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.