A chemical company in north China's Hebei Province has had to turn to the Ministry of Commerce again for help after suffering from massive losses due to plummeting TDI (Toluene Diisocyanate) prices in recent years.
The Cangzhou Chemical Industry TDI Co Ltd applied to the Ministry of Commerce last December for an interim review on the dumping margin of TDI products imported from Japan and South Korea, said Ma Jian, a department director at the company.
In 2003, the Ministry of Commerce started imposing anti-dumping taxes on TDI products imported from Japan, South Korea and the United States.
But approximately one year after the country's top foreign trade regulator's arbitration on the anti-dumping taxation, TDI manufacturers and exporters from Japan and South Korea increased the dumping margin to such a degree as to exceed the arbitration-regulated anti-dumping tax rate, claimed Cangzhou Chemical Industry TDI Co.
"The reduced TDI price - largely caused by Japan and South Korea's dumping measures - has greatly squeezed our profit margin," complained Ma, comparing the current average price of 20,000 yuan (US$2,409) per ton with 25,000 (US$3,012) per ton 2000.
"The current TDI price cannot even offset our production costs," said Ma.
The Hebei TDI company last year earned a profit of approximately 1 million yuan (US$120,000) for the first time, largely due to its enhanced management and technologies, according to Ma, who claimed that the low price continues to hamper the firm's development efforts.
Consequently, the local TDI company, which was established in 1996, turned to the Ministry of Commerce for a re-examination of the dumping of TDI products from Japan and South Korea.
The ministry accepted the company's application and started its year-long interim review on February 3. It will last for 12 months, when a final decision is expected.
TDI is an embryonic petrochemical sector in China. It is a raw material used to produce downstream petrochemical products such as adhesives and coatings.
The country currently has three TDI manufacturers in Hebei, Gansu and Shanxi provinces - including the Cangzhou company. China still needs to import some 75 percent of TDI products to feed its annual domestic demand of 300,000 tons, Ma told China Daily.
Industry analysts appear quite confident about the result of the Cangzhou chemical company's move to fight the dumping measures, showing a complete understanding of these enterprises.
"Many of China's petrochemical industries are in their infancy, and a great number of petrochemical products rely on imports," said Han Yong, the law division's director under the China Chamber of Commerce of Metals Minerals & Chemicals Importers & Exporters (CCCMC), who stressed that some countries' dumping measures towards China are likely to paralyze these burgeoning petrochemical sectors.
"So the local petrochemical companies are supposed to resort to legal means to fight the intended dumping in order to defend their legitimate interests," suggested a trade lawyer.
Anti-dumping cases in China's petrochemical industry against foreign countries account for an overwhelming proportion among the total number of the country's anti-dumping cases, according to industry sources.
China launched its anti-dumping regulations in 1997. By the end of 2003, the country had dealt with 27 such cases against foreign countries, and regained an accumulated loss of more than 20 billion yuan (US$2.4 billion), according to statistics from CCCMC.
The petrochemical sector accounted for 20 of these 27 cases.
Last year, the petrochemical industry was involved seven out of eight anti-dumping cases, said the same sources.
Some experts projected that an increasing number of international anti-dumping cases are expected to arise, mainly as a result of the opening of regional markets due to commitments made to the World Trade Organization (WTO).
"A large number of Chinese companies have been authorized for exporting operations, and many are expected to remain internationally competitive thanks to their low prices," Zhang Hanlin, president of the WTO research institute at the Beijing-based University of International Business and Economics, was quoted as saying by a local newspaper. "That will inescapably lead to a host of anti-dumping measures in foreign markets."
Zhang added that, the reduced trade tariff in line with WTO agreements among members in 2005 will add fuel to the already fiercely competitive global market.
"The heated price war will trigger more disputes over dumping and anti-dumping," said Zhang.
But some industry analysts do not foresee major changes in the petrochemical industry in terms of anti-dumping conflicts this year.
Han Yong from CCCMC estimated the total number of anti-dumping cases in the petrochemical sectors will witness a major rise.
Han told China Daily that the industry will maintain strong growth momentum this year, as the production and demand for petrochemical products is still soaring.
"The booming industry will conduce to reducing cross-boundary trade frictions," explained Han, who took the steel sector as an example.
"Steel and petrochemical were once the two sectors worst hit by product dumping in China, but the zooming steel industry in recent years has not seen a single anti-dumping case in the country," said Han.
Commenting on the impact of the reduced tariff on the petrochemical industry, Han said that would not generate obvious shake-ups in terms of anti-dumping, as "the country's tariff on petrochemical products is already at a relative low rate."
"In addition, the product's low price does not show a direct correlation with dumping activities - it is also obviously closely connected with other market factors such as production and demand, and the macro-economic situation," Han added.
The United States, South Korea and Japan are the major countries involved in dumping petrochemical products in China.
Petrochemical companies from these countries often target the budding new-tech petrochemical sectors in China to dump their products, in a bid to dominate the Chinese market in the long term through suffocating these sectors, said industry analysts.
For example, the country's PVC (Polyvinyl Chloride) sector was crippled by the product dumping from countries including the United States, Japan, South Korea and Russia before 2003 when the government started levying anti-dumping taxes on imported PVC products.
After the anti-dumping measures were adopted in the PVC sector, many of the country's listed PVC producers, such as Shandong-based Sinopec Qilu Company Ltd and Sichuan-based Jinlu Group, witnessed a skyrocketing increase in their stock prices of 50 to 100 percent, according to company sources.
Statistics from the China Petroleum and Chemical Industry Association (CPCIA) show that 2004 saw an all-time high in terms of petrochemical industry production, sales, profits and taxes paid.
The industry's profits reached 279.3 billion yuan (US$33.7 billion), a jump of 58.7 percent from 2003, compared with an average annual increase of 21.1 percent from 2000 to 2004.
The industry's production value totalled 2.47 trillion yuan (US$297.2 billion) last year, up 32.5 percent year-on-year.
That growth was 16.2 percent higher than the average annual increase of 16.3 percent between 2000 and 2004, the association reported.
The robust growth of the country's petrochemical sectors is expected to be maintained this year, said industry experts.
It will largely be fuelled by the high crude oil price on the international market as well as China's fast-growing economy and favourable macro-economic conditions and policies.
China's petrochemical industry witnessed rapid expansion in January, CPCIA said, with 57 of the 64 major petrochemical products maintaining growth in the first month of the year.
(China Daily March 24, 2005)