Paint makers say EU tariffs on Chinese imports risk bankrupting them

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Paint makers are pushing for a rethink of EU anti-dumping measures against Chinese exports of key raw materials, saying they will lead to factory closures and further erode the region’s industrial base.

Paint makers in the bloc fear that tariffs of up to 39.7% on Chinese exports of titanium dioxide (TiO2) would bankrupt smaller producers and push larger producers to move production outside the bloc.

The provisional charges imposed in July have not yet been confirmed by member states.

“This is a matter of the survival of these industries,” said Nicolas Dujardin, chief operating officer of Océinde, a family-owned French paint manufacturer. “If all these investigations result in such high fees in Europe, then there will be some bankruptcies.”

Following an anti-dumping investigation launched last year, the EU introduced provisional measures, including retroactive duties, which could be adjusted or confirmed in January next year.

The debate highlights the dilemma the EU faces in protecting its industries from Chinese competition without fueling inflation and driving higher costs for its own producers.

Paula Salastie, the fourth-generation family owner of Finnish company Teknos, said the paints sector would face a prolonged downturn if consumers were hit by even higher prices, and that if Chinese supplies were diverted elsewhere, shortage of raw materials would cause production disruptions.

“If we can’t sell as much as we expected, then we have to cut jobs. We are watching with a very careful eye,” she said.

The duties meant the next investments were likely to go outside the bloc, she added.

The European Commission declined to comment, but noted that paint manufacturers had until October 21 to present their views before member states vote.

Major paint manufacturers also criticized the taxes. Pedro Serret Salvat, president of Europe, the Middle East and Africa at PPG, the world’s second largest paint company, said they would have a “negative impact on the competitiveness” of its EU manufacturers.

The debt was “disproportionate” and the retroactive application was “unacceptable”, he added.

Paint makers said the tariffs would be acceptable if they were phased in, along with increased subsidies for local titanium dioxide production.

However, Western TiO2 producers have been severely affected by Chinese competition.

China’s production capacity rose from 1.4 million tons in 2008 to about 6.1 million tons this year, taking its share of global consumption from 29 percent to 83 percent, according to TZMI, a supplier of industry information.

About 1.1 million tonnes of non-Chinese production has been shut down since 2007, including five EU plants, according to estimates by the European TiO2 Coalition, which made the complaint that led to the anti-dumping investigation.

Tronox, a titanium dioxide producer that led the European TiO2 Coalition, said its market was “a microcosm of the Chinese overcapacity problem”, which has also affected sectors such as batteries, solar panels and steel.

The company said the maximum increase in paint prices resulting from the taxes will be 5 percent. Paint manufacturers contested this, saying the impact could be greater.

Protecting the TiO2 industry mattered to the European aerospace industry because it was vital to the production of titanium metal used in aircraft, Tronox added.

“We cannot operate at 60 percent capacity utilization,” said Jeffrey Neuman, Tronox’s general counsel. Protecting industry through tariffs was “a fundamental question of industrial resilience,” he added.

Some paint makers have said they expect the duties to give Britain a Brexit windfall and boost Turkish rivals, with both nations still able to access cheap Chinese pigments.

But Tom Bowtell, chief executive of the British Coatings Federation, said any competitive advantage from lower input prices would likely be offset by the additional trade costs incurred by leaving the EU.

Tronox said it was concerned the UK could be flooded with Chinese material as exporters seek alternative markets outside the EU, especially as Brazil and India launched their own anti-dumping investigations into TiO2 shipments from the largest economy of Asia.