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Commodities Roundup: GOES Imports Drop, Rusal Sanctions Crunch and U.S. Raw Steel Production Jumps

08/17/2018 By

For the buyers and category managers out there, especially those of you deep in the weeds of buying and managing commodities, here’s a quick rundown of news and thoughts from particular commodity markets.

From price movements to policy decisions, our MetalMiner editors scour the landscape for what matters. This week:

GOES Imports Continue to Drop

MetalMiner’s Lisa Reisman touched on the ongoing decline in U.S. imports of grain-oriented electrical steel (GOES).

“The U.S. had imported at least 2,500 metric tons per month since the start of this year, but after the announcement of tariffs, imports shrank to 411 metric tons in July,” Reisman wrote.

On the tariff exclusion front, she noted three companies have filed the bulk of GOES-related exclusion requests, and none had been approved.

Rusal and Sanctions

MetalMiner’s Stuart Burns took a look at Rusal and how it’s dealing with the crunch of sanctions brought down by the U.S. back in April (which, at the time, shook the aluminum market). Panic eased as the U.S. gave companies until Oct. 23 to unwind business with Rusal.

“Although Rusal is looking to boost output of value-added goods (VAGs), as they call processed products, they sharply cut back production of foil, powders and other VAG products in April for fear of not being able to shift production if sanctions were sustained,” Burns wrote.

“As it happens, most global consumers restarted deliveries after a few weeks, but many in the U.S. are still reluctant to touch Rusal product — primary or VAGs — as the October crunch date looms.”

Domestic Raw Steel Production Rises

According to a recent American Iron and Steel Institute (AISI) report, domestic raw steel production jumped 5% year over year for the week ending Aug. 11.

Production for the week reached 1,855,000 net tons, at a capacity utilization rate of 79.1%.

Tariffs and Capacity Utilization

Speaking of capacity utilization, Burns also delved into its relationship to tariffs.

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

This year, things are much different, he explained.

“Following tariffs, steel prices are up sharply, profits are up at the domestic mills and so is capacity utilization,” he continued. “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.”

In spite of that, however, he said it is “unlikely” that new capacity will come onstream in the short term.

Indian Aluminum Sector Lobbies for Import Caps

Many countries have raised concerns that the U.S. tariffs on steel and aluminum would lead to diverted supplies of cheap metal flowing into their markets (namely from China).

The Indian aluminum sector is among those raising such concerns, as MetalMiner’s Sohrab Darabshaw explained this week.

“On the other hand, India’s largest aluminum producer wants the government to cap the quantity of imports of low-cost semis, wire rods and scrap from China and the U.S., as the percentage of inbound shipments in domestic demand is steadily going up,” he wrote.

Unsurprisingly, primary and secondary producers in India have different thoughts on the matter.

“The Metal Recycling Association of India (MRAI), a representative body of the secondary aluminum producers, recently issued a statement urging the government to bring basic customs duty on imports of aluminum scrap to zero from 2.5%,” he wrote. “This was in response to a move by the Aluminium Association of India (AAI), which wants the duty to be raised to 10%. MRAI feels the move of a hike will take away jobs of thousands of people working in the downstream & ancillary industry, (MRAI) said in a statement.”

In addition, Hinalco, the country’s largest aluminum producer, has asked the Indian government to impose import caps in the short term.

Department of Commerce Rules on Steel Flanges

The Department of Commerce issued a final affirmative determination in its anti-dumping and countervailing duty investigations of imports of stainless steel flanges from India.

The department ruled the flanges have been sold at less than fair value, ranging from 19.16% to 145.25%. It also calculated countervailable subsidies of 4.92% to 256.16%.

The U.S. International Trade Commission will issue its final determination next month; if it rules in the affirmative, the Department of Commerce will then issue anti-dumping and countervailing duty orders.