Articles in Category: Public Policy

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This morning in metals news, Rio Tinto made a copper discovery at its Grasberg mine for the first time since 2014, automakers urge Trump not to withdraw from the North American Free Trade Agreement (NAFTA) and copper hits a 3 1/2-week low.

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Rio Makes Copper Find at Grasberg

Rio Tinto made a copper discovery at its Grasberg mine, marking the first discovery of copper at the location since 2014, Bloomberg reported.

The discovery comes as Rio is considering leaving its Indonesian mine operation, according to the report. Rio’s total mined copper output declined by 9% last year, according to the report.

Don’t Pull Out of NAFTA: Automakers

As renegotiation talks focusing on NAFTA continue, automakers once again urged the president not to pull out of the trilateral trade deal.

According to Reuters, automakers urged the president not to terminate the deal and were hopeful a renegotiated deal can be reached among the member nations (the U.S., Canada and Mexico).

Trump has threatened to withdraw from the deal, inked in 1994, as manufacturing and labor group in the U.S. have argued NAFTA has seen jobs leave the country for Mexico. Meanwhile, other groups, like automakers, have indicated a desire to see the deal modernized for the 21st century, as opposed to spiking the deal entirely.

Regardless, pulling out of NAFTA would have a significant impact on a wide range of interconnected supply chains across North America.

The parties involved in the renegotiation hoped to reach a deal by the end of 2017, but that schedule proved to be overly ambitious. Now, negotiators will look to hammer something out during what is an election year in all three countries.

Copper, Nickel Slide

Copper fell to a 3 1/2-week low and nickel dropped by more than 5% on Tuesday, according to Reuters.

After zinc closed out 2017 on a hot streak, it has come back down to earth a bit after not unexpected profit-taking, according to the report.

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Copper, too, also fell as the U.S. dollar steadied (the two are inversely correlated), hitting an index value of 90.61 as of 12:15 p.m. EST Tuesday.

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This morning in metals news, two new vehicles made mostly with steel represent a victory for the steel industry, iron ore prices are down and the U.S. International Trade Commission (ITC) voted to continue its investigation into common alloy aluminum sheet from China.

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New Ram Pickup, Chevy Silverado Made with Steel

As the steel industry battles to remain the dominant material in automotive construction, the news of two new models constitutes a win for the industry.

Fiat Chrysler‘s new Ram pickup and General Motors‘ new Chevrolet Silverado truck are made mostly with steel, Reuters reported. The announcements represent a big win for steel, which is seeing increasing competition from aluminum within the automotive industry.

As Reuters reported, in late 2014 Ford launched the all-aluminum body F-150. While the versatile metal offered improved fuel economy, it comes at a premium to steel. The interplay between steel and aluminum vis-a-vis automobile construction is something that will need to continue to be monitored going forward.

Iron Ore Prices Drop

As Chinese rebar steel futures fell, so too did prices of iron ore in the face of flagging demand, Reuters reported.

Iron ore on the Dalian Commodity Exchange dropped 2.3% to 535 yuan per ton, according to the report.

ITC Continues Aluminum Sheet Investigation

The U.S. ITC announced Friday that it voted to continue its investigation of common alloy aluminum sheet from China.

“The United States International Trade Commission (USITC) today determined that there is a reasonable indication that a U.S. industry is materially injured by reason of imports of common alloy aluminum sheet from China that are allegedly subsidized and sold in the United States at less than fair value,” the ITC release covering the announcement states.

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Now, a preliminary countervailing duty determination is due Feb. 1 from the Department of Commerce.

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

Before we head into the weekend, let’s take a quick look back at the week that was here on MetalMiner:

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  • This week we wrapped up the latest round of posts for our January Monthly Metals Index (MMI) — check out this week’s posts on the following:
  • Oil and gas exploration is a topic that has both passionate supporters and detractors. President Trump’s recent proposal to open up new areas for drilling, not surprisingly, has both of those, as our Stuart Burns wrote earlier this week.
  • Sticking on the subject of oil, Burns surveyed the factors behind crude oil’s continuing rise in price. Political turmoil is one factor, among others, contributing to the increase.
  • The long wait is over … Secretary of Commerce Wilbur Ross has sent President Trump his Section 232 steel report (the statutory deadline was Jan. 15). Trump now has 90 days to decide what to do. A similar announcement for the Section 232 aluminum probe — which was launched last April, one week after the steel probe — should also be coming soon.

After a couple of self-imposed deadlines blown by and a lot of waiting, the next step in the Section 232 process has finally arrived.

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Thursday evening the Department of Commerce announced Secretary of Commerce Wilbur Ross had completed his Setion 232 steel report and sent it on to President Donald Trump. Under the statutory guidelines of Section 232 (derived from the Trade Expansion Act of 1962), Trump has 90 days to respond to the recommendations and act (or not act).

As a result of the investigation, the president could call for tariffs, quotas, or a hybrid tariff-quota solution in an effort to help domestic steelmakers dealing with rising imports.

The department’s announcement did not indicate what the contents of the report were. White House Deputy Press Secretary Lindsay Walters said the president would announce his decision “at the appropriate time,” CNBC reported.

The Section 232 probes into steel and aluminum imports were launched last April. The purpose of the investigation is to determine whether or not the imports pose a threat to the country’s national security. The last Section 232 investigation came in 2001, when it was that determined that imports of iron ore and semi-finished steel did not pose a threat to national security.

Unsurprisingly, reactions rolled in Thursday evening from the metals industry.

“The steel industry welcomes the news that the Secretary of Commerce has formally submitted his report to the president in the Section 232 investigation into the impact of steel imports on the national security,” said Thomas J. Gibson, president and CEO of the American Iron and Steel Institute (AISI), in a release. “We are confident that we have made the case that the repeated surges in steel imports in recent years threaten to impair our national security and we look forward to the president’s decision on the appropriate actions to address this critical situation.”

Scott Paul, president of the Alliance for American Manufacturing (AAM), expressed hope that Trump would not need 90 days to bring the investigation to its conclusion.

“Final resolution of the Section 232 case doesn’t need to take 90 days; we’ve seen more than six months of delays already,” Paul said in a release. “Let’s get this done by the end of January.”

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A rise in imports has been a consistent talking for Trump, with China in particular coming in for much criticism from the president and the domestic industry.

According to a recent AISI report, U.S. steel imports rose by 15.5% in 2017. The estimated finished steel import market share in 2017 checked in at 27% (22% for December 2017 alone).

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This morning in metals news, a law proposed in the U.K. could have a negative impact on the domestic steel industry as the country moves forward with Brexit talks, steel production in the U.S. Great Lakes region has jumped to start the year, four firms have submitted resolution plans for Electrosteel Steels and the U.S. Department of Commerce announced affirmative final determinations in the antidumping duty investigations of imports of carbon and alloy steel wire rod from South Africa and Ukraine.

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Union Warns About Proposed U.K. Law

A U.K. bill that aims to institute trading provisions for after the U.K.’s exit from the European Union could prove to offer fewer protections than existing E.U. tariffs, members of the Community trade union warned, according to the BBC.

Community union members wrote to Chancellor Philip Hammond, warning that the Customs Bill would not prove as strong as E.U. safeguards against antidumping already in place.

In the letter, quoted by the BBC, the members wrote: “When the UK leaves the European Union we will of course need to set up our own way of preventing unfair trade or dumping of goods. We understand this Customs Bill is putting down the framework for that to happen. But as it is currently written, we fear it will not be effective.”

Steel Production Up in the Great Lakes

Steel production has gotten off to a fast start in the U.S.’s Great Lakes region, the Northwest Indiana Times reported.

Production rose to 640,000 tons for the first week of 2018, constituting a 7.7% jump, the paper reported. Steel mills in the Great Lakes produced 594,000 tons of steel the previous week.

Companies Bid for Debt-Laden Electrosteel

Tata Steel, Vedanta and two other bidders are vying for the acquisition of Electrosteel Steels, which is currently involved in an insolvency resolution process, the Economic Times reported.

Electrosteel was one of 12 companies sent to insolvency proceedings by the Reserve Bank of India, the Economic Times reported.

DOC Makes Affirmative Determination on Wire Rod Imports

The U.S. Department of Commerce announced this morning that it had made affirmative determinations in its antidumping investigation of carbon and alloy steel wire rod from South Africa and Ukraine.

According to a department release, it determined that exporters from South Africa and Ukraine sold wire rod in the United States at 135.46-142.26% and 34.98-44.03% less than fair value, respectively.

The petitioners in the case are companies from four states: Gerdau Ameristeel US Inc. (Florida), Nucor Corporation (North Carolina), Keystone Consolidated Industries (Texas) and Charter Steel (Wisconsin).

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Before we come to the end of the first business week of 2018, let’s look back at some of the stories on MetalMiner so far this year:

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  • Chinese supply-side reforms generally have a big impact on metal prices — such was the case for copper, as our Stuart Burns wrote early this week.
  • In case you missed it, the fourth episode of our podcast series, Manufacturing Trade Policy Confidential, dropped this week. This time, we spoke with Heidi Brock, CEO of the Aluminum Association.
  • With 2018 just under way, many publications are making predictions for the year with respect to the markets and how they will perform (among other things). Burns rounded up some of the predictions being made for the year, ranging from the political to the economic.
  • After a solid 2017, Tata Steel has big plans for 2018, Sohrab Darabshaw writes.
  • Speaking of supply-side actions, Burns touched on oil output cuts led by OPEC.
  • We kicked off our monthly round of Monthly Metals Index (MMI) posts with the Automotive MMI.
  • Gold and Bitcoin, in terms of finance, sit on opposite ends of the spectrum, with the former representing tradition and the latter representing the rise of modern cryptocurrencies. However, their relative fortunes are more connected than you might think, Burns writes.
  • For our second MMI post, we surveyed the month in construction trends and prices.

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Everyone loves a forecast, a prediction, even a few ideas on what the future holds, and we become particularly obsessed with such ideas at the start of a new year.

So, we thought it would be fun to review a few sources’ suggestions on what 2018 may hold, some as specific predictions like those in the Financial Times, and some as possible standout black swan events that could catch us off guard, such as those in The Telegraph newspaper.

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Firstly, some of the Financial Times’s suggestions. They came up with 20 of them, but many are political and somewhat niche for our readership, like whether or not Britain’s Prime Minister Theresa May still be in power by the end of 2018. It’s a topic only the Brits are obsessed with and as it’s not exactly going to roil international markets one way or the other, we will ignore it here, as will non metal-market issues, like whether the AT&T-Time Warner merger will go through without big changes to both.

However, of more interest are questions like “Will Trump trigger a trade war with China?” Yes, in the FT’s opinion. The paper believes Trump will deliver on his protectionist campaign rhetoric and take punitive actions against China in 2018, resulting in China either imposing retaliatory measures or taking America to the World Trade Organization (WTO). (While on the Trump train of thought, another ditty from the FT is “Will the president will be impeached in 2018?” — or, at least, whether or not proceedings will be brought against him by the end of the year.)

Back to China, the driver for metal markets will be Chinese demand and Chinese GDP growth. At least officially, growth will continue to headline at 6.5% throughout 2018, the FT believes, although it clearly does not believe the official figures and makes the point real growth will be somewhat lower. Emerging market growth overall is expected to rise above 5% through 2018 despite the U.S. Federal Reserve increasing rates, which could spark taper tantrum spoilers (as in 2013). Even so, emerging market growth is expected to remain robust, aided by ongoing strong growth in the U.S. and Europe.

Political Turmoil Shakes Things Up Worldwide

Politically, 2018 could be an interesting year.

Read more

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It is often easier to criticize from the outside than to resolve from within — that is as true of boardrooms as it is of government.

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It should come as no surprise that President Trump’s well-intentioned claims during his election campaign to bring American jobs back to American steel mills — “When I’m president, guess what, steel is coming back to Pittsburgh,” he said during an April 2016 rally — have proved much harder to achieve in office than may have appeared to him and his supporters on the campaign trail.

Some believe the protectionist, low-hanging fruit of withdrawing the U.S. from the Trans-Pacific Partnership and ordering investigations into trade pacts such as NAFTA and the KORUS FTA have, if anything, exacerbated problems for domestic steel mills by prompting a flood of steel imports from firms trying to bring in steel before tariffs are hiked or other barriers are imposed. The New York Times has been accused — with some justification — of running an agenda counter to the Trump administration’s policies, but the facts are clear: steel imports have boomed since Trump came into power.

Source: New York Times

U.S. steel imports were up 19.4% in the first 10 months of 2017, compared to last year’s figures, according to the American Iron and Steel Institute (AISI). The New York Times points to ArcelorMittal’s decision to close a furnace at its Conshohocken, Pennsylvania steel plant in the new year, laying off 150 of the plant’s 207 workers as evidence of the impact. ArcelorMittal blamed low-priced imports, as well as low demand for steel for bridges and military equipment — both areas Trump promised he would make a key focus for investment if elected.

Although progress on trade issues has come too late for workers at Conshohocken, it is not too late for the industry as a whole.

The administration appears at odds over how to achieve control over imports, with some advocating hefty tariffs, others quotas, and all awaiting the results of the Department of Commerce’s 232 investigation by Jan. 15. The president will then have 90 days to decide what to do, the New York Times states.

If supportive and the report is acted on, plants like Conshohocken stand to benefit the most. Although underutilized at present, its speciality is ultra-strong, military-grade steel (a national security requirement if ever there was one).

Blocking imports, though, is not universally popular.

The auto industry frets that reducing imports will raise prices and impact competitiveness among domestic automakers, resulting in job losses worse than those experienced by the steel industry.

Source: New York Times

The steel industry itself has largely maintained employment over recent years after recovering from the financial crisis of 2008, despite investing in automation, which has helped improve efficiencies and productivity in the face of significant imports from Canada, eastern Europe and elsewhere (China features less nowadays and is well down the list due to earlier anti-dumping legislation).

Quite how the administration balances these competing priorities of domestic steel producers versus domestic steel consumers remains to be seen. Rhetoric so far this year suggests sympathies lie firmly with producers, but legislation needs to be finessed enough not to cause more damage than it intends to avoid.

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As we say, criticizing from the outside is much easier than finding solutions from within. Coming up with viable solutions will be the administration’s big challenge in 2018.

The U.S. Department of Commerce ruled Wednesday, Dec. 20, that Quebec-based Bombardier sold 100- to -150-seat large civil aircraft at less than fair value in the U.S., and also benefited from unfair government subsidies.

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“This decision is based on a full and unbiased review of the facts in an open and transparent process.” Commerce Secretary Wilbur Ross said in a prepared statement. “The United States is committed to a free, fair, and reciprocal trade and will always stand up for American workers and companies being harmed by unfair imports.”

The Department of Commerce determined that exporters from Canada sold the aircraft at 79.82% less than fair value and that Canada is providing unfair subsidies to producers of the aircraft at a rate of 212.39%.

The ruling makes for a big win for Boeing, the petitioner in the case.

It has been a busy year for the Department of Commerce. In its releases announcing trade cases throughout 2017, the department has touted the significant uptick in anti-dumping or countervailing duty cases taken up compared with last year.

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From Jan. 20 until Dec. 18, the department launched 79 anti-dumping and countervailing duty investigations. That total amounts to a 52% increase from last year’s total during the same time period, the department release announcing the Bombardier ruling stated.

The United States International Trade Commission (ITC) is scheduled to make its final determinations on or about Feb. 1, 2018.

If the ITC makes affirmative final determinations that the imports of aircraft from Canada “materially injure, or threaten material injury to, the domestic industry,” the Department of Commerce will issue anti-dumping and countervailing duty orders. If the ITC makes negative determinations of injury, however, the investigations will be terminated.

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This morning in metals news, the top copper producer in China was forced to stop production on account of a pollution order, Chinese steel futures are down, and Chinese officials falsified data in order to avoid steel and aluminum capacity cuts.

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Jiangxi Gets the Government Red Light

Jiangxi Copper Co., China’s top copper producer, had to halt its production after a local government order related to pollution from its facility’s activities, Bloomberg reported.

According to a company official Tuesday, the local Chinese government made the order in an effort to cut pollution in the area. The halting of production is set to last for at least a week, according to the report.

Chinese Steel Futures Drop

Chinese steel futures fell as a result of dropping output during the winter season, Reuters reported.

A drop in demand during the cooler season also contributed to the futures decline. According to Reuters, the most active rebar contract on the Shanghai Futures Exchange (SHFE) dropped 3% to close at 3,787 yuan ($578.54) a ton.

Chinese Officials Fake Data to Avoid Capacity Cuts

According to the state-run China Youth Daily, officials in China’s northern Shandong province used fake data to help aluminum and steel producers avoid mandatory production curbs.

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According to the Ministry of Environmental Protection, officials in Binzhou used fake certificates and false data to obtain approval for the construction of 2.4 million tons of new aluminum production capacity in 2014.