Aurelia Butler

European manufacturers say Brussels is adding to their supply chain crisis after it rejected requests for a big increase in the amount of steel they can import without paying punitive 25 per cent tariffs.Despite high prices for steel amid supply constraints, the European Commission has opted for only a small rise in quota-free imports for the next 12 months, from 3 per cent of annual demand to 4 per cent. Business groups say factories could be forced to relocate from Europe if the tariffs are not scrapped soon.The EU’s “safeguard tariffs” were imposed in 2018 after then US president Donald Trump hit many countries with duties of 25 per cent on steel imports and the EU feared a price collapse as it was swamped with steel diverted from US markets. Steel consumers wanted a big increase in the tariff-free quota now and abolition of all duties next year. Automotive-grade steel in the EU recently hit almost €1,500 a tonne, three times the price two years ago. Most western steelmakers are still enjoying healthy profits after recording their best year in 2021 following a decade of plant closures and lower demand. The economic recovery after the coronavirus pandemic helped boost demand for steel. “The slight liberalisation margin is simply not sufficient to ensure a fair access for European manufacturers to competitive steel,” said Paolo Falcioni, director-general of Applia, which represents Europe’s white goods makers. Calling for the removal of tariffs, he said they “risk promoting industrial delocalisation through imposing additional manufacturing costs”.ACEA, which represents carmakers in the EU, said the increase was “completely insufficient”. It added that “domestic steel producers are still incapable of satisfying the needs of EU automakers”, while the safeguards “artificially maintain record prices”. Around 90 per cent of EU car production used steel made in the bloc. Euranimi, an association of steel importers, filed a legal case against the commission at the EU’s General Court in June 2021, when the safeguard measures were extended for three more years.The annual review sets the level of quota, and member states will vote on the commission proposal on Wednesday, with the changes taking effect from July 1. Next year the commission will decide whether to extend the tariffs beyond 2024.Euranimi’s case, which has yet to be heard, said the commission should have taken into account the rebound in prices. In parts of Europe, hot-rolled coil, a widely traded product that is often seen as a benchmark for steel prices, jumped to €1,400 a tonne in April, according to commodity data provider Argus Media, though it has since fallen back to below €950 a tonne. “We are faced with massive inflation,” said an executive at one carmaker who declined to be named. “Steel is a big part of the price of a car. Having a car is no longer going to be affordable for the man on the street, only the most wealthy.”They added: “If things remain difficult our management will say we prefer to produce in Asia and import and pay the 10 per cent [vehicle import] tariff. It is still cheaper.”The situation is another problem for carmakers, many of which reduced production because of a shortage of semiconductors. Chips and other car components such as batteries are increasing in price.Eurofer, the European steel producers’ association, declined to comment before the member states’ vote on the annual tariffs on Wednesday. The trade body, however, has previously countered calls to completely remove the import safeguards. It argued that such calls do not “consider the real function of the steel quotas, which is to avoid serious disruption from sudden import surges without micromanaging supply or prices”.Chris Bandmann, steel analyst at CRU Group, said EU steel imports had been strong since the outbreak of the war in Ukraine in February as users had looked to source material from other countries. Imports from Ukraine have fallen heavily, while those from Russia have dropped off entirely as a result of EU sanctions in March. “The main story here is the change in sourcing. The loss of Russia as a trade partner following the import ban has forced diversification — with countries like India and South Korea benefiting from this gap in availability,” said Bandmann.The commission declined to comment because of the pending court case. More

TOKYO (Reuters) – Japan’s current account surplus shrank sharply in April as record imports overwhelmed exports, swinging the trade balance into the red, data showed on Wednesday, stoking some concerns about the country’s long-term purchasing power.Japan’s current account surplus stood at 501 billion yen ($3.77 billion) in April, the data showed, down 628 billion yen from the same month a year earlier.It was the third straight month of a surplus and broadly in line with economists’ median forecast for a surplus of 511 billion yen in a Reuters poll.Surging fuel purchasing costs pushed up overall imports by 32.8% year-on-year to a record amount, outpacing export growth led by steel and car shipments.The current account data underscored the change in Japan’s economic structure as the country earns hefty returns from its portfolio investment and direct investment overseas, which have replaced trade as a main driver of its current account gains.Some analysts are concerned that Japan’s current account surplus may keep shrinking although it is backed by hefty returns on investment overseas, for now.The current account surplus has been declining for four fiscal years in a row to March 2022.Although a weak yen helped inflate the cost of imports, its boost to exports was not as great as it once was due to an ongoing shift of exporters’ production abroad.($1 = 132.7800 yen) More

WASHINGTON (Reuters) -The World Bank on Tuesday slashed its global growth forecast by nearly a third to 2.9% for 2022, warning that Russia’s invasion of Ukraine has compounded the damage from the COVID-19 pandemic, and many countries now faced recession.The war in Ukraine had magnified the slowdown in the global economy, which was now entering what could become “a protracted period of feeble growth and elevated inflation,” the World Bank said in its Global Economic Prospects report, warning that the outlook could still grow worse.In a news conference, World Bank President David Malpass said global growth could fall to 2.1% in 2022 and 1.5% in 2023, driving per capita growth close to zero, if downside risks materialized.Malpass said global growth was being hammered by the war, fresh COVID lockdowns in China, supply-chain disruptions and the rising risk of stagflation — a period of weak growth and high inflation last seen in the 1970s.”The danger of stagflation is considerable today,” Malpass wrote in the foreword to the report. “Subdued growth will likely persist throughout the decade because of weak investment in most of the world. With inflation now running at multi-decade highs in many countries and supply expected to grow slowly, there is a risk that inflation will remain higher for longer.”Between 2021 and 2024, the pace of global growth is projected to slow by 2.7 percentage points, Malpass said, more than twice the deceleration seen between 1976 and 1979. The report warned that interest rate increases required to control inflation at the end of the 1970s were so steep that they touched off a global recession in 1982, and a string of financial crises in emerging market and developing economies.Ayhan Kose, director of the World Bank unit that prepares the forecast, told reporters there was “a real threat” that faster than expected tightening of financial conditions could push some countries into the kind of debt crisis seen in the 1980s.While there were similarities to conditions back then, there were also important differences, including the strength of the U.S. dollar and generally lower oil prices, as well as generally strong balance sheets at major financial institutions.To reduce the risks, Malpass said, policymakers should work to coordinate aid for Ukraine, boost production of food and energy, and avoid export and import restrictions that could lead to further spikes in oil and food prices.He also called for efforts to step up debt relief, warning that some middle-income countries were potentially at risk; strengthen efforts to contain COVID; and speed the transition to a low-carbon economy.The bank forecast a slump in global growth to 2.9% in 2022 from 5.7 percent in 2021, a drop of 1.2 percentage points from its January forecast, and said growth was likely to hover near that level in 2023 and 2024. It said global inflation should moderate next year but would likely remain above targets in many economies.Growth in advanced economies was projected to decelerate sharply to 2.6% in 2022 and 2.2% in 2023 after hitting 5.1% in 2021. U.S. growth was seen dropping to 2.5% in 2022, down from 5.7% in 2021, with the euro zone to see growth of 2.5% after 5.4%.Emerging market and developing economies were seen achieving growth of just 3.4% in 2022, down from 6.6% in 2021, and well below the annual average of 4.8% seen in 2011-2019.China’s economy was seen expanding by just 4.3% in 2022 after growth of 8.1% in 2021.Negative spillovers from the war in Ukraine would more than offset any near-term boost reaped by commodity exporters from higher energy prices, with 2022 growth forecasts revised down in nearly 70% of emerging markets and developing economies.The regional European and Central Asian economy, which does not include Western Europe, was expected to contract by 2.9% after growth of 6.5% in 2021, rebounding slightly to growth of 1.5% in 2023. Ukraine’s economy was expected to contract by 45.1% and Russia’s by 8.9%.Growth was expected to decelerate sharply in Latin America and the Caribbean, reaching just 2.5% this year and slowing further to 1.9% in 2023, the bank said.The Middle East and North Africa would benefit from rising oil prices, with growth seen reaching 5.3% in 2022 before slowing to 3.6% in 2023, while South Asia would see growth of 6.8% this year and 5.8% in 2023.Sub-Saharan Africa’s growth was expect to slow somewhat to 3.7% in 2022 from 4.2% in 2021, the bank said. More

Gross domestic product shrank an annualized 0.5% in the three months through March, revised figures from the Cabinet Office showed Wednesday. An upward revision in inventories was a key factor behind the better numbers. Economists had expected a 1.1% decrease, compared with an initial reading of -1%. An upward revision in private inventories was one of the main factors helping narrow the contraction. Business spending was revised down after a report last week showed companies invested at a slower pace in the first three months of the year. For now, analysts are expecting the economy to return to modest growth in the second quarter, as consumers regain confidence in venturing out to spend money following the lifting of the omicron wave restrictions.The updated report on the economy Wednesday comes with the main downside risks having largely shifted from the pandemic to cost-push inflation exacerbated by a sliding currency. Continued fallout from Russia’s war on Ukraine and China’s slowdown are other causes for concern.Data released Tuesday showed pent-up demand outweighed concerns over the impact of inflation on real incomes in April. But analysts warn that once that demand runs out, price gains may cool consumption if wage gains fail to keep up with rising living costs. The yen’s drop to fresh 20-year lows is amplifying some of the higher prices. While a cheaper currency is expected to be a boon for exporters and overseas tourists as Japan gradually reopens its borders, it makes imports of food and energy more expensive and pushes up basic living costs. So far, the Bank of Japan is sticking with its dovish policy stance of ultra-low rates to support the economy, while its peers raise interest rates to cool inflation. That policy difference with the US is helping the yen weaken further.What Bloomberg Economics Says…“Looking ahead, we expect GDP to rebound in 2Q on pent-up consumer demand after virus-related restrictions were lifted in March. But there are downside risks. Higher import prices are squeezing household budgets.”– The Asia economist teamFor the full report, click here.(Adds more details from the release)©2022 Bloomberg L.P. More

WASHINGTON (Reuters) -U.S. Treasury Secretary Janet Yellen told senators on Tuesday that she expected inflation to remain high and the Biden administration would likely increase the 4.7% inflation forecast for this year in its budget proposal.During a Senate Finance Committee hearing, Yellen said that the United States was dealing with “unacceptable levels of inflation,” but that she hoped price hikes would soon begin to subside.U.S. Consumer Price Index inflation has been tracking above 8% in recent months, the highest readings in over 40 years and well above President Joe Biden’s administration’s forecast for its fiscal 2023 budget.But another metric, the core Personal Consumption Expenditures price index excluding volatile food and energy costs, has begun to cool, edging down to 4.9% in April”I do expect inflation to remain high although I very much hope that it will be coming down now,” she said.Yellen repeatedly rejected Republican assertions that inflation was being fueled by Biden’s $1.9 trillion American Rescue Plan (ARP) COVID-19 spending legislation last year.”We’re seeing high inflation in almost all of the developed countries around the world. And they have very different fiscal policies,” Yellen said. “So it can’t be the case that the bulk of the inflation that we’re experiencing reflects the impact of the ARP.”The Biden administration is still pushing for a scaled-back version of its stalled climate and social spending agenda, which would offer tax credits for clean energy technologies and reform prescription drug pricing – policies that Yellen argued would help lower expenses for American consumers weary of price hikes.Yellen repeated her views that inflation was being fueled by high energy and food prices caused by Russia’s war in Ukraine, a shift to goods purchases during the pandemic, and by new COVID-19 variants and persistent supply chain disruptions. ‘TRANSITORY’ WRONG WORDYellen has come under fire from Republicans after acknowledging she was wrong last year in forecasting that inflation would be transitory and quickly subside. She will face more tough questions on the issue in a House Ways and Means Committee hearing on Wednesday.Yellen added that both she and Federal Reserve Chair Jerome Powell both “probably could have used a better term than transitory” in describing inflation that they thought would fade quickly.”When I said that inflation would be transitory, what I was not anticipating was a scenario in which we would end up contending with multiple variants of COVID that would be scrambling our economy and global supply chains, and I was not envisioning impacts on food and energy prices we’ve seen from Russia’s invasion of Ukraine,” Yellen said.She testified as the World Bank on Tuesday warned of a heightened risk of “stagflation” – the 1970s mix of feeble growth and high inflation – returning as it slashed its global growth forecast by nearly a third to 2.9% for 2022. More