Articles in Category: Public Policy

The Department of Commerce has initiated a Section 232 investigation covering neodymium-iron-boron magnets, the department announced Sept. 24.

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Section 232 investigation to cover neodymium magnets

neodymium magnet

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The Trump administration used Section 232 of the Trade Expansion Act of 1962 to investigate whether steel and aluminum imports are having a harmful impact on national security. Ultimately, as metals buyers know, the former president opted to slap tariffs on steel and aluminum of 25% and 10%, respectively.

Meanwhile, neodymium magnets go into a wide variety of applications, including wind turbines, electric vehicles and cordless tools, among many others. In addition, as the DOC noted, neodymium magnets also have military applications in fighter aircraft and missile guidance systems.

“The Department of Commerce is committed to securing our supply chains to protect our national security, economic security, and technological leadership,” Secretary of Commerce Gina Raimondo said. “Consistent with President Biden’s directive to strengthen our supply chains and encourage investments to shore up our domestic production, the Department initiated a Section 232 investigation on imports of NdFeB permanent magnets to determine whether U.S. reliance on imports for this critical product is a threat to our national security.”

The DOC asked interested parties to submit written comments, data, analyses, or other information to the Bureau of Industry and Security by Nov. 12, 2021.

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This morning in metals news: the U.S. Senate on Tuesday voted to pass a $1 trillion infrastructure bill; the Consumer Price Index for All Urban Consumers rose once again in July; and, finally, the Energy Information Administration forecast lower-than-average natural gas inventories heading into the winter heating season.

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Senate passes $1T infrastructure bill

infrastructure

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After a lengthy back and forth, the U.S. Senate passed a $1 trillion infrastructure bill Tuesday by a vote of 69-30.

“There is a discrepancy in historical Federal investment between highways, aviation, and intercity passenger rail,” the bill text reads. “Between 1949 and 2017, the Federal Government invested more than $2 trillion in our nation’s highways and over $777 billion in aviation. The Federal Government has invested $96 billion in intercity passenger rail, beginning in 1971 with the creation of the National Railroad Passenger Corporation. Intercity passenger rail Federal investment is only 12 percent of Federal aviation investment and less than 5 percent of Federal highway investment.”

United States Trade Representative Katherine Tai said the deal marked a step closer to “historic, once-in-a-generation infrastructure investments.”

“The bill will improve our roads, bridges and ports, build resilient energy networks that combat climate change, and strengthen our supply chains,” Tai said. “Finally, the strong Buy America provisions will support our workers and revitalize domestic industries while maintaining America’s competitive edge.”

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The world’s largest steel producer and exporter, China, is actively contemplating adding more curbs to halt environment pollution which, most likely, will reduce its steel output and dampen exports.

That’s good news for some of China’s neighbors steel-producing rivals, India and Japan.

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Steel cuts

Chinese steel factory

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The China Iron and Steel Association (CISA) warned on its Wechat channel last Sunday of impending cuts in crude steel output along with government-led environmental checks.

Daily crude-steel output at major mills fell 5.6% in the first 10 days of July from June, Bloomberg reported. These were at steel plants in Shanxi, Hubei and Hebei provinces, and mills including China Baowu Steel Group and HBIS Group.

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This morning in metals news: according to the Bureau of Economic Analysis, U.S. gross domestic product rose by an estimated 6.5% in the second quarter; meanwhile, the American Iron and Steel Institute (AISI) commented on the Biden administration’s infrastructure deal; and, lastly, copper prices have found some support this week.

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US GDP rises by 6.5% in Q2

US GDP

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The Bureau of Economic Analysis released its advanced estimate for U.S. GDP this morning, reporting a jump of 6.5% in Q2 2021.

U.S. GDP had jumped by 6.3% in Q1 2021.

“The increase in second quarter GDP reflected the continued economic recovery, reopening of establishments, and continued government response related to the COVID-19 pandemic,” the BEA reported. “In the second quarter, government assistance payments in the form of loans to businesses and grants to state and local governments increased, while social benefits to households, such as the direct economic impact payments, declined.”

In addition, the price index for gross domestic purchases rose by 5.7% in Q2. Meanwhile, current-dollar personal income decreased by $1.32 trillion in Q2, or 22%.

AISI applauds infrastructure deal

The American Iron and Steel Institute (AISI) yesterday applauded the news of the Biden administration’s infrastructure deal with a bipartisan group of senators.

“This is a key development in the process to fix America’s deteriorating roads and bridges – and to use American steel to do so,” AISI President and CEO Kevin Dempsey said. “We also applaud the bill’s provisions to ensure that the steel products for water infrastructure projects be made in the U.S. This package ensures that American steel —which is the cleanest in the world — will be used to build back America. We urge the Congress to pass this critical legislation as soon as possible.”

Copper price gets support

After retracing from an all-time high May 10 and then trending sideways for several weeks, the LME copper price has shown some strength this week.

The LME three-month copper price closed Wednesday at $9,719 per metric ton. The price had fallen to $9,245 per metric ton a week ago.

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For those keeping an eye on monetary policy, for now the Federal Reserve is maintaining the status quo vis-á-vis federal funds rates.

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Federal Reserve holds funds rate at 0-0.25%

Federal Reserve facade

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As the U.S. continues its long-running recovery after last year’s COVID-fueled recession, the Federal Reserve indicated the economy is getting stronger.

In a statement Wednesday, the Federal Reserve said “indicators of economic activity and employment have continued to strengthen.”

“The sectors most adversely affected by the pandemic have shown improvement but have not fully recovered,” the Fed said. “Inflation has risen, largely reflecting transitory factors. Overall financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.”

As parts of the country face rising numbers of cases of the Delta variant, the Fed said the path of the economic recovery depends on the course of the virus.

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This morning in metals news: the U.S. steel capacity utilization rate rose to 84.1% last week; privately owned housing starts jumped in June; and, lastly, Pedro Castillo has been declared president-election in Peru.

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US steel capacity utilization rises to 84.1%

hot rolled steel

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The U.S. steel capacity utilization rate continues to rise, jumping to 84.1% for the week ending July 17, the American Iron and Steel Institute reported.

The sector churned out 1.86 million net tons during the week. The output total marked an increase of 0.4% from the previous week and 37.7% year over year.

For the year to date, output reached 50.8 million net tons at a capacity utilization rate of 79.6%.

Housing starts jump in June

Meanwhile, privately owned housing starts reached a seasonally adjusted annual rate of 1.64 million in June, the Census Bureau reported.

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Government interference, even for the best of reasons, can have market-distorting effects.

Take, for example, calls by European aluminum producers to be excluded from the European Union’s Carbon Border Adjustment Mechanism (CBAM) carbon border tax proposal.

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European aluminum producers want out of CBAM

E.U. flag

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According to a Financial Times report this week, European aluminum producers are calling for exclusion from the first phase of the E.U.’s CBAM. They claim the plan will put the industry at a competitive disadvantage to foreign rivals. The argue it will encourage firms to direct their low-carbon production to Europe and simply sell their high-carbon production elsewhere.

As such, the net effect will be little global reduction in carbon emissions but significant competitive damage to domestic European producers, whose own carbon footprint may not be as low as those foreign competitors.

Some European mills, like Norsk Hydro, have extensive hydroelectric-powered smelter capacity. However, smelters in Europe (including Norway) currently incur a carbon cost, which is part of their electricity prices, the Financial Times reports.

Even producers using hydro and nuclear power pay because of Europe’s marginal pricing system for electricity, which is usually set by coal-fired power stations.

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This morning in metals news: U.S. fossil fuel consumption last year fell to its lowest level in nearly 30 years; nonfarm payroll employment rose by 850,000 in June; and, lastly, the American Iron and Steel Institute commented on the House’s INVEST in America Act.

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Fossil fuel consumption falls

crude oil

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U.S. fossil fuel consumption fell to its lowest level in nearly 30 years, the Energy Information Administration reported.

Total U.S. consumption of fossil fuels fell to 72.9 quadrillion British thermal units in 2020. The total marked a 9% decline from 2019.

“Last year marked the largest annual decrease in U.S. fossil fuel consumption in both absolute and percentage terms since at least 1949, the earliest year in our annual data series,” the EIA said. “Economic responses to the COVID-19 pandemic in 2020, including a 15% decrease in energy consumption in the U.S. transportation sector, drove much of the decline. The United States also had relatively warmer weather in 2020, which reduced demand for heating fuels.”

Nonfarm payroll employment up by 850,000

Nonfarm payroll employment rose by 850,000 in June, the Bureau of Labor Statistics reported.

Meanwhile, the national unemployment rate remained at 5.9%.

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The metals markets received a jolt late last week with the news that Russia is considering applying export tariffs to steel, aluminium, copper, nickel and ferro alloys from this August through to at least the end of the year in order to ease metal supply and prices for domestic consumers.

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Russia metals tariffs to cover copper, aluminum, nickel and others

tariff

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According to Bloomberg, the plans include a base duty rate across all products covered by the duties of 15%. However, it includes a specific minimum tariff for each metal, varying from $1,226 a ton for copper, $2,321 for nickel and $254 for primary aluminum. In addition, each steel grade would incur its own rate, starting with HRC at $115 per ton.

As Bloomberg states, the taxes could have far-reaching implications for global metals markets.

That is particularly true at a time of tight supply for products such as aluminum.

Rusal controls about 10% of the global aluminium sector. Meanwhile, Norilsk Nickel produces about 20% of the world’s nickel. Russia is the third-biggest steel exporter, with most sales going to Europe.

Just under 10% of the European market is serviced by primary aluminum imports from Russia. Europe is not alone, either. The U.S. and consumers in the Far East all receive primary aluminum supplies. Therefore, the tariff will have an impact on physical delivery premiums in the U.S., Europe and Japan.

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This morning in metals news: real GDP increased in all 50 states and the District of Columbia in the first quarter of 2021; the Energy Information Administration released an update on drilled but uncompleted wells; and, lastly, the Aluminum Association commented on the ongoing infrastructure talks.

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GDP rises in all 50 states

US GDP

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Gross domestic product (GDP) increased in all 50 states and the District of Columbia in Q1, the Bureau of Economic Analysis reported.

U.S. real GDP increased by 6.4% in the quarter.

Among the states, Nevada led the way with GDP growth of 10.9%.

EIA: drilled but uncompleted wells peaked in June 2020

The Energy Information Administration (EIA) today released an update on what it considers to be drilled but uncompleted wells for oil and natural gas basins.

“In May 2021, the most recent month available, we estimated that the United States has about 6,521 DUCs in seven major tight oil and shale natural gas basins, up from about 4,425 DUCs in 2013, the earliest year in the data series,” the EIA reported. “Nearly 40% of DUCs (or 2,616 DUCs) are in the Permian Basin, located in western Texas and eastern New Mexico.”

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