Battery Metals

Manufacturers in the Tri-State area, like their counterparts across the country, continue to question how tariffs on imported steel will impact their operations, particularly if demand skyrockets for domestic steel and wait times increase.

After months of cautioning new tariffs could be coming, President Donald J. Trump’s administration in June implemented a 25 percent tariff on steel and 10 percent tariff on aluminum.

The effect of the measures remains to be seen.

JLG Industries, which operates several plants and offices in Franklin County, Pa., and Washington County, Md., reported it is experiencing an impact not only directly due to tariffs, but also indirectly through increased domestic steel prices that developed as tariffs were being created.

“We are paying tariffs on some imported steel, but at the same time, domestic steel prices have increased 50 percent in recent months because of tariffs,” said Richard Wright, a spokesman for JLG’s access equipment segment. “The increase in steel price has a significant impact on our product cost, makes us less competitive selling U.S. manufactured products globally and puts U.S. jobs at risk.”

“At present, we’re not seeing an impact on demand (from customers), and therefore, there is no impact on employment,” Volvo Group corporate spokesman John Mies wrote in an email.

Volvo Group, parent company of the powertrain plant near Hagerstown, is seeing increased prices for certain specialty steel products, but most of the steel is purchased by suppliers rather than by the business directly, Mies said.

Franklin County (Pa.) Area Development Corp. President L. Michael Ross said he hasn’t heard much on the issue from large manufacturers in the county.

“The feedback we’ve gotten is they’re kind of in a holding pattern because they’re not sure what the final outcome is going to be,” Ross said.

One direct impact involves the construction of a 50,000-square-foot building FCADC is building in Wharf Road Industrial Park near Waynesboro, Pa. That building is designated for Jamison Door, which is moving one of its three facilities there from Washington County.

The building’s general construction contractor uses a Canadian steel supplier, which expressed concerns about tariffs months ago, Ross said.

“We had to make a very early commitment on steel,” he said.

For Jamison Door itself, the price tag is now higher for its custom-made, roll-up doors.

“Our prices have had to increase because the costs of steel and aluminum have increased,” said John T. Williams, Jamison’s chairman and chief executive officer.

He declined to enumerate what those increases are.

Williams, who estimated more than 90 percent of the company’s steel is domestically produced, is still watching markets to evaluate the overall impact. He exports some doors to Canada and fears being less competitive there due to retaliatory tariffs.

“I believe strongly in free trade, and I also believe the U.S. has not been as aggressive as it needed to be in the past in getting the reductions from other countries,” Williams said, saying he sees potential for the current negotiations between the United States and other countries to have a good end result for the country.

Ross said the economy is strongly positioned.

“I like to believe they’re not going to do anything to jeopardize it,” he said.

The Commerce Department reports receiving tens of thousands of applications for products seeking exemptions to metal tariffs.

Neither Volvo Group nor Jamison Door have applied for exemptions.

Wright declined to say whether JLG has applied for exemptions. He said the company “uses very little imported steel.”

A representative of Johnson Controls, which has a plant in Waynesboro, declined to comment for this story. A spokesman for Manitowoc did not respond to messages.

Turkey’s crude steel production rose 4.3 percent on an annual basis in the first five months of the year, reaching 15.9 million tons, the Turkish Steel Producers’ Association (TCUD) reported on July 7.

In May, Turkey’s crude steel production was up by 0.5 percent, year-on-year, reaching 3.3 million tons.

Turkey’s steel exports decreased 3.9 percent annually to reach 8.1 million tons in the first five months of 2018. The value of steel exports surged 20.2 percent to $6.7 billion in the period.

During the same period, Turkey’s steel imports increased 18 percent to 7.5 million tons yearly, while the value of these imports rose 35 percent to $6.2 billion.

According to the Turkish Exporters’ Assembly (TİM), Turkey’s exports of steel products climbed 34 percent to $1.2 billion, year-on-year, in June.

Gazi Bilgin, acting secretary-general of the TCUD, told state=run Anadolu Agency that U.S. President Donald Trump’s decision to impose a 25 percent tariff on imported iron and steel affected Turkey’s exports.

After Trump’s controversial decision, steel exports to the country fell 30 percent to $71.5 million in June, and also dropped 42 percent to $421 million in the first six months of the year.

India’s crude steel output grew six per cent to 26 million tonne (MT) in the first quarter of the ongoing financial year, according to official data. The country had produced 24.5 MT of crude steel during April-June, 2017-18, the Joint Plant Committee (JPC) said in its latest report.

The JPC, under Ministry of Steel, collects and maintains data on the domestic iron and steel sector.

“During April-June, crude steel production was 26.08 MT (provisional), a growth of 6.2 per cent over same period of last year,” the report said.

State-run SAIL, Rashtriya Ispat Nigam Ltd (RINL), Tata Steel, Essar Steel, JSW Steel and Jindal Steel and Power Ltd (JSPL) together produced 15.6 MT during the three-month period, registering a growth of 12 per cent over the year-ago period.

During the reported quarter, the output of hot metal was at 17.88 MT as compared to 16.10 MT during the year-ago period, an increase of 11 per cent.

The output of pig iron rose 5 per cent to 2.58 MT from 2.45 MT in April-June of 2017-18.

According to World Steel Organisation (worldsteel), India outstripped Japan to become the second largest steel producer as its steel output grew 3.43 per cent to 8.43 MT in February against 8.29 MT of the latter.

India has set a target of producing 300 MT crude steel by 2030 with an investment of Rs 10 lakh crore.

Steel Dynamics, Inc. (NASDAQ/GS: STLD) announced the completion of the acquisition of Heartland Steel Processing, LLC (formerly known as Companhia Siderurgica Nacional, LLC). Located in Terre Haute, Indiana, Heartland produces various types of higher-margin, flat roll steel by further processing hot roll coils into pickle and oil, cold roll, and galvanized products. As previously announced, the purchase price for Heartland was $400 million in cash, inclusive of $60 million of normalized working capital, and subject to customary transaction purchase price adjustments. The transaction was funded with available cash, with an expectation of near-term earnings and cash flow per share accretion.

“We enthusiastically welcome the employees and existing customers of Heartland into the Steel Dynamics family,” stated Mark D. Millett, President and Chief Executive Officer. “The successful completion of the Heartland acquisition represents another step toward one of our growth initiatives, to further increase value-added product and market diversification. We believe Heartland, together with our Midwest flat roll operations, will provide numerous synergies and a tremendous amount of operating flexibility and optionality. We look forward to bringing this strategy to fruition.”

The acquisition will expand Steel Dynamics’ annual flat roll steel shipping capacity to 8.4 million tons and total steel shipping capability to 12.4 million tons. The additional exposure to lighter-gauge and greater width flat roll steel offerings will broaden the Company’s value-added product portfolio, enhancing Steel Dynamics position as a leading North American steel producer.

The United States made 7.1 million tons of steel in May, a 3 percent year-over-year increase.

The Brussels, Belgium-based World Steel Association reported that the 64 steel-producing countries made 154.9 million tons in May, up 6.6 percent from May 2017. Steel mills worldwide operated at a utilization capacity of 77.7 percent, which is 4.2 percentage points higher than in May 2017 and 1 percentage points higher than in April.

China again made more than 10 times as much steel as the United States in May, according to the World Steel Association. It produced 81.1 million tons of steel that month, an 8.9 percent year-over-year jump.

The United States also was eclipsed in steel production in March by India, which produced 8.8 million tons, and Japan, which made 9.1 million tons.

In May, steel production rose by 3 percent in South Korea, 3.7 percent in Italy, 7 percent in Spain, 0.5 percent in Turkey, and 2.9 percent in Ukraine.

Steel output fell by 6.5 percent in France and 8.6 percent in Brazil in May.

On the evening of March 15, iron ore mining leases in Goa were thrown out of operations. The government there sealed mining operations of 88 leases after the Supreme Court ruled their second renewal as illegal. The apex court order has brought down the curtains on the flourishing five-decade old mining industry in Goa barring an interregnum of nearly three years when the same court suspended mining after the recommendations of the Justice M B Shah Commission.

The probe panel in its findings had claimed mining scam of the order of Rs 35,000 crore by Goa’s miners between 2005 and 2012. Acting upon the panel’s findings, the Supreme Court slapped a mining ban on the iron ore rich state in October 2012.

The ban on mining was lifted in April 2014 by the court with some riders. Goa’s mining cap was pegged at 20 million tonnes annually despite the industry capable of delivering double the figure.

The grim situation adversely hit the operations of Vedanta Group owned Sesa Goa and other large standalone miners. Adding to their woes, the Supreme Court order came as a shocker.

The court quashed the operations of all 88 iron ore leases operating under second renewal after March 15. Goa’s mining industry was pushed to the deathbed after this order.

Mining complements tourism in Goa’s revenue earnings. Collapse of mining activity means nearly paralysing the state’s economy. Some estimates peg the loss stemming from mining ban at Rs 3500 crore each year. If mining fails to revive, 2.5 lakh jobs are at stake. Goa has already witnessed street protests by the stakeholders.

No solution is in sight yet to defuse the mining crisis. The Supreme Court has declared that auctions are the only option to resurrect mining at those 88 leases. Stakeholders have sought the Prime Minister’s intervention to resolve the impasse. The Goa government is contemplating to file a review petition in the Supreme Court to allow mining of the 88 leases till auctions are finalised.

This will help save jobs and avoid revenue loss for the government apart from curbing unrest from closure of mines. The mining crisis has turned chaotic in the absence of chief minister Manohar Parrikar who was undergoing treatment in US when this report was filed. Mining contributes 20 per cent to Goa’s revenues.

Protests in the aftermath of the mining ban have taken an ugly turn as demonstrators made up by stakeholders dependent on mining, have blocked streets defying prohibitory orders of the government.

The fate of the 88 iron ore mines still hangs in the balance till their roadmap for auctions is prepared. Till then- revenues, jobs and exports and the state economy carrying the burden is in soup.

When Supreme Court pronounced those bold orders on mining in Goa and Odisha, few could realise the aftershocks. In Odisha, seven working iron ore and manganese mines went off the gear after they failed to pay the court ordered compensation by the December 31 deadline.

THE SUPREME COURT HAS DECLARED THAT AUCTIONS ARE THE ONLY OPTION TO RESURRECT MINING AT THOSE 88 LEASES. STAKEHOLDERS HAVE SOUGHT THE PRIME MINISTER’S INTERVENTION TO RESOLVE THE IMPASSE.

Three mines- Idcol, Serajuddin and Essel Mining later got the go ahead from the court to resume mining as their delayed payments were condoned. The restart of mines has spelt a bout of relief on iron ore supplies and prices which were disproportionately raised after fears of shortage of iron ore emanated from the mines closure.

Going by the Supreme Court order, the Odisha government raised a demand notice of compensation amounting to INR 17576.17 crore. It managed to collect about INR 12,000 crore. Now, the state government has taken to coercive action to collect arrears from the defaulting lessees. The directorate of mines has compiled a list of 56 errant miners whose leases run the risk of being annulled.

With the recommendation from the mines directorate in, notices are expected to be despatched to the miners for scrapping their leases. The government has also identified properties of mine defaulters for confiscation. Bank accounts would also be frozen to help make up the arrears in compensation.

Miners who are liable to face stern action include Sarada Mines, Mid East Integrated Steel, Geetarani Mohanty’s Tarini Minerals, RP Sao, Orissa Minerals Development Company (OMDC) and others. Together, these mines owe INR 7552 crore to the state government for violations of Environment (Protection) Act and Forest (Conservation) Act. Total compensation calculated by the government is assessed at INR 19174 crore for both the violations.

The miners in question would be served 60 days notices as to why their leases would not be cancelled. Action is being initiated by the Odisha government by invoking provisions of the Odisha Public Demands Recovery Act, 1962 to seize assets as the mining penalty is categorised under land dues.

Mining as an employment and revenue generating industry is in the throes of its worst crisis. With 17 key merchant mining leases due to lapse in Odisha by March 31, 2020, the deficit in iron ore production capacity is projected at 66 million tonnes.

The pan-India deficit due to expiry of merchant mines in other states is calculated at 85 million tonnes. The only advantage in iron ore mining from the Supreme Court orders has come in favour of Karnataka where the ceiling on production has been hiked from 30 to 35 million tonnes per year.

But, this capacity raise is not enough to meet the requirement of the end use industry, especially steel where annual capacity is envisaged at 300 million tonnes by 2030. Speeding up auctions of lapsing blocks is the ideal remedy.