EuroWire January 2017

Transatlantic cable

Scott Patterson, who covers nancial regulation for the Wall Street Journal from Washington, DC, reported on the contents of the senators’ letter, which asserted that Treasury’s Committee on Foreign Investment in the USA – which can recommend blocking or modifying foreign investments on national security grounds – should take into account when a foreign investment deal “creates potential for military know-how and sensitive technology to be transferred to China’s government.” Aleris, which has 14 plants around the world and annual revenue of about $3 billion, has supplied aluminium plate used by the American military, including for armoured vehicles. As reported by Mr Patterson, an Aleris spokesman said less than one per cent of the company’s 2015 volume went to defence applications, none of which is produced in the USA. A Zhongwang spokeswoman said the deal “will bring in additional resources and capital” to Aleris, which will “continue to be run independently.” (“A Dozen US Senators Ask Treasury to Block Zhongwang Takeover of Aleris,” 2 nd November) † Based in eastern China, China Zhongwang is one of the world’s biggest makers of aluminium extrusions used to make goods such as car parts, appliances and window frames. Mr Patterson took note of earlier Wall Street Journal reporting on the company: † In September, China Zhongwang was the subject of a page-one article detailing allegations that rms linked to Mr Liu had routed aluminium through Mexico in an e ort to disguise its Chinese origin and avoid USA tari s. Mr Liu denied any connection to the Mexico metal. † Also in September, the Journal reported that the Commerce Department was looking into whether a New Jersey company, Aluminum Shapes LLC, had imported aluminium pallets from China Zhongwang and then fabricated it as a way around punitive tari s. Aluminum Shapes denied this, saying it was only storing the metal. Elsewhere in metals . . . † Copper will surge more than 40 per cent from this year through to 2020 as the global market swings to a shortage, according to Japan’s biggest producer. These views echo those of Citigroup Inc, the New York-based multinational investment banking and nancial services corporation. The metal essential for power generators and cables will average $7,000 a metric ton in four years, up from $4,800 in 2016 and $5,200 this year, Pan Paci c Copper Co said in a presentation on 3 rd October in Tokyo. The expectation is for demand to exceed supply by 52,000 tons in 2017 after a surplus of 110,000 tons last year, with shortfalls continuing through the end of the decade. As reported by Masumi Suga and Ichiro Suzuki of Bloomberg News (2 nd October), Citigroup said the previous week that it was optimistic on copper prices over the ensuing 12 months because new supply had reached capacity and demand had increased in China, the world’s biggest user. Copper was the worst-performing metal on the London Metal Exchange in the year through to September 2016 after mine output surged in the rst half. The Australian banking and nancial services corporation Macquarie Group Ltd cut its September forecasts on “persistent oversupply.” Dorothy Fabian USA Editor

Among his campaign pledges was to “bring back steel.” Additionally, his commitment to boosting infrastructure spending brightens the outlook for American steel. Much steel will be needed for all those new roads and bridges, locks and dams, airports and railways. According to a Morgan Stanley estimate cited by S&P Global Platts , candidate Trump’s $550 billion stimulus plan would increase demand by 20 per cent annually for ve years. The calculation is for an incremental 22 million tons of steel demand for each year the programme is in e ect. Getting a huge infrastructure programme through Congress is no easy matter. Passage was denied President Barack Obama for years by Republicans, who still command a majority in both houses. But Mr Balcerek thinks it will likely be di erent now. He recalled the surprising move to open USA relations with Red China proposed in 1972 by President Richard Nixon, a Republican. Could a left-leaning Democratic president have achieved the historic breakthrough? Never. In that period of intense anti-communist fervour in the USA, only the hard-liner Mr Nixon, a reliably old-school crusader against communism, could muster the popular support su cient to realise his purpose. † Mr Balcerek sees a “Nixon-to-China situation” in the making now. He asserted that a Republican – and only a Republican – could push massive infrastructure spending through a Republican Congress, something politicians of all stripes know “in the back of their minds” is the single best way to help their country. And Mr Trump is a Republican, if of fairly recent provenance. Moreover, wrote Mr Balcerek in S&P Global Platts , “Trump is a builder, so construction is something he understands.” Protesting a Chinese company’s bid for a Cleveland area aluminium maker, lawmakers assert injury to America’s industrial base In a 2 nd November letter addressed to Treasury Secretary Jack Lew, a dozen US senators asked the Obama administration to block a Chinese company’s $1.1 billion bid to take over a USA aluminium manufacturer. The senators said the deal should be rejected because it would “directly undermine [our] national security, including by jeopardising the USA’s manufacturing base for sensitive technologies.” Zhongwang USA LLC in August had agreed to buy Aleris Corp (Beachwood, Ohio) from its private-equity owners in a deal that would mark the highest price ever paid by a Chinese rm for an American metals producer. Zhongwang USA is an investment company owned by Zhongwang International Group Ltd, the parent company of China Zhongwang. Liu Zhongtian, who controls Zhongwang USA and is also founder and chairman of Chinese aluminium giant China Zhongwang Holdings Ltd, has said the deal would o er a “complementary business foothold”for his operations in America. Aluminium

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January 2017