Articles in Category: Public Policy

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This morning in metals news, the E.U. is reportedly getting ready for the U.S. Section 232 tariffs to go into effect, U.S. raw steel production was up last week and Rio Tinto asked the Mongolian government to fulfill contract stipulations related to the firm’s copper mining project in the country.

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E.U. Not Optimistic About Section 232 Exemption

According to an Associated Press report, the E.U. has expressed doubt that it will win a long-term exemption from the U.S.’s Section 232 steel and aluminum tariffs.

“There have been signals from the U.S. that the exemptions will not be prolonged. So either they will be imposed on us the first of June, or there will be other sorts of limiting measures,” E.U. Trade Commissioner Malmstrom was quoted as saying.

Steel Production Rises

U.S. raw steel production for the week ending May 19 was up 3.3% from the same week last year, according to the American Iron and Steel Institute (AISI).

Production for the week was also up 1.6% from the previous week ending May 12.

Rio Tinto Asks Mongolian Government to Fulfill Copper Mine Contracts

According to a Reuters report, Rio Tinto has asked the Mongolian government to honor contracts related to its copper mine project in the country.

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According to the report, the government has arrested officials on account of possible misuse of power related to the contracts for the Oyu Tolgoi mine.

Does your company strategy call for a European manufacturing base but you worry you have missed the boat in terms of accessing lower-cost opportunities created when eastern European countries like Poland and the Czech Republic came into the E.U.?

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Lower land and labour costs, aligned with ample financial support from the E.U. to the poorer parts of Europe created a fertile investment environment for new business growth in these eastern European states. With a good standard of education, generally good rule of law and a high work ethic, it is not surprising eastern Europe has gone through something of an industrial revolution over the last 20 years.

But for firms looking to set up in those markets now, they are the Johnny-come-latelies to a maturing investment environment.

But fear not — a new wave of entrants may be on the horizon.

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This morning in metals news, South Korea has filed a complaint at the World Trade Organization (WTO) over the U.S. tariffs on washing machines and solar panels, turmoil in the aluminum market is high and copper prices dipped Monday.

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South Korea Goes to the WTO

South Korea has filed a complaint at the WTO over the U.S. tariffs on solar panels and washing machines, according to Reuters.

Aluminum Volatility

It’s been a bumpy couple of months for the aluminum market, as the U.S. Section 232 tariff on the metal and the announced sanctions Russian firms and their owners have combined to spark quite a bit of volatility.

Marco Palmieri, president of Novelis North America, pointed to the aforementioned items as the recent sources of uncertainty in the market during an interview with the Financial Times.

Copper Down, Lead Up

Copper prices dropped on account of rising stockpiles while lead continued to push away from its nine-month low, according to Reuters.

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LME copper dropped 0.7% while lead rose 1.5%, according to the report.

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This morning in metals news, every country exempted from the Trump administration’s Section 232 tariffs will be subject to either quotas or restrictions of some kind, copper hit a one-week high and aluminum prices jumped today as Trump administration officials kicked off a trip to Beijing to talk trade.

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Quotas and Restrictions for Exempted Countries

Peter Navarro, trade adviser to President Trump, said Thursday that every country that has received an exemption from the Section 232 tariffs on steel and aluminum will be subject to a quota or some kind of restrictions, Politico reported.

This week, the temporary exemptions for the E.U., Canada and Mexico, which were set to expire May 1, were extended 30 days.

Copper Rises to One-Week High

Copper prices hit a one-week high Thursday, Reuters reported.

LME copper rose 0.8% to hit $6,873 per ton, according to the report.

Aluminum on the Rise

As Trump administration officials began meetings in Beijing today with Chinese trade officials, the price of aluminum rose significantly, Business Insider reported.

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The aluminum price was up by over 3% Thursday, according to the report.

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This morning in metals news, the U.S. is considering quotas for the nations that had their Section 232 tariffs exemptions extended by 30 days this week, Russian aluminum giant Rusal could find its way out from under the eye of U.S. sanctions and the U.S. is hoping for a NAFTA deal this month.

Quotas for E.U., Canada, Mexico?

Earlier this week, the U.S. announced it had extended the deadline on temporary Section 232 tariffs exemptions for the E.U., Canada and Mexico.

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So, what happens now?

According to a Reuters report, the Trump administration is considering quotas and other restrictions.

The U.S. has already approved a 70% quota for South Korea, which was originally on the short-term exemption list but negotiated a long-term exemption with no tariffs.

Rusal and Sanctions

Russian firm Rusal could in fact end up avoiding the impact of U.S. sanctions, according to a MarketWatch report.

According to the report, En+ Group, the owner of Rusal, told the U.S. Treasury that oligarch Oleg Deripaska would reduce his role with the company, which was a condition for the U.S. in its previous announcement on the potential easing of the sanctions.

Lighthizer Wants a NAFTA Deal This Month

U.S. Trade Representative Robert Lighthizer said he wants to reach a deal on NAFTA sometime this month, Bloomberg reported.

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“We’re going to meet again on Monday, and we’ll see if we can get a good agreement,” Lighthizer said on Tuesday, as quoted by Bloomberg. “I’d like to get it done a week or two after that. If not, then you start having a problem.”

Following intense lobbying by French President Emmanuel Macron and German Chancellor Angela Merkel — plus, it must be said, the whole European steel industry and many consumers in the U.S. — U.S. President Donald Trump has announced a delay in the imposition of steel and aluminium tariffs on Canada, Mexico and, crucially, the European Union until June 1.

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The temporary exemptions from tariffs on these countries were set to expire today. At the same time, agreements for permanent exemptions for Argentina, Australia and Brazil have been made.

According to The Telegraph, the U.S. granted temporary relief to European producers from 25% tariffs on steel and 10% levies on aluminium only up to May 1but has now extended by a further 30 days while it tries to ring concessions out of its partners in NAFTA and with the E.U.

Specifically, the article suggests automobiles are high on the list of things on which Trump wants to see movement. The E.U. charges 10% import duty on U.S. cars but currently incurs only 2.5% on the import of E.U.-made cars into the U.S.

Tariffs would hit steelmakers this side of the Atlantic hard, the article states, with the industry only just recovering from the 2015 crisis, which cost tens of thousands of jobs. Closure of the U.S. market creates the potential for a “double whammy” to the European industry. Not only is America a major market for Germany, the U.K. and Italy, but Chinese producers are likely to flood Europe with excess output, which was a major cause of the crisis of three years ago.

China remains broadly the U.S. main target, but the steel and aluminium tariffs are part of a wider bid to renegotiate the terms of trade with a number of countries, from close to home with NAFTA to far-flung producers on the other side of the globe.

The president seems to have a bone to pick with most of them. The threat of sanctions is a blunt but effective tool to bring countries to the negotiating table. As a tactic, it does seem to have some merit.

No breakthroughs have been made, but many discussions are now ongoing that were being avoided a year ago. China’s steel imports have dwindled markedly into the U.S. over recent years, but aluminum remains significant. The threat of such has already drawn the ire of Beijing, but also the willingness to make conciliatory gestures, such as freeing up the domestic market for foreign investments.

But on two key trade demands, The New York Times reports Beijing is not willing to give ground.

Firstly, the president’s headline-grabbing $100 billion cut in the U.S.’s trade deficit with China and probably even more sensitive is a curb on a $300 billion Chinese plan to invest in advanced tech like A.I. and electric cars. China will almost certainly sweat it out if the president sticks to demands to row back on what China sees as its strategic future.

The row with Europe is far from settled. The postponement has only bought 30 days, so the pressure is on to find a solution.

Europe has more to lose than the U.S., so you have to think some form of settlement will be found that will, to some extent, meet the president’s objectives.

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If not, the pain Europe’s steel industry has gone through in the last 10 years will be nothing compared to what is to come.

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Editor’s Note: Check out Part 1 here

The option of European Economic Area (EEA) membership like Norway — which is not in the European Union (E.U.) but has open borders with the bloc and accepts some of its laws and regulations — seems strangely to have not been an option debated (at least publicly).

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The reason may be a hysterical backlash from those in favour of Brexit whenever a compromise position is mooted, so wedded are they to total exit.

The fact remains, however, the U.K. is making compromises on all fronts as it becomes increasingly clear it has no cards to play that the E.U. values. At risk of revolt or not, it may yet try to stay in the customs union as negotiations reach a head during the summer.

Should Britain leave the E.U. without an agreement, the worst that would happen would likely be World Trade Organization (WTO) rules on tariffs. That means the U.K. could end up with a deal like the U.S., where tariffs rates reflect the various parties’ home vested interests.

By the Numbers

The E.U. charges 10% on imports of U.S. cars, for example, compared with the only 2.5% the U.S. charges E.U. car makers, that would be a serious obstacle for major U.K. exporters like Jaguar Land Rover, Nissan, and BMW-owned Mini. The U.S., on the other hand, charges 130% duty on peanuts and 350% on tobacco, effectively cutting off trade in those areas.

Without an existing template to adopt, the U.K. would have a prolonged negotiation and an uncertain couple of years while the details were hammered out during which some firms inevitably would hedge their bets and move some facilities abroad as Rolls Royce aero engines announced it was considering this week, The Telegraph reported.

Everyone has an opinion, and frequently they are at odds.

Sir Lockwood Smith, New Zealand’s former high commissioner to the U.K., issued a warning as the government comes under pressure to stay in the customs union. He warned against remining locked into the E.U. system, saying failing to leave the customs union would be “awful for Britain and for the world,” The Telegraph reported last week.

But the commonwealth country’s experiences of free trade have not been to exit a major trading bloc on their doorstep in return for the tenuous opportunities further afield.

New Zealand has done very well from removing tariff barriers and opening up its economy. Prior to that, however, it was clearly stifled by restrictive barriers; that is not the case with the U.K., as trade with Europe is flourishing.

Life After the E.U.

Few now can be found who still cling to the notion the U.K.’s economy will expand faster or living standards will rise faster if the U.K. leaves the E.U. Even Brexiteers are notable for calling for a return of national sovereignty and immigration controls rather than the economic benefits.

But despite the gloomy outlook, both sides of parliament remain enthralled by the notion that “the people have spoken” and are unable to have a reasonable debate about whether it remains the best course of action.

As a result, Britain will almost certainly leave in some form, either soft or hard. It will probably fudge, compromise and capitulate to remain in the customs union, but there remains a chance – as a result of political revolt, rather than policy – that it could have a hard exit.

If that happens, manufacturing and services will both experience a systemic shock that could take years to overcome. British exporters will be forced to look for opportunities outside of Europe as markets within the bloc become less viable. Likewise, importers will look further afield if the imposition of tariffs and border controls puts European suppliers on the same footing as those from the rest of the world.

U.K. manufacturing and service industries will, to some extent, be forced to relocate plants and offices into Europe. New car plant investment, for example, would make more sense in eastern Europe than the U.K., should the U.K. leave the trading bloc without a free trade deal. Likewise, banking and insurance will need an E.U. presence to secure the licenses necessary to continue to operate within the E.U.

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It’s hard to see how the outcome can be good for anyone. The objective now is to hope for the least bad of options.

Few national stories preoccupy the newsfeeds day in, day out — short of war or rebellion — quite like Brexit has in the U.K.

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The irony is little progress has been made on the terms of Britain’s separation from the European Union since the decision was taken in June 2016. In the intervening months, not a day has gone by without some tedious detail of the squabbles between London and Brussels, or reports of indecision and lack of leadership at No. 10 Downing Street.

So, when news that Catherine, Duchess of Cambridge, had gone into St. Mary’s hospital in London for the birth of her third child, the country (and even more so the media) went into raptures of delight. With the baby boy successfully delivered, the hot topic was then what he will be named.

But even before the news broke, the media was getting back to business as usual, reporting the so far non-event that has been Brexit for the last two years.

However tedious as it may feel, the date is fast approaching — Oct. 18-19, when the two sides have to sign off on a withdrawal treaty. The treaty will supposedly include a free trade deal, if there is to be one, the structure of the Ireland/Northern Ireland border, and matters like the respective rights of citizens in the U.K. and E.U. and financial commitments.

On some points, progress has been made.

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The Office of the United States Trade Representative (USTR) on Friday released a special Section 301 report in which it called out and identified certain trading partners who are falling afoul of intellectual property rights rules.

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The USTR puts out the annual Special Section 301 review pursuant to Section 182 of the Trade Act of 1974.

“The ideas and creativity of American entrepreneurs fuel economic growth and employ millions of hardworking Americans,” U.S. Trade Representative Robert Lighthizer said in a USTR release. “This report sends a clear signal to our trading partners that the protection of Americans’ intellectual property rights is a top priority of the Trump Administration.”

The report identified a total of 36 countries for its Priority Watch List or Watch List (the former being more serious). Meanwhile, 12 countries made the Priority Watch List, those being: Algeria, Argentina, Canada, Chile, China, Colombia, India, Indonesia, Kuwait, Russia, Ukraine and Venezuela.

China’s inclusion on the Priority Watch List marked its 14th consecutive appearance on the list.

“Longstanding and new IP concerns merit increased attention, including China’s coercive technology transfer practices, range of impediments to effective IP enforcement, and widespread infringing activity—including trade secret theft, rampant online piracy, and counterfeit manufacturing,” the report states.

The 24 countries on the Watch List were: Barbados, Bolivia, Brazil, Costa Rica, Dominican Republic, Ecuador, Egypt, Greece, Guatemala, Jamaica, Lebanon, Mexico, Pakistan, Peru, Romania, Saudi Arabia, Switzerland, Tajikistan, Thailand, Turkey, Turkmenistan, the United Arab Emirates, Uzbekistan and Vietnam.

The USTR launched a Section 301 probe last August specifically focusing on Chinese trade practices. In March, the Trump administration proposed a possible $50 billion in tariffs on Chinese goods, sparking an exchange of tariffs threats between the two countries.

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Earlier this month, the USTR published a list of 1,300 Chinese products that could be subject to tariffs.

The full Special Section 301 report can be found here.

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Before we head into the weekend, let’s take a look back at the week that was with some of this week’s stories here on MetalMiner:

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  • What’s going on with steel prices? Have they neared a top? MetalMiner’s Irene Martinez Canorea offered her analysis on the subject earlier this week.
  • Also on Monday, MetalMiner’s Stuart Burns touched on aluminum prices, which have been on a wild ride the past couple of weeks with the announcement of sanctions on Russian companies and oligarchs, and then again when the U.S. Treasury opened the door to the potential easing of said sanctions (including against Russian aluminum giant Rusal).
  • India is looking east for its exports.
  • President Donald Trump and Saudi Arabia are at odds over the oil price.
  • Following up on the earlier post, Burns covered the subsequent drop in aluminum prices on the heels of the Treasury’s announcement.
  • The European Steel Association hopes the E.U.’s steel safeguard measures prevent a “surge” in imports.
  • Like aluminum, the nickel price also dropped significantly earlier this week.
  • The Aluminum Association urged President Trump to grant quota-free tariff exemptions — with respect to Section 232 — to “responsible” trading partners, calling for specific action to address Chinese overcapacity.
  • MetalMiner’s Sohrab Darabshaw offered the latest update on the bidding process for the bankrupt Indian firm Essar Steel.

MetalMiner’s Annual Outlook provides 2018 buying strategies for carbon steel