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It was the first edition of its kind, but it attracted quite an audience.

The International Steel Conclave, organized by the Indian Steel Association and Messe Frankfurt India, was held in the Indian capital of New Delhi on Oct. 25.

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Using the occasion to highlight the Indian government’s rapid strides in the steel sector, Minister Birender Singh said India is poised to achieve its stipulated target of 300 million tons of capacity by 2030. About 150 delegates and speakers, from national and international steel companies — including JSW Group, Tata Steel, JSPL, Steel Authority of India Ltd — were in attendance.

The minister lamented that though India does have good engineers and scientists, the country is not leading vis-à-vis innovation in steel technology. According to Singh, advancements would help reduce the country’s import bill.

Sounding positive on the forward movement of steel in India, Singh noted crude steel production capacity had gone up to 52 million tons, up by 6% from last year. He dubbed 2018 as a “year of new beginnings for the industry.”

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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 news, two prominent Chinese economists have been publicly critical of China’s economic model, the U.S. Department of Commerce has launched an audit of tariff waivers received by companies, China’s steel demand appears to be a boon for the Indian iron ore sector and U.S. Steel shares dipped after hours Thursday following the firm’s third-quarter earnings release.

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China Critique

As reported by the Financial Times this week, two Chinese economists were publicly critical of China’s economic model, arguing that China is to blame for the current trade crisis.

Zhang Weiying, a professor at Peking University’s National School of Development, delivered a speech in which he outlined his criticism.

“In the eyes of westerners, the so-called ‘China model’ is ‘state capitalism’, which is incompatible with fair trade and world peace and must not be allowed to advance triumphantly without impediment,” Zhang was quoted as saying.

Commerce Department Launches Audit of Tariff Waivers

The Section 232 tariff exclusion request process has been rife with complaints since it began in June, as companies sought exclusions in order to import products they argued are not made in the necessary quantity or quality within the U.S.

This week, CNBC reported that the Department of Commerce has launched an audit of the tariff waivers.

According to the report, the Department of Commerce has received nearly 50,000 tariff exemption requests.

MetalMiner’s TakeThe process in which buying organizations request exclusions from the Department of Commerce has indeed come under much criticism.

The criticism appears to be justified.

The sheer number of exclusion requests and the time necessary to evaluate the requests could take many months at a minimum and, second, the fact that the exclusions granted to date appear to get awarded to only those who do not have a mill or producer arguing against the request.

In other words, if the request goes unopposed, the exclusion request has a higher likelihood of being granted. MetalMiner is not aware of any exclusion request being granted in which a mill or producer has opposed the request.

The audit process should provide clarity around the provisioning of exemptions when mills/producers object to the request. But buying organizations should not expect any quick answers or resolution to their requests — audits take time to conduct and any recommended process changes will take time to implement.

Chinese Steel and Indian Iron Ore

According to a Bloomberg report, China’s steel mills have been searching for higher quality iron ore, part of the country’s battle against pollution.

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As a result, the Indian iron ore sector has sought to ramp up its capacity to meet that demand, particularly in the form of iron ore pellets.

U.S. Steel Shares Fall

Shares of U.S. Steel fell Thursday after the firm’s Q3 2018 earnings release, MarketWatch reported.

Shares fell 1.6% after hours Thursday, according to the report. U.S. Steel reported third-quarter net earnings of $291 million, up from $147 million in 3Q 2017.

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This morning in metals, U.S. imports of steel are down by 26%, metal prices have gotten a boost from a softer dollar and ArcelorMittal reported its third-quarter results.

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Steel Imports in the U.S.

U.S. imports of steel were down 26% in September on a year-over-year basis, the Times of Northwest Indiana reported.

MetalMiner’s Take: The other half of the story regarding imports relates to U.S. steel production, which has increased.

In fact, the U.S. has produced 3.5 million more tons of steel this year through Oct. 27, as compared to the same time frame (Jan. 1-Oct. 27) last year, just as the U.S. has imported 3.5 million fewer tons. U.S. mills have finally achieved an 80% capacity utilization rate, the first time that has occurred since April 2012. The Department of Commerce report on tariffs pointed to 80% capacity utilization rates as the minimum level needed to maintain a healthy steel industry.

Metals Rise on Dollar’s Drop

As a result of a softening dollar, a number of metals saw upward price movement, Reuters reported.

LME aluminum, for example, was up 1.1%, according to the report.

MetalMiner’s Take: Some kind of bounce-back was inevitable, both to the ever-strengthening dollar and to the correspondingly weakening commodities.

All metals have drifted off in the last week or so as trade news has been generally bearish and the dollar has remained strong. It is fair to say the U.S. economy is in the driver’s seat as far as global growth and sentiment is concerned; as it is showing little sign of abating, we can expect commodities to be broadly supported by generally tight supply markets and continued solid demand. Short-term price falls have rebounded somewhat this week and should remain supported by the broadly positive supply-demand picture, despite the noise of tariffs and trade wars.

ArcelorMittal Releases Q3 Results

Steelmaker ArcelorMittal is optimistic about its financial prospects over the next few months, Reuters reported, as U.S. tariffs on steel continue to support higher prices of the metal.

“As anticipated market conditions in the third quarter remained favourable, resulting in significantly improved EBITDA for the first nine months compared with 2017. We continue to see robust real demand and healthy utilization rates across all steel segments,” said Lakshmi N. Mittal, ArcelorMittal chairman and CEO, in a release.

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The firm reported Q3 2018 EBITDA of $2.73 billion, up from $1.92 billion in Q3 2017.

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Automaker General Motors shared news of a strong third quarter Wednesday when the company released its third-quarter financial results.

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“Our third-quarter performance demonstrates our determination to manage risks and deliver strong business results while continuing to advance the future of mobility,” Chairman and CEO Mary Barra said in a release.

GM reported third-quarter revenue of $38.5 billion, up 6.4% compared with Q3 2017. It also reported EBIT-adjusted income of $3.2 billion, up 25% year over year, and income of $2.5 billion.

In addition, the automaker reported EBIT-adjusted earnings per share (EPS) of $1.87, up from an expected EPS of $1.25, CNBC reported.

Earlier this year, GM announced it would begin reporting sales on a quarterly basis, as opposed to monthly. In the third quarter, GM saw North American sales of 833,712 units, 700,000 of which came in the U.S. (at an average transaction price of $36,000, up about $800 year over year and $4,000 above the industry average). The North American sales total for the quarter, however, was down 9.8% compared with Q3 2017.

Sales were also down in China, where GM sold 835,934 units, down 14.9% year over year. Chevrolet sales in China, however, were up 10% year over year, GM reported, “led by higher content crossovers including the Equinox, which saw 29 percent growth compared to a year ago.”

“Despite challenging market conditions, GM China achieved record third-quarter equity income, driven by a strong mix of vehicles in popular segments, led by record Cadillac sales and strong Chevrolet deliveries,” the GM earnings report states. “GM China is introducing 10 new or refreshed models in the second half of 2018.”

Cadillac sales were also up in China. GM reported Cadillac sales in the third quarter were up 4% year over year and were up 20% in the year to date.

Overall, total sales for the quarter were down 14.7% year over year, and are down 12.4% in the year to date. Sales in the year to date were down 1.8% in North America and 2.5% in China.

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GM shares were up 9.78% as of Wednesday afternoon following the morning’s earnings announcement.

As the prospect of an additional $257 billion in tariffs on Chinese goods looms, China’s ambassador to the U.S. said the countries should look to their “better angels” to guide them toward a resolution of their trade dispute, the state-run Xinhua News Agency reported.

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During a visit to the National Press Club on Tuesday, Chinese Ambassador Cui Tiankai cited President Abraham Lincoln’s famous words, as the event included a screening of the film “Better Angels.”

“It has made great strides, while also has had its share of setbacks,” said Cui, as quoted by Xinhua, of U.S.-China relations. “But every time it risked being stranded, every time its future was cast into doubt, the people of our two countries would be there, quietly but persistently, doing their part, lifting it out of the quagmire, and moving it forward.”

The ambassador’s comments came after Bloomberg reported Tuesday that the Trump administration was preparing to impose an additional round of tariffs on Chinese goods worth $257 billion — in addition to the $250 billion in tariffs already imposed this year — if talks to resolve the conflict fail.

President Donald Trump and President Xi Jinping are scheduled to attend the Nov. 30 G20 summit in Buenos Aires.

In September, the U.S. imposed $200 billion in tariffs on a wide range of Chinese products, adding to the total $50 billion in tariffs that had already been imposed earlier in the year.

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In 2017, the value of U.S. imports of Chinese goods hit just over $505 billion, according to Census Bureau data (the U.S. had a deficit in goods trade with China of over $375 billion last year).

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This morning in metals news, Shanghai steel prices are down, Shanghai zinc and copper prices are also down, and U.S. steel prices are up by double-digit percentages this year.

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Shanghai Steel Falls

Prices of Shanghai steel have dropped Wednesday for a third session in a row, Reuters reported.

The drop comes as manufacturing growth slows in the country, according to the report.

Copper, Zinc Also Down

The impact of a drop in manufacturing growth — and burgeoning trade tensions, in general — has not just been limited to steel in China.

According to Reuters, Shanghai copper and zinc prices have also dropped. China’s Purchasing Managers’ Index (PMI) dropped to 50.2 in October, down from 50.8.

U.S. Steel Prices Surge

On the other hand, prices of U.S. steel have been on the rise this year.

According to a research report by Business Forward Inc., prices of U.S. steel have surged by 11% since February, while prices of foreign steel fell 4.8% on average.

MetalMiner’s Take: It’s easy to blame tariffs for rising steel prices; certainly, tariffs provide price support.

However, most buying organizations MetalMiner has spoken to or worked with this year are having banner years with very healthy order books. The PMI data supports that assertion, as well. Strong demand, not just tariffs, provides price support.

In addition, as MetalMiner has written about extensively, commodities and industrial metals have been in a bull market since the end of July 2017. In bull markets, prices rise anyway, and that’s why buying organizations have also seen significant price increases for aluminum, zinc, nickel and, to a lesser extent, copper.

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The world price of steel has been depressed because Chinese overcapacity has nowhere to go except elsewhere, and those trade flows have put a lid on European prices. Now, the Europeans have begun to reconsider their own trade strategy so as not to harm the little steel manufacturing capacity that remains.

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According to an International Copper Study Group (ICSG) report released earlier this month, global copper production through the first seven months of the year was up 4.5% compared with the first seven months of 2017.

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By volume, copper production increased by 500,000 tons, according to the report, largely paced by gains in Chile and Indonesia.

“Production in Chile, the world’s biggest copper mine producing country, increased by 11% primarily because production in February/March 2017 was restricted by a strike at Escondida (the world’s biggest copper mine) and also because there is an improvement in Codelco’s production levels in 2018,” the report states.

As for Indonesia, its output surged by 30%, largely due to a temporary ban on concentrate exports last year, the ICSG report notes.

Mine production was down in Canada and the United States over the first half of the year, by 6% and 7%, respectively.

In terms of refined copper production, primary production is estimated to have increased 0.5% year over year, while production from scrap jumped 6%, good for an overall increase of 1.5%. China was the main contributor to production growth in this category, while Chilean production rose 5%.

On the other end of the spectrum, Indian production fell 22%. Production declines were also seen in Australia, the Philippines, Poland and the U.S. “as a consequence of maintenance shutdowns and operational issues.”

The refined copper balance through the first seven months of the year shows a deficit of 155,000 tons, according to the report.

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Even so, the copper price has traded sideways as of late, on the heels of a 7.8% surge in the LME copper price between Sept. 17 and Sept. 24 (reaching $6,318/t as of Sept. 24).

Source: LME

According to the report, the average LME cash price for September was $6,020.03/t, marking a 0.3% decline from the August average of $6,039.75/t.

Brazil’s Institute of Environment and Renewable Natural Resources, known as IBAMA, has lifted the embargo on Norsk Hydro’s Alunorte alumina refinery, several headlines are saying, encouraging many to think full production of alumina will start flowing from Hydro’s massive plant in the near future.

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But while it is correct that IBAMA has lifted an embargo, it is only IBAMA’s embargo that is so far lifted — an embargo placed on the bauxite residue deposit area (DRS2).

The decision to lift the embargo came after successful trials of Hydro’s press filter technology earlier this month, in which the firm successfully demonstrated its “state of the art” — in Hydro’s words — technology could process bauxite residues to a high enough standard to satisfy SEMA, the local environmental agency in the state of Pará, that the new treatment area DRS2 would be safe.

However, the embargo on DRS2 from the federal court system remains in place; a return to 100% of production capacity cannot be resumed until that court order is lifted.

So while we are all aware of the crippling impact the restrictions have had on output from Alunorte and the resulting volatility news and counter news is having on the alumina market (and by extension aluminum markets), what is less clear is when it will finally be resolved. It is only by understanding the cause that one can appreciate why it is taking time to achieve a solution.

The Court of Justice of Pará ordered Alunorte on Feb. 28 to reduce to 50% of production capacity at its alumina refinery, according to Norsk Hydro press releases, following concerns that the heavy rains led to leaks from the bauxite residue deposit containment ponds to the nearby river, causing contamination. The court also required Alunorte to suspend its operation of the bauxite solid residue deposit DRS2, and that a new operating license would be granted only when the integrity of the deposit was fully verified.

The decision to reduce output by 50%, rather than close it completely, was in part due to a determination made by the Secretary of State for Environment and Sustainability of Pará (SEMAS) that the Alunorte refinery could safely operate at 50% of capacity, but also recognition that with the Brazilian state and partner in the plant and nearby aluminum mill Albras were heavily reliant on Alunorte’s alumina, a full closure would have been catastrophic.

To read Norsk Hydro’s press releases, one would think we are talking of fresh water discharges from a leaky pipe or run-off from a coal shed roof, but the reality is more serious than that.

As a Norwegian site reported back in the spring, the series of discharges into the local river were unlicensed and, although the authorities were notified, the local population was not.

In addition to treated water, the toxic bauxite residue deposit known as “red mud” was also released during February of this year, risking the prospect that drinking water supplies downstream of the plant were polluted for several hundred families. Norsk Hydro would claim the releases happened at a time of heavy rains and were needed to release pressure on containment pools, which it must be said did not fail, as early reports suggested.

However, SEMA rightly questioned why, in an area with typically high seasonal rainfall, the pools were not designed to cope with such conditions. The releases were not accidents but the result of deliberate decisions. If the decision to ease pressure by releasing was taken then, so too could a warning to the local population not to drink the water until the pollution had passed and it was again safe.

To what extent the 50% restriction on Alunorte is a punishment and to what extent it is a precaution contingent on guarantees new measures are in place prior to a return to full capacity is unclear. There is a fair combination of economic necessity, environmental safeguards and no doubt politics in the mix.

At some stage, full production will resume — possibly by the end of this year, now that this new press refining technology has been approved.

Since Alunorte is such a key part of the alumina supply chain, aluminum mills’ margins have been under pressure as a result of the elevated alumina prices.

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At full capacity, the plant can produce some 6.4 million tons of alumina, or 10% of the world’s capacity outside China. Its impact on the alumina market has been likened to that U.S. sanctions on Rusal had on the aluminum market (another still unresolved source of potential volatility).

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This morning in metals news, another major tariff hammer could be set to fall on Chinese goods coming into the U.S., iron ore prices continue to rise and copper falls.

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More Tariffs on the Way?

The U.S. has already imposed tariffs worth a total of $250 billion on imports from China.

Since last month’s imposition of $200 billion in tariffs, tensions between the countries have not abated. According to Bloomberg, the U.S. plans to impose an additional $257 billion in tariffs — essentially covering all imports from China – if talks between President Donald Trump and President Xi Jinping fail to reach a resolution.

Iron Ore on the Rise

Iron ore prices were up Monday despite lower Chinese steel prices, Business Insider Australia reported.

Tuesday Tumble

Copper and other metals dropped Tuesday, affected by ongoing trade tensions between the U.S. and China, Reuters reported.

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Trump and Xi are expected to attend next month’s G20 meeting in Buenos Aires, the report notes.