CF Industries
Holdings Inc., Deerfield, Ill., alleges that Russian and Trinidad producers are
dumping UAN into the U.S. market at significant margins of up to 391.65 percent
for Russia and up to 159 percent for Trinidad. CF filed the case on June 30 (GM July 2, p. 1).
CF said that
starting in 2018, the European Union initiated UAN antidumping investigations
against Russia, Trinidad, and the U.S., leading to the imposition of definitive
antidumping duties in 2019 (GM Oct.
11, 2019). As a result, CF said Russian (Acron and EuroChem) and Trinidad
producer Methanol Holdings Trinidad Ltd. (MHTL), a unit of the Swiss-based
Proman Group, directed increased volumes of aggressively priced UAN to the U.S.
market.
CF said Russian
and Trinidad UAN exports to the U.S. surged by 34 percent, from 1.99 million st
in 2018 to 2.65 million st in 2019. CF said price pressure, combined with a
continued flow of subject imports in 2020, caused a collapse in the domestic
industry’s U.S. prices and profitability in 2020.
|
U.S. UAN Imports
|
2018
|
2019
|
2020
|
|
Russia/Trinidad
Imports (000 st)
|
1,997
|
2,649
|
2,182
|
|
Value per st
|
$171
|
$167
|
$136
|
|
Other Imports
|
644,374
|
510,364
|
537,248
|
|
Value per st
|
$203
|
$212
|
$196
|
|
Total Imports
|
2,641
|
3,160
|
2,720
|
|
Value per st
|
$178
|
$175
|
$148
|
Russia is the world’s leading exporter of UAN.
Trinidad the second-largest, with a limited or non-existent domestic market. Russia and Trinidad imports accounted for 41.1 percent and 35.5 percent of total U.S. imports, respectively, over the past twelve months for which data are available.
|
UAN (st)
|
May 2020-Apr. 2021
|
Percentage of Imports
|
|
Russia
|
1,085,549
|
41.1
|
|
Trinidad
|
938,367
|
35.5
|
|
ROW
|
619,795
|
23.4
|
|
World
|
2,643,711
|
100
|
Global UAN
consumption is concentrated in the E.U. and the U.S., leaving Russia and
Trinidad few other options. CF cited a recent Government of Trinidad and Tobago
(GOTT) assessment that North America consumes 70 percent of the world’s UAN,
while Western Europe takes 23 percent.
CF argued that based on available data, apparent domestic UAN consumption increased year-over-year from 2018-2020, by 5 percent from 2018-2019 and by 3 percent from 2019-2020. It said the increased demand was driven by unusually wet weather in late 2018 and in 2019 in the Cornbelt that prevented farmers from applying anhydrous ammonia.
CF said since
there was increased demand in 2018-2020 prices should have been going up, but
due to low-priced imports they went down. It said data indicates that the
subject imports undersold CF’s prices for 32 percent solution to retail
customers roughly 90 percent of the monthly comparisons from 2018 through March
2021.
CF lamented that the
domestic industry was hit by high natural gas prices in first-quarter 2020, but
added the industry was unable to pass those on to customers due to adverse
pricing conditions created by large volumes of subject imports. As previously
reported, CF’s UAN segment posted a first-quarter 2021 gross margin of only $2
million compared to the year-ago $42 million, and the segment was the only one
of five to see a product price decrease (GM
May 7, p. 32).
CF said the onslaught
of imports gained UAN market share in 2018-2019 at the expense of domestic
producers. CF gave the 2018 domestic market share as 89.3 percent and kept
confidential the amount importers gained, though a table accompanying the
filing suggested the domestic share dropped to 76.5 percent in 2019. CF said
the domestic industry was able to recapture market share from 2019-2020, but
only by dropping prices in order to remain competitive.
CF also
highlighted aggressive sales tactics for some Russian product, saying that at
least one producer sold UAN on consignment-like terms and guaranteed U.S.
importers a profit on downstream sales by agreeing to price its tons at a
specified discount when imported tons were sold to downstream customers in the
future, regardless of the ultimate price.
It said this
enormous assumption of risk by the Russian industry induced importers to commit
to purchase from Russian suppliers, knowing they would obtain a satisfactory
margin when those volumes were priced in the future, even if the market was
already oversupplied and prices were very low. It also incentivized importers
to continue selling into the market without regard to the effect of those sales
on prices, because the importers were guaranteed their margins either way.
CF used previous
DOC decisions regarding phosphates from Russia and melamine from Trinidad as
precedent for its argument that those governments were providing subsidized gas
to their UAN producers. It said natural gas accounts for one-third the cost of
UAN.
CF cited the
recently-decided Phosphate Fertilizers
from the Russian Federation, in which DOC found that Russia’s domestic
market for natural gas is distorted through the Government of Russia’s (GOR)
predominant role in the market via majority-ownership of Gazprom and other
interventions in the market. CF also noted that regional governments within
Russia have given tax incentives and other benefits to the companies.
CF said Trinidad producer MHTL benefits from several counteravailable subsidies, including the provision of natural gas for less than adequate remuneration (LTAR), corporate tax exemptions, and import duty and VAT exemptions.
CF noted that in
the case Melamine from Trinidad and
Tobago, DOC found that MHTL received countervailable subsidies for its
purchases of gas for LTAR in the amount of the discount to a purported
“market-based gas price.” It said DOC found that this discount was not
market-related because it did not reflect prevailing market conditions, but
instead was an incentive for the production of downstream petrochemical
products. CF said the state-owned National Gas Co. continued to provide gas to
MTHL during the current period of investigation.
CF said its
petition was being filed on behalf of the U.S. industry that produces UAN. CF
noted that it is the largest U.S. producer of UAN, and that collectively
domestic producers supporting its petition account for over 50 percent of total
domestic production in 2020. CF said other domestic producers were also
supportive, though a letter from LSB Industries Inc. was the only one available
in the public version of the petition.
As of July 16,
attorneys for several industry players were lining up to participate in the
case, including Acron, EuroChem, MTHL, Gavilon Fertilizer LLC, Trademark Nitrogen
Corp., Indagro USA Inc., International Raw Materials Ltd., J.R. Simplot Co.,
Yara North America Inc., and The Andersons Inc.
