Battery Metals

American companies looking for a way out of punishing steel tariffs say they’re trapped in a bureaucratic nightmare.
As they seek exemptions from the tariffs, which have sharply raised costs, these companies describe a lengthy, opaque review process. They say the uncertainty is already hurting their businesses and may cost them jobs.

Companies had filed more than 20,000 exemption requests through last week, arguing that they depend on imported steel and that domestic producers can’t fill the gap. The Commerce Department had announced a final ruling on only 98 of them.

“One of the frustrations is just not knowing,” said Rick Huether, whose family has run Independent Can Company, a Maryland can maker, since 1948.

Complicating the process, large steel companies like US Steel (X) and Nucor (NUE) have tried to block many requests at the last minute, giving businesses that want exemptions little or no time to respond.

“There’s no particular opportunity to go back and say they’re wrong,” said Alexander Schaefer, a partner at the Washington law firm Crowell & Moring representing roughly a dozen companies that have filed exclusion requests.

Because of the delay, workers whose jobs could be at risk are stuck in limbo.

The nation’s largest nail manufacturer, Mid-Continent Nail, laid off 60 of its 500 workers last week because of increased steel costs. The company is in danger of shutting production by Labor Day unless the Commerce Department grants it a tariff exclusion, company spokesperson James Glassman told CNN’s Poppy Harlow on Tuesday.

President Donald Trump frames his trade philosophy as “America first.” Trade policy itself is not always so clear-cut. A tariff that helps one company can hurt another, including in the United States.

Trump’s effort to protect the American steel industry is hurting many companies that rely on steel and aluminum, often imported at lower cost. An activist trade policy means picking winners and losers, even if indirectly. Some of those losers are American companies.

“I like Trump’s ideas. I don’t like his tactics,” Huether said. Saving one job in manufacturing could cost many more at other companies, he added.

An enormous ‘chore’

The Commerce Department granted its first exclusions for steel tariffs last week. Seven companies, including razor maker Schick Manufacturing, were told they didn’t need to pay the tariffs when importing certain components.

Trump imposed the tariffs on steel and aluminum imports using a little-known national security provision in a 1962 trade law. Because that provision is rarely used, both the Commerce Department and companies have to navigate an unusual exclusion process.

Commerce Secretary Wilbur Ross said in a press release that the exclusions issued prove his agency is “taking a balanced approach” to the tariffs, and will continue to protect both downstream industries and national security.

Still, the agency has yet to make final determinations on thousands of requests. Last week’s decisions covered fewer than 100 requests — 56 denials and 42 approvals.

Companies generally need to make numerous submissions, because the forms themselves are specific. For example, if a company buys three sizes of steel coil from a producer in South Korea, it must file three separate exclusion requests.

Ross acknowledged “the magnitude of the chore” at a hearing before the Senate Finance Committee last week, and said the agency is getting faster. He noted that the Commerce Department has been granted $1 million to hire more employees to help.

The Commerce Department declined to comment beyond Ross’ remarks.

Big steel companies intervene

The agency has said it will typically grant exclusions if companies can’t get steel domestically and there aren’t “overriding” national security concerns.

But the process is not straightforward, and the Commerce Department has not provided further insight on what it looks for as it evaluates requests.

The denials issued to 11 companies last week provide scant information about why the requests weren’t approved, according to a review of the denial letters, which have been posted online by the Commerce Department.

Some companies whose requests were rejected faced objections from US steel producers, which claimed they could meet demand.

Seneca Foods, which has filed at least three exclusion requests, said in one petition in April that it needed steel from China to make fruit and vegetable cans, because domestic supply is insufficient and of lower quality.

US Steel (X) filed a rebuttal, arguing it could supply the steel in question. The objection was posted online by the government one day after the 30-day comment period for Seneca’s request ended. At that point, it was too late for the company to respond.

The Commerce Department subsequently denied Seneca’s exclusion request. The rejection letter said the application was incomplete, but the Commerce Department didn’t specify what was wrong.

“The requester has not sufficiently addressed the reporting requirements specified in the form,” the denial letter said.

Seneca Foods did not respond to requests for comment. A spokesperson for US Steel said the company is “opposing product exclusion requests for products we produce.”

Companies can’t appeal after they are denied exclusions, but they can file new requests. But that opens the door to fresh problems.

New requests restart the clock, and companies that are granted exclusions are only reimbursed for the tariffs they have to pay during the review process. They don’t make back money they lost during any previous review periods, according to Crowell & Moring’s Schaefer.

Schick was granted exclusion requests for steel razor blades from Japan and Sweden. The Commerce Department found that the products were “not produced in the United States in a sufficient and reasonably available amount or of a satisfactory quality,” according to a letter explaining the decision. The agency also found “no overriding national security concerns.”

The flood of requests from U.S. manufacturers with the Commerce Department to exempt them from the Trump administration’s hefty tariffs on steel and aluminum imports is exposing competitive information to rivals, customers and U.S. metal producers.

The tariff exemptions process is a new front in a battle between U.S. steel and aluminum consumers, fighting to keep prices for those metals down, and U.S. metal producers which argue that foreign rivals have kept prices low with unfair trading practices.

So far, over 22,500 applications for exemptions have landed in Washington and many more arrive each day. Over 4,000 objections have been filed, which is also expected to grow.

Only 98 applications have been processed as of last week, and of those, only 42 were approved, according to the Commerce Department.

Companies are required to fill out a five-page form for each type of product it imports that details everything from the chemical composition of the metal and the volumes they use to its strength and where they are currently buying it overseas.

Those are details nearly every manufacturer considers highly proprietary, since it can be used to assess their cost structure. Competitors can use such insights to tell customers that the other company is likely to face supply shortages or is about to sharply raise prices.

Greenfield Industries Inc, a subsidiary of China’s TDC Cutting Tools Inc in Seneca, South Carolina, has filed 1,176 requests to exempt the various types of specialty steel it imports from China to make cutting tools at its 330-employee U.S. operation.

In one application, for instance, Greenfield states “the sole U.S. producer of high speed steel material appropriate for cutting tools is not currently ramping up any production to expand this aspect of their business and has not shown any interest in quoting new business.”

The applications give a roadmap to domestic metal producers seeking to block an exemption entirely. U.S. steel makers may file objections, each three pages long, to make the case that they can provide the metal to a customer instead of that customer using an overseas supplier.

Nucor Corp. (NUE.N), the Charlotte-based steelmaker, is among those filing objections.

“We are seeing exclusion requests where the volume being requested far exceeds the entity’s actual consumption or capacity,” said Katherine Miller, a Nucor spokeswoman.

She added that one request was for 30-times more volume than the company’s capacity.

One reason a company might exaggerate their needs is that the system does not define clearly what it means for a product to be available from a domestic source. Many applications note that, while a metal is available domestically, it’s not produced in the quantity required by domestic metal consumers.

Cost is not a reason for metals consumers to get relief. If a domestic producer says it can supply a product, no matter the price, it can potentially block an exemption request.

Other big steelmakers as well as other metal producers and processors, including United States Steel Corp (X.N) and AK Steel Holding Corp (AKS.N), are also filing objections. U.S. Steel referred inquiries to the company’s public statements, which have welcomed the tariffs, while AK Steel declined to discuss the exclusion process or their objections.

NLMK Pennsylvania LLC, a subsidiary of Russia’s NLMK Group which imports Russian-made steel slabs and rolls them into coils at its plant in Farrell, Pennsylvania, filed an application that says, in part, “our (U.S.) competitors consume slab they make for their internal needs and have no excess capacity available for sale on a consistent, stable basis.”

Nucor objected, stating there are “adequate supplies” of domestic steel slab and that “access to low-priced imported steel is not a sufficient basis for an exclusion.”

NLMK’s CEO Bob Miller told Reuters the objection from Nucor is “anti-competitive,” noting that Nucor is saying they make a product that can be used as a substitute for steel slab — the hot and cold-rolled coils of steel that both companies sell to end customers.

“So they’re basically saying they should have their customers buy hot and cold-rolled coils from us — and let NLMK go out of business,” said Miller, who also does not like that there’s no way to “rebut an objection.”

“It’s a total lack of due process,” he said.

Nucor did not wish to comment on their objection beyond their filing.

“GREAT SALES TOOL”

A review of filings by Reuters show how competitors are jumping into the fray.

Barry Zekelman, CEO of Chicago-based Zekelman Industries, a privately held maker of pipe and tube, estimates his company has filed a “couple dozen” objections and that he views the process as a “great sales tool.” He said the filings often show that the real motive for imports is to buy goods more cheaply offshore from low-cost countries like Turkey, Brazil and China.

Zekelman said it is too early to tell how much business he will gain from the process, but he expects those gains to come in the second half of this year.

The makeup of the metal only complicates the application process. Steel is not a single commodity, but rather a complex market made up of hundreds of different grades and types of metal that vary in terms of ease of stamping, resistance to breakage and other properties. For many uses, a new steel supplier has to be certified to assure that the steel meets the end-customer’s specifications.

Another issue is staffing. The Commerce Department is rushing to hire workers to handle the applications, which has many applicants worrying that the government workers will be ill-prepared to sift through the arguments.

“The concern is that these requests aren’t properly vetted” by people with expertise in the complexities of steel and aluminum production, said Alexander Russ, director of international and regulatory affairs at the Association of Equipment Manufacturers, a trade group.

“It’s bleak to say the least for companies trying to get an exclusion,” said Russ.

Tata Steel and ThyssenKrupp are close to agreeing terms on a merger that will create Europe’s second-biggest steelmaker, after Arcelor Mittal.

Senior City sources said the deal – which has been under negotiation for more than a year – could be concluded in the next few days.

It will see Tata Steel’s UK plants merged into a pan-European venture with annual sales of about £13bn.

These include the politically sensitive Port Talbot works in Wales.

Talks have been held up while the future of Tata Steel’s enormous pension scheme – which includes the former British Steel retirement plan – was decided.

Three months ago, the pensions regulator approved the creation of a new pension fund after Tata agreed to a £550m top-up.

More recently, ThyssenKrupp has faced pressure from shareholders to secure better terms from Tata.

Elliott Management, the aggressive New York hedge fund that has emerged as a key player in big European takeover battles, recently wrote to Thyssen’s board saying that Tata’s recent financial results did not warrant it receiving a half-share in the combined business.

Steel wheels

The deal marks another change of ownership for Britain’s steel industry, which once led the world, but has shrunk rapidly in the face of cheaper international competition.

Most of the industry was nationalised after World War Two, then re-privatised in 1988 as the British Steel Corporation.

It became Corus after a merger with a Dutch rival, Koninklijke Hoogovens, in 1999, and was bought by India’s Tata Steel in 2006.

The British Steel name was revived two years ago, when investment fund Greybull Capital bought Tata Steel’s Scunthorpe-based long-products division.

Tata and ThyssenKrupp have both said they are committed to the Port Talbot plant, which is Britain’s largest remaining steel plant.

But steel industry experts said there remained question marks over the site’s long-term future.

The flood of requests from U.S. manufacturers with the Commerce Department to exempt them from the Trump administration’s hefty tariffs on steel and aluminum imports is exposing competitive information to rivals, customers and U.S. metal producers.

The tariff exemptions process is a new front in a battle between U.S. steel and aluminum consumers, fighting to keep prices for those metals down, and U.S. metal producers which argue that foreign rivals have kept prices low with unfair trading practices.

So far, over 22,500 applications for exemptions have landed in Washington and many more arrive each day. Over 4,000 objections have been filed, which is also expected to grow.

Only 98 applications have been processed as of last week, and of those, only 42 were approved, according to the Commerce Department.

Companies are required to fill out a five-page form for each type of product it imports that details everything from the chemical composition of the metal and the volumes they use to its strength and where they are currently buying it overseas.

Those are details nearly every manufacturer considers highly proprietary, since it can be used to assess their cost structure. Competitors can use such insights to tell customers that the other company is likely to face supply shortages or is about to sharply raise prices.

Greenfield Industries Inc, a subsidiary of China’s TDC Cutting Tools Inc in Seneca, South Carolina, has filed 1,176 requests to exempt the various types of specialty steel it imports from China to make cutting tools at its 330-employee U.S. operation.

In one application, for instance, Greenfield states “the sole U.S. producer of high speed steel material appropriate for cutting tools is not currently ramping up any production to expand this aspect of their business and has not shown any interest in quoting new business.”

The applications give a roadmap to domestic metal producers seeking to block an exemption entirely. U.S. steel makers may file objections, each three pages long, to make the case that they can provide the metal to a customer instead of that customer using an overseas supplier.

Nucor Corp. (NUE.N), the Charlotte-based steelmaker, is among those filing objections.

“We are seeing exclusion requests where the volume being requested far exceeds the entity’s actual consumption or capacity,” said Katherine Miller, a Nucor spokeswoman.

She added that one request was for 30-times more volume than the company’s capacity.

One reason a company might exaggerate their needs is that the system does not define clearly what it means for a product to be available from a domestic source. Many applications note that, while a metal is available domestically, it’s not produced in the quantity required by domestic metal consumers.

Cost is not a reason for metals consumers to get relief. If a domestic producer says it can supply a product, no matter the price, it can potentially block an exemption request.

Other big steelmakers as well as other metal producers and processors, including United States Steel Corp (X.N) and AK Steel Holding Corp (AKS.N), are also filing objections. U.S. Steel referred inquiries to the company’s public statements, which have welcomed the tariffs, while AK Steel declined to discuss the exclusion process or their objections.

NLMK Pennsylvania LLC, a subsidiary of Russia’s NLMK Group which imports Russian-made steel slabs and rolls them into coils at its plant in Farrell, Pennsylvania, filed an application that says, in part, “our (U.S.) competitors consume slab they make for their internal needs and have no excess capacity available for sale on a consistent, stable basis.”

Nucor objected, stating there are “adequate supplies” of domestic steel slab and that “access to low-priced imported steel is not a sufficient basis for an exclusion.”

A review of filings by Reuters show how competitors are jumping into the fray.

Barry Zekelman, CEO of Chicago-based Zekelman Industries, a privately held maker of pipe and tube, estimates his company has filed a “couple dozen” objections and that he views the process as a “great sales tool.” He said the filings often show that the real motive for imports is to buy goods more cheaply offshore from low-cost countries like Turkey, Brazil and China.

Zekelman said it is too early to tell how much business he will gain from the process, but he expects those gains to come in the second half of this year.

The makeup of the metal only complicates the application process. Steel is not a single commodity, but rather a complex market made up of hundreds of different grades and types of metal that vary in terms of ease of stamping, resistance to breakage and other properties. For many uses, a new steel supplier has to be certified to assure that the steel meets the end-customer’s specifications.

Another issue is staffing. The Commerce Department is rushing to hire workers to handle the applications, which has many applicants worrying that the government workers will be ill-prepared to sift through the arguments.

“The concern is that these requests aren’t properly vetted” by people with expertise in the complexities of steel and aluminum production, said Alexander Russ, director of international and regulatory affairs at the Association of Equipment Manufacturers, a trade group.

“It’s bleak to say the least for companies trying to get an exclusion,” said Russ.

ISLAMABAD: Oil refineries have protested against the government’s directive to reduce the use of additives in motor gasoline aimed at boosting its quality, terming it a unilateral decision taken without taking them on board, which may lead to a sharp drop in production.

The former Pakistan Muslim League-Nawaz (PML-N) government, whose term ended on May 31, had notified that the use of manganese in petrol would be phased out, but the refineries were not ready to produce higher-quality petrol.

Refineries need around five years to install Continuous Catalytic Reforming (CCR) units for the production of high-quality petrol without adding manganese, say industry sources. It also requires investment of around $5 billion.

In November 2016, the government decided to upgrade the quality of motor gasoline (petrol) by introducing three new grades namely Research Octane Number (RON) 92, 95 and 97 that would replace the old RON 87. Domestic refineries were asked to produce RON 90 gasoline.

Earlier, the Oil Companies Advisory Committee (OCAC) – a grouping of oil processing and marketing companies – pointed out that refineries had installed isomerisation units on the government’s directive to produce Euro-II-compliant RON 87 gasoline and further upgrade was not immediately possible.

The committee recommended that manganese quantity in local and imported environment-friendly Euro-II gasoline should be limited to 54 milligrammes per litre (mg/l) as no addition of ferrocene or any other iron-based octane blending additive was permitted. Ogra supported the recommendations.

However, a committee, constituted by the PML-N government, decided on May 24, 2018 to restrict the use of manganese to 40 mg/l with immediate effect to October 31, 2018 and later to 24 mg/l effective November 1, 2018 to April 30, 2019. However, the decision sparked concern among the refineries.

Industry sources caution the production of refineries will drop by 1.5 million tons per annum in the wake of lower manganese ceiling and pressure on foreign currency reserves will mount as the country will import more petrol to meet consumer needs.

Oil refineries suggest the current limit of 40 mg/l, which would remain in force till the end of October, should be extended for five years in order to give them reasonable time for adopting technology for plant upgrade.

In a letter addressed to the director general oil of Petroleum Division, Attock Refinery Limited (ARL) Chief Executive Officer M Adil Khatak said ARL had serious reservations about what he said was a unilateral decision on the use of manganese and the unrealistic timelines.

“This would seriously impact and restrict motor gasoline production by local refineries and put unnecessary strain on the country’s fast depleting foreign exchange reserves,” he pointed out.

According to Khatak, ARL’s motor gasoline production alone will go down by around 40,000 to 50,000 tons per annum despite making a huge investment recently in a commercial isomerisation unit or the refinery expansion project.

“Even if any limits and timelines were to be specified, it should have been with consensus of all stakeholders,” he said.

He suggested that the current manganese limit of 40 mg/l should continue for at least five years, giving refineries reasonable time for applying new technology for upgrading their projects.

“Drastically reducing manganese content to 24 mg/l from November 1, 2018 to April 30, 2019 and then completely phasing it out is not a practical option for the refineries as this would adversely impact them financially when they are burdened with repayments for the last upgrade.”

“In spite of our reservations, we have started using 40 mg/l in our motor gasoline blending in line with the Petroleum Division’s directive till the matter of timelines is settled, however, due to a high inventory of petrol prior to the issuance of the above notification and existing level of manganese in our tanks and system, it would not be practically possible to use manganese in prescribed limits.”

According to Khatak, the refinery may take at least two to three months to completely dispose of the stocks in order to meet the required manganese specification for which necessary relaxation may be allowed.

According to the OCAC, MMT is a manganese-based fuel additive used for lead replacement as it is the only octane booster which enables old car engines to run with unleaded fuel.

Ferromanganese is a ferroalloy that has high content of manganese; it is manufactured by heating mixture of oxides Fe2O3 and MnO2 along with carbon, which is usually coke and coal in an electric arc furnace or blast furnace. In the furnace, the oxides go through carbothermal reduction, hence, producing ferromanganese which is used as deoxidizer for steel. The major deposits of ferromanganese are found abundant in South Africa, Mexico, France, and Australia among others.

One of the major drivers of ferromanganese market is the growing demand of steel across the globe. Moreover, increasing demand from the aluminum alloy sectors is also expected to fuel the growth of ferromanganese market. Ferromanganese has proved to be essential to steel and iron production owing to their deoxidizing, sulfur fixing and alloying properties. The major consumption of ferromanganese is reported from the steelmaking segment in the U.S. It also has application in aluminum alloys and is used in dry cell batteries in the form of oxide.

Ferromanganese is segmented into two types namely, high carbon ferromanganese and medium carbon ferromanganese. The primary features of this element include good anti-oxidant properties, excellent chemical composition and low melting point. High carbon ferromanganese is an excellent antioxidant with high carbon content and is heat resistant. It has desulphurizing and anti-oxidant properties that has applications in metallurgy, chemical industry and steel industry among others.

Due to environmental health concerns and health hazards, ferromanganese market is expected to experience threat to some extent. High level of exposure to ferromanganese in drinking water is allied with reduced intelligence quotients and intellectual impairment in children. In case of human health, inhalation or ingestion of ferromanganese leads to a rare neurological disorder known as Manganism, which is a restraint to the growing ferromanganese market. South Africa is known to have abundant ferromanganese resources and some trace deposits in India, China, and Australia among others. China is estimated to be the leading producer of ferromanganese among others economies globally but it still relies on imports from South Africa and Ukraine.

The Indian Ferro Alloy Producers Association (IFPA), represents the manufactures of noble and bulk Ferro Alloys in the country. It was established as an auxiliary industry to meet the growing demands and need of the domestic steel industry. This association was established in the year 1961 to take care of the interests of the members of this association. This association has been promoting the interest familiar to the Ferro Alloy producing company, developing synergy and cooperation among the producers in India which leads to the growth of steel industry thereby leading to increase in the demand for ferromanganese in the market.