Articles in Category: Public Policy

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This morning in metals news, Chilean miner Antofagasta expects a copper deficit this year, Polish lawmakers have proposed slashing the country’s mining tax and hackers have targeted Norwegian aluminum maker Norsk Hydro.

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Copper Deficit

Chilean miner Antofagasta forecasts a 2019 copper deficit ranging between 100,000 and 300,000 tons, Reuters reported.

“When we talk about the deficit, I don’t think it’s going to be a big one… it’s probably in a range between 100,000 and 300,000 tonnes,” CEO Iván Arriagada was quoted as saying.

Poland Mulls Cutting Mining Tax

According to another Reuters report, Polish lawmakers are considering cutting the country’s mining tax.

The tax — introduced in 2012 — primarily affects copper and silver producer KGHM, which is a major employer in the country, according to the report.

Norsk Hydro Hacked

The news turned from the announcement of a new Norsk Hydro CEO Monday to hacking on Tuesday.

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According to Reuters, the Norwegian aluminum maker suffered an attack by hackers that forced several plants to go offline.

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Stock and currency markets have been a little perkier the last week or so as expectations rise of some form of Chinese stimulus to boost demand — and, hence, global growth.

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That optimism, though, may be somewhat misplaced.

China has limited scope of debt-fueled stimulus of the type employed in the past, so a pick-up in demand resulting from fiscal measures may be more muted than some optimists hope.

Still, hopes were raised when Premier Li Keqiang closed a briefing to the National People’s Congress with a number of announcements. Beijing intends to use tools such as lowering bank reserve requirements, according to Bloomberg.

However, a promise to reduce VAT on manufactured goods from the current 16% to 13% from April 1 gave a definite fillip to traders and cast depression among hard-pressed aluminum semis manufacturers in the region. More competitively priced Chinese aluminum semi-finished product is the last thing regional aluminum producers want on their doorstep.

The measure is expected to further boost exports, which have already been running at near-record levels in 2018-19. According to Aluminium Insider, exports have risen from 517,000 tons per month last August to 552,000 tons in January to set a new record. Primary producers, who had been meeting to negotiate capacity closures in the face of slowing demand, are reportedly now likely to reverse that decision in the hope demand will pick up.

According to Aluminium Insider, the move is expected to pump in the region of CNY 600 billion (U.S. $90 billion) into the manufacturing sector, boosting the country’s gross domestic product by 0.6%. The move comes as the latest in a series of changes to the country’s tax regime conducted by Beijing, carried out to bolster the economy after manipulations of monetary policy and further debt-based spending have become increasingly difficult avenues for effecting change.

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Optimism is supported by the widespread belief that an agreement on China’s trade war with the U.S. is just a matter of weeks away — but the much-touted trade summit between President Donald Trump and Premier Li Keqiang has been postponed yet again, and may now not take place until well into April or even May.

A successful trade deal is by no means a certainty, as much as the markets will look for any deal to be better than no deal.

March 29 is currently supposed to be the date by which Britain’s future relationship with the European Union is finally settled.

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There are several possible outcomes of varying likelihood. Britain could remain part of the E.U., which is looking comparatively unlikely.

Or, it will leave based on the agreement Prime Minister Theresa May has reached with Brussels, but including some last-minute tweaks around the longevity of the Irish border question (the most likely option).

Or, Britain will plunge out with no formal agreement — and to judge by the opinions of much of the business community and many commentators, it would plunge into an extremely uncertain and volatile future.

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This morning in metals news, a Brazilian governmental regulator has suspended operations at two Vale SA facilities, India’s steel production jumped 4% year over year during the April 2018-January 2019 period and a company is seeking a federal loan to bring a promised aluminum mill to Kentucky.

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Brazil Suspends Two Vale Facilities

On the heels of a fatal dam breach at miner Vale SA’s Corrego do Feijao mine in Brazil, the Brazilian mining regulator has ordered the suspension of two other Vale facilities, Reuters reported.

Activity will be suspended at the miner’s Fabrica and Vargem Grande complexes, according to the report.

Indian Steel Production

From April 2018 to January 2019, Indian steel production surged 4% year over year, S&P Global Platts reported (citing government data).

In 2018, India surpassed Japan to become the world’s second-largest steel producer, behind only China.

Looking for a Loan

According to a report by the Louisville Courier Journal, Braidy Industries is looking to acquire an $800 million federal loan to fulfill a promise to build an aluminum rolling mill in Ashland, Kentucky.

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The company is seeking to acquire the loan via the U.S. Department of Energy’s Advanced Technology Vehicles Manufacturing, which, as the report notes, hasn’t issued a loan in eight years.

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This morning in metals news, President Donald Trump signed an executive order Thursday pushing for increased use of domestic materials and labor, miner Glencore released its full-year production results for 2018, and the latest on the deadly dam breach at Vale’s Corrego do Feijao mine.

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Buying, Hiring American

As part of a push to promote the use of U.S.-made materials and U.S. labor, Trump signed an executive order seeking to “strengthen Buy-American principles.”

The American Iron and Steel Institute (AISI) was among the industry groups to react to the signing.

“Strong domestic procurement preferences for federally funded infrastructure projects are vital to the health of the domestic steel industry, and have helped create manufacturing jobs and build American infrastructure,” AISI President and CEO Thomas J. Gibson said.

“This latest executive order builds upon President Trump’s April 2017 executive order on this topic, which resulted in stronger compliance with our domestic procurement laws, including Buy America requirements, and a marked reduction in waivers to those laws. We applaud President Trump for once again affirming his commitment to the fullest possible implementation of our domestic purchasing laws in signing this executive order today.”

Glencore Releases 2018 Production Results

Glencore’s copper production hit 1.45 million tons in 2018, up 11% from 2017.

Cobalt production, meanwhile, hit 42,200 tons, up 54% from 2017.

Zinc production was flat from 2017, while nickel production picked up 13%.

Vale Dam Breach

The latest local estimate of the death toll stemming from a dam breach at Vale’s Corrego do Feijao mine in Brazil has been moved up to 110 dead, with 238 missing, according to Reuters.

In addition, according to the Reuters report, a local newspaper published an internal Vale study showing the miner was aware nearby areas were at risk if the tailings dam burst.

The tailings dam burst last Friday, marking the second such event at a Vale mine in recent years; previously, a late 2015 dam breach killed 19 at a mine jointly operated by Vale and Australian miner BHP.

On Friday, the miner released a statement on its emergency preparedness.

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“Vale states that all its dams have a Emergency Action Plan for Mining Dams (PAEBM, Plano de Ação de Emergência de Barragens de Mineração), being in compliance with the Brazilian law,” the release states. “This plan is based on technical studies of hypothetical situations in case of dam breach. The PAEBM foresees what will be the flooding area and also the self-saving zone.”

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A recent article by CBC in Canada highlights the mess that has resulted from the imposition of steel and aluminum tariffs between the U.S. and Canada.

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It is fair to say the same mess is almost certainly prevailing on the U.S. side of the border.

The only winner seems to be the Canadian Treasury —and, likewise, the U.S. Treasury — which is raking in tariff duties from consumers having to pay more money on imported steel and aluminum.

CBC quotes Finance Canada data suggesting $839 million has been collected; the figure will hit over $1 billion by the time Canadian Finance Minister Bill Morneau announces his pre-election budget this spring.

Quite how he will handle this unexpected windfall remains to be seen.

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Late last week, a CMO of a B2B mobile technology company published a lightly scathing take on the mainstream media’s characterization of the current “trade war” (a “farce,” according to the headline), by making the case for, among other things, reshoring.

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Ostensibly reporting from the World Economic Forum in Davos, Switzerland, where representatives from participating countries such as Vietnam are worried about high-skilled manufacturing jobs skipping over them en route from China back to the Western world, the author writes that “we’ve really missed the point giving the trade war so many column inches.”

“While the cost of aluminum may sting now if you are importing,” he writes, “it’s an effect of the death throes of a model of production from the end of the last century,” going on to conclude that the future will belong to manufacturers who reshore their operations.

The article cites stats coming from the Reshoring Initiative, a firm that we at MetalMiner have had on our radar since roughly near the end of the Great Recession, and whose founder has been a key source for us in keeping our finger on the pulse of reshoring trends over the last several years.

That founder, Harry Moser, joins us as the first guest in conversation with Lisa Reisman on our new podcast series, “The Maker-to-User Trend in the Time of Tariffs.”

Maker-to-User in the Time of Tariffs: Background

After the U.S. Commerce Department’s Section 232 findings in early 2018, President Trump took action — and the rest is history.

This new podcast series takes a closer look at the U.S. manufacturing landscape in our present time of trade tariffs, and how manufacturers themselves are affected by the tariffs (winners and losers).

For example, just over 90% of manufacturing industry respondents in a recent, informal MetalMiner poll indicated that the Trump tariffs have hurt their respective businesses, via increased material costs, inventory woes and longer lead times, among other effects.

However, other manufacturers — for example, Honda — have posted healthy profits over the last year.

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Ultimately, we’re interested in what all of this means for the “maker-to-user” trend that we’ve seen gain steam the past several years.

For an excellent primer on the “maker-to-user” movement and trends, download our free white paper on the topic here.

Listen to more episodes and follow the MetalMiner Podcast here.

For those on the other side of the pond, the debacle that is Brexit must feel rather like a distant joke, particularly the defeat this week of Prime Minister Theresa May’s Brexit plan by not just Parliament, but a large number of her own party.

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There may be many of a more nationalist or independent disposition outside the U.K., who have cheered on Britain’s original decision to leave the E.U.

And then there may be those who have supply chains embedded in the U.K. — or, indeed, in continental Europe — who worry about the disruption a “hard” exit from the E.U. would entail. (A hard Brexit is generally taken to mean an exit without a deal in place that safeguards the existing terms of trade between the U.K. and E.U.)

Readers will not be surprised to hear voters in the U.K. are similarly split.

Some want separation from the E.U. at any price — those are hard line “Brexiters,” many of whom come from more rural and northern parts of the country. A proportion of referendum voters were Remainers, who never wanted to leave the E.U. and willingly accepted both the financial cost and the imposition of European rules as an acceptable price for the economic and security benefits of being part of, if not a united Europe, at least an integrated single European market.

Ranged in between — and without a referendum, we will never know quite know how many this includes — are a variety of opinions from Leavers, who have since seen what leaving really means and changed their minds, to those who would be willing to try a partial separation of the sort May negotiated with Brussels (but has been soundly thrown out by Parliament this week).

The scale of the government’s defeat on her plan should not be understated.

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This morning in metals news, the E.U. approved new steel import curbs extending until 2021 with a vote Wednesday, the copper price picked up as the U.S. dollar loses momentum and the United States Trade Representative (USTR) says it will set up a system for exclusions if the tariff rate increases on the $200 billion of duties imposed on Chinese imports in September (currently sitting at 10%).

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E.U. Moves Forward with New Steel Quotas

As expected, E.U. member states voted to impose new steel quotas, part of the ongoing response to the U.S.’s Section 232 tariffs imposed in March 2018 and fears of redirected steel supplies flooding Europe.

E.U. member states approved provisional measures in July 2018, but the approval Wednesday puts quotas into place that will extend to July 2021.

Copper Rises, Dollar Softens

The U.S. dollar was cruising ever-upward throughout the tail end of 2018, but that momentum has seemingly slowed of late.

The U.S. dollar and base metals like copper correlate inversely, meaning a drop in one typically presages a rise in the other.

As Reuters reported Wednesday, the LME three-month copper price jumped for a second straight day, moving up 0.8%.

The U.S. dollar index declined to start the year but has bounced back in the past week, sitting at 96.04 as Wednesday morning.

USTR to Allow for Exclusions if Tariff Rate Rises on Chinese Goods

According to a Bloomberg report, the USTR has promised two senators that there will be an exclusion request process on the previously announced $200 billion in tariffs on Chinese goods if the tariff rate rises to 25%.

The $200 billion tariff package, imposed in September, came at a 10% tariff rate, with a built-in increase to 25% as of Jan. 1, 2019.

That increase, however, was postponed, as the U.S. and China began a 90-day negotiating period to hash out trade differences.

Unlike the previous $50 billion tariff package announced last year, the larger tariff package was not looped into a tariff exclusion request process (that is, a process by which companies can make the case that they need exemptions from the duty).

MetalMiner’s Annual Outlook provides 2019 buying strategies for carbon steel

However, according to the USTR letter cited by Bloomberg, the U.S. will allow for exemption requests if the tariff rate is ultimately elevated to 25%.

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.

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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:

  1. “To compel U.S. citizens to participate in Chinese government investigations,
  2. To lure individuals back to China from abroad, and
  3. 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.

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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.