Industry News

Source: Time

Republicans plan House OK of payroll tax cut bill — and Keystone XL pipeline extension

The bill, which “includes language forcing work on the proposed Keystone XL oil pipeline from Canada that Obama wants to delay until after next year’s elections” and, just as importantly, “language blocking a proposed Environmental Protection Agency rule curbing industrial pollution,” will almost certainly not pass the Senate, validating the view that government will do nothing substantive regarding industry until 2013.

Lamy: “A new chapter in China’s reform and opening — let’s see how it goes!

It’s now been 10 years since China’s accession to the WTO, and the trade body’s secretary general is making overtures to China to continue to play fair in the global trade game. You can read his speech at the link above, but let’s not forget to read between the lines. What Lamy said in Beijing: “The WTO’s relevance for China keeps growing and helps this country to address its reform challenges.” What Lamy meant: Because you decided to be in this club, we really hope you stop cheating.

Why 2012 Will Be a Bad Year For Renewable Energy

An interesting piece from Time magazine: without the Production Tax Credits (PTCs), where will the wind and solar industries be?

–Taras Berezowsky

Steel plate mills operating here in the US appear to have gotten just a little bit more help from the International Trade Commission (ITC).

The ITC voted unanimously to essentially extend tariffs on imported steel plate from Korea, Indonesia and India. “Revoking the existing antidumping and countervailing duty orders on cut-to-length carbon-quality steel plate from India, Indonesia, and Korea would be likely to lead to continuation or recurrence of material injury within a reasonably foreseeable time, the ITC statement read.

Meanwhile, they voted to revoke the same tariffs for Italian and Japanese plate, citing less potential harm to US steel producers.

This decision comes on the heels of another unanimous vote — to keep tariffs intact for welded stainless steel pipe from Korea and Taiwan.

In the midst of a struggling domestic economy, where demand is low, American steel mills often say they need as much help as possible to combat unfair trade practices from other steel-exporting nations. In a press statement, Leo W. Gerard, president of the United Steelworkers, said, “five American steel producers operating plate mills in seven states and employing about 4,000 steelworkers were threatened if the duty orders were not kept in place.” These five mills are Arcelor Mittal’s US operations, Evraz Oregon Steel, Evraz Claymont, Nucor and SSAB Americas.

According to the ITC, less than 100,000 tons of steel plate were imported from these countries in 2010, a 90-percent reduction from the year prior to the filing of the petitions. That figure demonstrates the effectiveness of imposing these tariffs, according to the ITC.

Not only are producers being harmed by unfair dumping practices; the US Treasury may not be making as much money from the tariffs as it should be. In a time when tax policy is a one of the major hot-button issues, these extra funds could do their part in improving the government’s bottom line.

Writing on AISI’s SteelWorks blog in October, AISI President and CEO Thomas J. Gibson pushed H.R. 3057, the Enforcing Orders and Reducing Customs Evasion (ENFORCE) Act of 2011, which could “rectify the situation:

“This legislation ¦ will ensure that Customs and Border Protection (CBP) uses its authority to collect the correct amount of AD/CVD [antidumping/countervailing duty] duties imposed by law and due to the U.S. Treasury.   Similar to the Senate bill (S. 1133), the legislation will also establish a process by which domestic producers can petition CBP to investigate claims of customs fraud and AD/CVD evasion and would require that CBP make preliminary and final determinations to be made public within a specific time-line.

According to MetalMiner IndX data, US steel plate prices have fallen off the past 30 days, starting off at $942 per short ton in early November, falling to an inter-month low of $925 on Nov. 21. The price currently stands at $926 per ton.

Source: MetalMiner IndX

In comparison, Chinese plate has stayed firm at $706.07 per ton during the last 30 days; Korean plate at $890.59 for the latter part of the month; and Japanese plate steady at $1003.60 for the last 30 days, according to IndX data.

–Taras Berezowsky

TC Malhotra contributes to MetalMiner from New Delhi.

Source: Business Standard

Slowing sales due to rising interest rates and fuel prices have forced Indian automobile companies to tighten expenditures, even as some auto manufacturers have put their expansion plans on hold.

The impact of the slowdown has been seen on all sorts of vehicle production, including passenger cars, commercial vehicles and the two-wheeler segment.

According to a report published in the Business Standard, Hyundai, the second-largest carmaker operating in India, has stalled a roughly Rs 4 billion ($80 million) investment for a diesel-engine manufacturing facility in Chennai.

The newspaper report quoted Arvind Saxena, Hyundai’s director of marketing and sales, as saying that they are not making any decision on the diesel plant yet. But the company’s investments there are so high, he said, that it can only go forward and not backward.

Passenger car sales have been slowing in India since July. According to latest data released by Society of Indian Automobile Manufacturers (SIAM), the cumulative production data for April to October shows overall production growth of 13.7 percent over same period last year. However, passenger car and bus production has contracted during this time. Production in October 2011 also registered nearly a 2 percent decline as compared to October 2010.

The overall sales growth rate recorded for April-October 2011 was 11.8 percent. However, the month of October 2011 dropped 1 percent as compared to October 2010.

In October 2011, passenger cars, utility vehicles and vans all recorded sales declines of 23.8 percent, 0.4 percent and 17.6 percent, respectively. Overall passenger vehicle growth declined 20.3 percent.

Three-wheeler sales declined 0.4 percent in April-October 2011. Also, while passenger carriers declined by 3.9 percent during that period, goods carriers registered growth of 15.8 percent. Meanwhile, sales of mopeds, motorcycles and scooters all increased.

During April-October 2011, overall automobile exports registered a growth rate of 29.7 percent. Passenger vehicles registered growth at 19.5 percent in this period. Two Wheelers, Commercial Vehicles and Three Wheelers segments recorded higher growth rates of 29.9 percent, 26.8 percent and 45.5 percent, respectively, during the period.

In October 2011 compared to October 2010, overall automobile exports still registered growth of 14.6 percent.

–TC Malhotra

As a corollary of sorts to my colleague Stuart’s earlier look at the Chinese aluminum market, a quick word about the US aluminum market picture. The Aluminum Association presented a Q3 2011 update last week on aluminum highlights, and the dominant (and rather positive) theme centered on exports.

The Aluminum Association’s Nick Adams said that the US is now “essentially a net exporter, which hasn’t happened in a long time. He makes his case citing the uptick in exports within the sheet and plate markets — up 36 percent in 2011 to date, compared with the same period in 2010.

Also, Adams said the “huge growth in export numbers for extrusion markets is notable, up nearly 38 percent in 2011 to date. For the same period, US and Canada aluminum exports overall, less cross-border trade, is up 22.5 percent, whereas imports are up by only 4.8 percent.

Ultimately however, according to one slide — unless I’ve missed something — the numbers don’t really add up in terms of the US being a net aluminum exporter:

Source: Aluminum Association

Seems as though Adams was speaking more to the fact that net imports have fallen significantly in 2011 so far, as compared with the 2010 market. He also mentioned higher exports of scrap to the Far East. (But other graphs still showed considerable growth in the US’ imports of Chinese sheet and foil in the past several months of 2011, while US exports of sheet and extruded shapes to Mexico — the largest market for those forms — remained flat and dropped, respectively, since this past summer.)

Auto Sector Continues Driving the Domestic Market

Obviously, transportation is still the big driver right now in terms of demand and production. Representing the largest number of shipments by end-use market in 2010 at 26 percent, transportation’s positive position is buoyed by North American light vehicle production. According to Ward’s data, Oct. 2011 production for the US, Canada and Mexico totaled 1,242,865 units, a 12% year-on-year increase. Year-to-date production totals 10,893,306 units, up 8.3 percent on 2010 numbers.

The November US auto sales figures, which came out late last week, showed nearly a 14 percent increase year-on-year, while the year-to-date sales were up 10.4 percent compared to 2010.

What To Expect

But will overall demand for aluminum continue? The other macro viewpoints reinforced by Tim Hayes, an analyst for Davenport and Company, global market and domestic economies, pointed to more positivity.

Hayes said that his data show the US is not in a recessionary period in the least, contrary to what the media has been reporting. He pointed to real domestic GDP numbers (up 2 percent in Q3), industrial production and factory output (up 0.7 and 0.5 percent, respectively, in October) and (very) slight glimmers of hope in the construction markets.

Hayes still sees aluminum demand up 10 percent next year, while global supply will clock in at about 8 percent. There will be risks of greater smelter cuts than previous analysis showed, he also said, given the lower aluminum prices.

–Taras Berezowsky

TC Malhotra contributes to MetalMiner from New Delhi.

India’s state-owned miner NMDC Ltd. and Russian steel and mining giant Severstal have signed the implementation protocol in Moscow for setting up a joint venture steel plant in the southern Indian state of Karnataka, according to a recent article in the Hindu Business Line.

The implementation protocol between NMDC and Severstal takes another step following the memorandum of understanding (MoU) they had signed in December 2010 for establishing a steel plant with an initial capacity of 3 million metric tons in Karnataka.

The proposed steel plant may be commissioned by 2017. The 50/50 joint venture project will span about 2,800 acres of land at Bellary in the southern state. The plant is estimated to cost $4 billion and would be funded with a 70/30-debt equity ratio by the Indo-Russian partners.

According to a statement issued by NMDC, a high-level delegation from India including the Indian steel minister and other NMDC executives held discussions with Severstal in their Moscow office. Severstal and NMDC discussed progress in establishing their joint project in Karnataka.

NMDC is involved in the exploration of wide range of minerals including iron ore, copper, rock phosphate, limestone, dolomite, gypsum, bentonite, magnesite, diamond, tin, tungsten, graphite, and beach sands. NMDC is India’s single-largest iron ore producer and exporter, producing about 30 million tons of iron ore from three fully mechanized mines. India is planning to increase its steel capacity to almost 200 million tons by 2020, which would only put a dent into China’s production lead.

The protocol defines the initial target plant capacity to be 3 million tons of finished steel. It also confirms NMDC and Severstal’s intentions to fully meet the joint venture’s captive requirements of both iron ore and coking coal so that it becomes fully integrated for these primary raw materials.

According to the statement, until the captive assets are fully developed, NMDC and Severstal take the responsibilities to supply iron ore and coking coal to the JV at market basis from their existing assets or alternative sources.

Alexey Mordashov, Severstal’s chief executive, is quoted as saying, “Our joint venture project in India with NMDC provides a very good fit with Severstal’s vertically-integrated, growth-focused business model. P.K.Mishra, the Indian government’s secretary of steel, is also quoted as saying this will be a vital move for the Indian steel industry.

Rana Som, chairman and managing director of NMDC, also reinforced that NMDC wants to make the project not only financially strong, but also socially meaningful and economically relevant to meet India’s needs.

Incorporated in 1958 as a fully owned public enterprise, NMDC is under the administrative control of the Government of India’s Ministry of Steel.

–TC Malhotra

In the first of three reports scheduled for release by the OECD over the course of next year, upstream and downstream companies impacted by the Dodd-Frank banking reform (and subsequent Conflict Minerals aspects of the legislation) have the opportunity to see the results of the OECD pilot study.

This first release includes two separate reports one for upstream companies and the other for downstream companies. We examined only the downstream report in conjunction with conflict minerals expert Lawrence Heim, who recently led a conflict minerals webinar with sponsor Aravo earlier this fall with MetalMiner. The recorded webinar provides an overview to the legislation.

OECD Framework Problematic

In our view, the OECD framework (or perhaps more accurately, SEC’s possible incorporation of it into their final rules) may create more problems than it solves. According to Heim, the OECD may not amend the language of the guidance itself, but instead is amending the substance of the guidance through less formal “clarifications” from the OECD secretariat. Heim points out three main ramifications for US companies that must comply with the US Conflict Minerals legislation:

  • First, if the SEC adopts the OECD guidance by reference or implication, the SEC — and the universe of regulated companies — will, according to Heim, “be at the mercy of OECD and those few companies who are participating in the pilot and thereby driving the OECD secretariat’s clarifications.”
  • Second, this creates a window for a non-US, non-regulatory body to modify (via “clarification” or other means) a substantive US regulatory provision, essentially sidestepping US rule-making processes.
  • Last, the pilot is scheduled to continue until August 2012, along with additional clarifications (some of which already have been requested by the participants) through that time. Therefore, the true substance or framework of what OECD really wants won’t be known for another eight to ten months. If the SEC does promulgate its final rule next month, it would finalize a regulation that isn’t really final, making it very difficult for US companies to plan and implement their conflict minerals programs.

So why wouldn’t we want to leverage someone else’s work, the argument goes? That may work for adopting industry-wide voluntary programs/solutions, but is not appropriate for rule-making bodies working in a legislative capacity.

Heim raises one critical argument to support that assertion. “This is similar to how industry challenged the EPA in the 90s when it intended to adopt the  ISO14000  standard as part of its regulatory framework, he said. Because ISO14000 represented a voluntary standard developed outside the US rule-making process and was never intended to have the force of law, EPA ultimately did not promulgate ISO14000 regulations. Heim doesn’t see any difference between this and the current situation with SEC/OECD.

The Pilot Group

The other issue with adopting the OECD approach involves who has (and who has not) participated in the pilot. A list of pilot participants (at least those that chose to disclose their names) appears on page 8 in the link entitled downstream baseline report.

The pilot group consists of predominantly mega-corporations with global operations primarily in the electronics and aerospace industries. Though these two industry groups certainly make up a substantial proportion of industries impacted by the legislation, based on attendees to our own MetalMiner Conflict Minerals webinar, we can safely say that the pilot group does not contain a range of firms also subject to the legislation.

This group of webinar attendees includes: SME firms, firms in the medical device, consumer packaged goods, appliance and oil and gas industries, among others. Those firms’ interests may materially differ from the concerns of electronics and aerospace manufacturers and distributors. In other words, the concerns of other companies not participating in the OECD pilot project may not have a voice in what may have a substantive impact on   the SEC rule-making process.

Other Areas of Interest

Heim’s firm, The Elm Consulting Group International, published a four-page briefing document on the OECD report. The briefing summarizes what Heim sees as some of the more important aspects of the pilot study, including how companies have approached creating a conflict minerals strategy or policy, challenges in identifying vendors that supply products that contain tin, tungsten, and tantalum, the complexity of supplier communications and the sheer depth of most supply chains (at least eight tiers in length). Heim also comments on smelter and supplier audits and what pilot participants have found while using the EICC-GeSI Conflict Free Smelter program.

The pilot program results will likely continue to identify challenges to the OECD framework. We will endeavor to stay on top of this issue as additional reports become available.

–Lisa Reisman

TC Malhotra contributes to MetalMiner from New Delhi.

In a major policy change, Australian Prime Minister Julia Gillard declared on Nov. 15 that her ruling Labour Party would reverse its ban on selling uranium to India.

Australia-based environmental news agency ECO News reported that the Australia India Business Council (AIBC) has welcomed Australian Prime Minister Julia Gillard’s support for uranium exports to India. ECO News quoted AIBC Chairman Arun Sharma as saying that the move was in Australia’s broader national interest and would strengthen ties with India.

The AIBC was set up in 1986 following recognition of the enormous trade potential between the two countries by the prime ministers of the day, Bob Hawke of Australia and Rajiv Gandhi of India.

Uranium currently contributes over A$750 million to the Australian economy. Australia has close to 40 percent of the world’s low-cost uranium supply and is the world’s third-largest exporter, with most of its exports going to the US, Japan and South Korea.

United States President Barack Obama has also virtually backed Australian PM’s plans to sell uranium to India, saying it “seemed to be compatible with international law and the Non-Proliferation Treaty.”

Indian Prime Minister Manmohan Singh and his Australia’s Gillard met in Bali on Nov. 19 for brief talks, moving discussions forward on selling uranium to India and also reviewing their strategic partnership. Gillard made it clear that she would move her proposal forward to lift the ban on uranium sale to India.

India quickly hailed Gillard’s move. Indian Commerce, Industry and Textiles Minister Anand Sharma welcomed Australia’s decision to reverse the ban on selling uranium to India. Sharma, who met the premier of New South Wales, Barry O’Farrell, said this decision was in line with the strategic nature of the relationship between the two countries.

Market observers say that Gillard will be under pressure to get her party to agree to her proposal even though India is not a signatory to the Nuclear Non-Proliferation Treaty (NPT). The final decision rests with Gillard’s Labour party, which will meet next month.

For the past four years, the Labour government has linked uranium exports to India signing the 1970 NPT. However, Australia had supported the NSG waiver for India in 2008, and since then, India has maintained that it would wait for Australia to make its own decision on uranium sales.

India has an indigenous nuclear power program and expects to have 20,000 MWe nuclear capacity by 2020 and 63,000 MWe by 2032. The country aims to supply 25 percent of its electricity from nuclear power by 2050 and for that to happen, India needs uranium, a key fuel for nuclear power generation. India’s domestic uranium reserves are small and the country is heavily dependent on uranium imports to fuel its growing nuclear power industry.

India’s energy demand has nearly doubled during the last decade with the rising economy. India is now the world’s fourth-largest energy consumer. In terms of energy mix, India relies heavily on coal, oil and natural gas. But during the last decade, India has enhanced its nuclear power generation program.

India signed a civilian nuclear deal with the United States in 2005, and in 2008, Nuclear Suppliers Group (NSG) granted India a waiver to commence civilian nuclear trade. After  the NSG waiver,  India signed uranium supply agreements with Russia, France, Canada, Kazakhstan, Namibia, Mongolia and Argentina.

Before the US-India civilian nuclear deal, Russia was India’s only uranium supply source. Russia had helped India build the Kudankulam power station in South India and Russia has recently pledged to help India build four new nuclear power plants.

Although India currently has 20 nuclear reactors in six power plants, nuclear power supplies less than 3 percent of India’s energy needs.

–TC Malhotra

Continued from Part One.

In another  twist, the Chinese are looking to bring their own case against the US in what appears on the outset as a somewhat self-defeating act.

Beijing is considering sanctioning a trade case against US producers of polysilicon, the raw material for stage 1 of the process (mentioned in Part One). The US exports about $873 million of polysilicon to China each year, roughly the same as the US imports in finished panels from China. The NYT article tells us polysilicon requires enormous amounts of energy. The process requires super-heating large volumes of material in electric-arc furnaces, including the melting of quartzite rock at more than 3,600 degrees Fahrenheit. The United States is one of the world’s largest producers of polysilicon, in states like Tennessee and Washington, because it has access to less expensive hydroelectric power.

China’s own polysilicon industry is controversial because it relies heavily on electricity generated by coal-fired power plants, which are both high-cost and pollution-intensive, and because weak environmental controls at Chinese polysilicon factories have resulted in toxic spills that have fouled streams and rivers. If China places tariffs on US suppliers, they will simply end up paying more for their raw material and encouraging domestic investment in exactly the kind of industry Beijing is seeking to dissuade in the new Five-Year Plan high-energy-consuming basic materials.

“This is not surprising at all — China is well-known for responding to trade cases by filing retaliatory trade cases,”  said  Tim Brightbill, counsel to the SolarWorld and the U.S. petitioners in the solar case, in an interview with MetalMiner. “This is just another example of China not playing by the established rules of international trade.”

Brightbill went on to say, “One interesting aspect of a polysilicon case is that while China used to be reliant on U.S. polysilicon imports, it is much less so today — because it has created its own heavily subsidized polysilicon industry in China.  The U.S. subsidy petition filed against China alleges that all of China’s top 10 polysilicon producers are state-owned or [state]controlled.

While on the subject of environmental problems, the question may have occurred to you, why don’t the Chinese go the whole hog, much like Japan did eventually with autos, and build all four stages in the US accessing domestic US polysilicon in the process? One reason appears to be that the US cares about its environment and permitting for firms engaged in manufacturing that uses a lot of chemicals is said to be too onerous better to produce in China where no one cares.

–Stuart Burns

The US’ pending trade dispute with China over  solar cells and modules, covered on MetalMiner on Nov. 10, looks like it will be successful in encouraging China to review its sales strategy towards finished solar panels; this comes following advice received by trade lawyers hired by Chinese firms to advise them on the  Commerce Department case, the NY Times reports.

Chinese solar panel manufacturers have apparently been advised they will stand little chance of success in the case, presumably because they are  engaging in dumping and  benefiting from subsidies, as US panel-makers claimed. Interestingly, like Japanese carmakers in the 1980s, Chinese solar panel manufacturers are said to be considering moving final assembly to the US so their panels become US-made.

However, because the case  covers both cells and modules, China would have to give up cell manufacturing as well. The manufacture of  solar panels  is   essentially a four-step process. According to the NY Times, molten polysilicon is used to grow crystals or cast blocks of polycrystalline silicon as the first step. The second step is cutting and polishing the material into thin, smooth wafers. The third involves chemically treating the wafer and adding electrical contacts — this essentially makes it a solar  cell. The fourth requires connecting 60 to 72 cells together, covering them in glass, a frame and adding an electrical junction box to make the finished module. It is this last stage the Chinese are considering moving to the US.

Good news, you may think, US assembly jobs and taxes! No, this final step in the process is said to be worth only some 15 percent of the cost of a panel and is either largely automated or uses low skilled labor. The value is in stages 1 and 2, which China is looking to keep at home, while shipping the finished wafers to South Korea or Taiwan for stage 3, thereby hoping to circumvent potential duties on Chinese origin components.  However, because  most of the intellectual property and capital investment is in the cell stage, U.S. manufacturers say they are confident they can compete with cells and modules made in other countries where the product is not dumped or subsidized, even if the wafers come from China. So the case is unlikely to be amended to meet the Chinese attempts to get around origin issues.

Continued in Part Two.

–Stuart Burns

The floodwaters may be slowly — agonizingly slowly — receding, but like ripples on a pond, the ramifications of Thailand’s recent floods are spreading around the globe and forward in time.

According to Businessweek, at least 533 people have been killed since late July, when monsoon rains began lashing Thailand. Flooding worsened in October, when rainfall (about 40 percent more than the annual average) filled dams north of Bangkok to capacity, prompting authorities to release more than 9 billion cubic meters of water down a river basin the size of Florida.

Advancing waters have swamped seven industrial estates north of Bangkok with 891 factories, and threaten two others in the capital where Honda, Isuzu Motors Ltd., and a unit of Mitsubishi Heavy Industries Ltd. have operations. Half the world’s hard-disc-drive manufacturers are either closed or on restricted working status, and automotive parts manufacturers, particularly Japanese supply chain firms, are particularly hard hit. Honda had to cut output at some North American plants this month as a result of disrupted parts supply, and a NY Times news service report said the flooding has forced Toyota to slow production in factories in Indonesia, Japan, Malaysia, North America, Pakistan, the Philippines, South Africa and Vietnam.

As the ripples spread, Japanese steel mills are trimming steel production in anticipation of slowing or delayed steel demand from the auto industry. The FT reported this week that car manufacturers have been asking mills to delay deliveries of steel sheet, causing Nippon Steel and JFE to shut capacity and revise production forecasts for the next quarter.

Although Hurricane Katrina was a case of weather pushing sea-waters inland past city defenses, it bears some similarity to Bangkok’s monsoon rains falling inland and causing flooding as the waters build on their way to the sea. In both cases, man-made defenses were thought to be adequate, but wholesale destruction of natural defenses has shown the weakness of relying on recent history as a guide to future expectations.

The monsoon rains were said to be the worst in 70 years, but the frequency is expected to increase as weather patterns change. The NY Times explains a large share of the industrial growth in Thailand has occurred on the floodplain north of Bangkok. Rice paddies were paved over to make way for factories, suburban housing and shopping malls, blocking the natural path and absorption of water during the monsoon season. Experts feel the Thai government will be given one chance and one chance only to make the necessary investments to provide canals, drainage and other defenses before foreign investors (particularly Japan as the largest) start to look for new sites to put their money in Vietnam, Indonesia, India and elsewhere in Southeast Asia.

As for us, we can expect to pay more for electronics containing hard-disc drives, particularly external HDD, as prices charged by those not affected rises. Car deliveries may also be delayed, although the supply chain was reasonably well-stocked and most manufacturers do have redundancy elsewhere to keep them going; but as an example, the new Honda Civic launch in the UK has been postponed by a month due to parts disruption from Thai factories.

As if we didn’t need any reminders after the Japanese earthquake of the global market’s interconnectedness, along comes yet another natural disaster to remind us that lowest cost is not always lowest cost.

–Stuart Burns

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