%.

Asia, Europe Eye Auto Tariff Probe

Naturally, foreign automotive manufacturers in Europe and Asia are not too happy about the news of another round of Section 232 coming their way.

The German president of the DIHK Chambers of Industries and Commerce criticized the move and the pretense of its invocation of national security, according to a Reuters report.

European automakers BMW, Daimler and Volkswagen all closed down on the heels of the news, while shares of Ford and General Motors were up, according to the report.

So You’re Telling Me There’s a Chance?

Every so often, officials involved in the NAFTA renegotiation talks will put a number to their thoughts on the feasibility of a deal being reached.

Today, Mexican Economy Minister Ildefonso Guajuardo said he saw a 40% chance of a deal before the July 1 presidential election in the country, according to Reuters.

NAFTA renegotiation talks began last fall, as the three countries have sought to update the trilateral trade deal first instituted in 1994.

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Automotive content rules have been a major sticking point in the talks, with the U.S. advocating for stricter rules; it remains to be seen how this week’s announcement of a Section 232 probe of automotive imports will impact the tenor of NAFTA talks (particularly vis-a-vis rules of origin).

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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