EU threatens to impose tariffs on steel from China

Once again, no one is dealing with the problem that small and medium manufacturers have, that is, if you tarif the raw materials but not the finished goods, they get around the tarifs by supplying the finished product, a flashlight, whatever, at below our costs for the raw materials.

International Herald Tribune
The EU began an inquiry into whether Chinese exporters, including Baoshan Iron & Steel and Wuhan Iron & Steel, sell flat-rolled steel in the EU below cost, a practice known as dumping. The inquiry covers €1.2 billion, or $1.7 billion, of imports of hot-dipped metallic-coated steel.

The investigation will determine whether the steel “is being dumped and whether this dumping has caused injury,” the European Commission, the executive arm of the EU, said in the Official Journal.

The commission has nine months to decide whether to impose provisional anti-dumping duties for half a year and EU governments have 15 months to decide whether to apply “definitive” levies for five years.

Here’s another, similar article, from the Toronto Star, a local (to Toronto) newspaper.

EU officials have warned of a protectionist backlash if China doesn’t do more to open up to European exports. They’ve also asked that Beijing address the valuation of the yuan, which they say gives Chinese exporters an unfair price advantage.

Canadian/American currency exchange

I haven’t written about currency issues here. Mostly I write about general stamping issues. This posting is written more from a Canadian stamping perspective.

The drop in value of the US $ is really starting to hurt us Canadian manufacturers.

On the one hand, it’s nice to get your raw materials cheaper. For instance, copper isn’t hurting us nearly as much as you might think, since it’s basically valued in US $ and we’re buying it in Canadian.

On the other hand, exports are a big part of our economy. It’s hard to say, even for an individual company, what fraction of sales are exported, because not all are direct exports. Some products, especially small metal parts, the area we’re in, get combined with other things by another canadian company before being exported to the US.

But sales to the US are hurting. If we keep the US$ price, we are losing our markup. If we ask for the Canadian price, it varies from one shipment to the next, an unfamiliar situatior for most american customers, who reject the idea. Even if they don’t, it prices us out of the market when compared to similarly qualified US suppliers.

It’s going to be an intesting ride …

Copper Continues Recent Slump

Nasdaq news

Copper continued its recent slide on Friday in U.S. trading. December-stamped copper contracts were at $3,325, down 3.75 cents on the session. The red metal dropped more than 20 cents on the week.

The metal moved lower throughout the week as economic concerns in the U.S. continued. Since the metal is often used by builders in construction, economic growth or lack thereof often moves the copper market. Investors continued to mull the US Federal Reserve’s decision to lower its interest rates by 25 basis points to 4.5% on Wednesday.

Copper heads for 4th weekly advance

Bloomberg.com: Latin America
Copper headed for a fourth weekly advance in London as a strike by Peruvian workers cut production and on speculation a report will indicate economic growth in the U.S., the second-largest user of the metal. Lead gained to a record. A three-day strike by workers at a smelter and two mines owned by Southern Copper Corp. in Peru reduced output by 10 percent, Chief Executive Officer Oscar Gonzalez Rocha said yesterday.

The Motley Fool had this humorous comment. The effect for metal stampers, if they’re correct, is more price increases in copper.

So here’s the latest metal muddle. Workers at three of Southern Copper’s (NYSE: PCU) Mexican mines have been on strike since the end of July. Wednesday, their Peruvian brethren struck for the third time this year. This isn’t a knock on Southern Copper specifically. Dozens of Peruvian mining unions have agreed to a national strike beginning Nov. 5. Thus, these miner grievances are anything but minor.

Production outages, of course, support the price of copper as stockpiles fall. So it’s a great time to own a copper producer, so long as its operations aren’t being disrupted.

Material Prices

It’s been a while since I reported on material pricing.

At the end of May, there were reports of a fall in copper prices.

Well, yes and no.

Copper hit a high of about $3.75 US at the beginning of May, fell to a low of $3.20 in early June, but is as I write is back up to almost $3.60.

Other materials: zinc got up to $1.85 in the early days of May but is down to $1.55 at the moment.

Brass is an alloy of zinc and copper, so the price of brass will be a blend of the copper and zinc prices.

Nickel (the major component at the moment for stainless steel surcharges) has dropped from $24 in early May to a little over $15 now. However, I haven’t seen the prices change much yet, probably because the service centers still have stock at the old prices. Hopefully that will change soon.

Copper May Fall Next Week on Speculation China Demand Will Slow

bloomberg.com

Copper may fall next week on speculation that demand will slow in China, the largest buyer of the metal, following a surge in imports in the first quarter.

Yahoo Asia:
copper rebounded on Friday, but analysts think the overall trend of rising copper stocks and lower demand over coming months could pressure prices down further.

Copper futures shed 2.3%
China Daily
Copper futures in Shanghai fell by […] nearly 4 percent, by midday on Friday before closing […] down 2.3 percent from the previous close, because of growing investors’ concern about rising stocks of the industrial metal in China.

Copper Heads for Largest Weekly Drop in 3 Months

Bloomberg.com

Copper headed for its largest weekly decline in three months in London on speculation that demand growth will slow in China, the world’s biggest user. Nickel and zinc rose.

China’s copper imports probably slowed in April, said analysts including Kevin Norrish at Barclays Capital.

“The Chinese market is suffering temporary indigestion after the amount of material delivered into Shanghai in the first quarter,” Norrish said today by phone from London. “Some people expected them to buy this week when they returned to the market after the holiday, but that hasn’t happened.”

Material Pricing

Here’s a brief update on material pricing.

Zinc has now fallen from the $2 US/lb that it was late last year to about $1.50 US now. However, many platers buy zinc on contract, and so until their contracts run out, higher prices will prevail. By comparison, zinc was $0.50 in June of ’05

Copper is again on the rise. It got down as far as $2.50 in February, but is up around $3.30 now. A year ago it was $4.00, so it’s a bit off the peak, but not enough to feel comfortable.

Nickel is climbing and shows no sign of stopping. It’s currently about $22.75, up from $16 at the year boundary, from $8 a year ago, and $3 five years ago.

Zinc is used in almost every method of rust-proofing steel (except stainless steel). Nickel is used in stainless steel. Brass is a combination of zinc and copper.

Copper Extends Longest Rally Since May on Mine Disruptions

Bloomberg News
Copper prices rose in New York, extending a six-week rally that is the longest since May, on speculation that supplies will be disrupted at mines in Indonesia and Argentina.

Workers at the Grasberg mine in Indonesia plan a “rally” starting April 18 that will last until owner Freeport-McMoRan Copper & Gold Inc. agrees to raise wages, said Frans Pigome, who heads the local group behind the action. In Argentina, Xstrata Plc delayed some copper shipments after a flood disrupted rail services. Prices have risen 47 percent in the past 10 weeks.

The disruption of supply “only adds fuel to the bullish fire,” said Jim Wyckoff, senior markets analyst at TradingEducation.com in Wesley Chapel, Florida. “The market is technically and fundamentally bullish.”