‘The US is not playing through the rules and China has not been playing by the rules for some time.’ This quote came from David Buckby, a Wood Mackenzie analyst consulted for Anthony King’s report on Ineos and others’ claims that overseas manufacturers are dumping chemicals on the European market at prices so low that domestic manufacturers cannot compete.
The chemicals industry has constantly been cyclical; requirement for chemicals is intently coupled to overall economic ebbs and flows. When global economies gradual, requirement – and for this reason prices– will drop. Manufacturers will typically weather these periods through running plants at decrease capacity, making decrease earnings (or even small losses) however maintaining the plants’ reliability to ride out the downcycle till demand picks up again.
This believes that the historical long-term trend of development in demand for chemicals will continue. But if the rules have changed, this method may no longer be effective.
Buckby was indicating to trade policies in the world’s two biggest superpowers, which have shifted away from globalized trading systems to become much more defensive of domestic industry. China has, for numerous years now, prioritized a shift from being a big importer of simple chemicals to becoming self-reliant and an exporter. State subsidies have assisted built of huge, efficient, incorporated chemical plants, at a time when demand for chemicals in the rest of the world has no longer stored up with the boom in supply, moreover sustaining depressed prices throughout the sector.
Confronting excess global supply of many primary chemicals, and with little prospect of China’s industry backing off manufacturing to increase prices, America has reacted with big trade tariffs. These are supposed to deter imports and permit its own chemicals industry to hold manufacturing and profitability, taking benefits of cheaper feedstocks and lower energy costs than European rivals. That has left Europe, along with other markets like South Korea, and others across southeast Asia, bearing the brunt of the deliver glut.
This is what has caused claims of ‘financial dumping’ in the EU. Ineos and others say it has long gone beyond ordinary market opposition, and imports are being sold at artificially low costs, in ways that threaten the viability of local producers. China has previously exploited a method of competitive competition on price to displace foreign manufacturers and gain control of supplies of diverse materials – rare earths and strategic metals.
Governments must therefore decide how critical the threat is, and how strongly they wish to reply. But while anti-dumping measures may provide some short-term comfort for domestic industry, they feel like a flimsy sticking plaster over the a much bigger problem of long-term competitiveness.
