The European Union has slapped anti-dumping duties on Chinese imports of citric acid after an investigation concluded two European producers have been injured by unfair competition.
The EU alleges that Chinese citric acid producers have benefited from government subsidies and loans, allowing them to sell citric acid at prices too low for European firms to recover their costs. From today, duties of almost 50 per cent will be applied on Chinese citric acid imports for the next six months.
Citric acid is a crucial ingredient in the beverage sector, used for flavouring and as a preservative. Demand for the ingredient is growing thanks to new applications and emerging markets. In Europe consumption increased by 15 per cent between 2004 and the investigation period to around 440,000 tonnes, according to the EU.
But while European production of the ingredient has increased slightly to meet new demand, its overall market share has shrunk by 9 per cent. Meanwhile, imports from China have increased by 37 per cent to 198,000 tonnes.
Chinese producers undercut European prices substantially, at an average rate of 15 to 21 per cent of the Europe price, investigators found.
Only two Europe-based citric acid producers supply the market, including Austria's Jungbunzlauer who brought the case to the attention of the EU authorities and Belgium's SA Citrique Belge, owned by Dutch chemicals group DSM.
Their profitability has declined as small price rises have been "insufficient for the community industry to maintain its profit margin" in the face of significant raw material increases, said the report in the EU's Official Journal.
"In view of the clearly established coincidence in time between, on the one hand, the surge of dumped imports at prices significantly undercutting the Community industry's prices and, on the other hand, the Community industry's decrease of profitability and deterioration of the other financial indicators, it is provisionally concluded that the dumped imports played a determining role in the injurious situation of the Community industry," it concluded.
Neither of the European citric acid producers have publicly commented on yesterday's announcement.
A sales manager at one of the Chinese companies involved in the investigation, who did not want to be named, told BeverageDaily.com that the tariffs would not have a significant effect on the firm's business. "Overall demand in the world is rising so we will adjust our international sales to focus more on other regions."
The company exported 20 per cent of its product to Europe last year, or 20,000 tons, but it also counts Asia and US as key markets.
However Chinese suppliers now have close to half of the EU citric acid market, suggesting that the introduction of tariffs will have a significant impact on importers and users of the ingredient in Europe.
EU member states will decide later this year on whether to keep the duties for a further five years.