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This morning in metals news, two new vehicles made mostly with steel represent a victory for the steel industry, iron ore prices are down and the U.S. International Trade Commission (ITC) voted to continue its investigation into common alloy aluminum sheet from China.

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New Ram Pickup, Chevy Silverado Made with Steel

As the steel industry battles to remain the dominant material in automotive construction, the news of two new models constitutes a win for the industry.

Fiat Chrysler‘s new Ram pickup and General Motors‘ new Chevrolet Silverado truck are made mostly with steel, Reuters reported. The announcements represent a big win for steel, which is seeing increasing competition from aluminum within the automotive industry.

As Reuters reported, in late 2014 Ford launched the all-aluminum body F-150. While the versatile metal offered improved fuel economy, it comes at a premium to steel. The interplay between steel and aluminum vis-a-vis automobile construction is something that will need to continue to be monitored going forward.

Iron Ore Prices Drop

As Chinese rebar steel futures fell, so too did prices of iron ore in the face of flagging demand, Reuters reported.

Iron ore on the Dalian Commodity Exchange dropped 2.3% to 535 yuan per ton, according to the report.

ITC Continues Aluminum Sheet Investigation

The U.S. ITC announced Friday that it voted to continue its investigation of common alloy aluminum sheet from China.

“The United States International Trade Commission (USITC) today determined that there is a reasonable indication that a U.S. industry is materially injured by reason of imports of common alloy aluminum sheet from China that are allegedly subsidized and sold in the United States at less than fair value,” the ITC release covering the announcement states.

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Now, a preliminary countervailing duty determination is due Feb. 1 from the Department of Commerce.

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Before we head into the weekend, let’s take a quick look back at the week that was here on MetalMiner:

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  • This week we wrapped up the latest round of posts for our January Monthly Metals Index (MMI) — check out this week’s posts on the following:
  • Oil and gas exploration is a topic that has both passionate supporters and detractors. President Trump’s recent proposal to open up new areas for drilling, not surprisingly, has both of those, as our Stuart Burns wrote earlier this week.
  • Sticking on the subject of oil, Burns surveyed the factors behind crude oil’s continuing rise in price. Political turmoil is one factor, among others, contributing to the increase.
  • The long wait is over … Secretary of Commerce Wilbur Ross has sent President Trump his Section 232 steel report (the statutory deadline was Jan. 15). Trump now has 90 days to decide what to do. A similar announcement for the Section 232 aluminum probe — which was launched last April, one week after the steel probe — should also be coming soon.

After a couple of self-imposed deadlines blown by and a lot of waiting, the next step in the Section 232 process has finally arrived.

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Thursday evening the Department of Commerce announced Secretary of Commerce Wilbur Ross had completed his Setion 232 steel report and sent it on to President Donald Trump. Under the statutory guidelines of Section 232 (derived from the Trade Expansion Act of 1962), Trump has 90 days to respond to the recommendations and act (or not act).

As a result of the investigation, the president could call for tariffs, quotas, or a hybrid tariff-quota solution in an effort to help domestic steelmakers dealing with rising imports.

The department’s announcement did not indicate what the contents of the report were. White House Deputy Press Secretary Lindsay Walters said the president would announce his decision “at the appropriate time,” CNBC reported.

The Section 232 probes into steel and aluminum imports were launched last April. The purpose of the investigation is to determine whether or not the imports pose a threat to the country’s national security. The last Section 232 investigation came in 2001, when it was that determined that imports of iron ore and semi-finished steel did not pose a threat to national security.

Unsurprisingly, reactions rolled in Thursday evening from the metals industry.

“The steel industry welcomes the news that the Secretary of Commerce has formally submitted his report to the president in the Section 232 investigation into the impact of steel imports on the national security,” said Thomas J. Gibson, president and CEO of the American Iron and Steel Institute (AISI), in a release. “We are confident that we have made the case that the repeated surges in steel imports in recent years threaten to impair our national security and we look forward to the president’s decision on the appropriate actions to address this critical situation.”

Scott Paul, president of the Alliance for American Manufacturing (AAM), expressed hope that Trump would not need 90 days to bring the investigation to its conclusion.

“Final resolution of the Section 232 case doesn’t need to take 90 days; we’ve seen more than six months of delays already,” Paul said in a release. “Let’s get this done by the end of January.”

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A rise in imports has been a consistent talking for Trump, with China in particular coming in for much criticism from the president and the domestic industry.

According to a recent AISI report, U.S. steel imports rose by 15.5% in 2017. The estimated finished steel import market share in 2017 checked in at 27% (22% for December 2017 alone).

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This morning in metals news, U.S. steel imports rose significantly in 2017, Shanghai nickel hits a 2-month high and the Peruvian government is considering a $2.4 billion railway project in light of rising copper output.

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Steel Imports Up by 15.5%; 2017 Market Share Hits 27%

According to Steel Import Monitoring Analysis (SIMA) data reported by AISI, total and finished steel imports in the U.S. were 38,149,000 net tons (NT) and 29,534,000 NT, up 15.5% and 12.1%, respectively, from 2016.

The estimated import market share for December was 22%, according to the SIMA data, and 27% for 2017.

Shanghai Nickel Rises Amid Concerns About Output

According to a Reuters report, Shanghai Futures Exchange (ShFE) nickel rose by as much as 1% amid concerns about output levels and production outages.

As of Jan. 5, deliverable ShFE nickel warehouse stocks are approximately 54% of what they were last year (48,920 tons, down from 90,000 last year).

Peru Eyes Estimated $2.4 Billion Railway Project

With copper output on the rise, Peru is considering an ambitious railway project to facilitate the transport of the metal.

According to Reuters, the Peruvian government is evaluating a $2.4 billion railway project for transporting minerals from an Andean region rich in copper to the Pacific coast.

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The proposed railway would start in the highland region of Apurimac and stretch 373 miles to the coast, carrying concentrates from Chinese-owned MMG Ltd’s Las Bambas mine and other copper and iron projects, according to Deputy Mines Minister Ricardo Labo said.

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This morning in metals news, a law proposed in the U.K. could have a negative impact on the domestic steel industry as the country moves forward with Brexit talks, steel production in the U.S. Great Lakes region has jumped to start the year, four firms have submitted resolution plans for Electrosteel Steels and the U.S. Department of Commerce announced affirmative final determinations in the antidumping duty investigations of imports of carbon and alloy steel wire rod from South Africa and Ukraine.

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Union Warns About Proposed U.K. Law

A U.K. bill that aims to institute trading provisions for after the U.K.’s exit from the European Union could prove to offer fewer protections than existing E.U. tariffs, members of the Community trade union warned, according to the BBC.

Community union members wrote to Chancellor Philip Hammond, warning that the Customs Bill would not prove as strong as E.U. safeguards against antidumping already in place.

In the letter, quoted by the BBC, the members wrote: “When the UK leaves the European Union we will of course need to set up our own way of preventing unfair trade or dumping of goods. We understand this Customs Bill is putting down the framework for that to happen. But as it is currently written, we fear it will not be effective.”

Steel Production Up in the Great Lakes

Steel production has gotten off to a fast start in the U.S.’s Great Lakes region, the Northwest Indiana Times reported.

Production rose to 640,000 tons for the first week of 2018, constituting a 7.7% jump, the paper reported. Steel mills in the Great Lakes produced 594,000 tons of steel the previous week.

Companies Bid for Debt-Laden Electrosteel

Tata Steel, Vedanta and two other bidders are vying for the acquisition of Electrosteel Steels, which is currently involved in an insolvency resolution process, the Economic Times reported.

Electrosteel was one of 12 companies sent to insolvency proceedings by the Reserve Bank of India, the Economic Times reported.

DOC Makes Affirmative Determination on Wire Rod Imports

The U.S. Department of Commerce announced this morning that it had made affirmative determinations in its antidumping investigation of carbon and alloy steel wire rod from South Africa and Ukraine.

According to a department release, it determined that exporters from South Africa and Ukraine sold wire rod in the United States at 135.46-142.26% and 34.98-44.03% less than fair value, respectively.

The petitioners in the case are companies from four states: Gerdau Ameristeel US Inc. (Florida), Nucor Corporation (North Carolina), Keystone Consolidated Industries (Texas) and Charter Steel (Wisconsin).

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This morning in metals news, China has issued stricter rules on building new steel capacity, Chinese steel production is expected to slow down in 2018 and LME copper rises as the dollar loses ground.

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New Rules to Put the Squeeze on New Capacity in China

China has new, stricter rules on building new steel capacity, the Ministry of Industry and Information Technology said on Monday, Reuters reported.

According to the report, the rules dictate that China will allow one ton of new capacity to be built for a minimum of 1.25 tons of old capacity closed in environmentally sensitive regions.

Chinese Steel Production to Slow in 2018

 In the same vein, Chinese steel production is expected to slacken this year, the Financial Times reported.
According to a poll of analysts, steel output is expected to rise by just 0.6% this year, the Financial Times reported.

Copper Rises as Dollar Falls

London copper picked up some momentum Tuesday as the U.S. dollar fell, Reuters reported.

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That dynamic came on the heels of the metal hitting a two-week low overnight, in tandem with a previous upward run by the dollar.

This morning in metals, a major player in domestic steel announced when its full-year earnings call will drop, China looks to be giving used cars some love, and Australia’s government appears a bit bearish on iron ore in the next couple years.

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Iron Ore Price Forecast for 2018-2019

Australia’s Department of Industry, Innovation and Science noted in recent commodities report that it expects iron ore prices to drop 20% in 2018 over this past year’s level, and continue that trend into 2019, according to Reuters.

A demand slowdown in China is much to blame, according to the department’s resource and energy analyst David Thurtell, as quoted by the news agency.

China Pivots to Used Cars

Speaking of demand slowdowns, China’s consumers may also be to blame for current — and future — automotive metals demand in Asia (and globally).

Read more

Before we come to the end of the first business week of 2018, let’s look back at some of the stories on MetalMiner so far this year:

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  • Chinese supply-side reforms generally have a big impact on metal prices — such was the case for copper, as our Stuart Burns wrote early this week.
  • In case you missed it, the fourth episode of our podcast series, Manufacturing Trade Policy Confidential, dropped this week. This time, we spoke with Heidi Brock, CEO of the Aluminum Association.
  • With 2018 just under way, many publications are making predictions for the year with respect to the markets and how they will perform (among other things). Burns rounded up some of the predictions being made for the year, ranging from the political to the economic.
  • After a solid 2017, Tata Steel has big plans for 2018, Sohrab Darabshaw writes.
  • Speaking of supply-side actions, Burns touched on oil output cuts led by OPEC.
  • We kicked off our monthly round of Monthly Metals Index (MMI) posts with the Automotive MMI.
  • Gold and Bitcoin, in terms of finance, sit on opposite ends of the spectrum, with the former representing tradition and the latter representing the rise of modern cryptocurrencies. However, their relative fortunes are more connected than you might think, Burns writes.
  • For our second MMI post, we surveyed the month in construction trends and prices.

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This morning in metals news, Chinese steel futures fell, iron ore has done well to start 2018 and a new copper deposit has been discovered in Ecuador.

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Chinese Steel Futures Break Three-Day Upward Streak

Chinese steel futures fell on Thursday, breaking a three-day streak of gains, according to Reuters.

The drop comes as demand is expected to slacken with upcoming winter snows, which will slow down construction projects in the country. According to the report, winter weather is expected to hit the country, in the form of rain and snow, in the coming week.

Iron Ore Rises in the New Year

Meanwhile, iron ore has had a nice start to 2018, according to this report by Business Insider Australia.

Quoting Metal Bulletin numbers, the price for benchmark 62% fines rose 0.3% to $74.97 a ton, an increase which came on the heels of a 2.9% increase on Tuesday.

Miner Makes Copper Discovery in Ecuador

Miner SolGold is “elated” by its recent discovery of a new copper deposit in Ecuador, The Telegraph reports.

According to the report, SolGold confirmed a mineral resource estimate (MRE) of more than 1 billion tons of copper equivalent at its Alpala site in northern Ecuador.

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“With a further 120km of drilling planned for 2018 this is likely to be a dynamic resource with many updates to follow,” said Michael Stoner, an analyst at Berenberg, to Business Insider. “It is positive to see the group lay down a sizable first marker for the resource and we are most interested in the high-grade core, which, if expanded, will greatly ease the route to first production.”

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Tata Steel has a couple of things going for it in the new year — but before we get into that, 2017 was a bit kinder to it than the preceding two years.

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And we are not saying that, but the CEO and MD of Tata Steel, T.V. Narendran himself, told a gathering of employees and some reporters here recently that 2017 was somewhat better than the previous two years for the company.

Looking Back: A Recovery in Steel Demand, Prices

In 2014, Tata Steel dealt with some of the challenges relating to the closure of its mines because of changes in regulations. The next year, it dealt with the challenge posed by neighboring China, which had increased its export volumes globally (including to India). Tata Steel continued to perform and grow in these two years, Narendran said.

According to him, 2017 saw “a recovery in global steel demand, prices and trade,” leading to better-than-expected performance by India’s steel sector. The year, he added, not only saw India becoming the third-largest steel producer in the world, it managed to successfully reverse the trend of increasing imports, as it became a net exporter.

Narendran was also positive on India’s National Steel Policy 2017, which draws up a long-term road map for steel.

Another point which went in favor of the steel sector, Narendran pointed out, was the rollout of the Goods and Services Tax (GST), which had positive implications across the company’s value chain in India.

The Year Ahead

Tata Steel has big plans for 2018.

Its board recently approved an expansion from 3 million tons (MT) per annum of its Kalinganagar plant in Odisha province to 8 MT. The plant’s expansion will be completed in four years and is expected to meet demand in automotive, general engineering and other valued-added segments. The project will be funded through a mix of both debt and equity, according to the board.

Meanwhile, Tata Steel Ltd has initiated the process of raising U.S. $2.15 billion in six-year syndicated loans as part of its $5.1 billion loan program to refinance its existing debt. It has already appointed a domestic investment bank to manage the issue. The Indian steelmaker is seeking $2.15 billion in six-year syndicated facility to refinance loans in the books of TS Global Holdings Pte and NatSteel Asia Pte on an immediate basis.

Analysts, too, seem positive regarding Tata Steel’s performance in the coming years. Credit Suisse, for example, has maintained an “Outperform” rating for the company.

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Citigroup has said Tata Steel Ltd notes that management had indicated plans to double capacity in five years. Tata Steel’s plans to double capacity in five years providing growth visibility, while attractive M&A and the Tata-Thyssen joint venture could take the stock higher. Strong spreads, captive India iron ore, improving leverage and reasonable valuations should benefit the company, said its analysts.