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Steel giants Tata Steel and thyssenkrupp have been talking about it since 2016, but now they have finally managed to reach an agreement to merge their European operations into a 50-50 joint-venture, according to the BBC.

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The merged business, to be called thyssenkrupp Tata Steel, will have annual sales of about £13 billion (U.S. $17 billion) and be able to produce 21 million tons of steel per year. The delays in reaching an agreement have in part been due to intense union lobbying to protect the two companies’ 48,000 workers.

The agreement is said to protect jobs with no compulsory redundancies for the next eight years, according to The Telegraph. While no compulsory redundancies have been agreed upon, the tie-up is expected to lead to about 4,000 voluntary redundancies as overlaps are eliminated between the three main hubs of the combined group – IJmuiden in the Netherlands, Duisburg in Germany and Port Talbot in South Wales — with the head office based in the Netherlands.

It is hoped the merged group will make cost savings of between £350-£440 million a year (approximately U.S. $520 million), although unions have secured an agreement for the first £200 million of operating profits to be reinvested back into the business. thyssenkrupp Tata Steel will be the second-largest steel producer in Europe after ArcelorMittal and it is hoped its size will help it compete against rising competition from Chinese imports (made worse by President Donald Trump’s recent imposition of a 25% import tariff on steel made in the European Union).

Heinrich Hiesinger, thyssenkrupp CEO, is quoted by the BBC as saying even prior to the U.S. import duty the two companies needed to consolidate and become more efficient because of increasing pressure from imports and an overcapacity within the industry. The loss of the two companies’ largest export market just makes matters worse.

The consequences for the combined group’s profitability in the event of Brexit have not, at least publicly, been discussed, probably because no one knows what the impact will be on moving products and people across borders post-Brexit. The only comment from the company came from Tata Steel UK CEO Bimlendra Jha who said it would be a “sorry state of affairs” when asked what a hard Brexit would mean.

Importantly, it gives the two companies an increased scale and opportunity to achieve some economies as a result.

Steel prices have picked up this year. Generally, Europe’s steelmakers are doing better, but they face considerable uncertainty as to the impact and duration of the current U.S.-European trade conflict, the level of increased Chinese imports and the possible impact of Brexit.

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All in all, the merger may prove timely; the challenges ahead are many.

The president’s assertion that trade wars are easy to win is — at this stage, at least — looking a little less certain than it was at the outset.

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Not surprisingly, exporters to the U.S. impacted by actual and proposed import tariffs are threatening to retaliate with tariffs of their own.

The Financial Times reports comments from global automakers warning that plans to impose tariffs on auto imports could raise prices of imported vehicles by as much as $6,000 per car and raise the cost of locally made cars, most of which include some foreign content.

The most alarmist comments are, not surprisingly, from the Alliance of Automobile Manufacturers, which is quoted as saying that buyers of imported vehicles would face an average $5,800 price rise from a 25% tariff.

“Nationwide, this tariff would hit American consumers with a tax of nearly $45bn, based on 2017 auto sales. Not included in this figure are costs from tariffs on auto components,” the industry group said.

In reality, such a significant price increase on imported cars would push the market in favor of domestic manufacturers. So, 2017 auto sales are probably not an exact benchmark; however, even the cost of the Honda Odyssey produced in the U.S. would rise by $1,500-$2,000 because of its imported content, the Financial Times reports.

Should, as seems likely, overseas markets impose retaliatory tariffs, this could have a significantly negative impact on U.S. auto exports, which totaled $99 billion last year.

Not surprisingly, figures vary widely as to the likely impact on U.S. vehicle production and the potential for loss of American jobs.

The Alliance of Automobile Manufacturers, citing data from the Peterson Institute, suggests a 25% tariff on imported vehicles and components would result in a 1.5% decline in U.S. vehicle production and a loss of 195,000 American jobs over a period of one to three years; if other countries retaliate, job losses could increase to 624,000.

Economists at Oxford Economics, on that other hand, said new U.S. auto tariffs would have a modest direct impact on the economy, suggesting a 0.1% reduction in GDP in 2019 and 0.2% in 2020, representing 100,000 job losses in the first year.

Either way, outside of political circles there seem to be few suggesting it will be good for jobs or auto production in the short to medium term. Should tariffs remain in place in the medium to long term, they would almost certainly boost prospects for domestic automakers and hasten the realignment of supply chains to domestic component suppliers.

So far, of course, it is unclear if the president really intends tariffs to be a long-term feature or rather a tactic he has deployed as part of a negotiating strategy to force changes in the terms of trade with America’s partners. Should the strategy be successful, it’s possible some tariffs will never be applied or could be rescinded within a matter of months. Businesses, of course, can only afford to sit and wait so long before they have to take action after the point at which tariffs are actually applied.

After the president’s unprecedented tariffs on steel and aluminum, few are doubting his resolve. Component suppliers throughout the supply chain are no doubt busy evaluating the implications for their business.

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Tariffs or no tariffs, that process alone will encourage the reshoring of component supplies over the coming years.

Supply chain vulnerability has taken on a whole new urgency.

President Donald Trump will not be the first commander-in-chief to find that waging wars on multiple fronts is a strategy with significant drawbacks.

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Taking on America’s NAFTA partners, Canada and Mexico, at the same time as the European Union is encouraging multiple retaliatory measures at a time when most people believe the real target was always intended to be China.

Many hold-up Caterpillar as the bellwether of U.S. industry, but if Caterpillar is the bellwether then Harley-Davidson must surely be the most iconic of American manufacturers. Its unique style of motorcycle is recognized and admired the world over and has come to epitomize the confident, free-spirited American dream.

So, when a firm like Harley-Davidson, which was repeatedly lauded by the president during his election campaign as an American icon and job creator, announces that it is going to have to shift production of its bikes overseas to avoid retaliatory tariffs imposed by the European Union, you have to ask if something is going a little wrong with the trade policy.

In a New York Times article, Harley-Davidson is quoted as saying the move “is not the company’s preference, but represents the only sustainable option to make its motorcycles accessible to customers in the E.U. and maintain a viable business in Europe.” Europe is the firm’s second-largest market after the U.S. However, as popular as its bikes are, the E.U.’s recently announced 31% import tariff — levied in retaliation for U.S. steel and aluminum import tariffs imposed by the president, the E.U. claimed — will, in the firm’s opinion, decimate sales.

Currently, Harley-Davidson incurs a 6% import tariff into the E.U., a cost the company appears comfortably able to absorb and still compete with domestic E.U. and Japanese motorcycle makers. But an increase to 31% would see on average a price increase of $2,200 per motorcycle, according to the article (although with the cheapest Sportster retailing for over $12,000 and top of the range models going for well over $20,000, that figure seems conservative).

Harley-Davidson agrees passing on the price increase to consumers is not viable. While no plans have been announced, the word is India may be the recipient of Milwaukee’s finest.

Not that India would be a significant market for Harley-Davidsons, as they have a heavy tax burden on larger bikes and you almost never see anything larger than the Royal Enfield 350 Bullit on the streets – the exception being the smart set in downtown Mumbai on their Ducatis and higher-end Japanese bikes (but that is still a small niche market).

Harley-Davidson sold 40,000 bikes in the E.U. last year and has vowed to absorb the tariff hike to preserve market share, at least for the remainder of this year, a move that could wipe out one-third of the company’s net profit. But Harley-Davidson does have options — it already manufactures in Brazil, Australia, India and Thailand, with India and Thailand becoming increasingly important assembly points.

These tariffs look set to hasten that trend, at least for sales outside of the U.S., as U.S. component costs rise due to import tariffs and retaliatory tariffs make U.S. manufactured goods less viable.

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Harley-Davidson is not alone in feeling the heat of such tariffs. Bourbon makers, orange juice producers and even playing card manufacturers are said to be in the same position.

But none are as quintessentially American as Harley-Davidson.

The U.S. Department of Commerce announced Tuesday that it had made a preliminary affirmative determination in its countervailing duty investigation of cast iron soil pipe imports from China.

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The department calculated countervailing subsidies ranging from 13.11-111.20%.

The 13.11% rate was applied to Yuncheng Jiangxian Economic Development Zone HengTong Casting Co. Ltd. The 111.20% rate was applied to Kingway Pipe Co., Ltd. “based on adverse facts available.”

The 13.11% benchmark was also applied to all other Chinese producers and exporters.

The petitioner in the case is the Cast Iron Soil Pipe Institute, based in Mundelein, Illinois. According to the Department of Commerce, imports of cast iron soil pipe from China in 2017 were valued at $11.5 million.

According to Census Bureau data included in the Department of Commerce fact sheet for the investigation, the U.S. imported 13,634 metric tons (mt) of cast iron soil pipe from China in 2015. That total jumped to 20,147 mt in 2016, but fell back down to 15,695 mt in 2017.

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The department’s final determination in the case is expected by Nov. 8, 2018. Should the department again rule in the affirmative, the case would then move to the U.S. International Trade Commission, which would be scheduled to make its final determination on Dec. 24, 2018.

The diverse drivers of expanding renewable energy and demand for liquefied natural gas (LNG) are in turn stimulating demand for stainless steels and aluminum.

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Perversely, the growing competitiveness of renewable energy is making the use of natural gas less economic for baseload power generation. However, according to a Bloomberg report, the rise of variable renewable energy sources is expanding LNG’s role in providing flexible power generation to balance the electricity grid in many major economies.

The use of LNG in the industrial and transport sectors is also pushing up gas demand, particularly in Asia where environmental concerns are finally having an impact on policy.

Markets like South Korea, Japan, Europe and particularly China are increasing LNG consumption as major new LNG facilities come on-stream and costs fall. According to global data, global LNG liquefaction capacity is set to expand by 117% over the next four years from 419 million tons per annum in 2018 to 907 million tons per annum by 2022. Not surprisingly, with its abundant natural gas supplies arising from the shale market, North America leads in terms of planned and announced capacity growth, contributing some 82% of the total, the news release reports.

Source: GlobalData

All this LNG requires both liquefaction and transport, driving demand for stainless steels, nickel alloys and aluminum. Indeed, the LNG market has proved one of the bright spots for stainless steel and nickel alloys badly hit by a collapse in investment in the oil industry following several years of declining crude oil prices.

The market now faces the prospect of renewed interest from the oil sector following substantial rises in the crude price over the last year and ongoing long-term investment in LNG facilities, both onshore and for marine transport.

Although there are likely to be ebbs and flows in LNG demand — and, therefore, investment over the coming decade — the consensus remains that the market will continue to grow as domestic production of natural gas in southeast Asia and Europe declines and import demand, therefore, rises.

Source: Bloomberg

Liquefaction facilities at the point of export and decompression facilities at the market of destination are contributing to demand for 5000 series aluminum alloys, particularly in the U.S., Australia and the Middle East.

While the construction of LNG carriers, which is dominated by the shipyards in South Korea and China, is creating demand for high-quality stainless steels and special nickel alloys, like Invar.

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LNG expansion has quietly played its part in the gradual rise in nickel prices over the last two years, despite most of the attention being taken by the electric vehicle battery market and renewables.

Steel and aluminum are getting all the attention these days — and perhaps rightfully so, given the international row over the U.S.’s steel and aluminum tariffs and the subsequent crossfire of counter-tariffs.

But copper, often referred to as “Dr. Copper” for its usefulness as an overall indicator of economic health, is also undergoing important developments.

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The LME copper price, however, has been on the downswing for much of June.

Three-month copper reached $7,268/mt as of June 11, but it has been all downhill from there. In the ensuing nearly two weeks, the LME three-month price has plunged 6.4% to $6,801/mt, according to MetalMiner IndX data.

The price, however, seemed to be begin to stabilize last week after closing at a one-month low.

Source: LME

Chinese Prices

Similarly, Chinese prices have dropped in recent weeks.

From June 11-24, China primary cash copper dropped from 53,840 yuan/mt ($8,226.38) to 51,470 yuan/mt ($7864.26), good for a 4.4% decline, according to MetalMiner IndX data.

Labor Talks in Chile

As is always the case with copper, labor negotiations in Chile, the world’s top copper producer, play a key role in the metal’s price.

Earlier this month, in an ongoing dispute at BHP’s Escondida mine, the company responded to a contract proposal from its unionized workers at the mine, Reuters reported.

“The company hopes … to reach a mutually beneficial agreement, and to touch on issues like the bonus and salary increases, which were not addressed in our response,” BHP said in a statement, according to the Reuters report. Per the report, the company must present a final contract offer by July 24.

In the same vein, Reuters reported Monday that workers at Codelco’s Chuquicamata mine are threatening to strike. The mine produced approximately 19% of Codelco’s total output in 2017, according to the report. Again, a strike there would certainly put support under the copper price.

U.S. Dollar

Meanwhile, the U.S. dollar, which is inversely correlated with base metals like copper, picked up steam from June 7-19, in line with the metal’s drop.

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However, the U.S. dollar index has tracked back in recent days, dropping from 95.50 as of Thursday to 94.30 late Monday afternoon.

If the aim of President Trump’s 10% import tariff on aluminum was to impact China or to encourage the reshoring of primary aluminum production into the U.S., it has, at least so far, been at best only a partial success.

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Just last month, Alcoa announced it will permanently close one of four potlines at the fully curtailed facility in Wenatchee, Washington, preferring to take a $62.4 million payment to the local energy provider Chelan Public Utility District (PUD) on the chin than invest in restarting the facility.

According to Alcoa, the potline planned for closure, Line 3, with a capacity of 38,000 metric tons per year, has not operated since 2001. Three other lines at the Wenatchee site, totaling some 146,000 metric tons per year, have been curtailed since December 2015. Another line at the Wenatchee site was permanently closed in 2004, underlining that not even significantly higher aluminum prices are enough to justify restarting.

Down in southwest Indiana, however, the firm is restarting its Warwick smelter, closed in March 2016 due to low aluminum prices. A local source advised Alcoa would reopen three of five smelter lines and add about 275 jobs at the complex, where its smelter feeds a rolling mill making aluminum for food and beverage packaging.

It would seem the U.S. will never (or not for years) be able to replace the 5 million tons it imports. Rather than generate American jobs, it will simply mean American consumers will have to pay more.

The CME spot contract tracking the U.S. Midwest physical aluminum premium is currently at 21.25 cents per pound ($468 per metric ton), Reuters reports. Now, admittedly there is a Russian premium in that premium, reflecting the sanctions applied to America’s second-largest supplier of primary aluminum, Rusal. But the Russian disruption is also being priced into higher premiums everywhere else and Japanese buyers are only paying a premium of just $160 per ton for the next quarter, the news source reports.

Source: Reuters

Meanwhile, Australia and Argentina, bizarrely exempt from the tariffs, will no doubt ship all they can up to their quota limits. Last year’s 100,000 tons and 250,000 tons, however, will not make much of a dent on Canada’s 2.5 million tons of metal supplied into the U.S. market.

Back to our opening question — if the intention on the other hand was to impact China, the strategy looks like it will have even less impact.

China exports no primary aluminum to the U.S. and precious little semi-finished metal following previous anti-dumping and tariff actions. Sadly, an opportunity for multilateral action at the G7 summit in Canada was missed, as the summit imploded amid infighting and disagreement.

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Multilateral action, Reuters proposes, had some effect in forcing China to rationalize its steel industry. A similar approach may bear fruit for aluminum if multilateral action were a strategy the U.S. embraced, but it does not.

It may seem like we are on the brink of a trade war Armageddon.

Certainly, stock markets have reacted negatively to the threat of a trade war between the world’s two largest economies, the U.S. and China.

But the reality is we are in the midst of a crude, clumsy and haphazard negotiating process — one that ultimately will be settled.

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The process of threat, bluster and bullying is typical of a property mogul’s approach. It likely works well in that market, but is anathema to diplomats and industrialists who prefer a more nuanced, thoughtful and largely (although not exclusively) collaborative approach.

Unconventional as President Donald Trump’s approach is (though it does not mean it may not be successful), if just seen from the current stage of the “negotiations” it looks pretty appalling.

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The U.S. Department of Commerce (DOC) issued an affirmative preliminary ruling this week in its anti-dumping investigation of imports of common alloy aluminum sheet.

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“The association and its member companies that produce common alloy aluminum sheet are very pleased with this finding that again underscores the Commerce Department’s commitment to combatting unfair trade,” said Heidi Brock, president and CEO of the Aluminum Association, in a prepared statement. “For too long, the Government of China has been unfairly and illegally subsidizing its aluminum industry, leading to massive market overcapacity and challenging producers across the value chain.  Today’s action by the Commerce Department is exactly the kind of strong, targeted trade enforcement we need in support of the rules-based global trading system.”

The DOC announced in November that it would self-initiate anti-dumping and countervailing duty investigations of common alloy aluminum sheet imports from China (typically, cases are initiated after a domestic producer files a petition with the Department of Commerce). The move marked the first self-initiated investigation by the DOC in over 25 years.

The DOC calculated preliminary antidumping margins of 167.16% of the value of the imported aluminum sheet.

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A final determination from the DOC in the anti-dumping probe is expected in late October or early November.

Even Glencore, with all its experience, contacts and resources, is finding the Democratic Republic of the Congo (DRC) a challenging place to do business.

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But this month Glencore has made significant progress in getting its DRC house in order.

Firstly, the miner reached a settlement with the state mining company, Gecamines, to wipe off more than $5.6 billion of debt the mines had been carrying as development costs. Glencore will not actually pay over that money, but by forgiving the debt servicing, costs are not accounted for before profits and dividends are agreed, effectively increasing the amount of money available for dividends to the DRC state.

Secondly, Glencore has reached an agreement with its erstwhile partner in the DRC Dan Gertler, a shady character on the U.S. sanctions list who is said to be a close friend of corrupt DRC President Joseph Kabila.

Glencore paid Gertler $534 million for his shares in Katanga and Mutanda last year. The company was obliged to pay him royalties from the mines, which he had previously acquired from Gecamines, the Financial Times reports. Gertler launched legal action against Glencore earlier this year when the firm failed to pay agreed royalties; he subsequently served freezing orders on Mutanda and Katanga mines in the DRC.

According to the Financial Times, when Glencore established that Gertler had a watertight contract, it concluded it was cheaper to pay the royalties and agreed to pay €21 million in royalties from the Mutanda copper mine in DRC in 2018 and €16.5 million each quarter from the Kamoto Copper Company, starting in 2019. Note the figures in Euros — because Gertler is on the U.S. sanctions list, they have to avoid U.S. Dollar payments and ensure no U.S. citizens are in the chain to meet compliance requirements.

The Kabila regime may well be partial recipients of these royalties — Gertler clearly isn’t saying — but his original “ownership” of the mines probably wouldn’t have come without strings attached. Also, it’s not that keeping the payments in Euros completely protects Glencore. The firm is still facing a bribery probe with the U.K.’s serious fraud office over its dealings with Gertler.

The Financial Times postulates Glencore needed to reach a settlement on its various DRC issues, as Chinese mining firms have been very active buying into DRC assets and are said to be interested in picking up what they could if Glencore were to lose its assets (either in court or via a state grab).

Meanwhile, Glencore continues to tussle with the DRC government over a new mining code and to fight a rear-guard action with another Mutanda shareholder.

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As we say, the DRC is a challenging place to do business, but Glencore is knocking down the barriers gradually and making progress.