Articles in Category: Non-ferrous Metals

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The Aluminum Association this week sent a letter to the Trump administration urging it to address Chinese overcapacity, as U.S. and Chinese officials are set to resume talks Wednesday and Thursday aimed at allaying trade tensions.

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The trade group sent the letter to Treasury Department Under Secretary David Malpass, who will lead the U.S. delegation in this week’s talks, which will be attended by Chinese Vice Minister of Commerce Wang Shouwen.

“With the market demand picture bright, and growth in the U.S. aluminum industry occurring, now is an excellent time to resolve trade issues between the United States and China,” wrote Heidi Brock, president and CEO of the Aluminum Association, in the letter. “We note with interest your upcoming meeting with Vice Commerce Minister Wang Shouwen and other representatives from China. This is an important moment in U.S.-China relations, and we respectfully request that the issue of China’s structural overcapacity across the aluminum value chain be included on the U.S. agenda.”

Throughout the year leading up to the imposition of tariffs on steel and aluminum, the Aluminum Association advocated for a trade remedy with a singular focus on China.

“At the same time, the association’s member companies have a shared belief that China’s trade distorting behavior drives massive structural overcapacity in both primary aluminum production and downstream products,” Brock continued. “This is a foundational problem confronting the industry not only in the United States but also around the world. For this reason, the Association has supported trade remedies that focus on China and leave market economies harmless.”

Despite winter cuts, China’s production has continued to rise. According to a Reuters report, July primary aluminum production was up 12% year over year. At 2.93 million tons, its July production was tied for the country’s monthly record.

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According to data released by the National Bureau of Statistics, Chinese primary aluminum production for the January-July period was up 3.0% compared with the same period in 2017.

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This morning in metals news, a group of Tennessee manufacturers sent the president a letter urging him to rescind the Section 232 tariff on imported steel, the Trump administration has proposed a new rule for emissions standards that would undo Obama-era limits and copper hit a one-week high.

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Manufacturers Ask Trump to Rescind Steel Tariff

A group of manufacturers in Tennessee have sent President Trump a letter asking him to remove the tariff on imported steel, The Tennessean reported.

According to the letter, the companies believe the tariff impacts their ability to compete with foreign companies.

“These employees and our businesses depend on access to competitively priced steel to fabricate our products and compete in a global marketplace,” the letter stated. “We cannot compete globally when the cost of our most important input has spiked and delivery times are extended.”

Trump Administration Proposes New Rule for Emissions Standards

The Trump administration Tuesday proposed a new rule governing emissions standards, which would undo Obama-era restrictions on carbon emissions, the Washington Post reported.

The Environmental Protection Agency (EPA) released a statement on what is being called the Affordable Clean Energy Rule.

“The ACE Rule would restore the rule of law and empower states to reduce greenhouse gas emissions and provide modern, reliable, and affordable energy for all Americans,” EPA Acting Administrator Andrew Wheeler said. “Today’s proposal provides the states and regulated community the certainty they need to continue environmental progress while fulfilling President Trump’s goal of energy dominance.”

Copper Bounces Back

Copper hit a one-week high Tuesday on the dollar’s losses and ahead of planned talks between the U.S. and China this week, Reuters reported.

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LME copper jumped 1% Tuesday, Reuters reported, rising to $6,053 per ton.

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In the latest move in the recent saga of burgeoning tensions between the U.S. and Turkey, the latter has filed a request with the World Trade Organization (WTO) for consultations over the U.S.’s additional steel and aluminum tariffs.

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The request was circulated to WTO members Aug. 20.

The U.S. recently doubled its steel and aluminum tariffs on imports of the Turkish metals, raising the rates to 50% and 20%, respectively.

Tensions between the two nations have increased, as the U.S. has called for the release of a detained American pastor, Andrew Brunson. The Turkish government detained the pastor on espionage and terrorism-related charges. According to media reports, the U.S. rejected a deal offered by the Turkish government, in which the pastor would be released in exchange for forgiveness of billions of dollars in fines on a Turkish bank.

On the other hand, the Turkish government has continued to call for the extradition of religious leader Fetullah Gulen — currently living in exile in Pennsylvania — whom the government claims was behind the failed coup in 2016.

President Trump announced the doubling of the metals tariffs in a tweet Aug. 10, writing: “I have just authorized a doubling of Tariffs on Steel and Aluminum with respect to Turkey as their currency, the Turkish Lira, slides rapidly downward against our very strong Dollar! Aluminum will now be 20% and Steel 50%. Our relations with Turkey are not good at this time!”

In response, Turkey imposed tariffs on U.S. imports, including automobiles, alcohol and tobacco.

The Turkish currency, the lira, has suffered in the process, as MetalMiner’s Stuart Burns explained last week. The lira has already been on the decline against the dollar in the past year, and proceeded to fall 20% on the heels of the current standoff with the U.S. As of Monday afternoon, the lira sat at ₺6.1544 to the U.S. dollar, having started the year at ₺3.7915.

According to Turkey, its request for consultations comes as it believes the U.S.’s doubling of the steel and aluminum tariffs is inconsistent with provisions of the WTO’s Agreement on Safeguards and the General Agreement on Tariffs and Trade (GATT) 1994.

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Turkey also argued that the U.S.’s application of Section 232 of the Trade Expansion Act of 1962 — the statute by which the metals tariffs came to be — is also inconsistent with provisions of the GATT 1994.

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According to data released Monday by the International Lead and Zinc Study Group (ILZSG), both lead and zinc were in deficit through the first six months of the year.

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According to the ILZSG report, Chinese data for the months of April, May and June are still unavailable; as such, revisions may be made as that data becomes available.

Global Lead Market

Global lead demand outpaced supply by 39 kt in the first half of the year, according to the report. Meanwhile, reported lead stock levels fell by 41 kt.

Global lead mine production fell 4.2% from the first half of 2017, down to 2,258 kt from 2,386 kt, which was “primarily due to lower output in Australia, Kazakhstan, Peru and the United States that more than offset increases in Europe, Cuba and Morocco,” according to ILZSG. Mine production in June hit 358.3 kt, down 3.4% from 371.0 kt in May.

Lead usage ticked up just 0.5% for the six-month period, aided by usage increases in the U.S. and Germany, according to the report.

Global Zinc Market

As for zinc, the global refined zinc market finished the first half with a 17-kt deficit, according to ILZSG. In that span, reported inventories increased by 77 kt.

Mine production in the first half dropped 2.4% year over year, with reductions in China, India and Australia offsetting a 5.6% rise in European zinc mine production.

Global zinc usage dropped 0.6% year over year, a trend led by apparent demand decreases in South Africa, Taiwan and the U.S., according to the report.

The LME lead price fell 8.7% in the last month, closing at $1,975/mt as of Friday, Aug. 17.

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LME zinc, meanwhile, traded mostly sideways for much of the past month before dropping 12.1% since Aug. 9, closing at $2,359/mt as of Friday, Aug. 17.

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This morning in metals news, U.S. steel mills saw their shipments rise in June, Shanghai rebar steel prices hit a nearly seven-year high and copper recovers on optimism regarding U.S.-China trade talks.

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Steel Shipments Surge

Shipments from U.S. steel mills rose 3.2% year over year in June, according to the Times of Northwest Indiana.

In the year to date, U.S. steel shipments are up an estimated 3.6%, according to the report.

Rebar Price Hits Seven-Year High

According to Reuters, the Shanghai rebar steel price has surged to a near seven-year high.

Supply concerns gave rebar price support. Rebar prices rose as much as 4.5% on Monday, according to Reuters.

Copper Bounces Back

The copper price has plunged in recent months, but showed signs of bouncing back Monday, according to Reuters.

The London copper price ticked up on positive sentiment vis-a-vis talks to resolve the simmering trade conflict between the U.S. and China.

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According to Reuters, LME copper jumped 0.9% Monday after closing down 0.2% Friday.

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

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This morning in metals, U.S. Steel announced a large investment at its flagship steel plant, the U.S. and China will resume talks on trade, and copper is set to finish the week with its biggest weekly loss since early July.

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U.S. Steel Announces $750M Investment

U.S. Steel announced it plans to invest $750 million in its flagship plant in Gary, Indiana, the Chicago Tribune reported Thursday.

According to the report, the firm credited the Trump administration’s trade policies in helping to facilitate the company’s modernization of its plants, while President and CEO David Burritt said the company is experiencing a “renaissance.”

U.S., China to Restart Trade Talks

Trade tensions between the U.S. and China have continued to grow, as the U.S. has in recent weeks imposed a total of $50 billion in tariffs ($16 billion of which will go into effect Aug. 23), with China responding in kind.

According to several reports, officials from the two countries plan to meet later this month to talk trade in hopes of deescalating the situation.

Copper Slides Again

It has been a tough couple of months for copper, which continued its slide this week, posting its biggest weekly loss since early July, Reuters reported.

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According to the report, the LME copper price fell 4.5% this week.

India’s aluminum sector finds itself in a state of flux.

Secondary aluminum makers in India are not upset by the import levies announced by U.S. President Donald Trump, but have expressed concern at the inverted duty structure perpetuated by the Indian government itself.

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On the other hand, India’s largest aluminum producer wants the government to cap the quantity of imports of low-cost semis, wire rods and scrap from China and the U.S., as the percentage of inbound shipments in domestic demand is steadily going up.

As has always been the case, the primary and secondary producers are once again at loggerheads.

In all this, the sector, which is not yet on the core sectors list, has demanded a new policy itself, which the government says it is contemplating.

The Metal Recycling Association of India (MRAI), a representative body of the secondary aluminum producers, recently issued a statement urging the government to bring basic customs duty on imports of aluminum scrap to zero from 2.5%. This was in response to a move by the Aluminium Association of India (AAI), which wants the duty to be raised to 10%. MRAI feels the move of a hike will take away jobs of thousands of people working in the downstream & ancillary industry, (MRAI) said in a statement.

Ongoing exports of primary aluminum have upset the secondary producers more than the Trump tax. This lot claims the skewed duty structure has squeezed capacity utilization and affected margins.

In all this, the largest producer of aluminum, Hindalco, has asked the government to impose quantitative restrictions on imports in the near term.

A Bloomberg Quint report quoted Satish Pai, managing director and CEO, as saying the government should move to duty safeguards eventually, adding that while quantitative restrictions will be helpful in the short term and are allowed under the World Trade Organization regime, safeguards will take at least six months.

Hindalco has asked the government to limit imports based on the average of the last three years of imported quantity.

In this kind of tax regimes, India’s aluminum industry is barely remaining competitive because it has the highest production costs for aluminum among the largest producers (including Canada, Russia, the Middle East and China). Other hurdles include high power costs, which drove smelter metal’s cost 73% higher in the last 15 years compared with a 64% rise in the price of aluminum on the London Metal Exchange.

As India strives to meet its economic growth targets, aluminum is becoming increasingly critical for its infrastructural needs. In India, aluminum consumption is pegged at 2.5 kg per capita. To reach the global average of 11 kg per capita, India must up annual consumption by 16 million tons.

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Experts in India are calling for the government to formulate a National Aluminium Policy (NAP) focusing on holistic short- and long-term visions, identifying growth targets for demand augmentation and capacity addition.

Even if U.S. steelmakers have been slow to add capacity following President Trump’s tariff protection, it would seem foreign steel makers are willing to commit to domestic U.S. production.

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The Financial Times this week reported on the announcement by BlueScope Steel, Australia’s biggest steelmaker, to examine adding 600,000 to 900,000 metric tons per year of steelmaking capacity to its North Star business in Ohio. This would raise the Ohio plant’s existing production of 2.1 million metric tons per year to some 3 million tons at a cost of between U.S. $500 million and $700 million.

The project would involve the addition of a third electric arc furnace and a second slab caster, according to the Financial Times report. A decision is expected at the company’s February 2019 annual results pending the outcome of the feasibility study, by which time a clearer picture may emerge of what the tariff landscape is going to look like longer term.

Interestingly, Australian steelmakers are exempted from the tariffs; in theory, BlueScope could have invested at home. Australia, however, along with Argentina, are subject to quota limits, so ramping up domestic production to meet U.S. demand is not considered a viable option.

According to the Financial Times, domestic U.S. steel producers are, not surprisingly, doing rather well from the tariffs.

The resulting price rises have fueled a rally in U.S. domestic prices, helping firms like ArcelorMittal surpass forecasts previously set by analysts. Arcelor’s earnings came in at $5.59 billion before interest, taxes, depreciation and amortization for H1 2018. That represented an increase of 28.6% on the same period a year before, as half-year sales rose 17.6% year-on-year in value terms to $39.2 billion, primarily due to higher steel selling prices. Net income was up by almost one-third to $3.06 billion. It hasn’t yet resulted in Arcelor announcing any increased investment in domestic U.S. production capacity — the real aim of the tariffs — but, arguably, steelmakers are waiting to see how the whole tariff situation develops and whether they are truly here to stay (in which case, investment could result).

The U.S. Department of Commerce found foreign steel accounted for about one-third of the 107 million metric tons of steel the U.S. economy used in 2017, the Weekly Standard reported.

Although U.S. producers still have a commanding market share, the report concluded that inexpensive foreign imports were causing domestic steelmakers to lose money, lay off workers, and close plants last year.

U.S. steel plants in 2017 ran at just 72% of capacity, below the 80% level they are widely considered necessary to be profitable. The blame for poor capacity utilization fell firmly at the door of “excessive imports of steel.”

Well, that was last year; this year is something very different.

Following tariffs, steel prices are up sharply, profits are up at the domestic mills and so is capacity utilization. The domestic mills have the option to price balance towards full capacity, shielded as they are now behind a 25% import tariff. They may choose to take higher prices and forego full capacity or adjust pricing to achieve full capacity; we will see what policy has been adopted when Q3 and H2 figures are released.

It is unlikely significant new capacity will be added in the short term, though, despite talk of planned new capacity.

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According to Reuters, steel output in the United States rose 2.9% in the first half to 41.9 million metric tons and gained 0.8% in June to hit 6.9 million tons for the month. Data from the American Iron and Steel Institute (AISI) show capacity utilization at U.S. mills in the year to July was 76.4%, up from 74.4% in 2017, suggesting domestic mills generally are opting for better prices as a route to profitability rather than pricing out tariffed imports.

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This morning in metals news, domestic raw steel production for the week ending Aug. 11 jumped 5% compared with the same week last year, the U.S. has raked in more than $1.4 billion from its steel and aluminum tariffs, and China’s aluminum production surged in July.

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U.S. Raw Steel Production Surges Last Week

According to data released by the American Iron and Steel Institute (AISI), U.S. raw steel production jumped 5% year over year for the week ending Aug. 11.

Production for the week hit 1,855,000 net tons at a capacity utilization rate of 79.1%. Production was also up 1.5% from the previous week ending Aug. 4.

Tariff Windfall

The Trump administration’s tariffs on steel and aluminum have yielded revenue amounting to more than $1.4 billion, according to a recent Congressional report cited by CNBC.

As for the much-criticized tariff exclusion process — many have lamented the slow rate at which the Department of Commerce has processed the requests — as of Aug. 6. the Department of Commerce had received 33,099 requests, approving 1,428 requests and denying 702.

Chinese Primary Aluminum Production Rises

July proved to be a productive month in China for primary aluminum production.

The country saw production surge 12% year over year, according to a Reuters report.

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According to the report, citing National Bureau of Statistics data, China produced 2.93 million tons of primary aluminum in July. The output marked a 3.4% increase from the previous month, according to the report.