This morning in metals news, German firm Thyssenkrupp announced the sale of its elevator segment, the U.S.’s trade deficit in goods dipped in January and the International Tin Association recently surveyed tin producers regarding the impact of the coronavirus outbreak.
It probably had to happen at some stage.
As we wrote recently, it isn’t the coronavirus epidemic as much as the response to it that is causing a collapse in supply chains.
The decision to shut down roads and quarantine cities across China has caused delays in workers returning to factories and those factories receiving raw materials.
Thought you had the China supply risks covered? More than one supplier, multiple logistics options, natural disaster contingency planning… yep? Try this: employee arrest and detention.
Here’s What Happened
As we reported soon after it happened last week, the Bureau of Consular Affairs under the U.S. Department of State has issued a warning of an increased risk of arbitrary arrest and detention when U.S. citizens, particularly those of dual nationality, come to leave China. According to the notice, Chinese authorities have asserted broad authority to prohibit U.S. citizens from leaving China by using ‘exit bans.’ The post states China uses exit bans coercively:
- “To compel U.S. citizens to participate in Chinese government investigations,
- To lure individuals back to China from abroad, and
- To aid Chinese authorities in resolving civil disputes in favor of Chinese parties.”
According to the notice, U.S. citizens may be detained without access to U.S. consular services or information about their alleged crime. U.S. citizens may be subjected to prolonged interrogations and extended detention for reasons related to “state security.”
Why It Happened
Sounds serious, doesn’t it? But to be fair, the current notice is largely a repeat of one issued the same time last year and China retains a Level 2 caution, according to U.S. authorities — meaning two out of four travelers should “exercise increased caution” when in the country. This is a warning that has at times applied to parts of Europe due to a perceived risk from terrorism.
According to Conde Nast Traveler, the advisory follows high-profile cases in December in which two Canadian businessmen, Michael Spavor and Michael Kovrig, were detained for unspecified reasons, citing a Reuters report. Both Kovrig and Spavor remain in detention in China and are awaiting trial, with the U.S. and Canada calling for their release. In total, some 13 Canadians have been detained of late in moves said to be linked to the arrest of Huawei executive Meng Wanzhou.
Some put the restatement of the travel advisory down to increased trade tensions between the U.S. and China following President Trump’s trade war, but while such issues don’t help, the reality is China has always imposed strict censorship laws and still rigidly controls free speech. It uses such laws in situations that Western societies find arbitrary and unrelated, but the Chinese no doubt brought in the laws with the express intention of giving them a catch-all legal framework to bring leverage if they felt an individual, company or even country was not acting in China’s best interests.
What It Means for Metal Buyers
Buying organizations should, from time to time, be reminded that China is not a benign democracy, but an autocratic single-party state controlled by an increasingly powerful centrist elite.
The West’s view that China would become progressively more liberal and democratic over time has proved to be fundamentally flawed — and with that realization, our perception of risk for employees and contractors we send or employ there should change too.
McKinsey is a highly respected firm of consultants, but we rarely report findings of its work because the material released into the public domain is often too generalist for our practitioners at the coal face of metal procurement.
Arguably, a recent article on the future of containerization could be said to be in the same vein, comparing as it does their findings in 1967 to today and weighing up current trends extrapolating how the industry could change over the next 50 years. Fifty years is a long time — many of us won’t even be working anymore by then — but of course changes will happen gradually over the period. Some of the developments they mention are already in process today.
Careful not to make specific predictions, McKinsey suggest the following may happen by 2067. Like cars, the firm sees ships becoming autonomous — a scary thought, but, realistically, if you can do it with trucks and cars, why not boats?
President Donald Trump said today that his administration has approved the Keystone XL pipeline, reversing the Obama administration’s decision to block the oil transportation project.
Speaking from the Oval Office, Trump officially announced the approval shortly after the State Department issued TransCanada‘s permit, making good on one of his campaign promises. The approval greenlights the Canadian company to complete construction on the pipeline that will funnel crude oil from Canada to refineries on the Gulf Coast.
The American Petroleum Institute praised the approval.
“Today’s action to approve the Keystone XL pipeline’s cross-border permit is welcome news and is critical to creating American jobs, growing the economy, and making our nation more energy secure,” said API President and CEO Jack Gerard. “This critical infrastructure project has been studied longer than any pipeline project in U.S. history with exhaustive reviews by the State Department concluding that the project is safe for the environment and the best option for transporting domestic crude and Canadian oil to U.S. refineries.”
The 1,179-mile addition to existing pipelines that will stretch from Alberta, Canada to the U.S. Gulf Coast is estimated to create 42,000 construction jobs but only 35 full-time, maintenance positions once it’s completed.
Lopez Allows Suspended Mines to Ship Out Stockpiled Nickel Ore
The Philippines’ environment ministry, led by Environment and Natural Resources Secretary Regina Lopez, has allowed eight suspended nickel ore miners to ship out stockpiles of mined ore, sources told Reuters, temporarily boosting supply from the world’s top exporter of the raw metal after a major crackdown.
More than half of all the mines in the Philippines have been ordered to permanently shut to protect watersheds in an eight-month campaign led by Lopez.
Two requests for proposals were released yesterday by Customs and Border Protection for the planned border wall between the U.S. and Mexico along the southern border in several states.
New descriptions in the RFPs include this language: “CBP seeks highly qualified Contractors to assist in the development of a new border wall design standard as well as construct border wall and supporting tactical infrastructure/technology along the southwest border. CBP seeks highly qualified Contractors to propose a reinforced solid concrete wall that meets or exceeds CBP’s performance requirements. The proposed prototype designs shall not include the use of proprietary design or equipment. CBP plans to enter into multiple-award, indefinite-delivery, indefinite-quantity (IDIQ), task order contracts for Border Wall Design/Build Construction. The IDIQ may include various, simultaneous task orders ranging from $100,000 up to $275,000,000 per task order.
“CBP anticipates awarding IDIQ contracts to multiple Contractors. All selected Contractors will be awarded one (1) task order to construct its proposed prototype.”
The RFP goes on to state that “the prototypes will inform future design standard(s) which will likely continue to evolve to meet USBP’s requirements. Any and all prototypes will be designed to deter illegal entry into the United States. Through the prototyping process, CBP may identify new designs or influences for new designs that will expand the current border barrier toolkit that CBP will use to construct a border wall system. The border barrier toolkit is based on USBP’s requirements.”
Steel Industry Supports Revisiting Auto Emissions Standards
The American Iron and Steel Institute, the largest trade body representing the steel industry, issued a statement in reaction to the Trump administration’s recent announcement that it is re-examining fuel-economy standards set by the Obama administration for 2022-2025 model year light-duty vehicles.
“AISI is pleased the administration has withdrawn the final determination of the EPA Light Duty Vehicle Emission Standards issued in January,” Thomas J. Gibson, president and CEO of AISI said in the statement. “As a key materials solutions provider, we look forward to a dialogue between EPA, National Highway Traffic Safety Administration, California Air Resources Board, auto manufacturers and other relevant stakeholders on the Mid-Term Evaluation. The steel industry is making investments in new grades of lightweight, high-strength steels to assist our automotive customers in reducing emissions and improving fuel economy performance. We are confident that getting the partnership between the government and stakeholders back on track will result in a plan for the future which protects the environment by establishing a common sense, implementable single national program for CAFE and GHG standards.”
U.S. infrastructure was given a near-failing grade of D+ by the American Society of Civil Engineers (ASCE) yesterday, the largest trade association of the civil engineering profession in the U.S. This was the second time in two reports that our national roads, bridges, railways, airports, dams and other infrastructure sites barely avoided the dreaded F. The criticism could give momentum to President Donald Trump’s vow of a $1 trillion investment to rebuild everything from roads to dams.
The D+ grade from the American Society of Civil Engineers‘ (ASCE) is unchanged from its last report card in 2013, suggesting that only minor progress had been made in improving public works.
The ASCE estimated in a statement that the United States needed to invest $4.59 trillion by 2025 to bring its infrastructure to an adequate B- grade, a figure about $2 trillion higher than current funding levels.
Chinese Steel Exports Plummet
Chinese steel exports tumbled to a three-year low in February, customs data showed on Wednesday, lower than expectations, as steelmakers in the world’s top producer shifted to meeting rising demand at home.
Shipments for the month were 5.75 million metric tons, the lowest since February 2014, data from the General Administration of Customs showed. It was down 29.1% from a year ago and down 22.5% from January.
A Washington, D.C. federal judge refused Monday to halt construction and drilling on the recently approved, eight-mile final stage of the Dakota Access pipeline, rejecting the Cheyenne River Sioux Tribe’s plea for a temporary restraining order to ostensibly protect a religiously and culturally significant lake.
A similar challenge was rejected by another federal judge last year.
Philippines Environment Czar Cancels 75 Mining Contracts
The Philippines’ Environment Ministry, under the direction of Environment and Natural Resources Secretary Regina Lopez, on Tuesday ordered the cancellation of 75 mining contracts, stepping up a campaign to stop extraction of resources in sensitive areas after earlier shutting more than half of the country’s operating mines, Reuters reported. The contracts are all in watershed zones, with many in the exploration stage.
They cover projects not yet in production and the latest action by Lopez suggests she will not allow them to be developed further. The move turns up the heat in her battle with the mining sector after she ordered the closure of 23 of the country’s 41 mines earlier this month on environmental grounds.
The Trump administration is reportedly considering an executive order that would suspend the conflict minerals rule of the Dodd-Frank banking regulation bill.
The conflict mineral rule requires reporting of supply chains to enforce a ban on tin, tantalum, tungsten and gold from the Democratic Republic of the Congo. It’s backed by human-rights groups but many businesses say the rule, as is, requires a swath of industries to investigate whether their products contain metals that could have been sold by armed groups so far down their supply chains that it’s impossible to tell where it came from. Reporting has been spotty even under the current rules.
The proposed executive action, drafted last week and reviewed Wednesday by The Wall Street Journal, would suspend the conflict-minerals rule for two years. Business groups have fought the rule in court, saying its requirements are costly and burdensome.
US Sells Crude Oil From Strategic Reserve
10 million barrels of crude from the U.S.’s strategic reserve are scheduled to be sold later this month, the Department of Energy said.
The shipment is part of a total 25 million barrels, to be sold over a period of three years, as per the 21st Century Cures Act, signed in December last year.
Initial panic in India over reports of an executive order to be signed by U.S. President Donald J. Trump tightening the non-immigrant H-1B visa regime has subsided. Outsourcers, primarily from India, are the top recipients of H-1B visas, managing the technology departments of large U..S corporations with imported staff.
From anxiety, the mood here has now dropped to a “wait and see” one. The Government of India has tried to allay fears by saying no such executive order has been passed and Foreign Ministry spokesman Vikas Swarup explained to the media that three private bills in the matter had been introduced in the U.S. House of Representatives, adding that such bills had been introduced in the past, too, and the mere introduction of them is nothing new. For now, the government does not want to say anything more, since the bills have to go through the full Congressional process.
Panic at the IT Department
Analysts say the panic was natural since news about the likely change in the H-1B visa rules came soon after the new President banned refugees and travelers from seven predominantly Muslim countries from traveling to the U.S. (the travel ban has since been temporarily lifted by a temporary restraining order from a federal judge). Read more