Toolbox trade wars: How a sure winner in U.S. dispute has yet to reap benefits

Date Mar 12 2018 16:31:05 Source:Reuters

  FRANKLIN PARK, Ill., March 12 (Reuters) - Nestled in an industrial park near the end of the runway of O’Hare International Airport, Metal Box International Inc. should be one of the winners of a little-known trade war over toolboxes.

    In January, the U.S. International Trade Commission ruled Chinese imports had harmed domestic producers of big tool chests sold in retail stores, prompting the Trump administration to slap anti-subsidy duties of up to 95 percent on Chinese boxes.

That could jump far higher later this year, after the administration decides whether to add anti-dumping duties on top

of the anti-subsidy charges.

    "This is a game changer for us," said Mitch Liss, one of the owners of the privately held company, who said regaining just a small slice of the Chinese business would make the factory boom.

    Metal Box International is one of only two remaining U.S. producers of such boxes. The other is Waterloo Industries, a far larger company recently acquired by Stanley Black & Decker Inc, the global tool producer.

    So if retailers were going to start buying American again to avoid the mounting duties, it would almost certainly be visible at this factory.

    It hasn't worked out that way. There was a small uptick after the January ruling, Liss said, but so far no boom in orders. After spending $300,000 on new equipment in a surge of optimism, he put plans to buy additional machines on hold and has not added any new workers.    

    Meanwhile, the Trump administration's move last week to crack down on steel and aluminum imports is threatening to boost costs for Metal Box International as well as Stanley Black & Decker, which uses those metals to fashion similar tool chests.

    Stanley Black & Decker declined to talk about whether it was seeing any impact on its business from the new toolbox duties, though a spokesman told Reuters the International Trade Commission’s decision could mean “increased volume in the plant, which can translate into growth in U.S. manufacturing jobs.”

    A spokesman for Home Depot said he would not discuss the company's tool chest sourcing "for competitive reasons."

    The current battle over steel and aluminum tariffs underscores the risks and complexity in trade disputes, which often pit America’s love of cheap imports against its desire to protect blue-collar jobs. Winners and losers aren’t always initially clear.

Tariffs on steel and aluminum could help some U.S. workers - United States Steel Corp cited the prospect of tariffs this week as its reason to restart a mill in Illinois, for instance.

    But as a consumer of steel, Liss said the metal tariffs will hurt him but quickly adds that he understands why industries are looking for protection from cheaper imports.


    Metal Box International had a strong business in tool chests as recently as 2014, when among other models it sold a design to Home Depot with glass on the fronts of the drawers - which made it easier to see which tools were in each compartment. Those were a big seller.

    But the business quickly faded, he said, as they were displaced by imports that sold to retailers at lower prices than Metal Box International could match. Shipments of boxes fell by half in 2015 and fell again by half in 2016, said Liss.

    The company was planning to shut down when Liss heard that his last U.S. competitor, then called Waterloo Industries, was planning to file a trade case. Waterloo coordinated its efforts with Liss, who traveled to Washington to testify against the importers.

    The trade case targeted only a slice of the toolbox industry. Small, portable toolboxes were excluded, as were professional-type toolboxes sold by companies such as Snap-On, which market directly to buyers.

    Companies have long sought trade protection in Washington, often finding as much success under Republicans as Democrats. The trade dispute process is meant to be bi-partisan, with an equal number of Democrats and Republicans sitting on the International Trade Commission.

    But the climate now has shifted decisively in the favor of protection under Trump, especially for old-line industries like steel. The Commerce Department said it launched 82 new investigations into trade cases last year, a 58 percent jump over the year before.

    “There is the potential element of companies knowing that they’re dealing with a more sympathetic administration,” which may be prompting more complaints, said Scott Lincicome, a trade expert at the free-market oriented Cato Institute.

    The Department of Commerce can do subtle things to help companies succeed in these cases, he noted, like offering better guidance in how to draft complaints. But Lincicome said the number of trade cases were already on the rise before the last election. These things always tend to “come in waves,” he added.

    The Metal Box International plant, which employs about 100 people, was building Husky brand tool chests for Home Depot one recent day, with workers clustered around an assembly line inserting drawers into the boxes as they rumbled down the line.

    The metal-bending machines Liss bought are already lined up in the middle of the plant, but not yet operational. Ever thrifty, Liss bought the machines from a company that reconditions equipment, rather than splurging on new.

    “I bought these for $75,000,” he said. “New, each would cost $250,000.”

    Liss said most workers here are unaware how close the plant came to shutting down or how tenuous the situation remains. And even those who do know, like the director of operations Tom St. Germain, tend not to talk about the political atmosphere that seems to be helping U.S. producers like them.

    Germain said he likes President Trump, but added that “if he shut his mouth and did his job, he’d be more successful.”

    Liss calls St. Germain almost every day to check whether big orders are rolling in.

    These are early days, Liss said, so it still might happen. Retailers may have already stocked up on imports as they anticipated the trade ruling in favor of the domestic producers.

But this would normally be a busier time, since Father's Day -along with Black Friday and Christmas - are the highpoints of their annual selling cycle.   

    Still, each week that passes without a surge of orders adds to his worry and confusion. At the moment, he says “we’re back to being a little stressed out.”  

Edited by SHMET

LME rethinks cobalt contract for electric vehicle sector

Date Mar 12 2018 15:22:16 Source:Reuters

    LONDON, March 9 (Reuters) - The London Metal Exchange has abandoned plans for a cobalt sulphate contract for the electric vehicle battery supply chain because pricing for the chemical has historically been based on the metal it is derived from, cobalt industry sources said.

    The exchange is instead looking at offering a cash-settled cobalt metal contract, which will trade alongside its physically deliverable metal contract launched in 2010.

    Interest in battery metals such as cobalt, nickel and lithium has soared over the past year on the automotive industry's ambitious plans to produce electric cars and cut noxious fumes from vehicles powered by fossil fuels.

    However, prices of cobalt sulphate, which alongside nickel sulphate and lithium are used to make the rechargeable batteries used to power electric vehicles, are typically based on the metal plus or minus a dollar amount.

    "The amount depends on whether the sulphate market is in surplus or deficit; there is no fixed formula," one cobalt industry source said.

    "The LME's existing cobalt contract isn't very liquid. A  cash-settled contract could have more success, but there's no reason why we can't two have contracts."

    LME Chief Executive Matt Chamberlain told Reuters last year that the exchange's new cobalt contract was likely to be for cobalt sulphate. 

    "We are investigating the possibility of a cash-settled cobalt contract to expand our offering in battery metals," an LME spokesperson said in response to a request for comment.

    "If we were to launch a new cash-settled cobalt contract it would not be until the end of 2018 or early 2019." 

    The LME recently asked companies that assess traded cobalt metal prices -- Metal Bulletin, Argus Media and CRU Group – to submit proposals to supply prices that can be used as a reference for a cash-settled contract, sources said.  


    "Metal is a smaller part of the cobalt market than chemicals, but this is how the industry has developed over the years," one cobalt producer said.

   Consultants CRU Group estimate that cobalt metal accounted for 36.8 percent of nearly 104,000 tonnes of consumption last year, with the remainder going to chemicals for batteries used in mobile devices and electric vehicles.

    CRU expects the metal component to fall to 32 percent, or about 46,000 tonnes, in 2021 in a market it estimates will total more than 144,000 tonnes.

    Growing dominance of chemicals is mainly due to electric vehicles.

    Volkswagenfor example, last November approved a five-year spending plan to further the German group's goal of transforming itself into a leading force in electric cars.

    Volkswagen is planning spend more than 34 billion euros ($41.80 billion) on electric cars, autonomous driving and new mobility services by the end of 2022. 

    Such ambitious moves by the car sector are why the LME has been consulting with companies in the supply chain – metal producers as well as chemicals, battery and car companies -- about what the industry needs and what is feasible.

    One source said the LME was still looking at lithium, in which the choice is between carbonate and hydroxide, but that the idea of a nickel sulphate contract had been shelved because,as with cobalt sulphate, pricing is based on the metal rather than the compound.   

($1 = 0.8133 euros)


Edited by SHMET

Gold prices flat as rate hike worries ease

Date Mar 12 2018 15:11:39 Source:Reuters

   March 12 (Reuters) - Gold prices were steady on Monday as the U.S. dollar inched lower, with the latest U.S. jobs report easing fears of inflation and faster U.S. rate hikes.

    Spot gold was flat at $1,323.07 per ounce at 0315 GMT. U.S. gold futures  GCcv1  for April delivery were little changed at $1,323.70 per ounce.

    The dollar index  .DXY  against a basket of currencies was down 0.1 percent at 90.038.   

    "The labour report that we saw in the U.S. on Friday has spilled over into this week ... Slowdown in the growth of wages last month has certainly eased concerns about more aggressive rate hikes," said ANZ analyst Daniel Hynes.

    Inflation worries faded after U.S. data on Friday showed nonfarm payrolls jumped by 313,000 jobs last month, but annual growth in average hourly earnings slowed to 2.6 percent after a spike in January.

    Money market traders stuck to bets that the U.S. Federal Reserve would raise interest rates three times this year, with only around a one-in-four chance seen for a fourth rate hike in 2018. 

    A relief rally swept across Asian share markets on Monday in the wake of the jobs report. 

    Inflation concerns generally boost gold, which is seen as a safe-haven against rising prices. But expectations the Fed could raise interest rates to fight inflation make gold less attractive because it is not interest-yielding.

    "We still are somewhat wary on gold short-term as we suspect that the precious metal will struggle on account of a stronger dollar, which we expect to start perking up as we head closer to the (next) Fed meeting," INTL FCStone analyst Edward Meir said in a note. The central bank is due to meet from March 20.

    Spot gold may revisit its March 9 low of $1,312.99 per ounce, as suggested by a double-top and a retracement analysis,  according to Reuters technical analyst Wang Tao.

    Meanwhile, speculators raised their net long position in gold by 4,178 contracts to 161,812 contracts, Commodity Futures Trading Commission (CFTC) data showed.

    Among other precious metals, silver fell 0.1 percent to $16.58 per ounce.

    Palladium was down 0.1 percent at $994.72 per ounce, while platinum  XPT=  was flat at $964.50 per ounce.

Edited by SHMET

China steel exports may fall further in 2018 - top executive

Date Mar 12 2018 15:07:46 Source:Reuters

    BEIJING, March 10 (Reuters) - Chinese exports of steel products may continue to fall this year due to strong domestic demand and reductions in capacity due to environmental commitments, the chairman of state-owned mill Fujian Sangang Group Co Ltd said.

    The prediction follows a 30.5 percent plunge in Chinese steel exports last year to 75.43 million tonnes, as strong domestic prices and high profits at home led to a drop in shipments abroad.

    The supply and demand trends are now more in line following the supply-side reforms "while most of the downstream sectors have shown signs of recovery", Li Lizhang told Reuters on the sidelines of China's annual parliament session on Saturday.

    Demand from property, infrastructure, manufacturing and shipbuilding sectors will increase, he said, while steel supply would also see small pick-up this year compared to 2017.

    China, the world's top steel maker, produced 831.73 million tonnes of crude steel last year. It aims to eliminate around 30 million tonnes of excess capacity as part of Beijing's steadfast effort to curb air pollution.

    Cities across the country are carrying out stringent measures to lower fine particulate matter (PM2.5) readings. The steelmaking hub of Tangshan in Hebei province said it will extend production restrictions for another eight months after current curbs expire next week. 

    Li said production curbs would not be limited to the smog-prone region of Beijing-Tianjin-Hebei: "Other regions will also see restrictions if pollution levels exceed the limits."

    Despite this, steel prices would not see a big fluctuation, he said, as steel mills have already prepared for "the new normal".

    Fujian Sangang, the biggest producer in southeastern China, has a total capacity of 11 million tonnes. It produced 11.19 million tonnes of steel products last year, and plans to produce 10.8 million tonnes in 2018.


Edited by SHMET

China says trade war with U.S. will only bring disaster to global economy

Date Mar 12 2018 15:03:59 Source:Reuters

  BEIJING, March 11 (Reuters) - Any trade war with the United States will only bring disaster to the world economy, Chinese Commerce Minister Zhong Shan said on Sunday, as Beijing stepped up its criticism on proposed metals tariffs by Washington amid fears it could shatter global growth

    After pressure from allies, the United States has opened the way for more exemptions from tariffs of 25 percent on steel imports and 10 percent on aluminium that U.S. President Donald Trump set last week. 

    On Saturday, the European Union and Japan urged the United States to grant them exemptions from metal import tariffs, with Tokyo calling for "calm-headed behaviour." 

    But the target of Trump's ire is China, whose capacity expansions have helped add to global surpluses of steel. China has repeatedly vowed to defend its "legitimate rights and interests" if targeted by U.S. trade actions.

    Zhong, speaking on the sidelines of China's annual session of parliament, said China does not want a trade war and will not initiate one.

    "There are no winners in a trade war," Zhong said. "It will only bring disaster to China and the United States and the world."

    China can handle any challenges and will resolutely protect its interests, but the two countries will continue to talk, he said.

    "Nobody wants to fight a trade war, and everyone knows fighting one harms others and does not benefit oneself."

    Trump's announcement on tariffs underlined concerns about rising U.S. protectionism, which has sparked bouts of turmoil in global financial markets over the past year as investors feared a damaging trade spat will shatter a synchronized uptick in world growth.

    China's metals industry issued the country's most explicit threat yet in the row, urging on Friday for the government to retaliate by targeting U.S. coal - a sector that is central to Trump's political base and his election pledge to restore American industries and blue-collar jobs. 

    The U.S. is the world's biggest importer of steel, purchasing 35 million tonnes of raw material in 2017. Of those imports, South Korea, Japan, China and India accounted for 6.6 million tonnes.

    Trade tensions between China and United States have risen since Trump took office. China accounts for only a small fraction of U.S. steel imports, but its massive industrial expansion has helped create a global glut of steel that has driven down prices.

    The dispute has fuelled concerns that soybeans, the United States' most valuable export to the world's second largest economy, might be caught up in the trade actions after Beijing launched a probe into imports of U.S. sorghum, a grain used in animal feed and liquor. 



    Zhong said U.S. official trade deficit figures had been over-estimated by about 20 percent, and in any case would be a lot lower if the United States relaxed export restrictions on some high-tech goods.

    He also reiterated a previous pledge that China would lower import tariffs on consumer goods including automobiles, as part of an effort to boost domestic consumption.

    Trump believes the tariffs will safeguard American jobs, though many economists say the impact of price increases for users of steel and aluminium, such as the auto and oil industries, will destroy more jobs than curbs on imports create.

    Nonetheless, there is growing bipartisan consensus in Washington, and support within some segments of the U.S. business community, for the U.S. government to counter what are seen as Beijing's predatory industrial policies and market restrictions on foreign firms.

    Trump's administration has said the United States mistakenly supported China's membership in the World Trade Organization in 2001 on terms that have failed to force Beijing to open its economy.

    Diplomatic and U.S. business sources say the United States has frozen a formal mechanism for talks on commercial disputes with China because it is not satisfied Beijing has met its promises to ease market restrictions.

Edited by SHMET