Articles in Category: Imports

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Before we head into the weekend, let’s take a look at the week that was and some of the storylines on MetalMiner, which this week touched on steel prices, the potential opening up of Greenland’s resources and U.S.-India trade talks.

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Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

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This morning in metals news, U.S. imports of steel through the first eight months of the year are down 13.6%, Rio Tinto signed a memorandum of understanding (MOU) with China’s largest steel producer and LME copper prices fell Thursday.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

Steel Imports Down 14%

U.S. imports of steel for the year through August are down 14% compared with the same period last year, the American Iron and Steel Institute (AISI) reported.

Imports through the first eight months of the year totaled 20.67 million tons. Finished steel import market share for August checked in at 19%, just below the 20% mark for the year to date.

Rio Signs MOU with Baowu

Rio Tinto has signed an MOU with China Baowu Steel Group and Tsinghua University through which the parties will partner to “develop and implement new methods” to reduce carbon emissions across the steel value chain.

“This pioneering partnership across the steel value chain will bring together solutions to help address the steel industry’s carbon footprint and improve its environmental performance,” Rio Tinto CEO J-S Jacques said.

“The materials we produce have an important role to play in the transition to a low carbon future and we are committed to partnering with our customers and others to find the most sustainable ways to produce, process and market them. We are already doing this in aluminium and now, through this partnership, we will be doing it in the steel industry.”

LME Copper Falls

The LME copper three-month price bounced back from MetalMiner’s short-term support level earlier this month, rising 1.13% over the last month, according to MetalMiner IndX data.

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However, the price dropped Thursday, falling 0.7% to $5,750/mt.

As noted earlier this week, global copper mine production dropped 1.4% in the first half of the year, while refined copper production fell 1%, according to the International Copper Study Group.

The primary reason to pay attention to Chinese steel prices pertains to the country’s price leadership in the global marketplace.

However, since currency dynamics shifted recently, now is a good time to take a more tactical look at the U.S.-China steel price spread.

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The price spread between U.S. and Chinese steel increased during the months following the March 2018 implementation of tariffs on steel imports into the U.S.

After peaking around June 2018, the price spread between U.S. and Chinese steel commodity prices then shrank again by July 2019 — to its lowest level since December 2017 — largely due to falling U.S. prices.

Source: MetalMiner data from MetalMiner IndX(™)

The spread for CRC looks similar, but at different dollar amounts.

Source: MetalMiner data from MetalMiner IndX(™)

As shown on the chart of the spread below, for HRC, the spread between prices narrowed significantly several times in recent history, but came closest to approaching zero in December 2017 and then again in January of 2019.

A smaller spread benefits U.S.-based producers, since similar prices disincentivize imports.

Source: MetalMiner data from MetalMiner IndX(™)

Once accounting for additional costs associated with shipping, finance, the cost of carry and margin, any time the spread exceeds around $90/st — meaning U.S. costs exceed Chinese steel costs by a minimum of $90/st — imports start to look attractive, all other things being equal.

With tariffs, this cost should theoretically provide a buffer against import competition for U.S. producers to the extent of the tariff cost, plus the original competitor’s price, shipping and related costs associated with imports.

For example, assume a tariff rate of 25% on a China HRC price of $485/st and a U.S. price of $585/st. With import freight plus costs at an estimated $90/st, the tariff adds an additional cost of $143.75/st, with an end price total of $718.75/st.

In this example, at this price point and tariff rate, we would need to see the price spread exceed $233.75/st (cost of importing, plus costs of tariffs) before imports theoretically make sense, as shown by the purple line in the chart above.

For CRC, the red line in the chart below indicates where a $90/st import charge intersects the spread line.

For a short time during the start of the tariffs, U.S. producer prices surged; therefore, producers may not have actually allowed the tariffs to render protection as intended by their use, per the HRC model shown above.

U.S. producer prices look to have already corrected from the aforementioned price surge.

Source: MetalMiner data from MetalMiner IndX(™)

Looking at the chart above, CRC imports should be more heavily impacted by the imposition of tariffs, since imports make more sense from a price perspective.

Instead of seeing tariffs as providing a buffer allowing higher prices, what seems closer to reality has more to do with China’s need to lower prices. With U.S. prices corrected, we expect to see lower Chinese prices, as producers drop prices to stay competitive.

In fact, recently we did see lower Chinese HRC prices and a fairly weak, but still sideways, domestic CRC price. Weaker demand in China is a key factor underpinning the price weakness.

Source: MetalMiner data from MetalMiner IndX(™)

Since June, as shown in the chart above, the domestic price of HRC steel in China trended lower, but just slightly (note the narrow range shown on the vertical axis).

In early August, the Chinese government allowed the currency to weaken to a 7-to-1 level vis-a-vis the yuan versus the dollar. This effectively dropped the price of Chinese steel for international buyers and the amount of the related percentage-based tariff.

Source: MetalMiner data from MetalMiner IndX(™)

Compared to HRC, China’s domestic CRC price trend has looked more firmly sideways since June 2019.

Source: MetalMiner data from MetalMiner IndX(™)

In the case of CRC, we can see more clearly in the chart below how the adjusted exchange rate impacts the international price of Chinese CRC steel exports, as the domestic price has nudged up overall since June.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

Source: MetalMiner data from MetalMiner IndX(™)

What This Means for Industrial Buyers

Chinese producer prices looked flat to weak during the summer months and into the fall, as the exchange rate adjustment made steel imports from China look more attractive.

Given the high levels of production from China, generally speaking, we can expect to see the highly competitive price environment to continue, providing industrial buyers with ample options for negotiations.

AdobeStock/Stephen Coburn

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

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

 

Looking for metal price forecasting and data analysis in one easy-to-use platform? Inquire about MetalMiner Insights today!

Much was made during the U.K.’s Brexit referendum campaign from those eager for separation from the E.U. about the ease of reaching free trade deals with the rest of the world.

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Misguided as these promises have proved, those involved are not alone in seeing the theoretical benefits of forging free trade agreements, while also ignoring the practicalities of trade and countries’ relative industrial strengths and weaknesses.

The U.K., for example, along with the rest of Europe and the U.S., has a very powerful agricultural lobby that demands and receives considerable protections.

There is some argument in support of this. A country is dangerously exposed if it is totally reliant on imports of that most basic of needs – foodstuffs. We can maybe live without avocados, but could we live without our cereals and vegetables?

With the looming possibility of an exit from the E.U. on Halloween (Oct. 31) – either with some kind of framework deal or, more likely, without – the U.K. is finally, after three years of near-paralysis, making plans for what a post-Brexit tariff landscape it may go for.

It is an interesting situation, as countries are rarely faced with the opportunity for a wholesale change in tariffs; usually, such changes happen gradually and as part of bipartisan negotiations over many years.

Carolyn Fairbairn, director-general of the U.K.’s CBI business lobby group, was quoted as saying this is “the biggest change in terms of trade this country has faced since the mid-19th century, with no consultation with business, no time to prepare.”

But the U.K. may have to unilaterally decide what tariffs to impose (or not), as it will probably be bereft of its free trade arrangement with the E.U. and, at the same time, with the E.U.’s trade agreements with third countries, like Canada, in a matter of weeks.

When the U.K. exits the E.U., if it has no agreement in place it will automatically leave all of the E.U.’s trade agreements forged with countries around the world — marking a revision to so-called WTO rules.

Canada is a case in point.

Prime Minister Boris Johnson and his supporters breezily asserted during their campaign that they would rapidly roll over the E.U.’s free trade deal with Canada to apply to a newly separate U.K.

Well, when push comes to shove and faced with the choice, Canada has politely declined, according to the Financial Times.

The reason is because, as it stands, the U.K. is planning to remove all tariffs — or at least on some 87% of imports — making Canada’s terms with the U.K. in such a scenario better than the terms it enjoys with the E.U.

Tariffs are being periodically reviewed; for example, a proposed 22% tariff on heavy HGV trucks was recently revised to 10%, the same rate as cars, following fierce lobbying from the road transport lobby. With that caveat in mind, the U.K. would only impose tariffs on some 13% of goods, said to include meat and dairy products, vehicles, ceramics, and fertilizers. The sectors chosen are said to support farmers and certain manufacturers.

Interestingly, automotive parts would not face tariffs in a bid to support the continuation of just-in-time automotive supply chains between the U.K. and mainland Europe that have become so highly integrated over the last 20 years. As such, some fear the wholesale collapse of the U.K. automotive sector in the event of a hard Brexit.

There remain a few weeks for interested parties to lobby for special status or protection from such a zero-tariff policy — you can bet there will be plenty that do just that.

The government is set to increase tariffs on bioethanol after the domestic industry complained that low tariffs on imports could threaten its future. Likewise, ministers are also expected to increase the tariffs charged on imports of textiles; although the U.K.’s textiles industry is relatively small, it may be part of a wider policy to limit rises in costs for consumers as a result of Brexit.

Boris Johnson’s government is desperate for Brexit to appear a success to the general populace. As such, one of its top priorities is that voters should not experience a bruising rise in living costs, such as may result from tariffs being imposed on imports (Britain is a net importer of goods by a wide margin).

How long this status would be maintained remains to be seen — maybe the other side of an election, the cynic would suggest, but the proposal seems to be the tariff structure should last at least 12 months.

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For exporters selling to the U.K. who currently face E.U. tariffs, life could be about to get easier selling into a tariff-free, post-Brexit U.K. economy.

As a wider experiment on the impact of tariffs on an economy, it will be interesting to see whether a zero- and low-tariff mix environment has the galvanizing impact some free-trade economists have promoted.

freshidea/Adobe Stock

This morning in metals news, China spared U.S. soybeans and pork imports from tariffs, copper prices gained on the current tenor of trade news and Chinese iron ore rose to a five-week high.

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China Exempts Pork, Soybeans from Tariffs

China announced it will exempt imports of U.S. soybeans and pork from tariffs, MarketWatch reported, as the two countries aim to move toward a resolution to their long-simmering trade differences.

Trade talks between the countries are scheduled to resume in early October.

Copper Prices Rise

Copper prices made gains to close the week amid the latest seemingly positive news coming out of the ongoing U.S.-China trade saga.

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LME three-month copper was bid up 1.1% on Friday, reaching $5,895 per ton, Reuters reported.

Iron Ore Rises to 5-Week High

Chinese iron ore prices surged to a five-week high, the Hellenic Shipping News reported, supported by restocking demand ahead of holidays in the country.

Iron ore futures on the Dalian Commodity Exchange rose as much as 3.9% on Thursday, up to 681 yuan ($96.08) per ton, according to the report.

Zerophoto/Adobe Stock

This morning in metals news, China’s trade activity with respect to aluminum and copper slowed in August, Nucor announced Chairman and CEO John Ferriola will be retiring at the end of the calendar year and residents of an Arizona town expressed staunch opposition to a proposed aluminum recycling plant.

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China’s Aluminum Exports, Copper Imports Fall

China’s imports of copper and exports of aluminum fell in August as the trade war with the U.S. escalated with the most recent exchange of tariffs.

China’s copper imports fell 3.8% in August compared with the previous month, Reuters reported, while aluminum exports fell 4.3% compared with July totals.

Nucor CEO to Retire

Nucor Chairman and CEO John Ferriola will retire at the end of this year, the company reported.

Ferriola has served as chairman since 2014 and CEO since 2013.

Nucor’s Board of Directors elected Leon J. Topalian, 51, to be president and chief operating officer, effective Sept. 5, 2019. Topalian will succeed Ferriola as CEO on Jan. 1, 2020.

Residents Oppose Proposed Arizona Aluminum Recycling Plant

Locals in the Arizona farming town of Wenden have come out in opposition to an aluminum recycling plant proposed for the town, azcentral.com reported.

MetalMiner’s Annual Outlook provides 2019 buying strategies for carbon steel

According to the report, residents urged officials from the Arizona Department of Environmental Quality not to grant an air-quality permit for the proposed Alliance Metals plant.

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

This morning in metals news, the U.S. Department of Commerce issued affirmative determinations in its anti-dumping investigation of fabricated structural steel imports, Turkey’s largest industrial group will halt steel production and a U.S. Department of Justice lawsuit poses a roadblock for Novelis‘ bid to buy Aleris.

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U.S. DOC Rules on Fabricated Structural Steel Imports

The Department of Commerce has made affirmative preliminary determinations in its anti-dumping probe of imports of fabricated structural steel from Mexico and China.

The DOC found dumping margins for China and Mexico ranging from 0.00% to 141.38% and 0.00% to 30.58%, respectively.

Meanwhile, the DOC issued a negative determination with respect to imports from Canada.

Turkey’s Largest Industrial Group to Pause Steel Production

According to a report by Ahval, Turkey’s largest industrial group plans to halt steel production due to challenging market conditions.

According to the report, Koç Holding’s Koç Çelik unit will halt production from September until the end of January.

Novelis-Aleris Deal

Novelis‘ planned purchase of Aleris is under scrutiny.

The U.S. Department of Justice filed a lawsuit to prevent the move, citing concerns over potentially higher prices for automotive aluminum sheet.

MetalMiner’s Annual Outlook provides 2019 buying strategies for carbon steel

The $2.6 billion purchase was initially announced in July 2018.

Before we head into the Labor Day weekend, let’s take a look back at the week that was and some of the metals storylines here on MetalMiner:

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The Canadian government recently announced policy and regulation changes that it argues “will help improve Canada’s trade remedy system for all sectors.”

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Earlier this month, Canada announced changes to its anti-dumping policy, in addition to the establishment of a new aluminum import monitoring and a pledge to strengthen its existing steel import monitoring system.

“Amendments are being made to the Special Import Measures Regulations to ensure that an appropriate level of anti-dumping duties can be applied to goods that are dumped into Canada,” the Department of Finance said in a release.

“This will provide greater flexibility to the Canada Border Services Agency (CBSA) to address situations where there may be distortions in the price of the goods in the country of export. It clarifies alternative methods to calculate the costs of production of the imported goods, in cases where the price of inputs is distorted because of purchases made between affiliated companies or because of a particular market situation.”

Anti-dumping policy changes will also help the CBSA in its attempts to determine whether a product has been dumped.

“This will make it easier for the CBSA to compare the price of the goods imported into Canada with the price of the goods sold by the same exporter to a different country, to find whether there is dumping,” the Department of Finance said. “Changes will also allow the CBSA to better identify dumping that occurs in targeted patterns and is hidden by high prices.”

In addition, as of Sept. 1, 2019, certain aluminum products will be added to the Import Control List.

“Aluminum importers will be required to cite the GIP on CBSA import declarations in order to import the products into Canada,” the Department of Finance continued. “As a direct result of these changes, the industry and the Government will have access to more timely aluminum import data—making it easier to quickly identify whether global oversupply of aluminum is making its way to Canada.”

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Meanwhile, the Aluminum Association in the U.S. applauded the Canadian government’s announced reforms.

“Strong trade enforcement is absolutely essential to a fair, rules-based global trading system,” said Lauren Wilk, the Aluminum Association’s vice president for policy. “Including aluminum products in Canada’s import monitoring system will help government officials and the industry to identify trends in trade flows and address aluminum misclassification, transshipment and evasion of duties.

“The Aluminum Association has been a strong advocate for the creation of an aluminum import monitoring system in the United States to address similar issues in our country, and we look forward to working with the U.S. government to develop a program that will help ensure U.S. aluminum producers can compete on a level playing field within North America.”