Ryan’s Notes

July 29, 2013

ITC hearing on SiMn draws sparks

Arguments presented this month to the ITC by FerroAtlantica and its subsidiary, FerroVen, as to why there should be no antidumping duties on Venezuelan silicomanganese were precise: Venezuelan producers are not substantial contributors to the global silicomanganese market and should not be subject to antidumping duties placed on large market players like India and Kazakhstan. Venezuela in no way represents a threat nor has it caused harm to US domestic producers, testified Julie Mendoza of Morris, Manning & Martin, the law firm representing FerroAtlantica.

In 2012, Mendoza successfully litigated and won the precedent-setting Brazilian silicomanganese antidumping case on behalf of Vale and proved that the nation's producers did not inflict or pose material threat or harm to US companies because of its limited output and insubstantial role in the global marketplace.

Mendoza argued that FerroVen, along with the only other Venezuela producer, Hevensa, comprise just two tenths of 1 % of global output of silicomanganese, and therefore do not have substantial market influence and should not be subject to antidumping duties along with India and Kazakhstan. India, the world's second largest producer, accounts for 11 % of total production, and Kazakhstan, the world's sixth largest producer, chums out nearly 10 times the volume of Venezuelan furnaces. In 2012, Venezuela exported 12,000 mt according to the Global Trade Atlas; in comparison, India exported 1-million mt, and Kazakhstan exported 200,000 mt.

Both Mendoza and FerroAtlantica North America's GM, Edward Hopkins, noted that, unlike Kazakhstan and the two largest vertically integrated US producers, Venezuelan suppliers do not control manganese mines and must purchase ore on the open market. Mendoza further remarked that continued controls on commerce, including free flow of goods, capital and currency, and the regular interruption of electricity, make it impossible for Venezuelan producers to contribute in a substantial way to the global marketplace for silicomanganese.

In addition, Venezuelan producers consistently experience inflated costs reflected in higher tags for domestic buyers within the South American country. Hopkins said that the company has never imported material into the US market but explained that, nonetheless, the company does not wish to be labeled as an "unfair trader."

FerroAtlantica's Export Manager, Antonio Salinas, acknowledged the Venezuelan political and economic situation and the challenges of producing an energy- and raw material-intensive commodity in the South American country. He noted that, while the nation is estimated to produce approximately two tenths of 1% of global output, he believed that figure could be lower in 2013. Salinas remarked that unpredictable power outages frequently cause furnaces to be shut down, and raw material shortages have faced production problems. He also surmised that it is likely that Hevensa's operations have not operated at full capacity.

Felman Production, the largest US producer and a subsidiary of Georgia American Manganese, provided an emotional case, claiming that imports of silicomanganese would greatly hurt US domestic production. It cited the three-month closure of the company's West Virginia furnaces. Mendoza, however, argued that Felman has the ease and quick ability to supply its customers either with imports from the Georgian operations or from domestic supply, as it sees fit, based upon the company and market conditions. Felman and Georgia American Manganese supply over 50% of the US needs for silicomanganese, while Eramet's output is thought to go almost entirely to USX.

Barry Nuss, CFO of Georgian American Alloys, which owns Felman Production and Felman Trading, stressed the role that pricing plays in the silicomanganese market. He commented that, should orders from downstream customers be revoked, the damage would be substantial and possibly lead to the permanent closure of Felman Production. Mendel Sossonko, Sales Manager at Felman Trading, said that, while domestic producers may have logistical advantage over importers and be in closer proximity to customers, the company competes daily with importers and any revocation of orders would be detrimental.

Eramet Marietta also provided its view in favor of the continuation of antidumping duties against Kazakhstan, India and Venezuela. All testimonies again highlighted the immense competition of the industry, specifically in the US, and reiterated the necessity of being the lowest bidder to win supply contracts. 

Peter Rochussen, VP of Eramet North America, provided further insight to the instability and weak nature of the US steel industry, particularly with regard to long products used in non-residential construction and infrastructure. He explained that a flood of cheap imports from Kazakhstan, India and Venezuela would induce unimaginable harm and ultimately lead to the shuttering of US operations. He noted that, while Venezuela currently represents a small portion of global production, the nation likely has much higher apparent capacity and possibly large inventories. He insisted that FerroVen and Hevensa can produce much more silicomanganese than Venezuelan domestic customers can use.