Articles in Category: Public Policy

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Before we head into the weekend, let’s take a look at the week that was and some of the metals storylines here on MetalMiner:

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President Donald Trump’s suggestion that the U.S. could buy Greenland from Denmark was met with incredulity in Nuuk, Copenhagen and across Europe.

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“Greenland is not for sale. Greenland is not Danish. Greenland belongs to Greenland. I strongly hope this is not meant seriously,” Greenland Prime Minister Mette Frederiksen said during a visit to the territory on Sunday, as reported by The Times.

The prime minster added, “Thankfully, the time where you buy and sell other countries and populations is over. Let’s leave it there. Jokes aside, we will of course love to have an even closer strategic relationship with the United States.”

Frederiksen is said to have rejected Trump’s proposal, describing the notion of selling Greenland as “an absurd discussion.”

Strangely, Trump seems to have taken affront that the 58,000 population of Greenland did not want to be bought and sold like chattels. He then tried to lean on Denmark by commenting on how the U.S. protects Denmark and, as a result, should be more willing to sell its semi-autonomous territory (Greenland governs itself but relies on Denmark for its defense and foreign policy).

After being flatly refused by both Nuuk and Copenhagen, President Trump reacted in an apparent fit of pique, canceling his planned trip to Denmark next month.

Crass as the handling of this idea has been, it is not the first time the U.S. has tried to buy its massive neighbor.

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This morning in metals news, President Donald Trump on Sunday said he is not ready to make a trade deal with China just yet, ArcelorMittal faces falling steel prices as it attempts to revive India’s Essar Steel and the Department of Commerce today added 46 Huawei affiliates to the Entity List.

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Trump ‘Not Ready’ for a Deal

On Sunday, President Trump said he’s “not ready” to make a deal with China on trade.

Earlier this month, the president announced a 10% tariff on an additional $300 billion in Chinese goods.

“We’re doing tremendously well, our consumers are rich, I gave a tremendous tax cut, and they’re loaded up with money,” Trump was quoted as saying by Reuters.

Falling Steel Prices Impact ArcelorMittal’s Essar Plans

Falling steel prices could complicate steelmaker ArcelorMittal’s plans to bring India’s Essar Steel back to health, according to a report by the Hindu Business Line.

Earlier this year, ArcelorMittal put forth a $6 billion bid to buy the bankrupt Indian steelmaker, which was approved by an Indian court in July.

DOC Adds Huawei Affiliates to Entity List

On Monday, the Department of Commerce announced the addition of 46 affiliates of Chinese tech firm Huawei to the Bureau of Industry and Security (BIS) Entity List.

However, the BIS will also extend certain licensing agreements to Huawei for 90 days, effective today.

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“BIS has also announced that it will extend the Temporary General License (TGL) authorizing specific, limited engagements in transactions involving the export, reexport, and transfer of items – under the Export Administration Regulations (EAR) – to Huawei and its non-U.S. affiliates which are subject to the Entity List,” the Department of Commerce said in a release. “The continuation of the TGL is intended to afford consumers across America the necessary time to transition away from Huawei equipment, given the persistent national security and foreign policy threat. This license will be effective on August 19, 2019 and last an additional 90 days.”

This morning in metals news, a Turkish military pension fund has reportedly reached a tentative deal to buy the ailing British Steel, copper prices held flat Friday and the latest round of tariffs could impact China’s ability to prop up its economy.

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Turkish Military Pension Fund to Buy British Steel

The British Steel saga could be moving toward a positive resolution.

The steelmaker, the U.K.’s second-largest, went into liquidation in May after it was unable to secure a government loan. Afterward, a bidding process began for the firm.

In recent weeks, a Turkish military pension fund emerged as the favorite to buy the troubled steelmaker. On Friday, the BBC reported the Turkish fund has reached a tentative deal to buy British Steel.

According to the report, the Turkish Armed Forces Assistance Fund said it plans to take over British Steel by the end of the year.

Copper Flat

Copper prices traded flat to close the week, Reuters reported.

LME three-month copper held at around $5,750 per ton, while the most-traded SHFE copper contract held at around $6,591 per ton, according to Reuters.

Tariffs and China

Earlier this month, President Donald Trump announced a new round of tariffs on Chinese products, aiming a 10% tariff on an additional $300 billion in Chinese goods (although the U.S. later announced the tariff would be delayed for some items in the product list).

With the new tariffs, nearly all of the U.S.’s imports of China would be subjected to tariffs.

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According to a J.P. Morgan analyst in an interview with CNBC, the tariffs could impact Beijing’s ability to mitigate the damages via government measures. Bruce Kosman, chief economist and head of global economic research for J.P. Morgan, said China has deployed policies to mitigate the damages of the tariffs over the last year, but it is unclear how much more China will be able to do on that front.

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This morning in metals news, Vale’s resumption of activities boosted its iron ore production to its highest level in nine months, ArcelorMittal released its second-quarter financial results and a U.S. judge blocked a planned copper project in Arizona.

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Vale Production Surges in July

After Brazilian miner Vale resumed production at its largest mine in the Minas Gerais state, its iron ore production soared 16.6% in July from the previous month, Reuters reported.

Earlier this year, a fatal tailings dam breach at Vale’s mine in Brumadhinho impacted operations and helped send iron ore prices upward.

ArcelorMittal Releases Q2 Results

Steelmaker ArcelorMittal reported Q2 2019 EBITDA of $1.6 billion and 1H 2019 EBITDA of $3.2 billion, which was down 42.6% on a year-over-year basis.

Second-quarter shipments of steel and iron ore rose 4.8% and 6.1%, respectively, on a year-over-year basis.

“Given weak demand and high import levels in Europe, the Company has taken steps to align its European production levels to the current market demand,” the steelmaker said. “As a result of previously announced European production curtailments, approximately 4.2Mt of annualized production curtailment is scheduled for 2H 2019.”

Judge Blocks Arizona Copper Project

A U.S. judge blocked a copper project previously approved by the U.S. Forest Service, the Associated Press reported.

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The previously approved project included plans for a $1.9 billion mine in Arizona’s Coronado National Forest.

This morning in metals news, the EPA reversed an Obama-era decision regarding an Alaskan mining project, the Federal Reserve issued its first rate cut since the financial crisis and a Chinese billionaire is alleged to have instituted a scheme to avoid $1.8 billion in tariffs on aluminum exported to the U.S.

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EPA Decision Undoes Obama-Era Ruling

The EPA issued a ruling that reversed an Obama-era ruling that had blocked an Alaskan mining project, CNN reported.

According to the report, the Pebble Mine project had previously been blocked because the EPA during the Obama administration determined the project would have adverse effects on the area’s fish habitat.

Fed Issues First Rate Cut Since 2008

As many had expected, the U.S. Federal Reserve on Wednesday announced its first interest rate cut since 2008.

The Fed and Chairman Jerome Powell have come in from criticism by President Donald Trump for previous rate increases, arguing they were hampering the economy’s momentum.

The rate decrease announced Wednesday come in at a quarter of a point, down to 2-2.25%.

“Job gains have been solid, on average, in recent months, and the unemployment rate has remained low,” the Fed said. “Although growth of household spending has picked up from earlier in the year, growth of business fixed investment has been soft. On a 12-month basis, overall inflation and inflation for items other than food and energy are running below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed.”

Chinese Billionaire Accused of Scheme to Avoid $1.8B in Aluminum Tariffs

In a 53-page indictment released by a federal grand jury this week, a Chinese billionaire is accused of misrepresenting aluminum exports to the U.S. as pallets in an effort to avoid $1.8 billion in aluminum tariffs.

“The 53-page indictment alleges that China Zhongwang Holdings Limited, Asia’s largest aluminum extrusion company; Zhongtian Liu, the company’s former president and chairman; and several individual and corporate co-defendants lied to U.S. Customs and Border Protection to avoid paying the United States $1.8 billion in anti-dumping and countervailing duties (AD/CVD) that were imposed in 2011 on certain types of extruded aluminum imported into the United States from China,” the U.S. Attorney’s Office of the Central District of California said in a release.

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According to the documents, the aluminum exports were simple extrusions, rather than pallets. The products, misrepresented as pallets in order to circumvent tariffs, were then sold “to related entities to fraudulently inflate the company’s revenues and deceive investors around the world,” the indictment alleges.

Rare earths are coveted around the world for their application in a wide variety of high-tech uses, from consumer electronics to military applications.

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However, a rare earths market dominated for years by China has presented a challenge to the U.S.

Toward that end, President Donald Trump this week directed the Pentagon to search for alternative sources of rare earths magnets, particularly cobalt samarium magnets.

In a determination pursuant to Section 303 of the Defense Production Act of 1950, Trump said the “domestic production capability for Samarium Cobalt Rare Earth Permanent Magnets is essential to the national defense.”

“Without Presidential action under section 303 of the Act, United States industry cannot reasonably be expected to provide the production capability for Samarium Cobalt Rare Earth Permanent Magnets adequately and in a timely manner,” Trump’s determination continued. “Further, purchases, purchase commitments, or other action pursuant to section 303 of the Act are the most cost-effective, expedient, and practical alternative method for meeting the need for this critical capability.”

In a separate letter — addressed to Rep. Maxine Waters, chairwoman of the House Committee on Financial Services, and Sen. Mike Crapo, chairman of the Senate Committee on Banking, Housing and Urban Affairs — Trump said there is a “shortfall in the defense industrial base relating to production capability” for samarium cobalt rare earth magnets.

“The Department of Defense will take actions to develop and purchase equipment and materials needed for creating, maintaining, protecting, and expanding production capability for Samarium Cobalt Rare Earth Permanent Magnets,” Trump said in his letter.

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Last year, the Trump administration omitted rare earths from a $200 billion tariff list on Chinese goods. (Earlier this year, MetalMiner’s Stuart Burns delved into China’s upper hand in the rare earths market and how it could use that as a bargaining chip in its ongoing trade talks with the U.S.)

According to the U.S. Geological Survey, U.S. imports of rare earths in 2018 reached a value of $160 million, up 17% from $137 million in 2017. From 2014-2017, 80% of the U.S.’s imports of rare earths compounds and metals came from China.

The U.S. steel industry applauded the president’s latest executive order, which targets the augmentation of the percentage of domestic steel content — among other goods — in federal procurements.

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On Monday, July 15, the president signed a proclamation hailing this “Made in America Week,” and also signed an executive order aimed at “maximizing use of American-made goods, products, and materials.”

The order strengthens the requirements under the Buy American Act — originally passed in 1954 during the Eisenhower administration — for federal agencies to buy American-made goods.

According to White House trade adviser Peter Navarro, the order would increase the threshold for domestic content of iron and steel from 50% to 95%, Reuters reported.

The order directs the Federal Acquisition Regulatory Council to, within 180 days, consider proposing an amendment to the Federal Acquisition Regulation (FAR) that would dictate materials be considered of “foreign origin” if “the cost of foreign iron and steel used in such iron and steel end products constitutes 5 percent or more of the cost of all the products used in such iron and steel end products.”

For all other products, the threshold for foreign origin would be applied if “the cost of the foreign products used in such end products constitutes 45 percent or more of the cost of all the products used in such end products.”

“The philosophy of my administration is simple. If we can build it, grow it or make it in the United States, we will,” Trump was quoted as saying by the Associated Press.

Thomas J. Gibson, president and CEO of the American Iron and Steel Institute (AISI), praised the move.

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“This announcement is another positive step in ensuring the fullest possible implementation and enforcement of existing domestic procurement laws and ensuring the steel industry remains competitive,” he said in a prepared statement. “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. We applaud President Trump for once again affirming his commitment to the steel industry that built, and continues to build, our nation.”

In an effort to boost the domestic steel sector, the Trump administration invoked Section 232 of the Trade Expansion Act of 1962 last year to impose tariffs of 25% and 10% on steel and aluminum, respectively. Since then, the U.S. steel sector’s capacity utilization rate has trended upward.

According to AISI, the U.S. steel sector’s capacity utilization rate hit 81.1% for the year through July 13, up from 77.0% for the same period in 2018. Production for the aforementioned year-to-date period hit 52.3 million tons, up 5.2% on a year-over-year basis.

Are gold prices really going to keep rising? Source: Adobe Stock/Nikonomad.

Gold powering to $1,400 an ounce sounds rather optimistic, but is actually not too far from the truth.

Spot gold has already gained about $80 so far this month, pushing the price this week to its highest level in more than five years.

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We have reported earlier about the rising appetite for gold in the form of ETFs and physical metal, but investors’ enthusiasm was spurred this week by dovish comments made by the Federal Reserve on Wednesday regarding interest rates.

Where previously the Fed has indicated patience and a watch-and-see policy, this week it signaled a possible interest rate cut as soon as next month.

The Fed is apparently worried about a deteriorating domestic and global economic backdrop, according to Reuters. A combination of damaging trade wars and slowing growth in all the major trading blocs, set against a backdrop of a potential end of a bull market cycle, is getting not just central banks but investors worried, too.

CNBC cited more technical issues around the movement of longer-dated treasuries as a major stimulus to gold buying (at least this week). The article states the 10-year Treasury yield slipped below 2% for the first time since November 2016, breaching an important psychological level, adding that the surge in gold prices was likely driven by the declines in yields of shorter-duration Treasuries ranging between three months and two years. The yield on the three-month Treasury note trickled lower to 2.146%, while the two-year note dropped to 1.716%.

Whether the Fed will cut rates next month will be driven by a number of factors, not least of which will be the impact of a strong dollar on U.S. exporters. The European Central Bank and the Reserve Bank of Australian have both signaled they intend to cut rates.

The Fed’s news this week has taken the edge off the dollar. Relatively speaking, however, other trading blocs appear ahead of the Fed in easing monetary policy. There is talk of quantitative easing returning in Europe, a move that could spark trade tensions between the U.S. and the E.U. as the Euro weakens further (which will be the subject of an upcoming followup piece on MetalMiner).

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Meanwhile, gold is in fashion and, in the absence of any contrarian news, appears set for further gains.

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This morning in metals news, steelmaker ArcelorMittal has concerns over a new law Italy is set to approve later this month, Vietnam plans to impose anti-dumping duties on coated steel from China and South Korea, and a work stoppage continues at Codelco’s Chuquicamata copper mine in Chile.

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ArcelorMittal Looks for ‘Legal Certainty’ in New Italian Law

Steelmaker ArcelorMittal and its Italian subsidiary, ArcelorMittal Italia (AMI), have expressed concerns to the Italian government regarding its new Crescita law decree, which it is scheduled to be ratified later this month.

“If ratified as currently drafted, the provision concerning the Taranto plant would impair any operator’s ability to operate the plant while implementing the environmental plan approved by the Italian Government in September 2017, including for ArcelorMittal,” the steelmaker argued in a release. “The Taranto plant has been under seizure since 2012 and cannot be operated without legal protection until the environmental plan is implemented.”

The steelmaker continues added the Crescita law removes “legal safeguards.”

“However, the Crescita law decree removes the legal safeguards existing when ArcelorMittal agreed to invest in the Taranto plant,” the firm said. “These safeguards are necessary until the company has completed the environmental plan to avoid incurring liability for issues that it did not create.”

With the law set to be ratified by June 29, the steelmaker said amendments can be made.

“AMI remains hopeful that, as part of the amendment process, legal certainty will be restored in the interest of the Italian economy and of the stakeholders of ArcelorMittal Italia, enabling AMI to continue operate of the plant while completing the environmental requalification plan,” the firm said.

Vietnam Imposes Anti-Dumping Duties

Vietnam will impose anti-dumping duties on imports of coated steel from China and South Korea, S&P Global Platts reported.

According to the report, the duties are set to take effect June 25 and extend for about four months.

Work Stoppage Continues at Chuquicamata

The No. 1 copper producer in the world, Chile’s Codelco, is facing a work stoppage at its Chuquicamata mine, Bloomberg reported.

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The stoppage hit its seventh day Thursday, according to the report, after labor unions called the latest Codelco offer “irresponsible.”