The U.S. International Trade Commission (ITC) recently released a report detailing its November ruling regarding the third sunset review of antidumping duties on urea imports from Russia and Ukraine. The six-member ITC voted on Nov. 15 (GM Nov. 21, 2011) that revoking the antidumping duties, which have been in place since the late 1980s, would likely lead to the continuation or recurrence of material injury to the domestic urea industry within a reasonably foreseeable time.
The report, Solid Urea from Russia and Ukraine Investigation Nos. 731-TA-340-E and 340-H (Third Review), lists the criteria used by the ITC and the reasons for its affirmative ruling. It also, however, lists the arguments posed by two dissenting ITC members who voted to revoke the antidumping duties.
The ITC noted that urea imports from the subject countries have “reestablished a presence in the U.S. market” since the last sunset review more than five years ago. The panel also noted that foreign producers in Russia and Ukraine “possess significant production capacity and excess capacity,” and that “foreign producers in both countries are highly export oriented.”
The ITC noted some stark changes in the domestic industry since the antidumping duties were first imposed. “The domestic urea industry has continued to shrink,” the report said. “It consisted of 24 producers during the original investigations, 12 producers during the first five-year reviews, 7 producers in the second five-year reviews, and 6 producers (with 7 plants) in these reviews.” The ITC said domestic urea production accounted for less than one-third of the U.S. market for urea during the most recent period of review.
As a result, ITC said imports play an important role in serving the U.S. urea market, with most import tons during this period of review coming from Canada, China, and Middle Eastern countries with readily available supplies of natural gas, such as Egypt, Saudi Arabia, Oman, Kuwait, Qatar, and Bahrain.
When examining the conditions of competition in the U.S. market since the last review, the ITC considered the likely volumes, price effects, and impact the domestic industry would face if the antidumping duties were revoked. Regarding likely volumes, the ITC said “cumulated subject import volume from Russia and Ukraine would increase significantly” if the antidumping duties were revoked.
“The attractiveness of the U.S. market is confirmed by EuroChem’s actions over the period of review,” the report said. EuroChem is the largest Russian producer of solid urea, and from 2008 to 2010 enjoyed a zero margin on urea exports to the U.S. because of its new shipper status.
“The record shows that EuroChem has added granular production capacity at its Russian facilities and has announced that the U.S. market is one of the primary targets for its granular product,” the report said. “EuroChem has also established a trading company in the United States, EuroChem Trading USA Corp., which will help facilitate its sales. Moreover, the record shows that EuroChem has started shipping solid urea to the United States and is offering it at prices that undercut the domestic producers’ prices.”
The ITC further noted that although global demand for urea is predicted to increase in the reasonably foreseeable future, global urea production capacity is forecast to outpace global consumption over the next few years. “This situation of global oversupply suggests that producers in the subject countries will need to seek out alternative export markets,” the report said. “The United States is the world’s fourth largest market for urea consumption and the largest importing country, making it the natural alternative market.”
Regarding the likely price effects of