The European Commission late this week ruled on a partial interim review initiated on Aug. 17, 2017, of the current antidumping measures in place on Russian ammonium nitrate (AN) imports in the European Union, following a request submitted collectively by eight European farmers’ associations, representing users from Ireland, Spain, the U.K., France, Italy, and Finland (GM Sept. 1, 2017). The request was limited in scope to the examination of injury.
The collective applicants argued that EU farmers, as users of AN, are suffering from the antidumping measures that have been in place for more than 20 years, and that the injury situation of the EU industry should be reviewed due to lasting changes (GM Sept. 1, 2017).
They had called upon the Commission to immediately suspend the antidumping measures.
In its ruling this week, while the Commission concluded that two circumstances – the restructuring of the EU AN industry and the global AN market – have changed since its 2002 review, and that these changes are of a lasting nature, it also believed there is a likelihood of recurrence of injury should current antidumping measures be removed.
The Commission concluded that Russian producers could use their still available, albeit limited, spare capacity to export to the EU should the measures be terminated, and that it is also likely that some volumes currently exported to third countries would be redirected given the relative attractiveness of the EU market and its proximity to Russia. It added that the likely future evolution of Russian export prices is also a clear indication that injury could recur quickly.
However, in view of the increase in the level of concentration of the EU AN manufacturing industry due to numerous mergers and acquisitions since 2002, with four large groups – Yara International ASA, CF Industries Holdings Inc., Borealis AG, and EuroChem – now accounting for nearly 6 out of 8 million mt of EU AN production, together with global changes in the AN market since 2002, the Commission ruled to amend the antidumping measures applicable to AN imports from Russia.
Currently, imports of AN from the Russian Federation into the EU are subject to antidumping duties (expressed on the CIF EU border price, customs duty unpaid) ranging from €28.88/mt to €32.82/mt for EuroChem and from €41.42/mt to €47.07/mt for all other Russian suppliers, depending on AN product. The new antidumping duty rates have been amended to range from €28.78/mt to €32.71/mt. The new rates will come into force on Nov. 16.
In terms of global changes in the AN market relevant to its assessment, the Commission noted that Russian consumption of AN had more than tripled since 2002, from 2.2 million mt to 7 million mt in 2016. In addition, demand from third markets, mainly Latin America and notably Brazil, has increased as well. On the other hand, it noted agricultural consumption of AN in the EU-28 had decreased slightly since 2002, making the EU market in terms of volume less attractive than in 2002, as well as in 2014. The U.S. also removed its antidumping measures on AN from Russia in Aug. 2016
Similarly to previous investigations, the Commission noted that gas represents over 60 percent of the total cost of ammonium nitrate production, and that domestic gas prices in Russia are regulated by the state via federal laws and “do not reflect normal market conditions, where prices are principally set by production costs and profit expectations.”
It said, however, the situation concerning domestic prices in Russia is only relevant for the establishment of dumping as it only concerns the determination of the normal value, and reminded that the current review related to the injury situation only.
Brussels-based Fertilizers Europe, which represents the majority of Europe’s major fertilizer manufacturers, had submitted that the changes linked to the restructuring of the EU industry were not significant compared to the Russian gas advantage, but the Commission said the lasting change found was not about the Russian gas situation, but about the EU industry that consolidated since the 2002 review.
The Commission’s full investigation findings are outlined in the Official Journal of the European Union, Nov. 15 L.287.
The Commission on Nov. 13 had ruled on a separate interim review on existing antidumping duties applicable to imports of AN from Russia, also launched on Aug. 17 last year, following a request for the review lodged by the Acron Group, in conjunction with its subsidiary company, Dorogobuzh, and its affiliated Switzerland-based trading company, Agronova Europe (GM Sept. 1, 2017).
Following that interim review, the Commission’s decision was to withhold any changes to the current antidumping measures in place on Russian AN imported into the EU after concluding that the circumstances regarding the gas market in Russia have not changed.
Fertilizers Europe had welcomed the European Commission’s central finding that the gas market in Russia “remains predominantly distorted by the state’s fixing of gas prices sold by Gazprom, a state-owned enterprise.”
“Such a central finding is of strategic importance to the EU nitrogen fertilizer industry, which operates under market economy conditions while its Russian competitors, in stark contrast, work off an artificially low state fixed cost base encouraging structural dumping,” said Fertilizers Europe Director General Jacob Hansen, in a media statement.
However, he said the European mineral fertilizer industry is very concerned that the Commission, having recognised this profound structural problem, which results in “structural dumping,” does not apply a consistent logic that there is thereby persistent “structural injury” in the interim injury review made by EU-based farming organisations.
“As an industry, we are very concerned with the Commission’s decision to reduce by one third the anti-dumping duty on AN originating from Russia despite recognising structural dumping, as it sets a very dangerous precedent which puts at risk high-skilled jobs and competitiveness of European fertilizer industry as a whole,” said Hansen.
Fertilizers Europe believes the Russian AN industry still represents “a considerable injurious threat” as it maintains a spare export capability of over 1.2 million mt/y. Moreover, the Russian industry remains a “powerful export industry” with exports reaching over 3.5 million mt/y in 2017. In comparison, the EU AN market is estimated between 6.4-7.5 million mt annually, it said
“No amount of EU industry re-structuring or improved efficiencies can compensate for the massive ‘gas gap’ between Russia’s typical state fixed price of $2.5 MMBTU against the EU’s wholesale gas price of nearly $10.00 MMBTU,” said Hansen.
“The EU industry will be closely monitoring and assessing both the immediate and long-term impact of the EU’s reduction of the anti-dumping duty on AN from €47/mt to 32/mt, and it cannot be ruled out that the EU industry will ask for an interim review to make for an increased anti-dumping duty,” added Hansen.