Israel Chemicals could be effectively shut out of the U.S. magnesium market later this year as American officials weigh an appeal to impose anti-dumping duties of 193% being sought by a company controlled by a major donor to Israel.
U.S. Magnesium, which is controlled by Ira Rennert through his Renco Group, accuses ICL of dumping its magnesium on the American market, and selling it below production costs. It also claims that the Israeli government subsidizes ICL’s production costs.
As evidence of the dumping claims, the appeal cites the much higher prices ICL’s Dead Sea Magnesium unit charges for its magnesium in Kazakhstan.
The U.S. Commerce Department imposed a preliminary tariff of 7.5% on ICL magnesium exports in May and warned in July it was considering the case for raising them to 193%.
A tariff hike of that order would bring an end to ICL’s sales to the U.S. market, which amount to 10,000 tons annually and account for about 44% of its magnesium sales worldwide. ICL, whose principal business is potash mined from the Dead Sea, is one of Israel’s biggest companies and exporters.
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ICL’s magnesium business is expected to lose about $20 million this year on sales of $100 million amid low world prices for the metal. In its second-quarter financial report, the company warned that a loss of the U.S. market, where prices are higher by up to $2,000 a ton, would double the losses of the magnesium unit.
Rennert, whose $3 billion fortune ranks him as No. 287 on the Forbes magazine list of wealthiest Americans, is a major donor to the U.S. Republican Party as well as to Yeshivat Netiv Aryeh, Bar-Ilan University and the Western Wall Heritage Foundation.
But his company U.S. Magnesium is in head-to-head competition with ICL. Mining magnesium from Utah’s Great Salt Lake, it produces about 46,000 tons annually of the metal used by the automotive and building industries.
Chinese makers, which dominate the global market, were rendered uncompetitive in the U.S. after anti-dumping duties of 113% were imposed on them in March. Russian and Turkish producers have come to fill the vacuum left by China’s exit, but ICL remains the second-largest supplier to the American market after U.S. Magnesium.
ICL said in its second-quarter report it could potentially redirect magnesium, exports to European and Asian markets. However, now that Chinese producers have lost the U.S. market, global supplies have risen and prices have fallen sharply.
As a result, many of the 400 jobs at ICL’s magnesium operations near the Dead Sea could be cut as well as jobs at subcontracting companies.
A final decision on the tariffs is expected in November. In the meantime, the company has adopted a two-pronged strategy of trying to delay the tariff decision and getting it reversed.
ICL has been in talks with U.S. Magnesium, the U.S. Commerce Department and Israel’s Economy and Industry Ministry about a proposal under which it would agree not to sell its magnesium below a certain minimum price in exchange for a delay in imposing the higher tariff. Israel’s Economy Ministry would be responsible for monitoring ICL’s adherence.
However, the deadline for all the parties to sign off on the plan is October 22 and the discussions have stalled.
ICL’s other strategy is to appeal to the U.S. International Trade Commission. The five-member board, which is empowered to decide on issues like dumping, patent infringements, has ruled on a preliminary basis that there was a “reasonable indication” that the American magnesium industry had been “materially injured” by Israeli competition after U.S. Magnesium filed its appeal a year ago.
Israel was able in 2001 to convince the ITC not to impose tariffs, but sources noted that in Trump’s Washington to atmosphere is far more protectionist than in the past.
On the other hand, ICL has allies in the U.S. which could pay more if the anti-dumping tariffs reduce competition in the market and lead to higher prices. ICL also supplies magnesium to a handful of sensitive sectors, including the zirconium used to clad rods for power plants.
The North American Die Casting Association has told the ITC that access to magnesium is critical to its members, which use it to manufacture automobile engine and transmission parts to computer components and medical devices.
“Since there is only one major producer of magnesium in the United States, U.S. Magnesium would face very little competition without imports,” NADCA warned in a November 2018 letter.
It said the fact that Israeli magnesium sales in the U.S. decline from 2014 to 2017 by 28% in value and 36% in volume was prima facie evidence that U.S. Magnesium was not being harmed by the import competition.