EU provisional antidumping duties on fatty alcohols anger buyers

20 May 2011 16:10  [Source: ICIS news]

LONDON (ICIS)--European fatty-alcohol buyers remain disappointed with last week's decision by the European Commission to add provisional antidumping duties on material imported from producers in India, Malaysia and Indonesia, market participants said on Friday.

The provisional duties came into effect on 12 May and will apply for a period of six months, after which they will be reviewed by the Commission.

The imposition of the duties followed the Commission's antidumping investigation launched in August 2010, which was initiated after a complaint filed by European fatty-alcohol producers Cognis, which is now part of BASF, and Sasol Olefins & Surfactants.

The complaint alleged that producers in southeast Asia and India were exporting material to Europe at prices that were either lower than domestic prices of the product, or lower than the costs of production.

Cognis and Sasol declined to comment on the decision.

The provisional duties introduced range from between 4.3% to 13.8% for producers in India, Malaysia and Indonesia, and apply to saturated mid-cut fatty alcohols as well as long- and short-chain alcohol imports.

Duties were calculated on the basis of a comparison of the average price of the dumped imports and the target price of the EU fatty-alcohol industry, the Commission said.

A source with the European Commission insisted that all legal conditions required to impose the provisional duties have been met.

“Injurious dumping was established on the part of the exporting producers, and it was found that the imposition of measures would not be against European Union interest,” said the source.

“The investigation has established that the antidumping duties imposed should not have a serious impact on importers and users…and should lead to the re-establishment of fair competition on the EU market.”

European buyers argue that despite being provided the opportunity to voice their concerns to the European Commission, their point of view has been overlooked in the decision-making process.

The majority of buyers remain concerned that any additional duties passed on to them will make it virtually impossible to maintain a profit.

There was also a great deal of apprehension felt among smaller European buyers, who fear that the provisional duties will become a more permanent fixture and could force them to exit the market altogether.

“How do [Cognis and Sasol] intend to supply the market when the majority of their fatty alcohols are produced for captive usage?” a smaller buyer asked.

The added duties come at a time when the European fatty-alcohols market continues to remain firm as a result of tight supply and high feedstock costs.

Although prices of the feedstock Bursa Malaysia Crude Palm Oil (CPO) have declined from the highs of ringgit (M$) 3,643/tonne (€839/tonne, $1,199/tonne), which were reached during the week ending 11 March, prices of fatty alcohols remain at high levels, buyers said.

The majority of European mid-cut fatty alcohol contract prices for the second quarter settled at €2,600–2,800/tonne, up by €400/tonne from first-quarter contract prices.

The contract prices, which were settled on a free delivered (FD) northwest Europe (NWE) basis, are now at a record high for European material.

“We have lost considerable business in [the second quarter] due to the increased costs of feedstock pushing up the price we can sell material at to retain a profit,” a buyer said.

“Even if producers from the Far East and India offer fatty alcohols at a lower price, the added duty means they are more than likely going to remain at [second-quarter] levels, and possibly even reach new highs,” he added.

Smaller European producers of fatty alcohols are also wary about the provisional antidumping duties, saying the plans will create an opportunity for larger producers to gain a competitive edge in the market.

A source at one of the affected Indian producers said that the added duties would be certain to deter European consumers from purchasing material from them. But with a shortage of material noted by many market participants, the source said EU-based buyers would have no choice but to continue purchasing from the affected producers in the short term.

Manoj Jha, CEO of India-based oleochemical consultancy Unidus, said many Asian producers will pass on the duty to end-users.

“It looks like EU end-users and consumers will have to shell out higher prices for their shampoos and detergents just to save two producers – Cognis and Sasol,” he said.

News that Singapore-based Wilmar International is building a natural alcohols plant in Rotterdam, the Netherlands, has raised hopes among some market participants of a possible easing in the tight supply in the future.

The Rotterdam facility, which is expected to come on stream by 2013, will supply natural alcohols to US surfactant producer Huntsman as well as the European market.

One buyer said that other producers from southeast Asia and India may consider building plants in Europe to avoid selling material with the added surcharges.

The buyer added that it is hopeful that there will be increased production in Europe and a more balanced market in the future, suggesting this could even work to the detriment of major European fatty-alcohol producers.

($1 = €0.70, €1 = M$4.34)

Additional reporting by Doris de Guzman

Read Paul Hodges’ Chemicals and the Economy blog

By: Neha Popat
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