Japan

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This morning in metals news, Canadian Prime Minister Justin Trudeau is confident in the ability to reach a North American Free Trade Agreement (NAFTA) deal, West Coast ports are preparing for the imposition of the Trump administration’s steel tariff, and Tokyo and Seoul are seeking exemptions from the tariffs.

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After Winning Tariff Exemptions, Canada Aims to Navigate Toward NAFTA Deal

Canadian Prime Minister is touring his country’s steel and aluminum country on the heels of exemptions gained from the newly approved U.S. tariffs.

Despite that victory, another big policy items remains on the docket: renegotiating NAFTA.

“The president has said as long as there’s a Nafta there won’t be any tariffs. We have a Nafta now, we will have a Nafta once we improve it. That sounds to me like we’re pretty good on not getting tariffs,” Trudeau said Wednesday in an interview with Bloomberg Television’s Michael McKee at a steel mill in Regina, Saskatchewan. “I’m very optimistic we’re going to be able to get to a win-win-win.”

Ports Prepare for Tariffs

West Coast ports, like the Port of Vancouver, are preparing for the impact of the U.S. tariffs set to go into effect March 23.

Abbi Russell, communications manager for the Port of Vancouver in Washington state, told NPR steel is tied to approximately a third of the port’s revenue.

The port is the second-largest importer of steel products on the West Coast, according to the report.

Japan, South Korea Angling for Exemptions

After Canada and Mexico secured temporary exemptions from the steel and aluminum tariffs announced by the U.S., other countries are seeking exemptions of their own.

Among those, according to the Nikkei Asian Review, are Japan and South Korea. Japanese Deputy Prime Minister Taro Aso called the tariffs “very regrettable” during a news conference earlier this month, according to the report, and Paik Un-gyu, South Korea’s minister of trade and industry said, during a March 9 meeting with steelmakers, “I am sorry that the U.S. government made this decision.”

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According to the report, the South Korean minister added the country plans to seek exemptions from the steel tariff and is also considering taking a case to the World Trade Organization (WTO) with other countries.

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This morning in metals news, Japan’s steelmakers are on a hot run (despite the bad press of the Kobe Steel quality data falsification scandal), U.S. Steel reported fourth-quarter 2017 net earnings of $159 million and Glencore said production in 2017 was down for most commodities.

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Japanese Steelmakers Boast Surge in Profits

Despite the dark cloud hovering over Kobe Steel on the heels of its data falsification scandal, it’s been a strong nine months for Japan’s steelmakers.

According to Reuters, steelmakers in the country reported a jump in nine-month earnings, led by Nippon Steel & Sumitomo Metal Corp.

U.S. Steel Reports 4Q Earnings

U.S. Steel reported full-year 2017 net earnings of $387 million, or $2.19 per diluted share, during its quarterly earnings call Thursday morning.

Adjusted net earnings were $341 million, or $1.94 per diluted share, compared to a full-year 2016 net loss of $440 million, or $2.81 per diluted share. Adjusted net loss for 2016 was $250 million, or $1.60 per diluted share.

Fourth-quarter 2017 net earnings were $159 million, or $0.90 per diluted share. Adjusted net earnings for the fourth quarter 2017 were $136 million, or $0.76 per diluted share, compared to a fourth quarter 2016 net loss of $105 million, or $0.61 per diluted share. Fourth quarter 2016 adjusted net earnings were $47 million, or $0.27 per diluted share.

Glencore Says 2017 Production of Most Commodities Dropped

According to miner Glencore, 2017 was a down year for production of most commodities, per a MarketWatch report.

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Copper production for the 2017 calendar year fell 8%, Glencore said, although fourth-quarter production was up 20% from the previous quarter.

The Renewables 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.”

Actual Metal Prices and Trends

U.S. steel plate rose 4.0% to $721/short ton and U.S. grain-oriented electrical steel (GOES) coil rose 3.8% to $2,593. Korean steel plate also increased, jumping 8.9% to $620.62/metric ton.

Chinese steel plate dropped 0.2% to $683.63/mt. Japanese steel plate posted a slight move in the other direction, rising 0.3% to $712.68/mt.

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This morning in metals news, imports of steel into the U.S. are up 18% through the first 11 months of the year, Rio Tinto completed a $1.5 billion buyback of its shares, and Japan’s biggest copper smelter expects copper price to continue to rise in 2018 and beyond.

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Imports Up 18% Through November

Imports of steel in the U.S. are up 18% through the first 11 months of the year, according to preliminary Census Bureau data cited by the American Iron and Steel Institute (AISI).

The U.S. imported a total of 2,718,000 net tons (NT) of steel in November 2017, including 2,126,000 net tons (NT) of finished steel (down 14.6% and 16.8, respectively, versus October final data).

Total and finished steel imports through 11 months are 35,632,000 and 27,637,000 net tons (NT), up 17.5% and 14.3%, respectively, versus the same period in 2016. 

Rio Tinto Finishes Major Buyback

Mining firm Rio Tinto said it had completed a $1.5 billion share buyback, with more to come, according to a Nasdaq report.

According to the report, Rio Tinto said today that it will commence a further $1.925 billion on-market buyback of Rio Tinto plc shares, to be completed no later than Dec. 31, 2018.

Copper on the Rise

According to a Japanese copper smelter, 2018 offers a healthy diagnosis for “Dr. Copper.”

The largest copper smelter in Japan, Pan Pacific, says copper prices will continue to rise next year, according to a Reuters report.

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Executive officer Satoshi Arai said the firm expects copper prices to average $7,280 a ton in 2018 and $7,720 a ton in 2019 (compared with $6,100 a ton this year).

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This morning in metals news, the Japanese steel industry’s output is expected to grow next year, lenders have a new plan for Essar Steel, and China’s zinc and copper outputs in November were at their highest since late 2014.

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Japanese Steel Sector Set to Ramp Up Output

According to the Japan Iron and Steel Federation, the country can expect to see increased crude steel output in 2018 and 2019.

According to Reuters, Kosei Shindo, the chairman of the Japan Iron and Steel Federation, said “I hope that crude steel output (for next business year) would exceed 10.6 million tonnes.”

A New Plan for Essar Steel

In its insolvency proceedings, lenders to Essar Steel have reduced the time allowed to resolve the firm’s default, according to a report by the Economic Times.

The “single stage” process, according to the report, means any interested bidder has to meet both the conditions to be considered by the bankers, according to the report.

China Zinc, Copper Output Up

China’s output of copper and zinc in November was at its highest since December 2014, according to Reuters.

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According to the report, China’s refined copper output increased 9.8% to 786,000 tons, while zinc production rose 7.5% to 603,000 tons.

Besides bringing back some cheer to the sector, the latest report by industry monitoring body World Steel Association (WSA) on crude steel production reveals an interesting story.

World crude steel production soared in October, thanks to higher output in China, the U.S., India and Japan.

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While production in the U.S. zoomed by 12% year-over-year in October, China manufactured 72.4 million tons (MT) in the same month, a 6.1% year-over-year increase and 10 times more than the U.S. did that month.

India, on the other hand, produced 8.6 MT of crude steel in October, up by 5.3% to 8.6 MT.

Clearly, the October cheer is positive news, in the sense that the steel sector is making a comeback. The WSA tracks steelmakers in 66 countries globally, representing about 85% of total steel production, and has said in this report that world steel production increased 5.9% year-over-year to 145.3 MT in October.

The China steel story, incidentally, produced nearly half of the world’s steel in October, which indicates a revival of sorts in the growth story there, too.

According to Moneycontrol.com, the downside was reported from Japan, the world’s second largest crude steel producing country. It registered a 1% contraction in output at 8.971 MT in October 2017, compared to 9.060 MT during the same month last year.

During the first 10 months of 2017, Japan’s steel output dropped from 87.442 MT to 87.239 MT, a 0.2% dip compared to the same period last year.

There’s a keen tussle on between the four steel giants (the U.S., China, Japan and India), with the latter already the world leader in stainless steel production and the third largest crude steel producer.

For example, India had overtaken Japan to become the second-largest steel producer in the world after China in 2016, according to the International Stainless Steel Forum. The country’s stainless steel production had gone up to 3.32 MT for 2016, approximately 9% more than the 3.0 MT achieved in 2015. Read more

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This morning in metals news, the Indian government says the country’s steel firms can meet the railway industry’s needs, copper hits a one-month high and the Japan Iron and Steel Federation says it doesn’t expect a decline in automobile steel sheet demand.

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Domestic Firms Can Meet Railway Demand, Indian Government Says

According to an Indian government panel, domestic steel companies like Jindal Steel and Power Limited can meet the railways’ demand if given an opportunity, Reuters reported.

According to Reuters, the state-run Steel Authority of India Ltd (SAIL) has struggled to supply the steel as India looks to expand its rail network, the fourth-largest rail network in the world.

Copper Hits One-Month High

Copper rose to a one-month high on Monday, Reuters reported, topping $7,000 in the process.
The jump comes “amid signs of resilience in China’s industrial sector,” Reuters reported.

Demand for Automotive Steel: Japan Iron and Steel Federation

Despite news that Nissan and Subaru did not comply with inspection procedures for decades, the top official of the Japan Iron and Steel Federation said they do not expect a decline in demand for automobile steel sheets.

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This morning in metals news, U.S. Steel issued a press release in response to Chicago Mayor Rahm Emanuel’s comments regarding the company’s dumping of toxic materials into Lake Michigan, Japanese steel output was down in October and Glencore‘s head of copper stepped down after an internal review.

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U.S. Steel Responds to Mayor Emanuel

Following Chicago Mayor Rahm Emanuel’s comments Sunday regarding U.S. Steel’s dumping of toxic chromium into Lake Michigan — including plans to sue the company — the company issued a response.

“U. S. Steel is committed to complying with all environmental standards, to ensuring the safety of our employees and our neighbors in the communities in which we live and operate, and to safeguarding our shared environment.  We take that responsibility very seriously and recognize this as a critical aspect of our role as a member of each community in which we operate.  We also take every incident seriously.  We have worked with appropriate government agencies in the past as effectively as possible and continue those efforts as part of our work to continuously improve our environmental compliance processes.”

“With regard to the October 26 operating excursion at our Midwest Plant, we want to reiterate the event did not pose any danger to water supply or human health, and we promptly communicated the issue to the Indiana Department of Environmental Management (IDEM).”

The City of Chicago plans to sue to company after the latest dumping incident in October. According to the Chicago Sun-Times, city attorneys began proceedings required by the Clean Water Act in order to file suit against U.S. Steel.

The company also had a chemical spill at its Portage, Indiana facility in April. Hexavalent chromium was released into a waterway about 100 yards from Lake Michigan.

Japanese Steel Output Down

According to Reuters, Japan’s crude steel output fell 1% in October from a year earlier to 8.97 million tons.

Temporary halting of production at some facilities contributed to the drop, according to the report.

Glencore Copper Head Steps Down

Glencore’s head of copper has stepped down on the heels of an internal review, Bloomberg reported.

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Aristotelis Mistakidis, the copper head, and executives Liam Gallagher and Tim Henderson offered to step down after an internal review found “material weaknesses” in financial reporting controls at the firm’s Katanga Mining Ltd. operation in the Democratic Republic of Congo.

The internal review found that the com,any overstated copper output in 2014 by about 7,900 metric tons and failed to disclose additional compensation paid to named executive officers, according to the report.

Who would have thought it — a major Japanese corporation caught falsifying inspection and quality data?

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Japanese standards have come to be accepted as a byword for quality in the manufacturing industry — but it would seem in a world where even Germany’s premier automotive giants can cheat and deliberately mislead customers, so can the Japanese.

Who can you trust, consumers down the supply chain must be asking, if even Japanese and German manufacturers are prepared to lie and falsify quality assurance data?

The latest scandal to rock Japan’s manufacturing sector is an admission by the country’s third-largest steel producer, Kobe Steel, that for potentially up to 10 years they have been falsifying quality data.

As these goods have gone into aerospace, construction, automotive and transport applications, the only saving grace seems to be that checks so far suggest the material supplied has met the standards expected.

But as the investigation is in its early stages, there is plenty of scope for worse scenarios to unfold.

Some 20,000 tons of metals delivered to about 200 customers are said to have been affected this year, with not just steel but also aluminum and copper goods involved. The Financial Times reported products affected included: 19,300 tons of aluminum plate and extrusions; 2,200 tons of copper strip and pipe; and 19,400 cast and forged aluminum parts for customers such as Boeing, Toyota, Honda, Mazda, Mitsubishi Heavy Industries – maker of regional jets and the H-2A satellite launch vehicles.

Boeing issued a statement saying, “Nothing in our review to date leads us to conclude that this issue presents a safety concern, and we will continue to work diligently with our suppliers to complete our investigation.” That, however, hasn’t saved the share price from taking a pummeling.

Kobe shares are down over 40% this week. The cost of protecting the company’s bonds has quadrupled over the same period.

Source Financial Times

The company is desperately trying to get a handle on how widely and for how long the falsification of paperwork has been going on, and whether it also extends to Kobelco, the group’s maker of construction equipment.

Unfortunately for Japan Inc, Kobe is not alone in its misdemeanors.

Two weeks ago, carmaker Nissan recalled nearly 1.2 milliom vehicles that had been certified by unauthorized technicians. Last year, Mitsubishi Motors admitted to having overstated mileage figures for eight vehicles in its range.

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Is it too much to expect major corporations to tell the truth? They certainly trade on their brand image as reliable and high-quality manufacturers.

Such failures make something of a mockery of Western firms’ often disparaging comments about the quality of emerging-market competitors when their own systems and procedures appear little better.

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Before you head into the weekend, check out some of the stories that went up this week on MetalMiner:

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  • The London Metal Exchange (LME) is an institution steeped in tradition — but even the most tradition-rich entities have to change, eventually. Our Stuart Burns wrote about the LME and how it is changing (or, in some cases, staying the same).
  • The electric car industry continues to grow, but the move toward electric in China likely represents the biggest such move by a single nation to date.
  • Our Irene Martinez Canorea checked in on tin and other base metals. In short, many that boomed in August have come back down a bit this month.
  • Burns wrote about China Zhongwang and its ongoing efforts to build up its presence on the global stage.
  • The U.S. Department of Commerce opened countervailing duty and antidumping investigations into titanium sponge imports from Japan and Kazakhstan.
  • Meanwhile, the U.S. International Trade Commission, voted to uphold antidumping orders in a five-year sunset review related to CASSLP pipe from Japan and Romania.
  • The third round of North American Free Trade Agreement renegotiations kicks off tomorrow in Ottawa. United States Trade Representative Robert Lighthizer, during a question-and-answer session earlier this week, touched on the negotiations and what the U.S. is hoping to accomplish.
  • United Steelworkers issued a statement calling for the Trump administration to act vis-a-vis its ongoing Section 232 probe related to steel imports.
  • It’s been talked about for more than a year, but Tata Steel and Thyssenkrupp finally agreed to merge their European operations this week.

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