The automotive intelligence groups forecast a 3.3% increase year over year when adjusting for differences in selling days.
“Despite challenges posed by inclement weather in most of the country, retail sales demand continues to be strong with the industry posting a second consecutive month of year-over-year gains,” said Thomas King, president of the data and analytics division at J.D. Power. “Typically, weather related sales disruptions are made up in the weeks following, so most of the sales lost at the beginning of February will be made up at the end of February and trail into early March.”
This morning in metals news: US construction spending picked up in January; meanwhile, the Federal Register published the text of President Joe Biden’s latest executive order; and, lastly, the copper price came back down to close last week.
In its analysis, the DOC used sales information for Jiangsu Zhongji Lamination Materials Co., Ltd. and Xiamen Xiashun Aluminum Foil Co., Ltd.
“The Aluminum Association and its members are pleased that the Commerce Department continues to enforce vigorously the anti-dumping and countervailing duty orders on aluminum foil from China,” said Tom Dobbins, president and CEO of the Aluminum Association.
Dobbins said the unfair trade orders are “leveling the playing field.”
However, he also said it is “discouraging” that Chinese producers are exporting foil using unfair trade practices.
“Today’s announcement reinforces the need for continued vigilance to ensure that foil imports from China are competing fairly in the U.S. market,” he added.
The Department of Commerce calculated a combined anti-dumping and countervailing duty rate of 71.98% for Jiangsu Zhongji Lamination Materials.
Meanwhile, the DOC calculated a combined rate of 67.45% for Xiamen Xiashun Aluminum Foil Co.
The duties also apply to “other cooperative respondents” whose shipments the DOC did not analyze individually.
The calculations cover aluminum foil that came into the United States between Aug. 14, 2017 and March 31, 2019.
“The unfair trade orders on aluminum foil from China continue to be effective in ensuring fair competition with imports from China,” said John M. Herrmann, lead counsel to the domestic industry. “We will continue our efforts to ensure the effectiveness of these unfair trade orders, including aggressive efforts to identify and thwart schemes to evade enforcement of the orders.”
Meanwhile, the Department of Commerce late last year launched investigations related to aluminum foil imports from five other countries.
The DOC in October launched probes related to imports from Armenia, Brazi, Oman, Russia and Turkey.
The period of investigation runs from July 1, 2019, to June 30, 2020.
As we’ve noted in our Rare Earths Monthly Metals Index (MMI) series, rare earths supply has long been a point of concern for the US, particularly the Pentagon. (Recently, MetalMiner’s Stuart Burns delved into China’s overwhelming control of the rare earths processing market and indications Beijing is considering tighter rare earths export regulations.)
In that vein, the president’s latest executive order — his 33rd in just over a month in office, which the White House said he would sign Wednesday — aims to secure those critical supply chains.
The White House said the order focuses on six key areas:
the defense industrial base
the public health and biological preparedness industrial base
the information and communications technology (ICT) industrial base
the energy sector industrial base
the transportation industrial base
supply chains for agricultural commodities and food production
Whether the new Biden administration creates a more insightful or sophisticated approach to trade remains to be seen.
But, if nothing else, a new administration is a chance for a reset on policies that have not worked as intended under a previous administration.
Aluminum tariff policy
The previous administration’s Section 232 tariffs on aluminum of 10% were well intentioned. The tariffs aimed to try to reverse the decline in US domestic aluminium smelting capacity.
In recognition of aluminum’s role in defense and aerospace applications, the government viewed the growing level of imports as a threat to national security. As such, creating a barrier to imports intended to allow US smelters to operate profitably and encouraged firms to reopen idled capacity. Furthermore, the hope was that, in time, firms would open new smelters.
The previous decade had been brutal for the US aluminium smelting industry.
But even accepting that the COVID-19 pandemic made 2020 a far from typical year, it has become clear the tariff strategy has not worked on a number of levels.
While the inflationary cost of finished goods has been minor, the aluminum content even of a can of beer is a small fraction of the total product cost. It remains true that consumers have had to foot the bill.
It was always the intention that domestic producers would raise their prices to the import plus tariff price. The corresponding uplift was what was supposed to allow them to operate profitably again, to arrest the decline and reopen idled capacity.
Annualized production rose to 1.15 million tons at the end of 2018 from 750,000 tons a year earlier. The increase, however, proved short-lived. By the end of last year, national annualized production had fallen to 920,000 tons and capacity utilization to about 50%, Reuters reported.
Equally worrying the post states, there has been no new smelting capacity. The United States remains as dependent as ever on imports of primary metal.
Aluminum tariff and Canada
Buyers will remember the spike in prices that followed the reinstatement of tariffs on Canadian aluminium predicated on the “surge in imports,” as the Trump administration claimed at the time.
The reality was Canadian-origin metal had simply made up for the absence of Russian metal following Rusal’s pivot away from the US, largely to Asian markets, following the earlier sanctions on owner Oleg Deripaska. Russian imports collapsed from 725,000 tons in 2017 to only 136,000 tons last year. Shipments from Canada simply filled the gap, rising 10% in 2019.
The previous administration seemed to accept that imports from Canada should not be considered a strategic risk. Ultimately, it removed the tariff in September 2020.
But what of potential suppliers elsewhere? Would it not be of value to the US to widen its non-tariff supply base?
Biden rescinded permission to exempt the UAE recently for what seemed like political rather than national security reasons. China has never exported primary metal, so it remains irrelevant to this policy.
The years ahead
How the US handles imports of semi-finished products going forward will be the topic of a separate post. The US has inherited a fractious trade landscape as a result of the last few years.
It does so at a time of a fundamental re-evaluation of its trade priorities. Many would argue that re-evaluation is long overdue.
That re-evaluation includes its relationship with China. In that vein, the US is better off by working in cooperation with its allies and neighbors than the unilateral policies of the previous administration that have largely failed to deliver benefits.
This morning in metals news: the gold price continues to slide; the Federal Reserve released its latest Monetary Policy Report; and the record freeze in Texas is disrupting natural gas production.
Gold price weakens
After surging to around $2,035 per ounce in August, the gold price for the most part trended in a band between $1,850-$1,950 through the balance of 2020.
Of late, however, the gold price has retraced, even falling below the $1,800 threshold.
Gold closed Thursday at $1,775 per ounce.
The gold price has fallen, even as the US dollar has also continued to lag. The US dollar index reached 90.23 today, compared with just over 99 a year ago.
One thing worth monitoring is growing interest in cryptocurrencies, particularly Bitcoin. The cryptocurrency has surged above the $53,000 mark and jumped by approximately 80% this year.
Amid a run of loose monetary policy from central banks around the world, some investors will look to other assets. That could mean they’ll even look to assets other than time-tested safe havens, like gold.
It’s unlikely that the US dollar will lose its status as the global reserve currency anytime soon. However, cryptocurrencies like Bitcoin could potentially weigh on gold, leading some investors to rethink traditional safe-haven asset strategy.
A lot can change in a year. In February 2020, Bitcoin hovered around just under $10,000.
The MetalMiner Best Practice Library offers a wealth of knowledge and tips to help buyers stay on top of metals markets and buying strategies.
The Renewables Monthly Metals Index (MMI) rose by 4.4% this month, as the Energy Information Administration released a forecast on renewable energy.
(Editor’s note: This report also includes the MMI for grain-oriented electrical steel, or GOES.)
Renewable energy growth in the US
US electricity generation from renewable energy sources is forecast to double over the next 30 years, according to the Energy Information Administration.
Renewable energy sources accounted for 21% of US electricity generation in 2020. The EIA forecasts that percentage will reach 42% by 2050.
The renewable energy increase will come on the back of declining coal and nuclear power usage, the EIA said. Furthermore, wind power will account for the majority of renewable energy gains until 2024.
After that period, however, solar power will take over the majority of the gains.
“After the production tax credit (PTC) for wind phases out at the end of 2024, solar generation will account for almost 80% of the increase in renewable generation through 2050,” the EIA said. “Based on the Internal Revenue Service safe harbor guidance, EIA assumes that utility-scale solar PV facilities will receive a 30% investment tax credit (ITC) through 2023, which will then be reduced to 10% beginning in 2024.”
The MetalMiner Best Practice Library offers a wealth of knowledge and tips to help buyers stay on top of metals markets and buying strategies.
This morning in metals news: the US steel sector’s steel capacity utilization rate dipped to 75.2% last week; meanwhile, Tata Steel reported its highest ever consolidated quarterly EBITDA; and, lastly, the Metals Service Center Institute (MSCI) launched a new campaign advocating for infrastructure investment.
Steel capacity utilization down to 75.2%
The US steel sector’s capacity utilization rate for the week ending Feb. 6. fell to 75.2%, the American Iron and Steel Institute (AISI) reported.
The rate fell from 76.1% the previous week.
Output during the week ending Feb. 6 reached 1.71 million net tons, a 7.5% year-over-year decline. Meanwhile, the week’s output declined by 1.2% from the previous week.
Furthermore, year-to-date production totaled 9.1 million net tons. The total marked a 9.3% year-over-year decline. Meanwhile, capacity utilization for the period reached 75.8%, down from 82.2% during the same period in 2020.
The Aluminum Monthly Metals Index (MMI) increased by 2.1% this month, as LME aluminum prices traded sideways and the US reinstated the Section 232 aluminum tariff on imports from the United Arab Emirates.
U.S. aluminum reinstates aluminum tariff on UAE
On Feb. 1, President Joe Biden reinstated the 10% aluminum tariff on imports from the United Arab Emirates.
Former President Donald Trump had lifted the aluminum tariff on his last day in office. The reinstated aluminum tariff went into effect Feb. 3.
The reinstatement suggests that it is unlikely the Biden administration will remove the aluminum tariffs imposed by the previous administration. However, as of today, no further decisions were announced on aluminum tariffs.
In addition, Biden’s “Buy American” plans could impact the U.S. domestic aluminum market. The plan will likely promote the manufacturing of essential components in construction, appliances and electronics in the US.
These measures are welcomed at the primary production level. However, not all end-product manufacturers are on board, as they claim these government interventions will artificially inflate the Midwest Premium.
The new administration also announced the delay of the effective date of the Aluminum Import Monitoring and Analysis (AIM) system that the U.S. Department of Commerce created. The Department of Commerce originally said the system would be available Jan. 25. However, it is delaying the launch until March 29. Licenses will not be required for covered aluminum imports until the new effective date.
A Midwest-based trader told Construction & Demolition Recycling that demand for aluminum scrap remains high at secondary smelters that supply the automotive industry in the US
Chad Kripke, an executive vice president of Kripke Enterprise, a nonferrous scrap brokerage firm, confirmed that many sellers are relying on the spot market rather than signing contracts for 2021. This signals that it is a seller’s market.
This market environment is due to the reduced flows of scrap, which has caused spreads to tighten. As a result, secondary producers are opting to purchase scrap at what they might view as high prices rather than risking a lack of material.
Besides the U.S. Midwest Premium Futures, the platform now includes prices for some of the most common forms of aluminum sheet and coil. It includes prices for: 1100 H14, 3003 H14, 5052 H32, 5083 H321, 6061 T6 and 6061 T651.
Price data goes back to Jan. 1, 2020.
Actual metals prices and trends
The Chinese aluminum scrap price increased 0.4% month over month to $2,067/mt as of Feb. 1. Meanwhile, LME primary three-month aluminum increased 0.4% to $1,988/mt.
Korean commercial 1050 aluminum sheet remained flat at $3.30/kg. However, its European equivalent increased 8.3% to $2,948/mt.
Chinese aluminum billet and aluminum bar rose 0.4% to $2,389/mt and $2,489/mt, respectively.
Chinese primary cash aluminum dropped 2.4% to $2,365/mt. Meanwhile, its Indian counterpart declined 2.2% to $2.24/kg.
The orders range from Medicaid to the country’s pandemic response to augmenting public health supply chains.
Relevant to metals, Biden signed two orders aimed at increasing domestic content in federal procurement and the climate crisis.
“Both President Biden and President Trump, as part of their initial rounds of Executive Orders, each prioritized ‘Buy American’ type provisions — a notable point of similarity between two very different administrations,” said Alex Hontos, partner at international law firm Dorsey & Whitney. “Indeed, aspects of President Biden’s Executive Order are very similar to President Trump’s 2017 Executive Order. However, President Biden’s Executive Order contains more directives than Trump’s BA Executive Order did.”
Biden’s ‘Buy American’ plan
Government plans seeking to increase purchases of domestically produced goods are nothing new.
In July 2019, Trump signed an executive order titled “Maximizing Use of American-Made Goods, Products, and Materials.” In the order, Trump said his administration would “enforce the Buy American Act to the greatest extent permitted by law.”
The order called for the Federal Acquisition Regulatory (FAR) Council to consider proposing an amendment to provisions in the Federal Acquisition Regulation regarding classification of items as being of foreign origin.
For iron and steel products, that meant “the cost of foreign iron and steel used in such iron and steel end products constitutes 5 percent or more of the cost of all the products used in such iron and steel end products.”
For all other end products, the percentage would increase to 45%.
Fast forward to 2021 — what does Biden’s executive order on the issue of promoting domestic content in federal procurement?