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A preliminary finding by the U.S. Commerce Department on whether imports of epoxy resin from several Asian countries were dumped in the United States is “moderately negative” for chemical makers Olin (NYSE:OLN) and Westlake (NYSE:WLK), according to analysts at KeyBanc Securities.
The Commerce Department on Sept. 10 concluded that government subsidies are being provided to producers and exporters of epoxy resins from Taiwan, India and China, but not South Korea, which was below the allowed threshold. The department will issue a final determination by Jan. 21.
“The announcement is a negative read for both Westlake (WLK) and Olin (OLN) as the proposed countervailing subsidy rates will not affect South Korea, the largest exporting country,” Aleksey Yefremov, analyst at KeyBanc, said in a Sept. 10 report. “We had earlier expected Olin (OLN) and Westlake (WLK) to each see approximately $75 million to $150 million annualized ebitda benefit from import duties on epoxy resins in the U.S. and EU.”
The U.S. Epoxy Resin Producers Ad Hoc Coalition, which consists of Olin (OLN) and Westlake (WLK), in April filed antidumping duty and countervailing duty petitions with the Commerce Department on imports of epoxy resin from China, India, South Korea, Taiwan and Thailand.
The Commerce Department’s preliminary proposal suggests a countervailing subsidy of about 109% for epoxy resins originating from China, about 1%-3% from Taiwan and about 2% from India except for those produced by Champion Advanced Materials, which will see a counter subsidy rate of about 114%.
Importantly, the European Union investigation is pending with a decision likely next year, according to KeyBanc.
“The benefit of tariffs will be fairly inconsequential unless the EU imposes a more meaningful duty than the U.S.,” KeyBanc said. “In the best-case scenario, we wouldn’t expect more than $30 million-$50 million annualized ebitda benefit for key producers, starting at some point in 2025.”
Olin (OLN) and Westlake’s (WLK) joint petition alleged that imports of epoxy resin from the targeted countries were being sold in the United States at less than fair value, or dumped.
The countervailing duty petition alleged that the governments of the targeted countries provide countervailable subsidies for the production and export of epoxy resin.
Olin (OLN) and Westlake (WLK) together alleged that domestic industry was materially injured and is threatened by the imports with further material injury.
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