USA: National Refrigerants has warned that the imposition of anti-dumping duties on the import of Chinese refrigerants could jeopardise the future of the company.
The prospect of anti-dumping duties on imports of HFC refrigerant blends moved a step closer at the end of June after a final determination by the US Department of Commerce found in favour of dumping margins of between 101.82% and 216.37%. These will now be imposed if the US International Trade Commission makes a similar affirmative determination on August 1.
The initial antidumping petition was filed by a coalition of US-based manufacturers and other interested parties last June. They claimed that unfairly traded imports of certain HFC blends and components from China were causing material injury to the US domestic fluorochemicals industry.
In testimony presented before the US International Trade Commission on June 21, Maureen Beatty, executive vice president of National Refrigerants, said she did not believe that there was unfair competition resulting from imported HFC components. She claimed that, if anything, the unfairness might lie in the lack of competition between the US component producers and their refusal or inability to sell key components to a meaningful degree.
Headquartered in Philadelphia, Pennsylvania, National Refrigerants is one of the world’s largest refrigerant distributors of refrigerants with over 500 locations in the United States, Canada, and Europe. It blends and supplies a number of refrigerant blends including the five involved in the anti-dumping petition – R404A, R407A, R407C, R410A and R507A.
Giving testimony alongside Honeywell, Chemours, Arkema and others, Maureen Beatty said: “With all that National has invested, and with a workforce that rivals or exceeds each of the petitioners in size and technical know-how, it is surprising to hear them say that National should not be considered a part of this US industry.”
National only manufactures refrigerant blends and must source the individual components from other manufacturers. Maureen Beatty’s testimony provided a fascinating insight into how the system works and why National it says it has to rely on imports.
“R32 is required for three of the five subject blends, but only Arkema produces it,” she said. R125 is required for all five subject blends, but only Honeywell produces it. R143a is required for two of the five blends, and again, Honeywell is the only domestic source.”
Honeywell, Chemours and Arkema, it was revealed, get around their own component sourcing problem by swapping components with each other.
“That way, they each consume their own components and get what they are missing from one of the other two. With this arrangement, Arkema, Honeywell, and Chemours can always satisfy their own blending requirements,” Maureen Beatty said.
National has to buy components on the open market but National claims there are no distributors or traders who sell US-made components.
“So, if Arkema, Honeywell, or Chemours don’t want to sell to National, or they can’t sell us what we need, then we really only have two options. We can either import components so that we have what we need to keep our plant running, or we’ll be forced to go back to the days when the blends were patented and we were only a distributor and not a US manufacturer of these products.”
National says it can source components from multiple Chinese suppliers, as opposed to just one option per component in the US. It does not purchase any Chinese blends.
Although unable to obtain a written agreement with any domestic component producer prior to 2013, National’s purchases of US components since then have increased.
“Still, what they have been willing or able to supply us comes nowhere close to satisfying National’s blending requirements,” said Beatty.
“In an ideal world, National would source most, if not all, of its components domestically given the shorter delivery times, and we almost always accept domestic components when offered. The few instances in which we have declined an offer were because the offers didn’t make sense given our current inventory position.”
She maintained that if antidumping duties were imposed on HFC components, National would have no guarantee that Arkema and Honeywell would sell them components in the quantities that they needed.
“History has taught us that they either cannot or will not because they are in the business of selling blends, not components, and National will always be an afterthought until they satisfy their own internal needs and swaps with the other two members of their alliance before making commercial sales to companies like us,” said Beatty.
“Even assuming that they could make more components available to National, they would have all the negotiating power in the absence of competition. And, if we can only get R32 but not R125, what good is that when R125 is a component of all five blends covered by this case? National’s ability to obtain R125 dictates how much of the other components it requires.
“We cannot understand how the antidumping law can be used to benefit companies that could not or would not sell us what we needed. We do not see how component imports can be blamed for any injury because, without those imports, our US manufacturing operations and jobs would truly suffer.”
Honeywell refuted National’s assertions. Omar Irani, Honeywell’s fluorine products global director of product management, said: “We have never refused to sell to National or ICOR — or any other US customer — at a fair market price. In fact, we have a long relationship selling HFC components and blends to National and others, and we want to maintain those relationships.”
He stressed that they had not turned away any buyers for lack of product or capacity.
“In fact, as soon as antidumping duties were imposed, we committed to increase the volume of product supplied to National, and we agreed to supply product at very fair prices. And as demand increases in coming years, we will be able to increase our output by de-bottlenecking the plant and expanding operations,” he said.
The petitioners have claimed that imports from China increased by 60% from 2012 to 2014, and continue to increase. Testimonies from those affected revealed the extent to which they claim Chinese producers have injured the US industry by selling the refrigerants at unfairly low prices.
“We have lost business, closed capacity, reduced our workforce, and sold HFC blends below the cost of production because we cannot escape the price levels established in the market by dumped imports,” said Jim Bachman, Chemours North American business manager.
“The fact that we were able to increase prices only after we filed the antidumping case demonstrates the link between our prices and the prices set by the Chinese HFC imports. For our business to recover and even to survive, we need continued relief from the effects of unfair trade.”
Beth Sassano, market manager of Chemours refrigerants business explained how each component required a dedicated production facility costing hundreds of millions of dollars to build and operate.
“Due to these significant investments, the US producers are continually faced with “make” versus “buy” decisions,” she said.
It was explained that the swaps as described by National Refrigerants helped US producers to achieve economies of scale and to provide cost effective products to the market place.
HFC blending was also fundamentally different from manufacturing of pure HFC components, it was argued.
“Compared to HFC components, which require significant capital investment, the investment to set up a blending operation is very small,” said Beth Sassano. “Also, unlike component manufacturing plants, which must be operated 24 hours a day, seven days a week, blending facilities do not require continuous production nor have high fixed costs. HFC blends can all be made using the same blending equipment with low investment. It’s a very simple mixing operation. It is not run at high temperature or high pressure, and there are no hazardous by-products.”
The US International Trade Commission is due to make its final determination on August 1.