FOCUS: Trump’s new tariffs unsettle Chinese minor metals, ferro-alloys markets

Fresh concerns about the impact of the escalating US-China trade war have unsettled minor metals and ferro-alloys markets after the United States announced it is imposing new tariffs on $200 billion worth of Chinese goods.

The higher import taxes will apply to almost 6,000 items – the biggest round of US tariffs so far.

Minor metals and ferro-alloys that appear on the new list of tariffs include: bismuth, cadmium, gallium, germanium, germanium dioxide, selenium, tellurium, silicon, magnesium, mercury, arsenic, rhenium, hafnium, ferro-tungsten, ferro-vanadium, ferro-silicon, ferro-manganese, vanadium pentoxide, titanium, cobalt sulfate, cobalt metal, cobalt tetroxide

The taxes will take effect from September 24, starting at 10% and increasing to 25% from the start of next year unless the two countries reach a deal.

The US first imposed sweeping tariffs under Section 232 on $60 billion of Chinese products in March, including 25% duties on steel and 10% on aluminium.

Three months later, it imposed a 25% tariff on a further $50 billion worth of Chinese imports, and then on August 7 unveiled a list of $16 billion worth of Chinese imports to be hit with another 25% tariff.

Throughout this process, China has resolutely met each tariff with one of its own against imports of US goods.

“It’s hard to gauge how this will affect the markets right now,” an indium trader in the US said.

“It all depends on how busy the fourth quarter buying is and how much stock people are holding,” the trader added.

“But there is not a lot of spot material available in the US right now,” a second trader said, explaining that minor metals participants had been confident their markets would not be affected by the sanctions due to the importance of imports to the US in those markets. 

Activity in minor metal markets around the world had already slowed in the past couple of weeks while participants awaited a decision from US President Donald Trump’s administration as to whether a number of minor metals produced by China will be subject to import tariffs.

Bismuth to take a hit
Among minor metals, bismuth is set to be particularly affected by the new tariffs, market participants in China said. Around 90% of bismuth imported into the US comes from China, a minor metals producer in China told Metal Bulletin.

Bismuth prices have been already weakening for the past few months in anticipation of the US tariffs. Metal Bulletin last assessed in-warehouse bismuth prices at $4-4.60 per lb. The weekly assessment had been at $4.50-5.05 per lb at the start of June.

With the new tariffs in place, Chinese sellers will have to adjust their prices even lower to compete with sellers outside of China and keep their customers in the US, market sources in China added.

US buyers can look to Canada, South America, some parts of Europe and South East Asia, depending on the metal, to circumvent an increase in the duty-paid price of Chinese material, some market participants in the US and China said.

Contingency plans
Some short-term contingency plans to avoid tariffs had already been put in place ahead of the latest tariff announcement.

Traders started to ship indium to the US in anticipation of the official announcement of the tariffs, Metal Bulletin reported in late August.

The germanium market had also anticipated the new tariffs, sources said. “Before the announcement of the US tariff list on Chinese products, US buyers had bought some cargoes in previous months,” a major germanium producer/exporter told Metal Bulletin.

“China is the sole supplier for germanium ingot, and if US consumers have to use this cargo, they will have to accept the tariff increase. But for germanium dioxide, there are other options except China, so the exports of germanium dioxide will be affected more than germanium ingot,” the above exporter added.

The other scenario is that Chinese exporters would divert their cargoes to European markets instead.

“We haven’t considered the impact of US tariff as majority of the cargoes we buy from China are exported to Europe,” an international trader said.

“For some minor metals from China, they have a larger market share in Europe than in the US,” he added.

This scenario could result in greater competition in the European market, which may weigh on prices there.

Market participants have also pointed to the possibility that Chinese producers will conduct the processing of minor metals and ferro-alloys in other countries in Southeast Asia to avoid the US tariff.

“It is an option but I don’t think it is easy to put into practice,” the same international trader said.

Possible impact on prices
The new round of tariffs will lead to higher prices in the short term, market participants in the US said, because volumes being moved into the US will be quickly depleted when tariffs are applied to their replacement units.

“There is a lot of uncertainty for now and we will have to see how it all pans out in the next couple of weeks,” a second US trader said.

But the price rally will be short-lived, market sources said. In the long term, Chinese exporters are more likely to lower their offer prices to partially offset the tariff cost, a Chinese trader said.

“Chances that Chinese exporters would share the tariff costs with the US buyers, or even take the costs completely on themselves,” the trader said. “If they don’t lower the quotations, they might lose market share.”

Anna Xu contributed to this article.