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Commodities Roundup: China’s Domestic Consumption Slump, Aluminum Prices and Turkey Tariffs

08/31/2018 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:

China and Commodities

MetalMiner’s Stuart Burns this week surveyed commodities prices, which, as he notes, often track cyclically along with growth. That is, strong growth fuels rising commodities prices, and rising prices fuel growth.

China is a big driver of commodities prices. As Burns explains, Chinese domestic consumption has slowed down, which has dampened commodities prices.

“Chinese consumers help fuel growth at global companies like Apple, General Motors, Volkswagen and many others,” he wrote. “Yet retail sales this year have grown at their slowest pace in more than a decade. Wages in the private sector are growing at their slowest pace since the global financial crisis. The stock market has fallen by one-fifth.”

Aluminum Ups and Down

Earlier this week, MetalMiner recapped recent movements and events in the world of aluminum.

LME aluminum had been dropping steadily in the month’s following the U.S.’s sanctions crackdown on Russian companies (including aluminum major United Company Rusal).

However, this week the LME aluminum price showed signs of bouncing back, rising 4.7% from Thursday, Aug. 23 to Wednesday, Aug. 29.

In other aluminum news, Turkey requested consultations with the U.S. over its additional steel and aluminum tariffs, as tensions between the two countries have yet to abate.

Elsewhere, U.S. Secretary of Commerce Wilbur Ross visited the Century Aluminum plant in Hawesville, Kentucky, where the company celebrated its announced $150 million investment to increase its output, which will add approximately 300 jobs in the process.

“For the first time in decades, we are changing the trajectory of the industry,” Ross said during comments at the Hawesville plant. “Many have painted our efforts to create a level playing field and ensure the continued viability of the aluminum industry as the starting of a trade war. But you have been engaged in this fight for a long time.”

Tariffs and Turkey

Circling back to Turkey, steel plays a significant role in the country’s economy.

As such, despite Turkey’s relatively modest GDP, the U.S.’s steel tariff has a larger-than-usual bite into the Turkish economy, Burns wrote.

“To get a sense of the scale, according to official estimates Turkey imported 13.4 million metric tons of steel in 2017, marking a 13% decrease from 15.4 million metric tons in 2016,” Burns explained. “To put that in proportion, it is about half the U.S. imports of steel, yet for an economy a fraction of the U.S.’s in size. Much of that comes from Russia and Ukraine in the form of flat rolled products and billets for rerolling, according to U.K. government sources.”

Earlier this month, President Trump announced the U.S. would double its tariff rates for steel and aluminum with respect to Turkey, bringing them to 50% and 20%, respectively.

“In addition, deprived of one of its major markets — the U.S. — Turkish mills will be forced to look elsewhere for sales, a change that will likely entail discounting to maintain sales (at least in the short term),” Burns added. “European and Middle Eastern producers will be watching trade flows carefully to see if tonnage is dumped in their markets, and steel scrap suppliers will be worried about the hit on demand (prices have already started to fall).”

Steel Imports Down 10%

According to a recent report, U.S. imports of steel are down 10% through the first seven months of the year compared with the same period last year.

U.S. steel import market share, however, rose from 21% in June to 23% in July.

DOC Makes Determination in CVD Case on Steel Wheels from China

The U.S. Department of Commerce this week issued an affirmative determination in its countervailing duty investigation of steel wheels from China.

The imports benefited from countervailable subsidies ranging from 58.75% to 172.51%, according to the DOC.

Global Crude Steel Production Rises

According to the World Steel Association’s monthly production report, global crude steel production jumped 5.8% year over year in July.

The 64 countries reporting to the World Steel Association produced 154.6 million tons (MT) in July.