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This morning in metals news, the clock is ticking on the E.U.’s temporary exemption from the U.S.’s steel and aluminum tariffs, global steel output is up, and Germany gets ready for the tariffs to go into effect Friday.

Tariff Exemption Deadline June 1 Draws Near

The European Union was granted a 30-day extension to its temporary exemption from the Section 232 steel and aluminum tariffs late last month — less than 24 hours before they were set to go into effect — but that pushed-back deadline is approaching at the end of this week.

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Nonetheless, according to a report by the Financial Times, U.S. Secretary of Commerce Wilbur Ross said negotiations can still continue even if tariffs are in place, as Ross pointed to the example of China, on which the tariffs have already gone into effect.

Germany Prepares For Tariffs

Speaking of Europe, Germany is preparing for the tariffs to go into effect, according to a Reuters report.

According to a German economy ministry spokesman, as quoted by Reuters: “As far as I know it is in the night (going into) June 1. As far as I know, they (the tariffs) would automatically take effect.”

Global Steel Output Rises

Global crude steel output in April was up as winter cuts in China are in the rear view mirror, according to a Zacks report.

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According to the report, Chinese production rose 4.8% year over year.

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This morning in metals news, Germany is getting ready to face the 25% U.S. steel tariff when the current temporary exemption for the E.U. expires early next week, Canada’s foreign minister says NAFTA negotiators have made progress on automotive rules and the E.U. is keeping a close eye on aluminum imports in the post-Section 232 world.

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Preparing for Tariffs Time

The European Union is collectively bracing for the U.S.’s Section 232 steel and aluminum tariffs exemption to expire early next week, after which E.U. member states would be hit with the 25% and 10% tariffs on steel and aluminum, respectively.

Germany, of course, a prominent steel producer, is one of those member states preparing for the U.S. tariffs. 

According to a German official cited by the Financial Times, Germany is seeking a “long-term deferral” from the tariffs.

NAFTA Talks Drive Forward on Auto Rules

According to Canadian Foreign Minister Chrystia Freeland, talks on renegotiation of the North American Free Trade Agreement (NAFTA) have made some progress on automotive rules, Reuters reported.

The talks have focused on, among other things, the percentage of each vehicle required to be composed of components from NAFTA nations (by value).

E.U. Eyeing Aluminum Imports

The E.U. has begun to monitor aluminum import levels to determine if the U.S. Section 232 measures have diverted an increased amount of global supplies to the 28-member bloc, Reuters reported.

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According to the report, data collected on import levels will be used to determined whether or not the E.U. needs to implement measures to curb imports.

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This morning in metals news, Tata Steel announces a big investment, Chinese steel shipments have continued to drop and the U.S. International Trade Commission (ITC) will expedite a five-year sunset clause review of carbon and alloy steel standard, line, and pressure (CASSLP) pipe from Germany.

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Tata Steel Makes Big Port Talbot Steel Investment

Tata Steel announced it is investing £30 million in its Port Talbot steelworks, the BBC reported.

According to the report, the Indian firm will install a 500-ton steelmaking vessel at the plant, in addition to other upgrades.

Dropping Chinese Steel Shipments

President Donald Trump kicked off his tour of Asia this week; while North Korea draws much of the headlines, China’s steel industry is also among the list of items in the spotlight.

Bloomberg notes that dropping steel shipments from China, the world’s top steel producer, undercut the Trump administration’s rhetoric calling out China’s excess steel capacity.

“Exports from the country that accounts for half of global production dropped to 4.98 million tons last month, down from September’s 5.14 million, and the lowest since 2014, according to customs figures,” Bloomberg’s report reads. “That’s a far cry from the monthly peak in late 2015, when they exceeded 11 million tons.”

U.S. ITC Expedites Review of CASSLP Pipe From Germany

The U.S. ITC announced Monday that it voted to expedite its five-year sunset review concerning the antidumping duty order on seamless CASSLP pipe from Germany.

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“As a result of the vote, the Commission will conduct an expedited review to determine whether revocation of the order would be likely to lead to continuation or recurrence of material injury within a reasonably foreseeable time,” the ITC release about the vote reads.

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This morning in metals, officials from Thyssenkrupp’s home German state indicated they are confident the merger proposed for the German firm and Tata Steel can be pushed through, a mothballed U.K. steel plant is now back up and running, and Great Lakes steel production picked up last week.

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Time to Make a Deal

Tata Steel and Thyssenkrupp recently came to an agreement to merge their European operations — however, there are still some hurdles to clear in order to seal the deal on the move.

On Wednesday, German officials in North Rhine-Westphalia, the state in which Thyssenkrupp is located, indicated they were confident that management of the company would be able to strike a deal with workers, Reuters reported.

Gupta to Revive Shuttered Former Tata U.K. Facility

Sanjeev Gupta, of Liberty Speciality Steels, re-opened a steel facility Wednesday in the U.K. that was closed by former owner Tata Steel, The Economic Times reported.

Gupta revived a small bloom caster at its Aldwarke works facility in Rotherham, the Times reported. The move comes more than a year and a half after the facility was closed by Tata Steel UK.

Great Lakes Steel Production Up

Production of steel in the Great Lakes region recently got a boost, ticking up 2.7% last week, according to The Northwest Indiana Times.

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Last week, 684,000 tons of steel were produced in the region, according to the report citing data from the American Iron and Steel Institute (most coming from the northwest Indiana counties of Lake and Porter).

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Details are pretty sketchy at present, but a recent Reuters article sheds light on an investigation underway by Germany’s competition regulator into a suspected violation of antitrust laws in the steel industry.

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According to Reuters, the investigation expands an ongoing cartel office inquiry, which already covers makers and sellers of stainless steel, car manufacturers and suppliers, as well as companies in the forging sector.

The suspicion is of “anti-competitive collusion between companies” on flat steel products. Although not all steel firms are currently under investigation, many of the largest ones are.

Both ArcelorMittal and Salzgitter have confirmed units of their company have been searched in the first phase of an operation late last month that included seven companies and three private homes in Germany. According to the Reuters report, Manager Magazin reported that included in the investigation is the German Steel Federation, an industry association, although the publication did not cite any sources in its report.

Interestingly, any collusion may be limited. Kajor steel producer Thyssenkrupp and steel distributor trader Kloeckner & Co. both said they had not been searched, according to Reuters, nor is this part of a wider European Union action. Allegations appear to be restricted to several steel producers in Germany, although some of them, such as ArcelorMittal, are multinationals.

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This afternoon in metals news, gold inches upward, partially stemming from concerns on the heels of a North Korean missile test; Germany, among others, waits to hear what the U.S. has to say about steel; and, in anticipation of protectionist policies from the Trump administration, U.S. Steel rose by 8% in June.

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Gold Up on N. Korea Concerns

After North Korea’s recent test strike of an intercontinental ballistic missile (ICBM), the price of gold ticked upward, a common reaction for the safe-haven metal.

“Safe-haven buying re-emerged in the gold market after the latest missile test in North Korea,” ANZ Research said in a note to Reuters.

Also looming over the gold price are the minutes of June’s Fed meeting, which many awaiting for news about the Fed’s plans for further interest rate hikes this year, Reuters reported.

Germany Anticipates Trump Administration’s Words on Steel

While China is the central focus of the Trump administration’s Section 232 investigations of steel and aluminum imports, other nations are interested in the investigations’ results.

Germany is among those nations, as a top exporter of steel to the U.S. The Germans are waiting to hear from President Donald Trump during the G20 summit, which begins on Friday in Hamburg, Germany.

When asked during a news conference Wednesday whether steel would be an issue discussed during the G20 summit, German government spokesman Steffen Seibert said, “That will become apparent. It also remains to be seen what the American president brings (to the meeting).”

U.S. Steel Up Big

Many expect the Trump administration to announce new tariffs or quotas, a result of the 232 investigations into steel and aluminum imports launched in April.

While the policy recommendations of those probes haven’t been announced, some U.S. businesses are feeling pretty good about what those protectionist policies might do for them. For example, U.S. Steel went up 8% in June.

But what happens next? A self-imposted Department of Commerce deadline came and went this past Friday with no announcement of the steel investigation’s conclusion. According to Section 232 of the Trade Expansion Act, the Secretary of Commerce has 270 days to prepare a submit a report to the president.

As such, the Trump administration still has plenty of time to think about the subject of steel imports. With that said, any momentum felt by the domestic steel industry as a result of talk of impending protectionist policies could begin to deflate the longer the process drags out. Many are looking to Trump’s participation at the Group of 20 summit later this week for more specific answers regarding the president’s thoughts on steel overcapacity.

The Department of Commerce today announced its affirmative final determinations that steel producers in Austria, Belgium, France, Germany, Italy, Japan, the Republic of Korea (South Korea), and Taiwan are dumping imports of carbon and alloy steel plate in the U.S.

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Margins in the dumping investigations ranged from 3.62% to 148.02%, and were, in certain instances, based on adverse findings against non-cooperative responding parties. Commerce also determined that critical circumstances exist in three investigations, allowing for collection of duties for a retroactive period of 90 days before the preliminary determination, spanning back to August 16. Commerce also found that South Korea is providing unfair subsidies to its producers of steel plate at a countervailable duty rate of 4.31%. As a result of these final affirmative determinations, Commerce will instruct Customs and Border Protection to collect cash deposits based on these final rates. Read more

However much we may focus on supply and demand fundamentals, metal prices and economic stability will be influenced more in 2017 by trade policy than just about any other issue.

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The new Trump Administration in Washington has already shaken up the status quo for NAFTA with threats to renegotiate the terms of that 20-year-old agreement in a manner that would have been inconceivable just six months ago.

Now, Peter Navarro, who heads the new National Trade Council, described the euro this week as an “implicit Deutsche Mark” that gives Germany a competitive advantage over its trade partners and accused Germany’s structural imbalance in trade with the rest of the E.U. and the U.S.A. as the result of a deliberately engineered-to-be-undervalued currency. Navarro accused Germany of engineering a grossly undervalued euro to exploit the terms of trade with its principal trading partners and called it illegal. Read more

North Dakota Senator John Hoeven (R.) said the U.S. Army Corps of Engineers is ready to provide the easement necessary to build the final leg of the $3.8 billion Dakota Access oil pipeline under North Dakota’s Lake Oahe.

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Hoeven said he spoke with acting Secretary of the Army Robert Speer and Vice President Mike Pence Tuesday.

The Army Corps issued a statement Wednesday saying it had initiated the steps outlined in President Donald Trump’s directive to complete the 1,172-mile crude oil pipeline but that no permit has been granted. A decision will be made “once a full review and analysis is completed” in accordance with the directive, Malcolm Frost, a spokesman, said in the statement.

U.S. Representative Kevin Cramer, a Republican from North Dakota, also said that the Army Corps had notified Congress of its plan to grant the easement. A spokesman for the Standing Rock Sioux tribe and others that have fought against its construction, said Tuesday that it will challenge any suspension of the federal environmental review that previously held up the pipeline. However, the Tribe lost a previous challenge in federal court when a judge approved the final eight miles of the route, noting that the proposed route does not go through tribal lands.

Navarro: Germany Takes Advantage of Undervalued Euro

Peter Navarro, the head of President Trump’s new National Trade Council, recently gave an interview to the Financial Times. The economist told the FT that Germany is using a “grossly undervalued” euro to “exploit” the U.S. The euro has weakened against the dollar over the past two years.

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He also told the FT that one of the administration’s trade priorities is unwinding and repatriating the international supply chains on which many U.S. multinational companies rely, “It does the American economy no long-term good to only keep the big box factories where we are now assembling ‘American’ products that are composed primarily of foreign components,” he said. “We need to manufacture those components in a robust domestic supply chain that will spur job and wage growth.”

So, as we discussed above, if the new, post-Brexit U.K. allows open access to workers from the European Union — and not allowing open borders and easy employment for other Europeans was the central plank and sticking point of the entire Leave campaign — it might be easier to make a deal with those former partner nations in the E.U. That would also raise the question, “what was all of this for?”

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If discarding the objective of banning open access proves too much of a barrier, the U.K. may opt to fall back on World Trade Organization rules which will mean tariffs and possibly other bureaucratic barriers such as quotas will be established between the U.K. and Europe. That will encourage firms to locate future investment inside the single market rather than in the U.K.

What Might A Future Deal Look Like?

In the meantime, and a final solution could be two years away, the U.K. benefits from a lower pound which will boost exports to the single market and rest of the world. There are a number of models the U.K. could agree with Europe on, long-term, to establish trade rules and coexist in the future.

Germany exports the third-most of its goods to Great Britain behind only the U.S. and France. Negotiators are already trying to solve the puzzle of how to let the U.K. leave the E.U. without Germany leaving all of that business on the Brexit table. Source: Adobe Stock/Luzetania.

The Remain camp’s favorite is the Norwegian model that gives tariff-free access to the single market in return for free movement of labor, acceptance of many of the E.U.’s laws and payment into the E.U. budget, although no say whatsoever, into how that money is spent. The movement clause is likely a dealbreaker for Leave hardliners. Read more

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