Steel

ronniechua/Adobe Stock

On Monday, the U.S. announced an agreement in principle regarding aspects of the North American Free Trade Agreement (NAFTA), albeit in a bilateral sense, as Canada remained on the sidelines of the talks between the U.S. and Mexico.

Need buying strategies for steel? Try two free months of MetalMiner’s Outlook

“The United States and Mexico have reached a preliminary agreement in principle, subject to finalization and implementation, to update the 24-year-old NAFTA with modern provisions representing a 21st century, high-standard agreement,” the Office of the United States Trade Representative (USTR) said in a release. “The updated agreement will support mutually beneficial trade leading to freer markets, fairer trade, and robust economic growth in North America.”

Talks to modernize the 24-year-old trilateral trade agreement began in August 2017 and underwent numerous rounds, encountering challenges along the way.

Read more

Turkey may not be a big cheese in many ways, but its currency has taken a hammering following President Donald Trump’s threats of doubling tariffs and dire sanctions against a select few individuals close to authoritarian President Recep Tayyip Erdoğan.

But apart from the impact on one or two other emerging-market currencies, like South Africa’s, the rest of the world has barely noticed.

In one industry, however, Turkey is a sizable player: steel.

Read more

gui yong nian/Adobe Stock

This morning in metals news, the Mexican steel industry has been invited to visit Washington to talk about the possibility of a steel quota (instead of the the 25% tariff), Tata Steel’s UK arm has posted losses this past year and China says trade talks this week were “constructive and candid.”

Need buying strategies for steel? Try two free months of MetalMiner’s Outlook

Looking for a Quota

Mexico’s steel industry has been invited to Washington to talk about the possibility of implementing steel quotas, Reuters reported.

According to the report, the Mexican steel industry association, Canacero, said it was called to Washington to discuss the possibility of moving to a quota system instead of the current 25% tariff (in place vis-a-vis Mexico since June).

Meanwhile, talks on the renegotiation of the North American Free Trade Agreement (NAFTA) continued this week, as the U.S. and Mexico have engaged in talks without Canada’s participation.

Tata Steel UK Posts Losses

Last year was a tough one for Tata Steel UK.

According to the Financial Times, higher raw material prices was among a series of issues leading to losses for the steelmaker last year.

The steelmaker reported an annual pre-tax loss of £222 million for the one-year period ending March 31, according to the report.

‘Constructive and Candid’

Trade officials from the U.S. and China met Aug. 22-23 in an attempt to stem rising tensions between the two nations, most recently manifested by the trading of tariff salvos at $16 billion apiece.

According to a report by the state-run Xinhua News Agency, the meetings this week were “constructive and candid.”

MetalMiner’s Annual Outlook provides 2018 buying strategies for carbon steel

“Both sides will keep in contact about the future arrangement,” the report states, quoting a China Ministry of Commerce statement.

Ezio Gutzemberg/Adobe Stock

This morning in metals news, $16 billion in tariffs on imports of Chinese goods will go into effect tomorrow, optimism from the Mexican side is high with respect to a NAFTA deal and steel demand in India is pushing the global total toward a new record.

Need buying strategies for steel? Try two free months of MetalMiner’s Outlook

Tariffs Going into Effect

The U.S. earlier this month announced it would impose an additional $16 billion in tariffs, on top of the $34 billion that went into effect in July. The new round of tariffs is set to go into effect Thursday, Aug. 23.

According to CNN, 80 industry groups testified during hearings on the tariffs held by the Office of the United States Trade Representative.

The list of items features 279 tariff lines (the originally proposed list featured 284 items), including electric motors, motorcycles and agricultural equipment (including irrigation equipment), among other things.

Making a Deal

Talks focused on renegotiating the North American Free Trade Agreement (NAFTA) began in August 2017 and have undergone round after round since then, with no resolution.

According to a Reuters report, however, Mexican trade officials were optimistic about a solution being reached in the near term.

“We hope that we’ll have a solution in the next couple of hours, or the next couple of days,” Mexican Economy Minister Ildefonso Guajardo was quoted as saying (prior to a meeting with U.S. Trade Representative Robert Lighthizer).

Chatter surrounding the 24-year-old trilateral trade deal has picked up in the weeks since the July 1 Mexican presidential election. Reshaping the trade deal, which accounts for over $1 trillion in annual trade, has been a stated goal of President Trump (who has referred to NAFTA as the “worst trade deal ever made”).

The U.S. has sought to win concessions for a more favorable NAFTA, including a higher rules of origin auto content percentage. Under NAFTA, 62.5% of the auto content of a vehicle must originate in the U.S., Canada or Mexico in order to avoid tariffs in the North American market. That percentage was 50% upon NAFTA’s inception in 1994 and rose to 56% in 1998.

Global Steel Demand Surges

Demand for steel is set to reach a record high for the second year in a row, partially thanks to surging demand in India, according to the Nikkei Asian Review.

Want to see an Aluminum Price forecast? Take a free trial!

Demand is projected to hit 1.61 billion tons this year, according to World Steel Association data cited by the report.

Dmitry/Adobe Stock

This morning in metals news, a group of Tennessee manufacturers sent the president a letter urging him to rescind the Section 232 tariff on imported steel, the Trump administration has proposed a new rule for emissions standards that would undo Obama-era limits and copper hit a one-week high.

Need buying strategies for steel? Try two free months of MetalMiner’s Outlook

Manufacturers Ask Trump to Rescind Steel Tariff

A group of manufacturers in Tennessee have sent President Trump a letter asking him to remove the tariff on imported steel, The Tennessean reported.

According to the letter, the companies believe the tariff impacts their ability to compete with foreign companies.

“These employees and our businesses depend on access to competitively priced steel to fabricate our products and compete in a global marketplace,” the letter stated. “We cannot compete globally when the cost of our most important input has spiked and delivery times are extended.”

Trump Administration Proposes New Rule for Emissions Standards

The Trump administration Tuesday proposed a new rule governing emissions standards, which would undo Obama-era restrictions on carbon emissions, the Washington Post reported.

The Environmental Protection Agency (EPA) released a statement on what is being called the Affordable Clean Energy Rule.

“The ACE Rule would restore the rule of law and empower states to reduce greenhouse gas emissions and provide modern, reliable, and affordable energy for all Americans,” EPA Acting Administrator Andrew Wheeler said. “Today’s proposal provides the states and regulated community the certainty they need to continue environmental progress while fulfilling President Trump’s goal of energy dominance.”

Copper Bounces Back

Copper hit a one-week high Tuesday on the dollar’s losses and ahead of planned talks between the U.S. and China this week, Reuters reported.

MetalMiner’s Annual Outlook provides 2018 buying strategies for carbon steel

LME copper jumped 1% Tuesday, Reuters reported, rising to $6,053 per ton.

gui yong nian/Adobe Stock

In the latest move in the recent saga of burgeoning tensions between the U.S. and Turkey, the latter has filed a request with the World Trade Organization (WTO) for consultations over the U.S.’s additional steel and aluminum tariffs.

Need buying strategies for steel? Try two free months of MetalMiner’s Outlook

The request was circulated to WTO members Aug. 20.

The U.S. recently doubled its steel and aluminum tariffs on imports of the Turkish metals, raising the rates to 50% and 20%, respectively.

Tensions between the two nations have increased, as the U.S. has called for the release of a detained American pastor, Andrew Brunson. The Turkish government detained the pastor on espionage and terrorism-related charges. According to media reports, the U.S. rejected a deal offered by the Turkish government, in which the pastor would be released in exchange for forgiveness of billions of dollars in fines on a Turkish bank.

On the other hand, the Turkish government has continued to call for the extradition of religious leader Fetullah Gulen — currently living in exile in Pennsylvania — whom the government claims was behind the failed coup in 2016.

President Trump announced the doubling of the metals tariffs in a tweet Aug. 10, writing: “I have just authorized a doubling of Tariffs on Steel and Aluminum with respect to Turkey as their currency, the Turkish Lira, slides rapidly downward against our very strong Dollar! Aluminum will now be 20% and Steel 50%. Our relations with Turkey are not good at this time!”

In response, Turkey imposed tariffs on U.S. imports, including automobiles, alcohol and tobacco.

The Turkish currency, the lira, has suffered in the process, as MetalMiner’s Stuart Burns explained last week. The lira has already been on the decline against the dollar in the past year, and proceeded to fall 20% on the heels of the current standoff with the U.S. As of Monday afternoon, the lira sat at ₺6.1544 to the U.S. dollar, having started the year at ₺3.7915.

According to Turkey, its request for consultations comes as it believes the U.S.’s doubling of the steel and aluminum tariffs is inconsistent with provisions of the WTO’s Agreement on Safeguards and the General Agreement on Tariffs and Trade (GATT) 1994.

Want to see an Aluminum Price forecast? Take a free trial!

Turkey also argued that the U.S.’s application of Section 232 of the Trade Expansion Act of 1962 — the statute by which the metals tariffs came to be — is also inconsistent with provisions of the GATT 1994.

Pavel Ignatov/Adobe Stock

This morning in metals news, President Trump claimed his tariffs are saving the U.S. steel industry, steel supplies from Japan and South Korea to India have increased, and Turkey hits back with new tariffs in response to the U.S.’s doubling of the steel and aluminum tariffs.

Lower your aluminum spend – Take a free trial of MetalMiner’s Monthly Outlook!

Saving Steel

In an interview with the Wall Street Journal, Trump argued that his tariff on steel is saving the U.S. steel industry.

He also argued that in the future U.S. steelmakers will face mostly domestic competition as a result of the tariffs.

Indian Steel Import Levels from Japan, South Korea Surge

According to a Reuters report, levels of steel heading from Japan and South Korea to India have increased significantly as a result of tariffs.

Per the report, citing government data, during the April-June period imports from South Korea were up 31%, while imports from Japan jumped 30%.

Turkey Hits Back

The recent tension between the U.S. and Turkey continued to rise Wednesday, as Turkey announced tariffs it would apply to U.S. goods.

The announcement comes after President Trump announced the U.S. would double the tariff rates on steel and aluminum for Turkey, bringing them to 50% and 20%, respectively.

Turkey announced tariffs on American automobiles, alcohol and tobacco.

The U.S. has lobbied for the release of detained American pastor Andrew Brunson, while Turkey has continued to ask for the extradition of exiled religious leader Fethullah Gulen, whom the government claims was behind the failed 2016 coup.

For more efficient carbon steel buying strategies, take a free trial of MetalMiner’s Monthly Outlook!

The crisis has seen the value of the Turkish lira plummet in the plummet, hitting a record low against the dollar earlier this week before beginning to recover on Tuesday and Wednesday.

Even if U.S. steelmakers have been slow to add capacity following President Trump’s tariff protection, it would seem foreign steel makers are willing to commit to domestic U.S. production.

Need buying strategies for steel? Try two free months of MetalMiner’s Outlook

The Financial Times this week reported on the announcement by BlueScope Steel, Australia’s biggest steelmaker, to examine adding 600,000 to 900,000 metric tons per year of steelmaking capacity to its North Star business in Ohio. This would raise the Ohio plant’s existing production of 2.1 million metric tons per year to some 3 million tons at a cost of between U.S. $500 million and $700 million.

The project would involve the addition of a third electric arc furnace and a second slab caster, according to the Financial Times report. A decision is expected at the company’s February 2019 annual results pending the outcome of the feasibility study, by which time a clearer picture may emerge of what the tariff landscape is going to look like longer term.

Interestingly, Australian steelmakers are exempted from the tariffs; in theory, BlueScope could have invested at home. Australia, however, along with Argentina, are subject to quota limits, so ramping up domestic production to meet U.S. demand is not considered a viable option.

According to the Financial Times, domestic U.S. steel producers are, not surprisingly, doing rather well from the tariffs.

The resulting price rises have fueled a rally in U.S. domestic prices, helping firms like ArcelorMittal surpass forecasts previously set by analysts. Arcelor’s earnings came in at $5.59 billion before interest, taxes, depreciation and amortization for H1 2018. That represented an increase of 28.6% on the same period a year before, as half-year sales rose 17.6% year-on-year in value terms to $39.2 billion, primarily due to higher steel selling prices. Net income was up by almost one-third to $3.06 billion. It hasn’t yet resulted in Arcelor announcing any increased investment in domestic U.S. production capacity — the real aim of the tariffs — but, arguably, steelmakers are waiting to see how the whole tariff situation develops and whether they are truly here to stay (in which case, investment could result).

The U.S. Department of Commerce found foreign steel accounted for about one-third of the 107 million metric tons of steel the U.S. economy used in 2017, the Weekly Standard reported.

Although U.S. producers still have a commanding market share, the report concluded that inexpensive foreign imports were causing domestic steelmakers to lose money, lay off workers, and close plants last year.

U.S. steel plants in 2017 ran at just 72% of capacity, below the 80% level they are widely considered necessary to be profitable. The blame for poor capacity utilization fell firmly at the door of “excessive imports of steel.”

Well, that was last year; this year is something very different.

Following tariffs, steel prices are up sharply, profits are up at the domestic mills and so is capacity utilization. The domestic mills have the option to price balance towards full capacity, shielded as they are now behind a 25% import tariff. They may choose to take higher prices and forego full capacity or adjust pricing to achieve full capacity; we will see what policy has been adopted when Q3 and H2 figures are released.

It is unlikely significant new capacity will be added in the short term, though, despite talk of planned new capacity.

Want to see an Aluminum Price forecast? Take a free trial!

According to Reuters, steel output in the United States rose 2.9% in the first half to 41.9 million metric tons and gained 0.8% in June to hit 6.9 million tons for the month. Data from the American Iron and Steel Institute (AISI) show capacity utilization at U.S. mills in the year to July was 76.4%, up from 74.4% in 2017, suggesting domestic mills generally are opting for better prices as a route to profitability rather than pricing out tariffed imports.

Pavel Ignatov/Adobe Stock

This morning in metals news, domestic raw steel production for the week ending Aug. 11 jumped 5% compared with the same week last year, the U.S. has raked in more than $1.4 billion from its steel and aluminum tariffs, and China’s aluminum production surged in July.

Need buying strategies for steel? Try two free months of MetalMiner’s Outlook

U.S. Raw Steel Production Surges Last Week

According to data released by the American Iron and Steel Institute (AISI), U.S. raw steel production jumped 5% year over year for the week ending Aug. 11.

Production for the week hit 1,855,000 net tons at a capacity utilization rate of 79.1%. Production was also up 1.5% from the previous week ending Aug. 4.

Tariff Windfall

The Trump administration’s tariffs on steel and aluminum have yielded revenue amounting to more than $1.4 billion, according to a recent Congressional report cited by CNBC.

As for the much-criticized tariff exclusion process — many have lamented the slow rate at which the Department of Commerce has processed the requests — as of Aug. 6. the Department of Commerce had received 33,099 requests, approving 1,428 requests and denying 702.

Chinese Primary Aluminum Production Rises

July proved to be a productive month in China for primary aluminum production.

The country saw production surge 12% year over year, according to a Reuters report.

Want to see an Aluminum Price forecast? Take a free trial!

According to the report, citing National Bureau of Statistics data, China produced 2.93 million tons of primary aluminum in July. The output marked a 3.4% increase from the previous month, according to the report.

Pavel Ignatov/Adobe Stock

This morning in metals news, U.S. steel mills shipped 3.2% more steel in June 2018 than in June 2017, President Donald Trump announced the doubling of steel and aluminum tariff rates against Turkey, and Ford is feeling the effects of rising metals prices.

Need buying strategies for steel? Try two free months of MetalMiner’s Outlook

Steel Mills See Year-Over-Year Shipment Rise

U.S. steel mills shipped 7,988,026 net tons of steel in June, according to data released by the American Iron and Steel Institute (AISI).

The total marks a 0.8% decrease from the previous month, but a 3.2% increase from June 2017.

In the year to date, shipments have amounted to 47,304,057 net tons, a 4.1% increase compared with the first six months of 2017.

Trump vs. Turkey

While much of the focus has been on the deterioration of relations or escalation of tensions with China and even the E.U., in recent weeks the U.S.’s relationship with Turkey has taken a hit.

President Donald Trump announced Friday that his administration will double the steel and aluminum tariffs on Turkey, bringing them to 50% and 20%, respectively.

The relationship between the two countries has taken a hit in recent months following the U.S.’s imposition of Section 232 tariffs on steel and aluminum. In addition, last week the U.S. imposed sanctions on Turkish officials in relation to Turkey’s detainment of American pastor Andrew Brunson on charges of espionage.

Price Pressure

Rising steel and aluminum prices are weighing on Ford’s business, one Ford official said this week.

Want to a see Cold Rolled price forecast? Get two monthly reports for free!

Jim Farley, president of global markets, called the rising costs a “significant headwind,” as quoted by Bloomberg, but added the automaker does not plan on passing on the added costs to consumers.