INTERVIEW-U.S. steel import curbs could scuttle India's export ambitions –minister

Date Mar 14 2018 15:20:11 Source:SHMET

NEW DELHI, March 13 (Reuters) - India's ambition to become a major steel exporter could be disrupted by U.S. import curbs, Steel Minister Chaudhary Birender Singh said, underscoring the need for free trade.

    "Our exports have increased substantially, about 40 percent growth during January to December (2017)," Singh told Reuters in an interview on Tuesday.

    "What I foresee is that our exports are going to grow. In that case, these kind of disturbances should not take place."

    Last week, U.S. President Donald Trump set import tariffs of 25 percent on steel and 10 percent on aluminium, to come into force in 15 days, a disputed move that threatens to spiral into a trade war.

    India's stance, Singh said, will be to call for unrestricted trade and watch for responses from other steel-producing countries. 

    "We can't remain in isolation," he said, adding it had similar interests to those of other steel-producing countries. 

    "We are not exactly in wait and watch mode but the pace and intention of the other steel producing countries should also be watched closely."

    According to a Feb. 22 note prepared by the steel ministry, India expects a loss of $130 million due to the U.S. import tariffs, which accounts for just 5 percent of the country's total steel exports.

    India was already expecting a 6 percent fall in exports to the United States for 2017/18, to 333,656 tonnes, it said.

     Trade tensions are threatening what is the best global economic growth outlook in seven years, the OECD said on Tuesday.  



    India's much-delayed $1 billion joint venture between ArcelorMittal  MT.AS  and state-owned Steel Authority of India Ltd  SAIL.NS  to produce automotive steel may finally be signed by March-end, Singh said.

    SAIL and ArcelorMittal signed a preliminary understanding in 2015 to jointly produce 1.2 million tonnes of automotive steel a year, but disagreements over commercial terms have delayed the venture that would give the Luxembourg-based company a foothold in the world's fastest-growing steel market.

    SAIL was also in talks with Canada's Teck Resources Ltd  TECKb.TO , the largest North American producer of coking coal used to make steel, for long-term purchase agreements, Singh said.  

    South Korean steel major POSCO  005490.KS , meanwhile, has been in talks with Indian mills about joint venture opportunities, he said.

    "They (POSCO) approached us about six months ago to have a discussion on certain collaborations," Singh said, adding that a project with POSCO might take off within two years without giving more details.

    Singh said India was pushing foreign companies to set up plants in India to benefit from a procurement policy that gives preference to local mills, as the country needed to do more to make high-end steel products.

    "High-end steel production is the major area of our concern," he said.



Edited by SHMET

ArcelorMittal Canada steelmaker not seeking government aid –CEO

Date Mar 14 2018 15:19:31 Source:SHMET

HAMILTON, Ontario, March 13 (Reuters) – ArcelorMittal Dofasco's  MT.AS  chief executive said on Tuesday the company was not seeking Canadian government aid as the domestic steel industry faces uncertainty after U.S. President Donald Trump provided temporary tariff relief on steel imports.

    Sean Donnelly, who heads Canada's largest steel manufacturer, added that the government must put resources in place to ensure cheap steel is not diverted to Canada after Trump decided last week to impose a 25 percent tariffs on steel imports.

    Asked if his company would seek government aid, Donnelly replied: "No."

    Canada is the biggest supplier of steel and aluminum to the United States but the steel sector accounted for only 22,000 direct jobs and represented 2 percent of exports last year.

    Donnelly spoke to Reuters as Canadian Prime Minister Justin Trudeau visited the steel city of Hamilton to reassure workers and meet with company CEOs, as part of his week-long tour to defend Canadian jobs. On Monday, Trudeau called Trump to stress the need to preserve cross-border supply chains.

    Behind closed doors, Trudeau and industry representatives spoke about the issue of cheap steel entering Canada, but did not get into specifics, Canadian Steel Producers Association  (CSPA) President Joseph Galimberti said.

    Speaking to reporters, Trudeau said he was aware of concerns that countries now faced with tariffs could try to get their steel to the North American market through Canada and the government was working with the industry and United States to prevent that.

    "That is a concern that we share with the Americans and we're going to keep ensuring that Canadian steel is Canadian steel," Trudeau said before shaking hands and taking selfies with the assembled steelworkers.

    Galimberti said the meeting with Trudeau was an "important affirmation" that the government's months-long involvement in the issue would continue.

    Trump has linked permanent exemption to the successful renegotiation of the North American Free Trade Agreement, making the industry nervous.

    The North American industry is heavily integrated, with raw materials, steel and parts crossing the U.S.-Canadian border several times before a finished product such as a vehicle is sold to consumers. About 65 percent of the Hamilton port's tonnage is iron ore and coal used to make steel.

    Hamilton, about 75 km (47 miles) southwest of Toronto, has a population of 700,000 and houses Dofasco's mill, coking and finishing operations at Stelco  STLC.TO  and a collection of smaller operations that directly employ about 10,000 people in the city.


Edited by SHMET

PRECIOUS-Gold rises on increasing U.S. protectionism concerns

Date Mar 14 2018 15:18:55 Source:SHMET

March 14 (Reuters) - Gold prices rose on Wednesday to a one-week high on a weaker dollar following U.S. Secretary of State Rex Tillerson's sudden dismissal, which invigorated concerns of protectionist policies hampering global risk appetite.

    Spot gold  XAU=  rose 0.12 percent to $1,327.56 per ounce at 0402 GMT. It touched $1,329.22 an ounce during the session, its highest since March 7.

    U.S. gold futures  GCcv1  for April delivery rose 0.09 percent to $1,328.20 per ounce.

    On Tuesday, President Donald Trump fired Tillerson after a series of public rifts over policy on North Korea, Russia and Iran, replacing his chief diplomat with loyalist CIA Director Mike Pompeo.

    Risk aversion is back on the table following the unexpected news of Tillerson's dismissal and the appointment of Pompeo, said OCBC analyst Barnabas Gan.

    "Pompeo is a supporter of Trump's trade policy and could help advance his agenda of imposing it on U.S. trading partners ... all this uncertainty and risk aversion leaves gold as a safe haven option," Gan added.

    The U.S. dollar wallowed against the yen and other major currencies after the dismissal of Tillerson. This killed off an earlier bounce in the currency.  USD/

    A weaker dollar makes bullion, which is used as an alternative investment during times of political and financial uncertainty, cheaper for holders of other currencies.  

    "With the U.S. protectionist rhetoric likely to ring equity market alarm bells, gold should continue to be an ideal hedge in this highly unpredictable environment," said Stephen Innes, APAC trading head at OANDA.

    Asian shares eased on Wednesday amid fears of rising U.S. protectionism.

    Meanwhile, data on Tuesday showed U.S. consumer prices cooled in February amid a decline in gasoline prices and a moderation in the cost of rental accommodation, the latest indication that an anticipated pickup in inflation probably will be only gradual. 

    Inflation is a key economic factor the U.S. central bank considers when deciding monetary policy. A strong U.S. inflation reading could raise expectations for future interest rate increases, which would put pressure on non-yielding bullion.

    "The 0.2 percent increase in consumer price index suggests it won't be enough to spur more rate hikes by the Fed than already expected," ANZ analysts said in a note.

    Spot gold may rise to $1,334 per ounce, as it has cleared a resistance at $1,327, according to Reuters Technical analyst Wang Tao.

    In other precious metals, silver  XAG=  rose 0.5 percent to $16.62 per ounce.

    Platinum  XPT=  gained 0.3 percent to $964.50 per ounce and Palladium  XPD=  edged 0.1 percent higher to $991.47 per ounce.


Edited by SHMET

COLUMN-China's iron ore mountain may only be a molehill: Russell

Date Mar 14 2018 15:18:17 Source:SHMET

LAUNCESTON, Australia, March 14 (Reuters) - The relentless climb in China's port inventories of iron ore may not be asworrying to the market as they appear, more a reflection of a change in dynamics than anything else.

    Port stockpiles  SH-TOT-IRONINV  stood at 158.6 million tonnes of the steelmaking ingredient as of the end of last week, close to the prior week's record of 159.1 million, according to data from consultancy SteelHome.

    That's up from 148 million tonnes at the end of last year, and almost double the 79 million-tonne starting point of the climb in June 2016.

    Journalists love comparative superlatives and in recent weeks Reuters has described the inventories as enough to build Australia's Harbour Bridge almost 1,900 times over or Paris's Eiffel Tower 19,000 times, even to construct enough cars to reach from Earth to Moon if lined up nose to tail.

    There's nothing inherently wrong with using such comparisons as they are eye-catching and give readers an idea of how much iron ore is piled up at Chinese ports.

    But just because something is big doesn't necessarily mean it is creating a proportionately sized problem.

    This may well be the case with China's iron ore inventories, which at first glance look large enough to cause an overhang of supply in the world's top steelmaker.

    Probably more important than the overall size of the stockpile, however, is the composition of the iron ore grades contained within it.

    China's iron ore market is becoming increasingly bifurcated, with stronger demand for higher grades and weaker demand for the lower grades.

    This is a logical function of Beijing's push to lower air pollution, as higher-grade ores require less coking coal in the blast furnace, and also don't require the pre-blast furnace upgrading needed if a steel mill is using lower grade ore.

    There isn't a breakdown of the quality of iron ore in the port inventory data, but the market view is that much of the rapid growth in stockpiles over the past year has been in lower grades, such as ore with 58 percent iron content or less.

    The build-up of lower grade iron ore at Chinese ports obviously has an impact on miners supplying these grades, but it has less of an impact on import volumes.

    ANZ Banking Group said in a research note last month that what it termed the "effective" stockpile is closer to 100 million tonnes.

    If that is an accurate assessment, it means the iron ore mountain at Chinese ports isn't as daunting as it seems.



    Certainly, lower grade iron ore has been trading at a fairly wide discount to higher grades.

    The spot price in China of iron ore with 62 percent iron .IO62-CNO=MB , as assessed by Metal Bulletin, ended at $68.78 a tonne on Tuesday. The assessment for the 58 percent grade .IO58-CNO=MB  was at $40.36 a tonne.

    This makes the lower grade ore about 41 percent cheaper, and this has widened from the 29 percent gap that prevailed at the end of 2016.

    The issue for exporters of lower grade iron ore, such as India and Australia's Fortescue Metals Group  FMG.AX , is that they are now at a disadvantage to producers of higher-quality material.

    They are having to accept lower prices for their product, while also facing demand pressures as Chinese steel mills continue to operate under production constraints as part of anti-pollution measures.

    For miners with higher-quality ores, though, including Australia's Rio Tinto  RIO.AX  and BHP Billiton  BHP.AX , Brazil's Vale  VALE3.SA , and South Africa's Kumba  KIOJ.J , the rise in inventories is not much of a concern, given the Chinese are still demanding their product.

    How is the situation likely to resolve itself over the next few months?

    One way of clearing the inventory overhang would be for China's pollution restrictions to ease, allowing steel mills to use the lower grade ore, but this is far from a given as there are increasing signs that winter restrictions are being extended in several steel-producing regions. 

    The other would be for the discount of the lower grade ore to continue widening, and for owners of the existing stockpiles to be forced into accepting heavy losses.



Edited by SHMET

RPT-COLUMN-Aluminium through the looking glass after Trump's tariffs: Andy Home

Date Mar 14 2018 15:17:38 Source:SHMET

LONDON, March 13 (Reuters) - In a little more than a week's time the United States will impose a tariff of 10 percent on all aluminium imports and 25 percent on all steel imports.

    Except for those from Canada and Mexico.

    For now. 

    Their exemptions have been folded into separate negotiations on the North American Free Trade Agreement. 

    Other countries may receive exemptions as well, depending on who qualifies as a "real" friend in the eyes of U.S. President Donald Trump. 

    So far, only "our ally, the great nation of Australia" has been given the Presidential nod. 

    What were announced as global tariffs are already morphing into something more complex, shaped by confusingly elastic politics.

    The aluminium market, however, hasn't waited for the many nuances to play out. It has quickly adjusted to price in a post-tariff environment.



    Not on the London Metal Exchange (LME), where the aluminium price  CMAL3  at $2,100 a tonne is little changed since Trump signed the executive orders for tariffs last Thursday.

    Rather, the price reaction has taken place in the physical premium paid by U.S. manufacturers for their metal.

    The CME front-month Midwest premium contract  AUPc1  has nearly doubled from 9.4 cents per lb at the start of January to its current 18.5 cents.

    Expressed in dollar terms, the jump in premiums by $200 a tonne equates to nearly 10 percent of the cash LME aluminium price  CMAL0 .

    The last time U.S. aluminium premiums were at this sort of level was in 2014 and 2015.

    Back then U.S. aluminium users were in uproar. This time they're largely silent, even though the impact could be worse.

    Producers who were on the back foot four years ago have since seized the political initiative, helping to shape policy that links national security to their survival.

    Trump's tariffs have sent the U.S. aluminium sector tumbling through the looking glass into a world of inverted narratives.



    At the height of the aluminium premium bubble this decade a U.S. manufacturer was paying almost 24 cents per lb ($509 a tonne) over the LME price to obtain physical metal.

    What had previously been a stable, minor component of the "all-in" price took on a monstrous life of its own.

    Manufacturers, who had neither the tools nor the experience to handle the premium blow-out, went on the warpath, bringing down a storm of media and regulatory fire on the London Metal Exchange. Long load-out queues at LME warehouses in Detroit,they claimed, were directly inflating physical premiums.

    Sitting at the centre of the storm was a warehousing company called Metro International Trade Services, acquired by Goldman Sachs in 2010.

    The two companies' strategy of maximising queue revenue was accompanied by rising premiums, a virtuous circle for them but a vicious circle for aluminium buyers.

    The collective outrage, led by companies such as MillerCoors dragged U.S. lawmakers and even the Commodity Futures Trading Commission into the fray.

    Producers, who were benefiting from the windfall premium, were largely muted.

    The whole sorry saga ended with the LME introducing tough new load-out rules, Goldman selling Metro in 2014 and the warehousing company being fined $10 million by the LME in 2016, still a record penalty imposed by the exchange.



    Fast forward to the present and it is a former Goldman Sachs president and erstwhile commodities trader, Gary Cohn, who has been trying to sway President Trump from imposing tariffs, albeit unsuccessfully. He has resigned from the Administration.

    U.S. aluminium producers, meanwhile, have found their voice. They have helped to change the national debate from one of protecting consumers from high premiums to one of protecting smelting capacity from high imports.

    To be fair, they are now delivering on their part of the bargain.

    Century Aluminum  CENX.O  intends to restart about 150,000 tonnes of annual capacity at its Hawesville smelter in Kentucky.

    Magnitude 7 Metals (M7M) will restart two out of three potlines at the 263,000-tonne Marston smelter in Missouri – one in the second quarter and the other in the third quarter.

    Combined with Alcoa's  AA.N  already initiated restart of some of its idled capacity at the Warrick smelter in Indiana, these reactivations will mean that national capacity utilization starts approaching the Administration's 80 percent target.

    It would probably only take one more smelter to restart, even partially, for President Trump to declare mission accomplished.



    But at what cost to aluminium buyers? Consumer voices of protest have been curiously absent.

    The Can Manufacturers Institute (CMI), one of the few industry groups even to issue a public statement, said only that it was "disappointed" with the decision to impose tariffs.

    But then, when the argument is that tariffs will protect American jobs and national security, who wants to take the opposite side of the debate?

    The simple truth remains, however, that a 10 percent jump in the aluminium price is only going to have one possible outcome.

    The CMI estimates that the combination of steel and aluminium tariffs adds one cent on every one of the 119 billion cans consumed in the United States every year.

    Actually, aluminium users might have a double problem.

    The premium bubble of 2014-2015 occurred against a backdrop of falling LME aluminium prices. When accused at congressional hearings of ramping up physical market premiums, Goldman Sachs argued that the "all-in" aluminium price -- the premium plus basis LME price -- was still lower than it had been.

    This time around, rising premiums overlay an LME basis price that itself is in bull mode, up 25 percent since the start of 2017.

    U.S. aluminium buyers still have one card to play.

    Both the CMI and the Beer Institute are going to seek exemptions on the grounds that they won't be able to source all the metal they need in the United States and that "imported aluminum used to make beer cans is not a threat to national security".

    It all depends on what counts as "national security" in this looking-glass aluminium world.


Edited by SHMET