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This morning in metals news, steel prices in China are up and the government is looking to strike a balance, German company Thyssenkrupp isn’t in a rush to forge a merger with the European business of India’s Tata Steel and China responds to the U.S. Department of Commerce’s ruling this week regarding Chinese aluminum foil, which the DOC determined was being unfairly subsidized by the government.

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Steel Prices On the Way Up in China

Rising steel prices have Beijing looking for ways to adapt, according to a CNBC report.

On the heels of efforts to cut excess Chinese steel production, prices are rising — but the government is looking to strike a balance.

“For Beijing, it’s a tough situation: tackle steel overcapacity, rebalance economic growth, control environmental pollution and also manage market stability — especially in advance of a leadership shuffle due in the fall,” CNBC’s Sophia Yan writes.

No Rush to Merge, Thyssenkrupp CFO Says

Talks of a merger between the European businesses of Thyssenkrupp and India’s Tata Steel have hung around since last year.

They even seemed to get a boost in light of news reported yesterday about Tata’s plans to separate its British pension scheme from its businesses.

Despite that step, Thyssenkrupp CFO Guido Kerkhoff says not so fast.

Kerkhoff told reporters Thursday that while they prefer a “fast solution” in potential merger talks, quality comes first.

China Warns U.S. After DOC’s Aluminum Foil Ruling

Unsurprisingly, the U.S. aluminum industry applauded the Department of Commerce’s preliminary determination Tuesday regarding Chinese aluminum foil.

Also unsurprisingly, China had something to say about it, too.

The Chinese Ministry of Commerce wrote in a statement on its website that the DOC’s claims were “without foundation” and urged the U.S. to “act cautiously and make a fair decision to avoid any negative impact on the normal economic and trade exchanges between China and the U.S.”

On Tuesday, Secretary of Commerce Wilbur Ross announced the findings of the countervailing duties investigation, declaring that Chinese exporters of aluminum foil received countervailing subsidies of 16.56 to 80.97 percent. As a result, the U.S. could impose duties of up to 81 percent on Chinese foil in return.

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Meanwhile, the outcome of the Section 232 investigation into aluminum imports, however, remains pending.

With the oil price under pressure from excess supply and a growing percentage of the North American market’s oil and natural gas demand being met from domestic sources, the last thing you would expect is a surge in oil and natural gas tanker construction.

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But according to the Financial Times, that is exactly what Hyundai Heavy Industries (HHI), the world’s largest shipbuilder, is experiencing.

HHI has reported a 70% jump in first-half operating profit, to Won 315 billion ($280 million) in the first six months of this year from Won 186 billion a year earlier.

Even more impressive is the surge in the order book.

The group won orders to build 81 vessels worth $4.5 billion so far this year, compared with 16 vessels worth $1.7 billion in the same period last year led by a rebound in oil tankers and gas carriers, the Financial Times reports.

Source: Financial Times

It may be counterintuitive that shipping demand is surging so dramatically. Demand is positive but hardly growing robustly.

One explanation is as older vessels are retired for oil storage, stimulated by the current relatively low oil price environment, demand is increasing for more efficient, new vessels to replace them.

Apparently, both Samsung Heavy Industries and Daewoo Shipbuilding and Marine Engineering are going through a similar uptick in demand.

Samsung Heavy’s first-half operating profit swung to Won 48 billion from an operating loss of Won 277.6 billion a year earlier. Daewoo Shipbuilding is also expected to report an operating profit of up to Won 800 billion for the first half after narrowly avoiding bankruptcy in April on a $2.6 billion bailout by state-run lenders, the Financial Times reports.

For the big three, this turnaround must be very welcome after years of losses and poor sales. The news will also bolster Korean steelmakers and the rest of the shipbuilders’ supply chain.

The only country building much the last few years has been China, a shipbuilding market served almost exclusively by its domestic steel mills.

However, Korean steel mills have a well-established positon as producers of high-quality, shipbuilding-grade steel.

According to Clarksons, the Financial Times reports new orders for ships worldwide rose more than 40% in the first half of this year, with South Korea taking  one-third of them, closely trailing behind China. Continued strength into next year will depend on global growth continuing in a broadly positive direction and the longer-term trend of greater reliance on liquefied natural gas for power and chemicals feedstock.

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Liquefied natural gas shipbuilding construction has been a speciality of the Korean shipyards and should remain a core offering, despite growing competition from China’s shipyards.

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This morning in metals news, the U.S. aluminum industry expressed support for the U.S. Department of Commerce’s ruling that Chinese aluminum foil is benefiting from government subsidies, Indian steel company Tata Steel is expected to detach its U.K. pension scheme from its business and, in consumer products news, a recent report says copper cocktail mugs may be causing food poisoning.

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DOC Rules Chinese Aluminum Foil Benefits From Government Subsidies

The U.S. aluminum industry came out in support of a U.S. Department of Commerce ruling Tuesday, which said that Chinese aluminum foil was benefiting from government subsidies.

According to the preliminary determination of the countervailing duty investigation, Chinese exporters of aluminum foil received countervailing subsidies 16.56 to 80.97%, Secretary of Commerce Wilbur Ross announced Tuesday.

Per a DOC release, the Commerce Department “will instruct U.S. Customs and Border Protection to collect cash deposits from importers of aluminum foil from China based on these preliminary rates.”

“The United States is committed to free, fair and reciprocal trade, and will continue to validate the information provided to us that brought us to this decision,” Ross said. “The Trump Administration will not stand idly by as harmful trade practices from foreign nations attempt to take advantage of our essential industries, workers, and businesses.”

Per the release, imports of aluminum foil from China last year were valued at an estimated $389 million.

The Aluminum Association applauded the DOC determination.

“The association and its foil-producing members are very pleased with the Commerce Department’s finding and we greatly appreciate Secretary Ross’s leadership in enforcing U.S. trade laws to combat unfair practices,” said Heidi Brock, President and CEO of the Aluminum Association, in a prepared statement. “This is an important step to begin restoring a level playing field for U.S. aluminum foil production, an industry that supports more than 20,000 direct, indirect, and induced American jobs, and accounts for $6.8 billion in economic activity.

“U.S. aluminum foil producers are among the most competitive producers in the world, but they cannot compete against products that are subsidized by the Chinese government and sold at unfairly low prices.”

The ruling stems from the March 9 filing of antidumping and countervailing duty petitions by The Aluminum Association’s Trade Enforcement Working Group. The petition marked the first time the Aluminum Association has filed unfair trade cases on behalf of its members in its nearly 85-year history, according to the Aluminum Association release.

Tata Steel Inches Closer to Potential Merger

According to a BBC report, an announcement from Tata Steel regarding the separation of its British pension scheme from its businesses could be coming within days.

The pension scheme has been a “significant barrier” in merger talks between Tata and German steel producer ThyssenKrupp, according to the report.

According to the BBC, Tata “has been in negotiations with pension regulators and trustees” of the £15 billion British Steel Pension Scheme.

Health Officials Say Copper Cocktail Mugs Could Cause Food Poisoning

A recent report might give drinkers of Moscow Mules pause.

CBS News reported health officials in Iowa made the declaration that copper cocktail mugs — often used to drink the popular Moscow Mule cocktail — might cause food poisoning “after examining the poisonous nature of copper and copper alloys mixing with food.”

Per an advisory bulletin from Iowa’s Alcoholic Beverages Division, the federal Food and Drug Administration’s Model Food Code prohibits copper from coming into direct contact with foods that have a pH below 6.0 — for example, vinegar, fruit juice or wine.

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The Moscow Mule, an increasingly popular cocktail, includes lime juice.

The U.S. Department of Commerce. qingwa/Adobe Stock

This morning in metals news, the still-pending Section 232 investigations into steel and aluminum imports, raw steel production is up 2.7% in the U.S. year-over-year and aluminum has reached its highest point in 2.5 years.

Uncertainty Growing in Aluminum Market

It’s not exactly surprising that some in the aluminum and steel industries are feeling anxious about the Section 232 investigations, still unresolved, initiated by the Trump administration in April.

According to a report in Platts, that’s exactly how some are feeling on the aluminum side. Not only that, the uncertainty is making what was already considered a volatile aluminum market even more volatile.

Another potential consequence of the investigation? The cost of downstream products could go up, according to industry sources cited by Platts.

Raw Steel Production Down From Previous Week, Up For the Year

The American Iron and Steel Institute released its weekly raw steel production data on Monday, and the numbers are both up and down.

For the week ending Aug. 5, production was down 0.4% from the previous week ending July 29. Production for the week ending Aug. 5 amounted to 1,762,000 tons.

Production for the year to date, however, was up 2.7%, with 53,870,000 tons produced through Aug. 5 this year.

Aluminum Heats Up

The durable metal reached a 2.5-year high Tuesday on news of Chinese supply cuts and signs of strong Chinese demand, Reuters reported.

According to the report, 3.21 million tons of production will be shut down in China’s Shandong province.

LME aluminum eclipsed the $2,000/ton mark on Tuesday, reaching as high as $2,007 — the highest since December 2014, according to Reuters.

There’s been a shift in one of India’s biggest steel company’s plans.

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Steel giant Tata Steel will now focus more on India, its home base, than on global markets.

Chairman Natarajan Chandrasekaran has said Tata Steel’s priorities will be to focus on the Indian market, achieving operational excellence, and delivering value-added and differentiated products to its customers.

He told shareholders in the company’s Annual Report for 2016-17 that steel demand in India was set to witness a “significant growth in the future,” considering the current stage of development of the country’s economy and its expected growth path in the next decade.

Protectionism and Political Uncertainty

The global steel industry continued to witness challenging times, though the performance of the industry has been better this fiscal year.

While most in this sector, including Tata Steel, are keenly aware of the slow growth in global steel pickup for the last several years, they are also too aware of the fact that only China and India, where infrastructure development is the fastest, are the two places on earth where steel will continue to be used at a faster rate than the rest of the world.

The global steel industry continues to face structural overcapacity, but we see recovery in developed economies, such as Europe, gradual improvement in demand in India and better industry conditions in China.

At the same time, risk of uncertainty was likely to remain at elevated levels due to structural issues such as geopolitical uncertainty, especially in the U.S. and U.K., and the rising trend of protectionism, Chandrasekaran said.

In March 2016, Tata Steel announced plans to sell its U.K. business, as the company battled to control its “deteriorating financial performance.” In February, the company inked a pact to sell its Specialty Steel business, which employs 1,700 people, to Liberty House Group for £100 million.

Tata Launches Graphene-Coated Stirrups Products

What’s more interesting is the fact that Tata Steel was working on the commercialization of superconductor graphene, an advanced material. The company has launched ready-made graphene-coated stirrups called Tiscon Superlinks+.

Explaining this, Peeyush Gupta, vice president of steel marketing and sales at Tata Steel, said when four columns are built, the support link was normally made of steel. However, the link normally starts rusting after a while. Tata Steel has changed that by coating it with graphene.

Tata has said Superlinks+ comes with enhanced corrosion resistance and better bonding strength than other stirrups in the market. Incidentally, Tata Steel has filed seven patent applications in this area of work. The company is said to be contemplating other areas where graphene can be used. For this, a graphene development cell has been set up at Jamshedpur to identify applications and establish new businesses. In addition, two advanced material research centers of excellence have been established.

According to other media reports, Tata planned to start manufacturing graphene, which can be used in filtration systems, batteries and smartphones. The company is also working on drones and hydrogen fuel cells.

Graphene is ultra-light, 200 times stronger than steel and yet highly flexible. It is a superb conductor and is also transparent. Graphene research is focused on applications in energy, membranes, composites and coatings, biomedical, sensors, and electronics.

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Tata was working on using graphene in highly targeted wearable technology products, including a smartwatch meant for yoga enthusiasts.

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The damage to brand is extending far beyond Volkswagen.

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The whole German car industry, once held up as the paradigm of quality and professionalism, is feeling the aftershocks of Volkswagen’s emissions testing deceit (popularly dubbed Dieselgate).

The challenge for the German auto industry is made all the more severe because of the industry’s reliance on the diesel engine.

According to a Financial Times article, Germany’s carmakers will upgrade 5.3 million diesel vehicles to reduce their harmful emissions as they scramble to save the country’s manufacturing image and the technology so badly tarnished by the Volkswagen test-rigging scandal.

The 5.3 million cars to be upgraded include 3.8 million Volkswagen vehicles — 2.5 million of which had already been recalled over the emissions issue.

Some 900,000 Daimler cars are involved, plus 300,000 BMWs, as well as a few Opel vehicles, the report states.

The urgency is compounded by reports that a number of German cities, fed up with high levels of air pollution, are contemplating driving bans on diesel vehicles — a move that would devastate the auto sector, the Financial Times reports.

Read more

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This morning in metals news, Indian steel company JSW Steel Ltd. could partner with a Japanese firm to acquire distressed Indian companies, steel import permit applications fell 12.3% in the U.S. last month and Chinese aluminum capacity cuts are sending prices up.

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Steel Tycoon Sajjan Jindal Open to Partnership with JFE

A deal might be in the works between Indian and Japanese companies.

Bloomberg reported Sajjan Jindal and his JSW Steel Ltd. would be open to investment from the Japanese firm JFE Holdings Inc., per JSW Joint Managing Director Seshagiri Rao. According to the report, JSW is looking to acquire distressed companies in India.

With plants in southern and western India, JSW is looking to expand into the eastern half of the country.

Steel Imports Permit Applications Fall in July

According to the Commerce Department’s most recent Steel Import Monitoring and Analysis (SIMA) data, steel import permit applications fell 12.3% in July compared with the previous month.

According to a release from the American Iron and Steel Institute (AISI), in July the largest finished steel import permit applications for offshore countries were for: South Korea (333,000 net tons, down 14% from June preliminary), Turkey (211,000 net tons, down 36%), Japan (149,000 net tons, up 20%), Germany (144,000 net tons, up 24%) and Taiwan (136,000 net tons, down 17%).

Through the first seven months of 2017, the largest offshore suppliers were South Korea (2,261,000 net tons, down 5% from the same period in 2016), Turkey (1,681,000 net tons, up 11%) and Japan (935,000 net tons, down 12%).

Chinese Capacity Cuts Lead to Rising Aluminum Prices

The longevity of the positive effects of China’s capacity cuts has been debated here and elsewhere. In some cases, capacity cuts have simply given way to new capacity elsewhere, effectively negating the initial cuts’ support of aluminum prices.

For now, however, the most recent round of aluminum capacity cuts in China has been good news for the metal’s price, which has risen in recent days.

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According to Reuters, China is “forcing the suspension of aluminum plants that have not obtained proper permits to build or expand, or that have not met strict environmental standards.”

According to Reuters, shares of Aluminium Corp of China rose 47 percent since the start of July. Shares in Shenzhen-listed Yunnan Aluminium rose even more, by a whopping 55 percent.

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Talk of tariffs stemming from the Trump administration’s Section 232 investigations of steel and aluminum imports has seemingly softened over the last couple of weeks, but the overall trade dynamic between the to countries remains tense.

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First, President Trump told the Wall Street Journal last week that “we don’t want to do it at this moment” in reference to trade actions on steel imports resulting from the administration’s Section 232 investigation.

Section 232 of the Trade Expansion Act of 1962 gives the Secretary of Commerce authority to conduct comprehensive investigations to determine the effects of imports of any article on national security. The investigations were announced open in April. By law, the investigation must be concluded, including a submitted report, within 270 days of its opening.

More recently, a shift toward a negotiated agreement seems to be gaining favor. According to Inside U.S. Trade ($), Secretary of Commerce Wilbur Ross suggested “voluntary” agreements, according to House Ways & Means Committee members who met with Ross on July 27.

However, in terms of getting any additional clarity on what the administration plans to do, the committee members left the July 27 briefing without much of that.

“I don’t think that there was a lot of clarification,” Richard Neal (D-MA) told Inside U.S. Trade.
The deadlines for the Section 232 investigations are well down the road (not until January), but, until then, talk is likely to continue about what the administration will or won’t do, in addition to what other relevant parties could do in retaliation.
In similar news, the administration and many in the U.S. steel industry have pointed to China’s excess capacity as the major problem for the domestic industry, leading to suggestions of tariffs or quotas targeting China (but also affecting other steel-producing countries).
Talk of trade remedies against China, however, hasn’t just been limited to steel and aluminum.
Bloomberg reported earlier today that the Trump administration could go after China for perceived intellectual property violations.
According to the Bloomberg report, the administration is considering invoking another article — Section 301 of the Trade Act of 1974.
In essence, Section 301 is the mechanism by which the U.S. can respond to countries in violation of trade agreements or engaging in unfair trade practices. The move would further increase tensions between the U.S. and China, particularly in light of Trump’s admonishments of China for not doing enough to rein in North Korea.

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This morning in metals news, President Donald Trump might be close to a decision on how to deal with what are considered unfair Chinese trade policies, environmentally friendly aluminum produced by hydro-powered smelters is coming at a hefty price tag and aluminum got a positive boost Wednesday that might prove short-lived.

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Trump Could be Close to Decision on China Trade

According to a Reuters report, a Trump administration official said President Trump is close to a decision on how to respond to Chinese trade practices he considers unfair.

While the results of the Section 232 investigations into steel and aluminum imports have yet to be announced, Reuters reports Trump might ask U.S. Trade Representative Robert Lighthizer to initiate a Section 301 investigation of Chinese trade practices. A Section 301 investigation offers the “authority to enforce trade agreements, resolve trade disputes, and open foreign markets to U.S. goods and services.”

Section 301 was most recently used this past December by the Obama administration in the long-running dispute over the EU’s ban on U.S. beef, which dates back to 1989.

‘Green’ Aluminum to Cost a Lot of Green

Hydro-powered aluminum smelters producing so-called “green” aluminum are charging quite a bit for their product, according to a Reuters report.

Why? It’s partly because industrial consumers are under pressure to reduce their carbon footprints, so demand is high.

Big names like Norway’s Norsk Hydro, U.S.-based Alcoa, Russia’s Rusal and London-listed Rio Tinto all view this green wave as good news, Reuters reports.

Will more and more companies get on board with aluminum produced by more environmentally friendly processes? It’s safe to say that demand will likely only continue to grow in this sector (and for greener products and processes, generally).

Aluminum Gets a Boost, But It Might Not Last

Continuing with the aluminum thread, the metal got a boost Wednesday on news of expected capacity cuts, Reuters reported.

According to Reuters, the aluminum price moved up because of expectations of Chinese capacity cuts. However, as has been mentioned here before, the aluminum momentum might not last, as the capacity cuts might just end up being wiped out by new capacity.

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For example, Hongqiao Group plans to shut more than 2 million tons a year of outdated smelter capacity, Reuters reported — but after new investments, capacity will likely remain around current levels.

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This afternoon in metals news, a recent survey of automakers indicates aluminum’s use in vehicles will grow in a big way over the next decade, U.S. steel production for the week is down slightly from the previous week and copper keeps on soaring.

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The Rise of Aluminum

According to a recent survey of automakers released by The Aluminum Association and conducted by Ducker Worldwide, automakers expect usage of the light, durable metal to increase significantly in the manufacturing of automobiles.

Total aluminum content for North American lightweight vehicles will increase to nearly 9 billion pounds, reaching 565 pounds per vehicle (PPV) and representing 16% of total vehicle weight by 2028, according to the survey results.

“As our automotive customers embrace a multi-material approach to new car and truck design, that directly translates to increased amounts of aluminum,” said Heidi Brock, president and CEO of the Aluminum Association, in the release. “On top of 40 years of uninterrupted growth, the aluminum industry is experiencing a level of sustained growth not seen before in any market or product sector. However, the true winners of this change are American consumers who can choose next-generation cars and trucks that are high performing, efficient, safe, sustainable and more fun to drive.”

According to the release, the expected rise in aluminum use is “consistent with the emerging trend of automakers transitioning to a multi-material vehicle (MMV) design approach, choosing aluminum for doors, hoods and trunk lids, body-in-white, bumpers and crash boxes.”

Steel Production Has Small Week-Over-Week Dip

U.S. steel production dipped 0.2 percent from the week ending July 22 to the week ending July 29, according to data from the American Iron and Steel Institute (AISI).

Approximately 1.67 millions tons were produced last week, compared with 1.77 million tons during the week ending July 22.

However, the July 29 total is a significant step up from total production for the same week in 2016. Production last week was up 6.1% from the same week in 2016.

Copper Continues Surge

Copper continues to have a great 2017, recently hitting its two-year peak. According to CNBC, the metal jumped 7% in July alone.

A global supply deficit and a flagging dollar have supported copper prices this year.

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While some think copper could keep its momentum in the short term, many analysts predict a slowdown as the year progresses.