Articles in Category: Public Policy

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Steel companies and mining companies in India have heaved a sigh of relief after the federal government amended the prevailing mining law to permit the “seamless transfer” of regulatory approvals to new owners of operational iron ore mines, the Economic Times reported.

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Earlier the week, the government amended the Mines & Minerals (Development & Regulation) Act to ensure smooth transfer of ownership.

The lease of 334 non-captive mineral mines will expire March 31 this year. Of these, 46 mines are operational, 26 of which are iron ore mines.

When the lease expires, all will go on the auction list as per the mining law. However, for some time now there have been apprehensions that the auction round would not be concluded as scheduled.

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This morning in metals news, the U.S. steel sector’s capacity utilization rate reached 82.1% as of Jan. 11, Pilbara Ports Authority throughput in December 2019 rose 2% and the U.S. removed the label of currency manipulator it had imposed on China last year.

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U.S. steel capacity utilization rate hits 82.1%

According to the American Iron and Steel Institute (AISI), the U.S. steel industry’s capacity utilization rate for the year through Jan. 11 reached 82.1%.

During the period, mills produced a total of 3.01 million tons, which marked a 2.3% year-over-year increase (last year during the same period, the capacity utilization rate was 80.4%).

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Following from the long-running case recently won by the U.S. over whether the European Union (E.U.) provided Airbus with subsidies, on Dec. 2 the World Trade Organization (WTO) rejected the E.U.’s claim that subsidies were no longer provided to Airbus.

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This ruling gave the U.S. scope to execute an additional Review of New Tariffs on E.U. imports.

On Dec. 12, the U.S. Trade Representative (USTR) issued a notice additional products may see tariff rates of up to 100%, as listed in Annex II, posted at Regulations.gov.

This annex includes only products not currently affected by Airbus-related Section 301 tariffs issued during late 2019.

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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 coverage here on MetalMiner, including: a natural gas transit deal between Russia and Ukraine; aluminum prices; the impact of escalating U.S.-Iran tensions on oil prices; and the copper demand picture.

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Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

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This morning in metals news, the United States-Mexico-Canada Agreement (USMCA) received a bipartisan push from the Senate Finance Committee, average retail gasoline prices in 2019 were down compared with the previous year and iron ore futures in China reached an over five-month high.

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Senate committee gives USMCA approval

The United States-Mexico-Canada Agreement (USMCA) inched closer to ratification when the Senate Finance Committee overwhelmingly voted in favor of it Tuesday.

The White House and House Democrats reached an agreement on a revised version of the USMCA late last year; however, the deal must still be ratified with a vote in the Senate.

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2020 will — economically, anyway — be shaped in no small part by what happens in China.

The world’s second-largest economy has been on a slide in terms of GDP growth for years now. The 18-month trade war with the U.S. has contributed to that decline and has been the cause of considerable investor anxiety.

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This morning in metals news, China on Thursday announced new tariff exemptions for U.S. products, the American Iron and Steel Institute (AISI) advocated for the passage of the United States-Mexico-Canada Agreement (AISI) and the World Trade Organization continues to look for a solution to its Appellate Body crisis.

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China exempts U.S. products from tariffs

In another sign of incremental easing of tensions, China on Thursday announced more exemptions from tariffs for U.S. products.

According to the state-run Xinhua news agency, the exemptions mark the second round of exemptions on the first round of tariff countermeasures imposed by China in response to the U.S. Section 301 investigation. The exemptions will be in effect from Dec. 26, 2019, through Dec. 25, 2020, according to Xinhua.

Earlier this month, the U.S. and China announced they had reached an agreement on a partial trade deal, which would see the U.S. pull back $160 billion in tariffs on Chinese goods in exchange for increased purchases of U.S. agricultural goods.

AISI calls for USMCA approval

The American Iron and Steel Institute (AISI) released a statement advocating for the House to ratify the USMCA.

“The USMCA will benefit steel producers in the United States by improving on the terms of NAFTA in several key respects,” said Thomas J. Gibson, president and CEO of AISI. “By incentivizing the use of North American steel in the production of automobiles, auto parts, welded pipe and tube, and a number of other goods made primarily from steel through strengthened rules of origin and enhanced regional value content requirements, this agreement helps keep the steel industry manufacturing supply chain in North America strong.

“The USMCA also includes important provisions to promote increased cooperation and information sharing among the three North American governments to address circumvention and evasion of trade remedy orders. Such increased cooperation is essential to address more effectively the repeated surges of dumped and subsidized imports of steel products that have injured domestic steel producers in recent years.”

Earlier this month, the White House and House Democrats announced an agreement on revisions to the deal, which was already ratified by Mexico’s legislature earlier this year.

The House is expected to vote on the USMCA today.

Appellate Body deadlock continues

Earlier this week, we touched on the deadlock in the WTO’s Appellate Body, which has been unable to appoint new judges due to the U.S.’s obstruction; the body currently has only one member, which is not enough to make decisions on appeals (at least three members are needed to make rulings).

As such, countries can appeal rulings “into the void,” in essence sending cases to languish with the paralyzed Appellate Body.

In light of the crisis, WTO members have continued dialogue aimed at finding a solution.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

“A group of  WTO members once again issued a joint call to start the selection processes for filling Appellate Body vacancies,” a WTO release stated. “Speaking on behalf of the group, which now numbers 119 WTO members, Mexico said the considerable number of members submitting the proposal reflects a common concern over the current situation in the Appellate Body that is seriously affecting its workings as well as the workings of the overall dispute settlement system against the best interest of members. WTO members have a responsibility to safeguard and preserve the Appellate Body, the dispute settlement system and the multilateral trading system, Mexico said.”

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These are trying times for the World Trade Organization (WTO).

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

Amid the blustery headwinds of trade wars and tariffs, the WTO has come in for some heat, most prominently from U.S. President Donald Trump.

Most recently, the WTO’s Appellate Body, the organization’s vital dispute settlement mechanism, has reached an impasse. With the expiration of judges’ terms last week and the U.S.’s blocking of new appointments, the WTO is not able to fill positions on the panel, leaving it at a standstill with only one member.

European Commissioner for Trade Phil Hogan last week emphasized the nature of the crisis.

“This is a regrettable and very serious blow to the international rules-based trade system, which, for the past 24 years, has relied on the WTO’s Appellate Body – and dispute settlement generally,” Hogan said.

“This is a critical moment for multilateralism and for the global trading system. With the Appellate Body removed from the equation, we have lost an enforceable dispute settlement system that has been an independent guarantor – for large and small economies alike – that the WTO’s rules are applied impartially.”

WTO Director-General Roberto Azevêdo recently said he would begin consultations aimed at resolving the impasse vis-a-vis the Appellate Body.

“A well-functioning, impartial and binding dispute settlement system is a core pillar of the WTO system,” Azevêdo said. “Rules-based dispute resolution prevents trade conflicts from ending up in escalating tit-for-tat retaliation — which becomes difficult to stop once it starts — or becoming intractable political quagmires.

“Obviously the paralysis of the Appellate Body does not mean that rules-based dispute settlement has stopped at the WTO. Members will continue to resolve WTO disputes through consultations, panels, and other means envisaged in the WTO agreements such as arbitration or good offices of the DG … but we cannot abandon what must be our priority, namely finding a permanent solution for the Appellate Body.”

Meanwhile, the European Commission has put forth a proposal aimed at addressing the crisis from Europe’s perspective (the proposal is laid out helpfully in a flow chart).

“A stronger Europe in the world implies efficient EU leadership on global trade and appropriate powers to ensure that international trade rules are respected,” European Commission President Ursula von der Leyen said. “For that reason, I start my mandate by taking swift action to strengthen our trade toolbox. Today’s proposals will let us defend our interests in these particularly uneasy times for international trade. As many European jobs are at stake, the EU needs to be equipped to ensure that our partners respect their commitments and that’s what this proposal aims for.”

According to a European Commission release, the proposal allows “the European Union to protect its trade interests despite the paralysis of the multilateral dispute settlement system in the World Trade Organization.”

As a result of the blockage of new appointments, the proposal seeks to amend the existing Enforcement Regulation rules, which date back to May 2014.

“The Commission’s proposal will enable the EU to react even if the WTO is not delivering a final ruling at the appellate level because the other WTO member blocks the dispute procedure by appealing into the void,” the Commission said.

“This new mechanism will also apply to the dispute settlement provisions included in regional or bilateral trade agreements to which the EU is party. The EU must be able to respond resolutely in case trade partners hinder effective dispute settlement resolution, for instance, by blocking the composition of panels.”

In addition, a new position of Chief Trade Enforcement Officer will be filled in early 2020.

As it stands, if a country appeals a WTO ruling in favor of the E.U., the case goes to the effectively paralyzed Appellate Body, thereby allowing the country to appeal “into the void,” as the European Commission colorfully puts it.

As such, the Commission proposes the E.U. be able to “trigger countermeasures in situations where a partner prevents the dispute from reaching the point where such authorisation could be granted.”

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The proposal will be subject to the “normal legislative procedure,” and the Commission hopes the process can be concluded by mid-2020.

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Well, Boris the Bruiser has done it.

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Boris Johnson’s Conservative party pulled off the strongest showing for the Tories in the British elections since Margaret Thatcher’s 1983 victory and a thumping majority of 79, as the Labour and Liberal Democrat parties vote collapsed.

While some outlets will seek to show this purely in terms of the public’s desire to leave the E.U., the reality is motivations, particularly for traditional Labour and Liberal Democrat voters, were many and varied.

There was considerable tactical voting and very real fear in the closing days of the campaign that a Labour government — or, more accurately, a hung parliament with a strong Labour position — would result in extreme socialist decisions being imposed on the country, such as nationalization of extensive parts of the private sector and sharp tax rises.

The pound rises and falls

There was also a pervading weariness with the whole Brexit process, even for those preferring the option to Remain, as there was a desire to see an end to the trauma (even if that meant leaving).

Although markets had positioned themselves for a conservative win, the pound had eased in the days running up to voting, as the Labour party seemed to be making late gains, according to polls.

As exit polls came out last night, the pound surged to over 1.33 against the dollar and over 1.20 against the Euro. Interestingly, although some analysts are expecting further gains, the pound has since retreated a little, particularly against the dollar, as the realization has set in that while the U.K. is almost guaranteed to now leave by Jan. 31, 2020, the terms of a trade deal with Europe remain to be worked out.

Furthermore, the Boris Johnson government has already nailed its colors to the mast in setting a deadline of Dec. 31, 2020 for that deal (or the UK will revert to a hard exit and revision to WTO rules)

In essence, the hard Brexit option remains.

So, the much-hyped wave of pent-up investment that had been waiting for the certainty a decision would bring may have to wait at least another year to discover whether the U.K. will have tariffs and what kind of barriers will exist between the U.K. and E.U. in the longer term.

SNP’s success and a possible U.K. breakup

An unwelcome development, at least for the union of the United Kingdom, is the success of the Scottish National Party (SNP) in Scotland.

The SNP, while predicted by exit polls to pick up 55 seats, still managed 48 and a dominant position north of the border on their strongly Remain ticket. That opens the door for another independence referendum with a view to an independent Scotland staying in the E.U. – not a move the E.U. has embraced over the last three years of debate, it has to be said.

But the fact remains, fears of a breakup of the U.K. have surfaced as a real possibility.

Future policy

As for policy going forward, a new budget in February is expected to be stimulatory, with an increase in spending both on social services and, to a limited extent, on infrastructure.

As the Financial Times observed today, the Conservatives’ majority will give Johnson breathing space on domestic policy. It will also likely lead in time to a significant increase in infrastructure spending.

The Conservatives’ historical policy position — best described as metropolitan social liberalism — may be about to come to an end. They have won this election by enlisting new (for them) sections of the electorate; many of their gains are poorer seats, more reliant on public services and more socially conservative.

Brexit has allowed the Tories to reconnect with lower-middle class and blue-collar workers; its policies going forward will likely have to reflect that shift.

So, increases in spending and an end to tax cuts may prove more than just a campaign pledge. A move toward a more populist position is almost certain, with controls on immigration, a renewed focus on the use of foreign aid and various other policies likely.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

But it will be the U.K.’s engagement with Europe over the next 12 months that will shape the kind of country it is to become.

An open, relatively low-barrier trading agreement will allow a reasonably benign outcome and continued prosperity.

However, failure to achieve a workable agreement will raise the specter yet again of isolation and economic hardship – to some extent, on both sides of the English channel — and the possibility of a breakup of the Union down the line.

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This morning in metals news, the European Steel Association (EUROFER) offered its reaction to the new European Green Deal, China’s steel output could fall next year and China’s imports of iron ore dropped in November.

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EUROFER lauds carbon border adjustment mechanism in European Green Deal

This week, the E.U. unveiled the European Green Deal, which EUROFER largely supported in a statement Wednesday.

“We welcome the aims of the European Green Deal,” said Axel Eggert, EUROFER director general. “In charting a series of sectoral and specific policy plans, it is clear policymakers take seriously the need to transition to a carbon-neutral future with industry, rather than without it.”

EUROFER also highlighted the initiative’s carbon-neutral ambitions, particularly through the lens of steelmaking and competition against lower-lost, less “green” steel producers.

“It is now of utmost importance to develop a regulatory framework that creates markets for CO2-neutral products: these have significantly higher production costs, for example because of the use of highly-priced hydrogen instead of coking coal in the steelmaking process,” Eggert said. “Policymakers must establish – jointly with us – how ‘green’ steel can compete against carbon-intense, low-cost steel imports that have a significantly higher CO2 footprint than EU-made steel.

“The EU seeks to make Europe the first carbon-neutral continent by 2050, which is a high ambition. The steel industry is already working on a range of low- and carbon-neutral solutions that could lead to reductions in CO2 emissions from steelmaking by up to 95% in 2050 under an optimum regulatory framework. It is why a partnership on clean steel – as well as other means to ensure the steel industry remains competitive even as it becomes carbon-lean – is so essential.”

China’s steel output to drop in 2020?

Despite mandated winter production cuts over the past few cold seasons, China’s steel output has continued to ascend.

Next year, however, the country’s steel output is expected to come down from its record high set this year, according to the China Metallurgical Planning and Research Institute.

According to Reuters, the institute forecasts steel output will fall to 981 million tons next year, down from 988 million tons this year.

China’s iron ore imports drop

In other China news, the country’s imports of iron ore fell in November, Reuters reported.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

China imported 90.65 million tons of the steelmaking material last month, down 2.4% from the October import total, according to the report.