South Africa

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While the Department of Commerce’s release of its Section 232 report on steel and aluminum stole most of the headlines last Friday, the United States International Trade Commission (USITC) voted that imports of carbon and alloy steel wire rod from South Africa and Ukraine pose harm to domestic industry.

According to the USITC release, the U.S. Department of Commerce (Commerce) has determined the products “are sold in the United States at less than fair value.”

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The products included in the order are “certain hot-rolled products of carbon steel and alloy steel, in coils, of approximately round cross section, less than 19.00 mm in actual solid cross-sectional diameter.”

The vote in the case was unanimous, with Chairman Rhonda K. Schmidtlein, Vice Chairman David S. Johanson, and Commissioners Irving A. Williamson and Meredith M. Broadbent all voting in the affirmative.

Now, the Department of Commerce will issue antidumping duty orders for the imports from the two countries.

Imports of the two products from the countries in question were valued at $67.5 million in 2016, according to a USITC fact sheet. The domestic petitioners in the case were: Charter Steel, of Saukville, Wis.; Gerdau Ameristeel US Inc., of Tampa, Fla.; Keystone Consolidated Industries, Inc., of Peoria, Ill.; and Nucor Corporation, of Charlotte, N.C.

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According to the announcement, the USITC’s report on the investigation will be made available online March 22 at the following link:

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This morning in metals news, a law proposed in the U.K. could have a negative impact on the domestic steel industry as the country moves forward with Brexit talks, steel production in the U.S. Great Lakes region has jumped to start the year, four firms have submitted resolution plans for Electrosteel Steels and the U.S. Department of Commerce announced affirmative final determinations in the antidumping duty investigations of imports of carbon and alloy steel wire rod from South Africa and Ukraine.

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Union Warns About Proposed U.K. Law

A U.K. bill that aims to institute trading provisions for after the U.K.’s exit from the European Union could prove to offer fewer protections than existing E.U. tariffs, members of the Community trade union warned, according to the BBC.

Community union members wrote to Chancellor Philip Hammond, warning that the Customs Bill would not prove as strong as E.U. safeguards against antidumping already in place.

In the letter, quoted by the BBC, the members wrote: “When the UK leaves the European Union we will of course need to set up our own way of preventing unfair trade or dumping of goods. We understand this Customs Bill is putting down the framework for that to happen. But as it is currently written, we fear it will not be effective.”

Steel Production Up in the Great Lakes

Steel production has gotten off to a fast start in the U.S.’s Great Lakes region, the Northwest Indiana Times reported.

Production rose to 640,000 tons for the first week of 2018, constituting a 7.7% jump, the paper reported. Steel mills in the Great Lakes produced 594,000 tons of steel the previous week.

Companies Bid for Debt-Laden Electrosteel

Tata Steel, Vedanta and two other bidders are vying for the acquisition of Electrosteel Steels, which is currently involved in an insolvency resolution process, the Economic Times reported.

Electrosteel was one of 12 companies sent to insolvency proceedings by the Reserve Bank of India, the Economic Times reported.

DOC Makes Affirmative Determination on Wire Rod Imports

The U.S. Department of Commerce announced this morning that it had made affirmative determinations in its antidumping investigation of carbon and alloy steel wire rod from South Africa and Ukraine.

According to a department release, it determined that exporters from South Africa and Ukraine sold wire rod in the United States at 135.46-142.26% and 34.98-44.03% less than fair value, respectively.

The petitioners in the case are companies from four states: Gerdau Ameristeel US Inc. (Florida), Nucor Corporation (North Carolina), Keystone Consolidated Industries (Texas) and Charter Steel (Wisconsin).

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It is not unusual for the wrong thing to be done for the right reasons.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

Whether it is the rule of unexpected consequences or blind adherence to doctrine, there are countless historical examples of individuals, companies and governments that made decisions, claiming the moral high ground, which have resulted in damage or impoverishment to those the decision was intended to assist.

The mining sector and even some unions have reacted angrily to South Africa Minister of Mining Mosebenzi Zwane’s announcement last week at a presentation in Pretoria of a new mining charter intended to further extend South Africa’s Black Economic Empowerment (BEE) rules.

The charter sets out a number of significant changes to the rules governing ownership of South Africa’s vast mining industry.

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Here’s What Happened

  • All quiet on the precious-metals front this month, as our Global Precious Metals MMI held pat from May to June at a reading of 84.
  • Since we tend to keep a closer eye on the platinum group metals (PGMs) due to their automotive applications, the U.S. platinum price tracked by the MetalMiner IndX posted only a negligible gain, while the U.S. palladium price suffered only a negligible loss…reflected directly in the wash that was the sub-index’s June performance.
  • Interestingly, gold has been getting hot as of late. More on that below.

What’s Going On in the Background?

  • Although the Global Precious Metals MMI did not reflect it in the May-to-June time period, the U.S. gold price increase after June 1 has gotten some heads turning. As my colleague and new MetalMiner Editor Fouad Egbaria reported earlier this week, “gold neared its year-to-date high on Tuesday,” according to Reuters. “The rise comes in a climate of political uncertainty, with an election in the United Kingdom, former FBI Director James Comey’s testimony before the Senate Intelligence Committee on Thursday and a European Central Bank meeting this week,” Egbaria noted.
  • Back to platinum. As a reflection of the metal’s dawdling short-term pricing, South African producer Lonmin has been struggling, so much so that Reuters reported earlier this week that the company is “pulling every lever to try to restore confidence in its ailing business, including reopening a major shaft and expanding its biggest operation,” according to Lonmin’s CEO. Low prices and skyrocketing costs have reportedly conspired to present the company with a cash problem over the past near-decade.

What Metal Buyers Should Look Out For

  • Platinum specifically has had a low-price problem this year — but that’s obviously less of a problem if you’re purchasing metal. While we’re unsure of when prices will swing back up, mainly because output cuts in South Africa and elsewhere have seemingly not helped, it may be hard to discount current windows for smaller spot buys.

Exact Prices of the Key Movers and Shakers

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Palladium prices experienced an 11 percent increase since the start of February. Supply concerns due to the South African platinum miners’ strike might have helped move prices higher. The move seems to have great momentum, but how much higher can prices go? The precious and platinum-group metal (PGM) has been trading sideways since the end of 2012….

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Every single gold, silver, platinum and palladium price point tracked by MetalMiner’s monthly Global Precious Metals MMI® rose over the month of February, pushing the index to a value of 96 for March’s reading, an increase of 5.5 percent from 91 in February.

Compare with last month’s trends – here’s our free February MMI® Report.

The precious metal price index is now in a steep uptrend, relative to the last time it bounced back in November 2013:

Global-Precious-Metals_Price Index Chart

However, as far as a few metals are concerned – gold and platinum, for example – we’re not sure how sustainable their rises really are. Let’s begin with gold.

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The platinum price has been rising for the last 12 months, as this graph from producer Johnson Matthey shows, even as gold – with which it is often linked – had been steadily falling for most of last year.

platinum price chart

Source: Johnson Matthey

Platinum and its sister metal palladium have certainly benefited from rising automotive production, stimulating demand from the catalyst market, but platinum has also seen support from unrest in South Africa’s mining sector.

FREE Download: The Monthly MMI® Report – covering the Precious markets.

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The platinum market, to borrow a soccer phrase, is a game of two halves.

The platinum price has fallen steadily over the last 12 months, as the following graph from Johnson Matthey shows, but this coming year the future may not be as gloomy.

platinum prices johnson matthey chart

Source: Johnson Matthey

Platinum has struggled from the double-hangover of a falling gold price and excess liquidity created by above-ground stocks. The price has been dragged down like gold because of the metal’s role as a financial investment product, but a tightening supply market heralds a decoupling and rising prices this year and in 2015, according to HSBC in its recent Quarterly Metals & Mining Review.

FREE Download: The Monthly MMI® Report – covering the Precious markets.

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electricity plant steam

Should a country like South Africa really be producing an energy-intensive product like aluminum when the country’s power supply is so constrained?

BHP Billiton (LON:BHP) is importing bauxite from the firm’s Australian mines, taking advantage of the cheap power afforded by Eskom’s consumers’ subsidized supply, and then mostly re-exporting the finished ingot.

Good deal for South Africa?

Various government spokesmen have defended the deal, saying local aluminum consumers rely on the domestic smelters for supply and that the country benefits hugely from BHP’s export revenues, but how true is that?

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In the murky world of South African politics and big business, it is tough to get through to the facts.

Critics have argued for years that BHP Billiton (LON:BLT)’s power deal with Eskom is a sweet deal for the firm and a disaster for the country. Brokered by Mick Davis (subsequently of Xstrata fame, but then Eskom’s treasurer), and later by Derek Keys, the National Party’s finance minister, Gencor (later in its guise as BHP) built the Richards Bay smelters to take advantage of a surplus of electricity back in the 90s that the firm was willing to sell cheap.

Since the middle of the last decade, though, Eskom has been in a near-permanent state of crisis over electricity supply, suffering widespread blackouts in 2008 and continual horse-trading with big industrial users, some of whom are paid to reduce consumption in order to keep the lights on.

In such a situation, BHP Billiton’s power rate, reported by one source at R0.09/Kwhr (US$0.01/Kwhr), appears untenably low compared to residential users at R1.00/Kwhr (US$0.09/Kwhr) – still cheap by rest-of-world standards, but not when compared to the country’s average income levels.

FREE Download: The Monthly MMI® Report – covering the Aluminum market.

Questions are being asked, not by politicians, unfortunately, but by South Africa’s press among others as to why BHP is being subsidized when the rest of the raw material processing industry is not, or not to the same extent.

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