CF Industries
Holdings Inc., Deerfield, Ill., which filed an antidumping and countervailing
duty petitions on June 30 (GM July 2,
p. 1) alleging that a surge in UAN imports from Russia and Trinidad from 2018
through 2020 severely harmed domestic producers, reports that an uptick in
those imports also occurred this past June into the month of July.
“In the past few
weeks, we heard from our customers that Russian and Trinidadian producers are
still undercutting CF’s prices and planning to send even more tons of UAN to
the United States,” said CF President and CEO Tony Will in his written testimony
dated July 20, 2021.
“We’ve counted approximately 260,000 st of subject imports arriving in June 2021 alone,” he said. “You’d need to go back to November 2019 to find a month’s worth of subject imports that high – they are seeking to stuff U.S. distribution channels yet again.”
“This needs to
stop,” said Will. “Absent relief, the domestic industry’s condition will
worsen.”
Frank O’Connell,
CF Vice President of Product Management, UAN/AN, reported a surge in Russian
imports after CF publicly stated its intention to bring a trade case against
UAN from Russia. “We have heard from our customers that Russian producers are
undercutting our prices by as much as $70/st and trying to stuff the market
because of this case, with significant volumes of Russian product heading to
American shores,” he said.
“As these
low-priced imports enter the U.S. market, they will adversely impact U.S.
prices and our sales to downstream customers, compounding the injury we’ve
already suffered,” O’Connell added. “And if these products go into inventory,
they will create an overhang that impacts our profitability through the rest of
this year and into 2022.”
“According to data
tracked by CF, large quantities of subject imports entered in June and are
continuing to enter in July, after a temporary dip in import levels that began
in late 2020,” said Andrew Szamosszegi, Principal, Capital Trade Inc., who
delivered an economic presentation on behalf of CF. “These subject volumes
could overwhelm distribution channels in the coming months, a situation
comparable to 2019.”
Szamosszegi noted
that while subject imports ratcheted up to the U.S. 33 percent from 2018 to
2019, those imports into the European Union declined from nearly 1.2 million st
in 2018 to 800,000 st in 2019, to just below 600,000 st in 2020.
According to the
CF petition, UAN imports from Russia topped 1.7 million st for calendar year
2019, up from 2018’s 1.23 million st. However, they have been on the decline
since then. Trinidad imports topped out at 996,136 st in 2020, up from 2019’s
942,578 st. They have also been on the decline.
Any increase in
UAN imports for June and July would be a change in the near-term trend, as
January-May 2021 UAN imports were down 7 percent at 1.1 million mt, according
to Trade Data Monitor. Imports from
Russia were down 26 percent at 430,024 mt, and Trinidad 12 percent at 351,438
mt.
“CF and other
domestic producers were forced into a Hobson’s choice: either lose sales and
forfeit market share, or lower prices to unsustainable levels,” said Jeffrey
Kessler, an attorney with Wilmer Cutler Pickering Hale and Dorr LLP, on behalf
of CF. “And after lowering prices, they faced the same choice again from
persistent, aggressively priced subject imports. The result was a collapse in
the domestic industry’s U.S. prices and profitability in 2020.
“This fact pattern
easily satisfies the legal standard that the Commission must apply in the
preliminary stage: whether there is a reasonable indication of material injury
by reason of subject imports,” Kessler said.
CF argued that from 2018-2019 the subject imports surged by 33 percent, partly in response to E.U. antidumping investigations on UAN. “Moreover, a significant portion of the imports that surged into the U.S. market in 2019 accumulated in storage tanks and was not actually consumed by U.S. farmers until 2020,” said Kessler.
“This is because
the imports arrived too late in the year to reach farmers in time for the 2019
spring application season. As imports continued to enter, they stuffed U.S.
supply chains and glutted the market….,” he added.
In addition to
earlier CF allegations that Russian producers guaranteed importers “risk free”
profit on the UAN purchased from them, O’Connell said importers regularly
offered prices at “CF less $5/st” or with an even greater discount, and that
this caused a “race to the bottom” on pricing.
“U.S. prices for
delivery in the Midwest fell to their lowest level in over 15 years,” added
O’Connell. “At these prices, we believe it was unprofitable for Russian and
Trinidadian producers to sell their UAN here.”
Importers,
however, have countered that it is well-established that CF is the UAN price
setter in the U.S. (GM July 23, p.
1).
David Bilby, CF
Director, Market Research, Planning, and Analysis, noted that domestic
producers have made significant investments in the past decade to grow capacity
to serve U.S. customers and meet U.S. demand.
“From 2012 to
2017, U.S. producers, including CF, invested more than $4 billion to expand
production capacity, including over $2 billion that CF invested beginning in
2012 in a production facility in Donaldsonville, La. The Donaldsonville
investment expanded UAN production capacity by approximately 1.9 million st,”
said Bilby.
CF said
Donaldsonville is home to the world’s largest single-train UAN plant.
Bilby said CF has
never been able to operate the new Donaldsonville UAN plant at maximum
capacity, due largely to the unfair competition from dumped and subsidized
imports from Russia and Trinidad.
However, importers have argued that CF built the Donaldsonville expansion to serve the export market, and when the E.U. imposed duties against U.S., Russian, and Trinidad product, that CF dumped product onto the U.S. market (GM July 23, p. 1).
Bilby put total
U.S. capacity at over 16 million st, which he said exceeds U.S. demand. He said
CF’s capacity is 8.4 million st, saying the company’s UAN business employs 500
production workers, with 200 at Donaldsonville.
Bilby also said
the U.S. industry has the infrastructure and distribution network to serve
every region in the country, and said CF owns a U.S.-flagged vessel that it
uses to deliver UAN to ports on the East, West, and Gulf Coasts.
However, importers
argued that due to logistics and transportation costs, U.S. producers were less
likely to serve the outlying markets and those markets have been served by
imports (GM July 23, p. 1).
Bilby said the
U.S. accounts for over half of global UAN consumption, with the U.S. and E.U.
market combined accounting for three quarters. Only a handful of other
countries, such as Argentina, widely use UAN.
Bilby put Russian capacity at 3 million st, with Russia’s Acron launching a 500,000 st expansion. Acron has argued that while it was upgrading its facilities that it has been moving more toward urea and ammonium nitrate production and away from UAN. It also said that Russian exports of UAN to the U.S. declined over 3 percent between 2018 and 2020 and over 22 percent during the interim period.
CF put Methanol
Holdings (Trinidad) Ltd. (MTHL) capacity at about 1.5 million st. MTHL said
that its export levels to the U.S. have remained consistent except for 2018
when it was having production problems (GM
July 23, p. 1).
CVR Reports Severe Impact;
Farm Bureau Fears More Fert Price Hikes
U.S. UAN producer
CVR Partners LP, Sugar Land, Texas, added its voice to the trade complaint in a
July 26 statement to the U.S. International Trade Commission.
“For too long, CVR
has been forced to compete with Russian and Trinidadian imports that enjoy
government product cost subsidies and sell in the U.S. market at artificially
low prices to the detriment of our company,” said CVR President and CEO Mark
Pytosh.
“The U.S. UAN
market is a stable-growth, price-sensitive commodity market. In such a market,
an influx of subsidized imports at the levels seen in 2019 and 2020 was
virtually certain to depress prices, and that is exactly what happened. The
impact on our business has been severe – the depressed U.S. prices have
resulted in lower revenues and profits and constrained CVR’s ability to invest
capital into the business,” he said.
Pytosh said it was
critical that the U.S industry and its workers obtain relief as soon as
possible.
The American Farm
Bureau Federation (AFBF) said farmers are already burdened by higher fertilizer
prices, noting that the USDA’s Economic Research Service is projecting that
fertilizer prices will rise 5 percent in 2022 over 2021 – and that is before
tariffs on UAN were even being considered.
“If realized, this
will mean that between 2018 and 2022, fertilizer prices will have increased by
double digits for every major field crop in the U.S,” said AFBF, who put the
increase for cotton at 16.5 percent, barley 16.6 percent, oats 16.7 percent,
wheat 17.1 percent, peanuts 17.6 percent, rice 18.1 percent, corn and sorghum
18.6 percent, and soybeans 18.9 percent.
AFBF said
fertilizer costs are projected to account for approximately 36 percent of
operating costs for major field crops in the U.S. in 2022. It said since UAN
accounts for 43 percent of nitrogen fertilizer usage, and nitrogen accounts for
59 percent of total fertilizer use, that means about 25 percent of operating
costs can be attributed to UAN.
“Certainly, a
significant increase in UAN solution costs would be felt in farmers’ bottom
line,” said AFBF.
