Industry News

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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 storylines here on MetalMiner®:

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This morning in metals, China’s biggest steel city has ordered five-day output curbs to tackle pollution, the deputy USTR criticized Indian retaliatory tariff measures and it was another down week for copper.

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Tangshan Launches Cuts Ahead of Expected Smog

China’s top steelmaking city, Tangshan, has begun industry output cuts that will last five days, Reuters reported.

According to the report, the city has ordered steel mills to shut down sintering plants. In addition, coke and cement factories have been asked to cut their outputs.

USTR Criticizes Indian Trade Measures

Jeffrey Gerrish, the deputy United States Trade Representative, said this week that India’s retaliatory tariff measures are not “appropriate” and that India has not done enough to bring down the U.S.’s trade deficit with it, the Economic Times reported.

India is among the group of World Trade Organization (WTO) members to have requested consultations with the U.S., through the WTO dispute settlement mechanism, over its steel and aluminum duties.

Copper Down Again

It was another down week for Dr. Copper, as general trade anxiety continues to weigh on the market.

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According to Reuters, this week marked copper’s fifth consecutive week of price declines, as simmering trade tensions between the U.S. and China have impacted copper demand in China (the world’s top copper consumer).

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This morning in metals news, German steel companies are being hit with fines over price rigging, worker contract negotiations are underway at U.S. Steel and the U.S. Senate approved a symbolic measure that served to express frustration over the Legislature’s current lack of say in the process of imposing Section 232 tariffs.

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€205M in Fines Handed Down

According to the Financial Times, German authorities have meted out a total of €205 million in fines to six German steel companies, a steel association and 10 individuals.

The fines come as a result of the exchange of sensitive information and price rigging between 2004 and 2015, according to the report.

Time to Talk

U.S. Steel and the United Steelworkers union began contract negotiations this week, working toward a new labor deal before the current deal’s Sept. 1 expiration, the Northwest Indiana Times reported.

The last contract between the union and the steel firm was negotiated in 2015, per the report.

Senates Expresses 232 Frustration

In a non-binding vote Wednesday, the Senate voted 88-11 to direct negotiators to push for giving Congress a role in making decisions vis-a-vis tariffs when national security is a concern; that is, in the application of Section 232, which President Trump has already used twice (with tariffs on steel and aluminum already in effect and potential tariffs on automobiles and automotive components pending).

Sen. Bob Corker, R-Tenn., has spearheaded the effort to divert some of the institutional power behind Section 232 from the executive (i.e., the president) to the legislative (i.e., Congress).

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“We have to rein in abuse of presidential authority and restore Congress’ constitutional authority in this regard,” Sen. Jeff Flake, R-Ariz., was quoted as saying.

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This morning in metals news, President Donald Trump threatened China with an additional $200 billion in tariffs, copper fell to a one-year low and Glencore released a statement regarding the subpoena it received from the U.S. Department of Justice in its corruption probe.

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Tariff Saga Escalates

Trade tensions continue to rise as the U.S. and China trade tariff threats, which have evolved from mere threats to reality (as a batch of $34 billion in tariffs on Chinese goods went into effect Friday, July 6).

Now, Trump has threatened China with an additional $200 billion in tariffs, Reuters reported, as China has vowed to protect itself in response.

Per a release from U.S. Trade Representative Robert Lighthizer, the announcement comes after China retaliated to the aforementioned $34 billion in tariffs with matching tariffs of their own “without any international legal basis or justification.”

According to the state-run Xinhua News Agency, a Chinese Foreign Ministry spokesperson said the U.S.’s actions represent “trade bullying.”

“This is a war between unilateralism and multilateralism, between protectionism and free trade, and between power and rules,” spokesperson Hua Chunying said. “China will work with the international community to jointly safeguard the multilateral trading system and rules.”

Copper Slides

London copper dropped to a one-year low on the heels of the Trump administration’s $200 billion tariff threat, Reuters reported.

LME copper fell to to its lowest level since July 25, 2017, according to the report.

Glencore Issues Statement on DOJ Subpoena

As our Stuart Burns discussed on Monday, Glencore has found itself under the microscope of late, particularly the microscope of the U.S. Department of Justice.

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Glencore is being investigated for its dealings in Nigeria, the Democratic Republic of the Congo and Venezuela. In response to a subpoena, Glencore released a statement on its next steps.

“Glencore takes ethics and compliance seriously throughout the Group,” Chairman Tony Hayward. “The Company will cooperate with the DOJ, while continuing to focus on our business and seeking to maximise the value we create for our diverse stakeholders in a responsible and transparent manner.”

According to the release, Glencore has formed a committee to coordinate the firm’s response to the subpoena.

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This morning in metals news, the cobalt craze intensifies, Switzerland goes to the World Trade Organization (WTO) over the U.S. steel and aluminum tariffs, and U.S. raw steel production for the week ending July 7 was up 3.4%.

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Demand for Cobalt Rises

Cobalt prices recently eased away from long-term highs, but the market quickly changed — as it often does — as increasing demand has sent the price up, CNBC reported.

The rare material is coveted by automakers and tech companies, particularly in electric vehicle batteries. Demand for cobalt to be used in electric battery materials is projected to rise 40% this year, according to Darton Commodities, CNBC reported.

Switzerland Files WTO Complaint

Switzerland joined the growing list of countries to file a WTO complaint over the U.S. steel and aluminum tariffs, Reuters reported.

Switzerland is the eighth WTO member to file such a complaint.

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Raw Steel Production Up 3.4%

U.S. raw steel production for the week ending July 7 was up 3.4% compared with the same week in 2017, according to an American Iron and Steel Association (AISI) report this week.

Production hit 1,792,000 net tons at a capacity rate of 76.4%, according to AISI.

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This afternoon in metals news, the first batch of $34 billion in U.S. tariffs on Chinese goods went into effect Friday, China looks to build its relationship with Europe  amid increasing trade tension with the U.S. and the United States Trade Representative released the guidelines for the exclusion application process regarding Section 301 tariffs.

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U.S., China Trade Tariffs

The latest chapter of the U.S.-China unfolded Friday, as the first piece of the previously announced $60 billion in tariffs on Chinese goods went into effect (with China responding in kind).

Reuters reported Friday that some U.S. goods had started to come through customs, and that customs officials in Shanghai Monday were collecting tariffs on such U.S. goods as fruits and wine.

China Turns to Europe

Relations between the U.S. and China have chilled, to say the least, which is why the latter is turning to Europe.

CNBC reported Prime Minister Li Keqiang met with European leaders over the weekend, touting a willingness to open China’s economy to the world. In addition, other meetings with European leaders are on the docket in the near future, including an E.U.-China summit in Beijing next week, according to the report.

USTR Publishes Section 301 Exclusion Process

Just as with Section 232, there will be parties in the U.S. looking to gain exclusions from the tariffs imposed on a wide variety of Chinese goods.

On Friday, the Office of the U.S. Trade Representative published guidelines for parties looking to apply for exclusions from the tariffs.

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According to the USTR announcement, the public now has a 90-day period during which to file exclusion requests, making for an Oct. 9 deadline.

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

Need buying strategies for steel? Try two free months of MetalMiner’s Outlook

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

Ezio Gutzemberg/Adobe Stock

This morning in metals news, the U.S. and China trade tariff jabs, the steel import market share numbers for June are in and thyssenkrupp CEO Heinrich Hiesinger offers his resignation just days after the German firm’s finalization of a merger deal with Tata Steel.

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Trade Tensions Rise

At midnight, $34 billion of the U.S.’s previously announced $60 billion tariff package on Chinese goods went into effect. As previously indicated, China responded in kind, placing $34 billion in tariffs on American goods.

According to the Xinhua news agency, China’s 25% tariff will include agricultural products, vehicles and aquatic products. A China Ministry of Commerce spokesperson said the U.S. has acted like a “trade bully” that poses a “great threat to the security of global industry and value chains.”

Echoing previous comments from Chinese government officials, Premier Li Keqiang said that no one will win a trade war, but that China is “prepared to take countermeasures in the face of unilateral moves.”

Steel Imports Hit 22% Market Share in June

According to the American Iron and Steel Institute’s (AISI) report on steel imports in June, import permit applications were down 3.7% compared with the previous month. Steel import permit applications for June totaled 2,894,000 net tons (NT).

The countries with the largest finished steel import permit applications in June were: South Korea (206,000 NT, up 88% from May preliminary), Japan (134,000 NT, up 11%), Germany (105,000 NT, down 25%), Taiwan (103,000 NT, up 32%) and Vietnam (88,000 NT, up 18%).

Thyssenkrupp CEO Offers Resignation

It’s been a busy week for the German steelmaker.

Heinrich Hiesinger, CEO of thyssenkrupp AG since 2011, has offered up resignation just days after the German company finalized a merger deal with Indian firm Tata Steel, Reuters reported (the deal would merge the firms’ European operations to create Europe’s second-largest steelmaker, behind ArcelorMittal).

“Today I informed the Supervisory Board that I would like to step down from my position as CEO of thyssenkrupp,” Heisinger said in a prepared statement. “I take this step very consciously to enable a fundamental discussion in the Supervisory Board on the future of thyssenkrupp. A joint understanding of Board and Supervisory Board on the strategic direction of a company is a key pre-requisite for successfully leading a company. The broad support of our shareholders and the Supervisory Board was the basis for the success of our Strategic Way Forward since 2011.

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“This path always balanced the interests of our customers, employees and shareholders. Today thyssenkrupp is a completely different company regarding culture, values and performance. The joint venture of our steel activities with Tata is the next significant step to turn thyssenkrupp into a strong industrial company. We can be proud of what we achieved until now. For this I would like to thank all employees. They are the most valuable capital of thyssenkrupp.”

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This morning in metals news, E.U. states have thrown their support behind measures to curb steel imports, Indian steel demand could double by 2025, and copper and zinc prices continue to drop.

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E.U. Backs Steel Import Curbing Measures

E.U. states voted to approve provisional measures to curb steel imports on the heels of the U.S.’s steel tariff, Reuters reported.

E.U. industry members have warned about the potential for steel, once destined for the U.S. market, to flood the European market after the U.S. imposed a 25% global steel import tariff (which included exemptions for a few countries).

According to the report, 25 E.U. member states voted for the provisional measures, while three abstained from the vote.

Indian Steel Demand on the Rise

Demand for steel could be set to double by 2025, according to a report by the Economic Times.

Per the report, BHP Billiton said demand in the country could hit 170 million tons (MT) by 2025.

Copper, Zinc Prices Continue to Fall

Prices of copper and zinc hit multimonth lows yesterday, Reuters reported.

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Per the report, the zinc price dropped to its lowest since June 2017, while copper fell to an 11-month low.

The Automotive Monthly Metals Index (MMI) fell one point this month for a July reading of 103.

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U.S. Auto Sales

Nonetheless, June was a good month for the top U.S. automakers.

General Motors, which this year announced it would only report sales on a quarterly basis moving forward, reported its Q2 sales were up 5% year over year. Chevrolet and GMC sales were up 6% and 7%, respectively, while Cadillac sales were up 3% year over year.

“Customers are buying with confidence because the economy is strong and they expect it to remain strong,” said Kurt McNeil, U.S. vice president of sales operations. “GM is in a fantastic position with so many new crossovers at all four of our brands, the industry’s only three-truck pickup strategy and clear leadership in large SUVs.”

Ford’s sales were up 1.2% overall, with the breakdown of individual vehicle categories reflecting the transition away from traditional cars. Ford’s sales of trucks and SUVs were up 3.2% and 8.9%, respectively, while car sales were down 14% year over year.
Through the first six months of the year, however, Ford’s sales are down 1.8% compared with the first six months of 2017.

Fiat Chrysler boasted an 8% year-over-year increase in June sales, marking its best June for retail sales since 2004. The automaker’s Jeep and Ram Truck brands led the way, with sales increases of 19% and 6%, respectively.

Section 232 Auto Probe

As readers might recall, the U.S. Department of Commerce once again invoked Section 232 of the Trade Expansion Act of 1962, this time to investigate imports of automobile and automotive parts. The DOC launched the investigation in late May.

During a Senate Finance Committee hearing June 20, Commerce Secretary Wilbur Ross could not offer much in the way of specifics related to the investigation, claiming it was still too early in the process to make statements about what could happen vis-a-vis tariffs.

Hearings on the Section 232 probe are scheduled for later this month. As part of the process, interested parties could submit public comments for consideration; more than 2,300 comments were submitted.

Unsurprisingly, GM and other automakers submitted comments asking the administration to decide against imposing tariffs.

“If import tariffs on automobiles are not tailored to specifically advance the objectives of the economic and national security goals of the United States, increased import tariffs could lead to a smaller GM, a reduced presence at home and abroad for this iconic American company, and risk less—not more—U.S. jobs,” GM’s comment reads. “The threat of steep tariffs on vehicle and auto component imports risks undermining GM’s competitiveness against foreign auto producers by erecting broad brush trade barriers that increase our global costs, remove a key means of competing with manufacturers in lower-wage countries, and promote a trade environment in which we could be retaliated against in other markets.”

In response, the European Union has threatened to impose an additional $300 billion in tariffs on U.S. goods should the Trump administration elect to slap duties on auto imports, calling the potential auto tariffs a “tax on the American people,” The Guardian reported.

MetalMiner’s Stuart Burns earlier this week offered his commentary on the situation and, in his view, the negative impact tariffs would have on the market.

“Automotive manufacturers are not going to rush to build new production facilities in the U.S. in the short term, but if tariffs become a permanent feature then it’s likely to encourage the car industry to accelerate the shift towards regional production,” he wrote. “Those with scale will cope better and as such we could see further consolidation in the sector if tariffs become a permanent feature — not just in the U.S., but internationally, as trading partners retaliate against U.S. action.”

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Actual Metal Prices and Trends

U.S. HDG steel dropped $1 to $1,111/st. U.S. platinum fell 5.9% to $852/ounce (its lowest level since it hit $847/ounce as of July 1, 2017). Palladium bars continue to trade at a premium to platinum, but palladium also fell this month, dropping 3.5% to $948/ounce.

LME three-month copper fell 2.8% to $6,645/mt.

U.S. shredded scrap steel picked up a dollar to reach $371/st.

Chinese primary lead jumped 1.3% to $3,193.51/mt.