Paint makers say EU tariffs on Chinese imports risk bankrupting them

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

The bloc’s paint producers fear that tariffs of up to 39.7 per cent on Chinese exports of titanium dioxide (TiO2) would bankrupt smaller producers and push bigger manufacturers to shift production outside the bloc.

The provisional duties imposed in July have yet to be confirmed by member states.

“This is a question of survival of these industries,” said Nicolas Dujardin, chief operating officer of Océinde, a family-owned French paint producer. “If all those investigations result in such high taxes in Europe, then there are going to be some bankruptcies.”

As a result of an anti-dumping investigation launched last year, the EU introduced provisional measures, including retroactive duties, that could be adjusted or confirmed next January.

The debate puts a spotlight on the dilemma the EU faces in protecting its industries from Chinese competition without stoking inflation and generating higher costs for its own producers.

Paula Salastie, the fourth-generation family owner of Finland’s Teknos, said the paint sector would face a prolonged downturn if consumers were hit by even higher prices, and that if Chinese supply were diverted elsewhere, raw material shortages would cause production outages.

“If we’re unable to sell as much as we were expecting, then we need to cut jobs. We are looking with a very keen eye,” she said.

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

The European Commission declined to comment but noted that paint producers had until October 21 to submit their views ahead of a vote by member states.

Big paint producers have also criticised the duties. Pedro Serret Salvat, president of Europe, 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 duty was “disproportionate” and the retroactive application was “unacceptable”, he added.

Paint producers have said the tariffs would be acceptable if introduced gradually along with increased subsidies for local titanium dioxide production.

However, western TiO2 producers have been badly hit by Chinese competition.

China’s production capacity has ballooned from 1.4mn tonnes in 2008 to an estimated 6.1mn tonnes this year, taking its share relative to global consumption from 29 per cent to 83 per cent, according to TZMI, an industry information provider.

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

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

The company said the maximum increase in paint prices resulting from the duties would be 5 per cent. Paint producers disputed this, saying the impact could be higher.

Protecting the TiO2 industry mattered for the European aerospace industry as it was vital to producing titanium metal used in aircraft, Tronox added.

“We can’t operate with capacity utilisation at 60 per cent,” said Jeffrey Neuman, general counsel of Tronox. Protecting the industry through tariffs was “a fundamental industrial resilience question”, he added.

Some paint makers said they expected the duties both to give the UK a Brexit windfall and to 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 edge from lower input prices would probably be negated by the extra trade costs incurred by leaving the EU.

Tronox said it was concerned that the UK could be flooded with Chinese material as exporters sought alternative markets outside the EU, especially as Brazil and India had launched their own anti-dumping investigations against TiO2 shipments from Asia’s biggest economy.