U.S. and Canada

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This morning in metals news: the United States Trade Representative announced it would remove the 10% tariff on some Canadian aluminum products; China’s steel producers foresee growing demand throughout the remainder of the year; and iron ore prices are surging.

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USTR reverses course on Canadian aluminum tariff

Add yet another twist to the story of the U.S.’s 10% tariff on Canadian aluminum.

After reimposing the 10% tariff on some Canadian aluminum in early August, the United States Trade Representative announced Tuesday it is once again removing the tariff.

The U.S. originally imposed the tariff via Section 232 in early 2018, albeit initially exempting Canada (and Mexico). However, after the initial exemption period expired, the U.S. began slapping the tariff on imports from Canada.

In May 2019, the U.S. rescinded the tariff as part of ongoing negotiations over the successor to NAFTA. That agreement eventually came to be the United States-Mexico-Canada Agreement (USMCA), which went into effect July 1.

Last month, the U.S. announced it would reimpose the 10% tariff on unwrought, non-alloyed Canadian aluminum — or P1020. The administration cited a rise in imports when announcing the reimposition.

“After consultations with the Canadian government, the United States has determined that trade in non-alloyed, unwrought aluminum is likely to normalize in the last four months of 2020, with imports declining sharply from the surges experienced earlier in the year,” the USTR said in a release Tuesday. “Average monthly imports are expected to decline 50 percent from the monthly average in the period of January through July.”

The U.S.’s Aluminum Association applauded the reversal.

“Removing these disruptive and unnecessary tariffs on Canadian aluminum was the right decision for the U.S. aluminum industry and its 162,000 workers,” said Tom Dobbins, Aluminum Association CEO and president. “The Aluminum Association and its members support tariff and quota free trade within North America consistent with the recently implemented U.S.-Mexico-Canada Agreement (USMCA).”

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steel mill production line

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The Raw Steels Monthly Metals Index (MMI) increased by 4.3% for this month’s value. 

September 2020 Raw Steels MMI chart

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U.S. steel prices start increasing

HRC prices increased by over 5.4% throughout August, closing at $486/st. During the first two weeks of September, the price rallied up to $521/st.

Meanwhile, Chinese HRC prices mostly traded sideways during August and the first two weeks of September.

The recovery of the U.S. auto industry might be driving the steel price increases.

U.S. auto production continued to improve. Producers such as General Motors, Ford and Fiat Chrysler ramped up their assembly plants.

However, supply has not quite caught up with demand. As such, U.S. auto inventory continues to tighten.

By the end of June, vehicle inventory fell to 2.6 million, or 33% fewer units year over year. Pundits suggest U.S. auto sales will reach an annualized 13.5 million unit rate for 2020, with stronger demand coming in 2021.

The aforementioned factors have not only supported the U.S. HRC price; HDG prices also surged.

The U.S. HDG price only increased by 5.6% throughout August, reaching $736/st, but found further support during the first two weeks of September. By the end of the second week of September, HDG broke resistance to $788/st.

Chinese steel market

After record imports in July, China’s iron ore imports in August fell 10.9%.

The General Administration of Customs reported China imported 100.36 million tons of iron ore throughout August, while consumers bought 112.65 million tons in July. However, imports increased 5.8% year over year.

According to Tang Binghua, of Founder CIFCO Futures, imports slowed in August partly due to port congestion from coronavirus-related restrictions. In addition, fewer shipments came from Australia as it closed its financial year.

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