On 16 July, 2015, the United States Department of Commerce (USDC) announced that, in response to the appeal from the US-based refrigerant manufacturers, it would initiate an anti-dumping investigation on the hydrofluorocarbons (HFCs, refrigerants) imported from China, including mixtures and related raw materials.
It is known that, the US-based refrigerant manufacturers making the appeal included Honeywell International Inc., Amtrol Inc., Arkema S.A., Chemours Company, Hudson Technologies Inc., Worthington Industries, Mexichem Fluor, etc. These petitioners alleged that the products from China were sold below the fair value of the products in the US, damaging the local industry.
The USDC pointed out that the HFCs imported from China were estimated at a value of about USD109 million in 2014, USD134 million in 2013 and USD130 million in 2012. They preliminarily affirmed that the dumping margin was 111.20-300.30%.
In accordance with the trade remedy procedure, the United States International Trade Commission (USITC) will make a preliminary determination around 10 Aug. after the investigation. If the USITC affirms the dumping, USDC will continue making further investigation.
This also indicates that the Chinese HFC industry is again challenged regarding the exports, after the anti-dumping and anti-subsidy investigation on 1,1,1,2-tetrafluoroethane (HFC-134a) in 2014.
Anti-dumping investigation to further exert pressure on exports of HFCs in 2015
Since January 2015, according to the F-gas regulations, the EU has carried out quota regime on HFCs, to freeze application quantity and restrict import volume, and meanwhile it has noted the plan to reduce the HFC quota from 2016. Under the circumstances, the anti-dumping investigation by the US undoubtedly worsens the Chinese HFC industry.
With regard to the HFC quota in the EU, despite the considerable quota for China, it is mainly centred in foreign enterprises or Chinese-foreign joint ventures, such as Arkema (Changshu) Fluorochemical Co., Ltd. and Changshu 3F Zhonghao New Chemical Materials Co., Ltd., whilst only a small quota goes to domestic enterprises. This has significantly increased the pressure on the Chinese HFC industry.
CCM believes that, as the US launches the anti-dumping investigation, from H2 2015, the exports of HFCs from China might encounter more depressed market than that during the anti-dumping and anti-subsidy investigation on HFC-134a in 2014.
Chinese HFC industry expected to proactively cope with anti-dumping investigation and strive to win
Compared with the anti-dumping investigation in 2014, this investigation covers a larger product range (HFC-134a only vs. HFC series). Meanwhile, the number of petitioners also increases greatly (only 1 enterprise vs. enterprise alliance). Therefore, in response to this anti-dumping investigation, more domestic enterprises are expected to proactively join hands and respond to the case with the help of related government departments, so as to maintain a favourable export market.
The Chinese HFC enterprises cannot shrink back, mainly because of the severe on-going overcapacity in the domestic HFC industry and the long-lasting low profits for enterprises. For instance, the operating rate in H1 2015:
HFC-134a (220,000 t/a): 40-50%.
HFC-410a (a 1:1 mixture of difluoromethane - HFC-32 and pentafluoroethane - HFC-125) (about 200,000 t/a): below 60%
HFC-32 (about 120,000 t/a) and HFC-125 (about 150,000 t/a): both around 50%
Instead, enterprises are expected to proactively expand the export market to increase the demand and also to decrease the operating rate, so as to ease the inventory pressure, balance the supply and demand and get rid of the business predicament.
Such measures have been proven right by the HFC-134a market trend after the anti-dumping and anti-subsidy investigation on HFC-134a in October 2014. Since November 2014, the export market for HFC-134a improved markedly. From this, the greater demand gave support to the domestic HFC-134a price to recover. In 2015, many enterprises intentionally carried out the production measure – low operating rate – to maintain the relative balance between the supply and the fluctuating demand (decline brought by the EU's quota regime and rise thanks to the domestic peak season in Q2) and to stabilise the HFC-134a price.
Review on anti-dumping and anti-subsidy investigation on HFC-134a from China
In early 2014, the US carried out the anti-dumping and anti-subsidy investigation on HFC-134a imported from China. With the continuous efforts of Chinese manufacturers (Zhejiang Juhua Co., Ltd., Zhejiang Sanmei Chemical Industry Co., Ltd., etc.) and government departments, China won the case finally in October 2014. In the final determination, the USITC claimed that it would not impose high anti-dumping and anti-subsidy duties on HFC-134a from China.
However, the anti-dumping and anti-subsidy investigation imposed negative effect on the Chinese HFC-134a segment. Regarding the demand structure for the domestic HFC-134a, exports account for over 50%, of which the US is the largest destination (30% of the total), far beyond the 2nd largest destination (Japan, 8%). With the operating pressure brought by the overcapacity, the HFC-134a price decreased by about 10% YoY in China in 2014.