Solvay forces changes over soda ash duties

Date: 24/07/1997

By Chris Johnstone

Chemical giant Solvay will force the European Commission to drop anti-dumping duties against US exports of a key raw material used in glass-making after the Belgian firm changed its position midway through an investigation into whether they should be prolonged.

In a dramatic about-turn, soda-ash producer Solvay has switched sides and is now calling for US exports of the product to be allowed into the Union freely.

In doing so, it has abandoned its former European allies who are calling for the duties on soda ash - the main raw material in glass-making and one which is also used in other chemical processes - to continue.

The sheer dominance of Solvay as Europe's biggest soda- ash producer means that Trade Commissioner Sir Leon Brittan now has no option but to fall in line with its change in position, although smaller producers face the twin threats of a strengthened Solvay on their home markets and stepped up exports of US soda ash.

Commission officials will formally call for the duties to be discontinued in September.

UK soda-ash producer Brunner-Mond, formerly part of ICI, and Germany's Stassfurt have already complained bitterly to the Commission about its impending decision, but officials point out that they have no choice.

The Commission's own anti-dumping procedures state that duties should be discontinued if companies accounting for a minimum of 25&percent; of European production are not in favour of them. With Solvay's switch, that threshold is no longer met.

Solvay's change of heart can be traced back to its successful take-over this year of the Bulgarian soda ash company, Sodi.

The biggest privatisation ever undertaken by Sofia offered Solvay an additional 1.2 million metric tonnes of synthetic soda- ash production a year and the chance to further boost its position as the world's biggest producer, with output increased to 7.4 million metric tonnes a year.

US producers FMC and General Chemical rank as the second and third biggest producers, with former USSR manufacturer Sterlitamak the third. Total world production of soda ash stands at around 32 million tonnes a year.

However, the Sodi deal ran into opposition from Italy's competition authority, which demanded that Solvay change its stance and drop its support for duties on US imports of soda ash into Europe. This, it argued, would allow US imports to dilute Solvay's dominant position on the European market.

For Italy, Solvay's purchase of Sodi represented the take-over of the country's number one soda-ash producer by its biggest competitor. With other firms relative minnows on the market, the recently established Italian authority felt bound to take remedial measures.

The original duties on American companies in 1995 had worsened the situation in Italy by forcing FMC, one of Solvay's biggest rivals, to leave the local market.

Solvay claims that the Italian demands forced it to seek a change in position from some of the main players on the European soda ash market.

However, Commission sources say that Solvay's change of heart was enough on its own to block any possibility of the duties being continued.

Solvay argues the renewal of the duties on US imports has been meeting increased opposition over recent years. The duties were originally imposed in October 1995 and varied from 2.5&percent; to 13.9&percent; of the import price.

Solvay has always had more cause to be ambivalent about the duties than its European partners.

It bought into one of the biggest US producers of soda ash, now re-named Solvay Minerals Inc, which itself faced duties of 6.2&percent; on exports to the EU market.

Most of the production from the American acquisition was aimed at the local market and not Europe, said Solvay, adding that a large proportion of current US exports were now being directed towards Asia.