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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.

The Renewable Monthly Metals Index (MMI) picked up a point for our January reading, rising from 78 to 79 (a 1.3% jump).

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Several of the heavier hitters in this basket of metals posted price increases this past month.

U.S. steel plate rose 4.0% and U.S. grain-oriented electrical steel (GOES) coil rose 3.8%. Korean steel plate also increased, rising by a whopping 8.9% for the recent monthly window.

Chinese silicon and cobalt cathodes also posted notable price jumps. Meanwhile, Chinese steel plate fell slightly, while Japanese steel plate posted a small price jump.

Continuation of Steel Plate Tariffs on the Table

U.S. Rep. Pete Visclosky (D-Merrillville, Indiana) testified before the International Trade Commission recently on the subject of extending 18-year-old duties on cut-to-length carbon-quality steel plate from India, Indonesia and South Korea, the Northwest Indiana Times reported.

Northwest Indiana, where Merrillville sits, is home to significant domestic steel industry activity, including by ArcelorMittal, which produces steel plate at its Burns Harbor Plate Mill — located in Gary, Indiana — the paper reported.

“As a representative and resident of Northwest Indiana, I am acutely aware of the challenges facing the American steel industry due to the onslaught of illegal steel imports,” the Times quoted Visclosky as saying during testimony at a hearing in Washington, D.C. “The ArcelorMittal facility at Burns Harbor in Northwest Indiana makes cut-to-length carbon-quality steel plate, and every one of those dedicated workers deserve to be able to continue to fairly compete and make the best steel to the best of their ability in our global economy.”

Of course, the issue is one of many metals-related trade issues before U.S. trade bodies (the most headline-grabbing being the Section 232 probes into steel and aluminum imports, for which a ruling is expected this month).

Like the Section 232 probes, which seek to determine whether those imports negatively impact the country’s national security, Visclosky also cited national security concerns vis-a-vis steel plate imports.

“It is essential for both our national defense and our national economy, and we cannot afford to threaten our production capabilities,” the paper quoted Visnosky as saying.

GOES Gets a Boost

As reported by our Lisa Reisman yesterday, grain-oriented electrical steel (GOES) got a boost this past month.

GOES prices, as Reisman noted, usually don’t move in tandem with other forms of steel — but it didn’t play out that way in December.

Import levels, however, are something to monitor going forward.

“In addition to prices moving in a similar direction, import levels also followed similar patterns, although GOES imports showed a dramatically higher increase whereas finished steel imports grew by 14.5% on an annualized basis according to the American Iron and Steel Institute (AISI),” Reisman added.

While China is often the subject of much discussion regarding a flood of imports into the U.S., when it comes to GOES, Japan is actually the leader in exports to the U.S.

Source: International Trade Administration and MetalMiner analysis

Japan owns about two-thirds of the U.S. GOES import market share, rising significantly despite a drop in overall finished steel sent to the U.S.

The explanation for that disparity?

“Increased domestic efficiency standards have led to the development of higher performance electrical steels (HB), which have taken share away from the more conventional grades produced by the sole U.S. producer,” Reisman wrote. “With no U.S. producer of these grades, the market has become more reliant on exports from Japan.”

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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.

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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Everyone loves a forecast, a prediction, even a few ideas on what the future holds, and we become particularly obsessed with such ideas at the start of a new year.

So, we thought it would be fun to review a few sources’ suggestions on what 2018 may hold, some as specific predictions like those in the Financial Times, and some as possible standout black swan events that could catch us off guard, such as those in The Telegraph newspaper.

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Firstly, some of the Financial Times’s suggestions. They came up with 20 of them, but many are political and somewhat niche for our readership, like whether or not Britain’s Prime Minister Theresa May still be in power by the end of 2018. It’s a topic only the Brits are obsessed with and as it’s not exactly going to roil international markets one way or the other, we will ignore it here, as will non metal-market issues, like whether the AT&T-Time Warner merger will go through without big changes to both.

However, of more interest are questions like “Will Trump trigger a trade war with China?” Yes, in the FT’s opinion. The paper believes Trump will deliver on his protectionist campaign rhetoric and take punitive actions against China in 2018, resulting in China either imposing retaliatory measures or taking America to the World Trade Organization (WTO). (While on the Trump train of thought, another ditty from the FT is “Will the president will be impeached in 2018?” — or, at least, whether or not proceedings will be brought against him by the end of the year.)

Back to China, the driver for metal markets will be Chinese demand and Chinese GDP growth. At least officially, growth will continue to headline at 6.5% throughout 2018, the FT believes, although it clearly does not believe the official figures and makes the point real growth will be somewhat lower. Emerging market growth overall is expected to rise above 5% through 2018 despite the U.S. Federal Reserve increasing rates, which could spark taper tantrum spoilers (as in 2013). Even so, emerging market growth is expected to remain robust, aided by ongoing strong growth in the U.S. and Europe.

Political Turmoil Shakes Things Up Worldwide

Politically, 2018 could be an interesting year.

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Now that the New Year has begun, we’re getting ever closer (hopefully) to the Commerce Department’s final recommendations on the Section 232 investigation.

Today we continue our podcast series that we’re calling “Manufacturing Trade Policy Confidential,” in which we turn our focus to the aluminum industry. Our guest is Heidi Brock, the president and CEO of the Aluminum Association, whom we spoke with just before the winter holidays. She works tirelessly on behalf of the association’s members, which span the entire value chain. Heidi does find moments, however, to take a step back and see the bigger picture.

Recently, she got to see the newly commissioned USS Gabrielle Giffords, a warship named after the former Arizona congresswoman, and it left her with a sense of awe. “I just can’t tell you what an amazing experience it was,” she said.

To hear more on what a strong domestic aluminum sector has to do with national security, and how the aluminum sector views other hot trade issues of the moment and why, listen in to Lisa Reisman’s conversation with Heidi Brock.

Here’s Heidi in front of the U.S. Navy littoral combat ship USS Gabrielle Giffords:

Courtesy of Heidi Brock

For an additional sense of scale, here’s an “aerial view of the ship during its launch sequence at the Austal USA shipyard, Mobile, Alabama,” according to Wikipedia, from a photo provided by the U.S. Navy:

Source: U.S. Navy/Wikipedia

Manufacturing Trade Policy Confidential: Background

With everything that’s been happening on the international trade policy front over the past year, we wanted to give metal buying organizations more insight into the issues they may not be reading or hearing enough about — or at all — in the mainstream B2C media.

What better way to do so than go straight to the source — or sources — and interview some key movers and shakers on the manufacturing and policy fronts? So we’ve started a brand-new series called “Manufacturing Trade Policy Confidential.”

If you’ve visited MetalMiner’s digital pages over the past several months, you’re no stranger to the phrase “Section 232” — shorthand for the U.S. Department of Commerce investigation into whether certain steel imports constitute a national security risk, under the namesake section of the U.S. Trade Expansion Act of 1962.

The outcome of the investigation (findings from which were slated to come down last summer but have been delayed) could have significant effects on upstream and downstream manufacturing organizations, ranging from metal producers to buying organizations – even the mom-and-pops.

But Section 232 is only one small part. Trade circumvention, China’s non-market economy status, domestic uncertainty amidst proposed tax plans and many other issues have pushed us to start this new podcast series.

We’ll be publishing several more interviews in the coming weeks and months – stay tuned!

Listen to more episodes and follow the MetalMiner Podcast on SoundCloud.

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This morning in metals news, the top copper producer in China was forced to stop production on account of a pollution order, Chinese steel futures are down, and Chinese officials falsified data in order to avoid steel and aluminum capacity cuts.

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Jiangxi Gets the Government Red Light

Jiangxi Copper Co., China’s top copper producer, had to halt its production after a local government order related to pollution from its facility’s activities, Bloomberg reported.

According to a company official Tuesday, the local Chinese government made the order in an effort to cut pollution in the area. The halting of production is set to last for at least a week, according to the report.

Chinese Steel Futures Drop

Chinese steel futures fell as a result of dropping output during the winter season, Reuters reported.

A drop in demand during the cooler season also contributed to the futures decline. According to Reuters, the most active rebar contract on the Shanghai Futures Exchange (SHFE) dropped 3% to close at 3,787 yuan ($578.54) a ton.

Chinese Officials Fake Data to Avoid Capacity Cuts

According to the state-run China Youth Daily, officials in China’s northern Shandong province used fake data to help aluminum and steel producers avoid mandatory production curbs.

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According to the Ministry of Environmental Protection, officials in Binzhou used fake certificates and false data to obtain approval for the construction of 2.4 million tons of new aluminum production capacity in 2014.

India’s solar energy plans seem to have run into a spot of a bother.

The Indian government’s target is to boost installed solar power capacity more than five-fold to 100 gigawatt (GW) by 2022.

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The problem, though, is India meets about 85% of its solar cell demand through imports from China, and photovoltaic modules account for over half the costs of a solar project.

Now, the Indian government is left contemplating whether the domestic industry of solar cells and modules manufacturers should be “protected” from cheap imports. In that vein, the government is actively thinking of imposing an anti-dumping duty.

In a related development over last week, the Ministry of New and Renewable Energy has come out with a “concept note” for offering “direct financial support” of approximately U.S. $1.7 billion (Rs 11,000 crore), as well as a tech upgrade fund for solar manufacture. At the same time, it has said cell and module manufacturing capacity in the country is “obsolete.”

The concept note pointed India had installed capacity for producing 3.1 GW of cells and 8.8 GW of modules, but even this capacity was not being fully exploited because of obsolete technology. The Ministry of New and Renewable Energy believes only 1.5 GW of cell manufacture and 3 GW of module manufacture is being used.

Now, as per the concept note, the Indian government aims to provide a 30% subsidy for setting up new plants, while also expanding existing ones. Heavy equipment required to set up projects shall also be exempt from customs duty, according to the scheme to be operated by the Indian Renewable Energy Development Agency.

According to a news report, the Ministry’s note targets creation of solar cell manufacturing capacity of 10 GW over five years and includes interest subvention of 3% to manufacturers, setting up new capacity for loans taken through state-managed banks.

Cheap imports from China have brought down solar power tariffs to record lows, according to the Indian Solar Manufacturers Association. The latter has now petitioned the government to impose an anti-dumping duty on inbound shipments from China.

The concessions that the concept note speaks of are expected to bring down reliance on imports from China.

Already, there is a slowdown in fresh investments in this sector.

In November, tenders for new projects declined by 25% to 300 mega watt (MW) and auction of new offerings dropping by 98% to just 5 MW from levels of activity seen in October. According to the latest solar market update for the third quarter published by renewable energy market tracker Mercom Capital, a total of 1,456 MW of solar power projects was tendered and 1,232 MW auctioned in the period. The figures represented a marked reduction from the activity seen in the second quarter that saw 3,408 MW of solar projects tendered and 2,505 MW auctioned.

Meanwhile, the Directorate General of Safeguards and Anti-Dumping held the first oral hearing last Tuesday to investigate allegations of dumping imported solar cells and modules.

The domestic solar panel manufacturing industry, in a petition, had submitted that around 80% of the market had been taken away by imports. The domestic industry has taken the position that as imports harm the indigenous sector, a retrospective duty should be imposed on the importers. But this was challenged by some solar power project developers, who used the argument that silicon wafers required to make solar cells were also being imported, mainly from China, hence the domestic sector had no choice but to be dependent on imports.

The prices of panels have crashed to $0.32 per kWh from $0.50 per kWh in three years, owing to global over-capacity and “dumping” by China. The tariff for solar power projects has fallen by 80% in six years.

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All of the above could be music to the ears of the consumers … but not to the domestic manufacturers.

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Last week, China issued a global call to for countries to support the World Trade Organization (WTO) and the principles of global trade in the face of a perceived pullback from the U.S.

This week, China is risking another trade dispute by cutting export taxes on some steel products and fertilizers while completely canceling those for sales abroad of steel wire, rod and bars from Jan. 1, according to a Ministry of Finance announcement on Friday reported by Reuters. With the move, it appears, comes the expressed intention of boosting exports into markets already perceived as oversupplied.

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Just last month, the G20 convened a meeting in Berlin which included discussion of how to tackle excess global steel capacity over widespread fears China is using export markets to sell excess capacity.

That is a position China denies and points to the enforced closure this year of 100 million tons of legal and 120 million tons of illegal steel production. In reality, though, although the closure of illegal capacity — much of it scrap-based electric arc furnace (EAF) plants — the “closure” of legal capacity has been a mixed bag. Much of it was the permanent shuttering of already idled, older steel capacity.

China is not alone in having excess steel capacity — it arguably is not even in the forefront of global low-cost suppliers.

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This morning in metals news, global steel output rose last month, Chinese aluminum smelter cuts have fallen short, and a Trump administration official said the president’s new security strategy backs the case for potential tariffs on steel and aluminum.

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Global Steel Output Up

Although Chinese capacity cuts are on the horizon, global crude steel output rose by 3.7% in November, Reuters reported.

China’s goal of cutting capacity, in an effort to reduce pollution in the country, is expected to eat into that global output total.

November crude steel output in China hit a nine-month low, according to the report.

Meanwhile, in Aluminum Cuts…

How about Chinese efforts with respect to aluminum smelter closures?

According to Reuters, that has fallen short, as China has failed to implement closures for the winter season. As a result, the aluminum price has struggled in the face of record inventories in China.

New Security Plan Boosts Case for Steel, Aluminum Tariffs

As the metals industry waits for a resolution to the Trump administration’s Section 232 probes of steel and aluminum imports, a Trump administration official on Tuesday said the president’s new security strategy supports the case for steel and aluminum tariffs, Reuters reported.

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The Section 232 probes, launched in April, “are being discussed in the context of national security,” the official told Reuters. “The strategy highlights the importance of industrial strength, and that is also an element of the 232 analysis.”