Government Regulation
September 23, 2024
Tempur Sealy Update
Tempur Sealy issues an update on proposed Mattress Firm acquisition and divestitures
Sep. 23, 2024 7:01 AM ETTempur Sealy International, Inc. (TPX) StockBy: Clark Schultz, SA News Editor
Tempur Sealy International (NYSE:TPX) provided an update on Monday in regard to the company’s agreement to acquire Mattress Firm Group Inc. The deal is currently being challenged in federal court by the Federal Trade Commission.
The company said the litigation process continues to progress, with hearings currently scheduled to begin on November 12, and is expected to last about two weeks.
Looking ahead, Tempur Sealy (TPX) said it continues to believe that a successful litigation process can be completed in the coming months, which would allow the transaction to close in late 2024 or early 2025, consistent with previous expectations.
In connection with the planned Mattress Firm acquisition, Tempur Sealy (TPX) has entered into a purchase agreement with MW SO Holdings Company for the sale of 73 Mattress Firm retail locations and the company’s Sleep Outfitters subsidiary, which includes 103 specialty mattress retail locations and seven distribution centers. Tempur Sealy (TPX) will continue to supply its Tempur-Pedic, Stearns & Foster, and Sealy products to the divested Mattress Firm and Sleep Outfitters stores. The divestiture was noted to be subject to the closing of Tempur Sealy’s (TPX) acquisition of Mattress Firm and other customary closing conditions. It is expected to close approximately one quarter after the closing of the Mattress Firm transaction.
CEO statement: “As part of our engagement with the FTC on the proposed acquisition of Mattress Firm, we conducted a divestiture process, which led to an agreement with Mattress Warehouse, a company with extensive mattress retail experience, a strong capital base, and a capable leadership team.”
September 19, 2024
Formaldehyde Issues
Industry decries EPA’s formaldehyde analysis
By Larry Adams
September 17, 2024 | 12:57 pm CDT
In August, the Environmental Protection Agency released the finalized IRIS Toxicological Review of Formaldehyde that addressed the potential cancer and noncancer human health effects from inhalation exposure to formaldehyde.
Industry groups have questioned the methodology of the assessment, what they call “regulatory overreach,” and worry that the assessment will lead to additional regulations.
The assessment specifically focuses on the following health effects: sensory irritation; pulmonary function; immune system effects, focusing on allergic conditions and asthma; respiratory tract pathology; nervous system effects; reproductive and developmental toxicity; and cancer. For cancer, the assessment focuses on cancers of the upper respiratory tract (including nasopharyngeal
cancer, sinonasal cancer, cancers of the oropharynx/hypopharynx, and laryngeal cancer in humans) and of the lymphohematopoietic system (including Hodgkin lymphoma, multiple myeloma, myeloid leukemia, and lymphatic leukemia in humans).
Among the EPA’s findings were:
- Inhaled formaldehyde can cause health effects in humans, most notably respiratory effects. Children and those with respiratory disease appear to be most susceptible.
- Formaldehyde is carcinogenic to humans by the inhalation route of exposure.
Industry groups were quick to question the assessment. The National Association of Manufacturers, in an online policy post said The formaldehyde analysis risks “creat[ing] an unachievable standard and a de facto ban” on an essential manufacturing material
NAM added that the assessment maintains the formaldehyde threshold of 11 parts per billion proposed by the agency in 2022. That’s 30 times lower than Europe’s recently updated worker-exposure limit of 300 parts per billion and “lower than what can be found in homes or even background levels for outdoor air,” the NAM told the EPA.
The American Chemistry Council’s (ACC) Formaldehyde Panel issued the following statement on the IRIS Assessment of Formaldehyde:
“As required under the Toxic Substances Control Act (TSCA), any assessment of formaldehyde must begin with the best available science. This assessment fails that test and is therefore unfit for regulatory decision-making. EPA’s final assessment fails to reflect fundamental criticism from multiple peer review bodies or public comments provided by hundreds of experts, stakeholders, and other agencies. The Agency is on a path to ignore applicable scientific standards and procedural requirements, and issue unscientific and legally unsound regulatory actions based on this flawed assessment under TSCA and other laws later this year.
“If EPA continues on its current path, formaldehyde manufacturing and many of its downstream uses could be severely restricted or potentially banned in the U.S., with an overwhelmingly negative impact on the environment, human health, national security, and the economy.”
Groups with direct ties to the wood products industry also argued against the assessment. The Decorative Hardwoods Association (DHA) recently joined allies in a letter to members of Congress opposing the use of IRIS risk assessments in regulatory determinations. “Despite all of the comments and criticisms of the underlying assessment, the final assessment retains most of EPA’s original conclusions and no changes to the IRIS values,” wrote Keith Christman, president of the DHA, in a recent post
The Environmental Protection Agency’s final formaldehyde analysis does not mandate any new restrictions on industry, but may lead to a final risk evaluation that will.
Fighting IRIS
Congressman Glenn Grothman (R-WI) and Senator John Kennedy (R-LA) introduced the No Industrial Restrictions in Secret Act (No IRIS Act) to “reduce undue red tape” imposed by the EPA’S Integrated Risk Information System (IRIS). This bill is supported by the American Chemistry Council and a variety of other groups.
For instance, on September 9, the DHA, the Kitchen Cabinet Manufacturers Association (KCMA), and the Composite Panel Association joined 50 other national associations in supporting the No Industrial Restrictions in Secret (NO IRIS) Act of 2024 (S. 3724/H.R. 7284).
The bill seeks to prohibit EPA from using Integrated Risk Information System (IRIS) assessments for regulatory decisions. The IRIS program, which the congressman said “lacks Congressional authorization,” has previously influenced some of EPA’s chemical use restrictions. CPA supports this legislation to limit the potential for the formaldehyde IRIS assessment to be used to negatively impact the manufacturing and use of composite panels. Although the bill’s passage this year is unlikely, it helps raise awareness of the issue in Congress, according to the CPA.
Background
The EPA established the IRIS program in 1985 to gather data on how chemicals impact human health, however, it was never authorized by Congress.
IRIS has relied on flawed scientific data, disregarded relevant information, and dismissed public input. Despite the program’s inherent flaws, it creates chemical threshold assessments that have had devastating consequences for private industries.
“There needs to be a change in the way EPA conducts its business around scientific integrity and accountability in the way in which the federal government conducts chemical risk evaluations,” Grothman said.
September 16, 2024
Open Letter to All Spray Foam Applicators and Related Businesses
Compliance with Antidumping Duties and Tariffs for Spray Foam Products
Since July 2018, the United States has imposed a 25% tariff on several spray foam raw materials imported from China, including isocyanates, polyether polyols, fire retardants (such as TCPP), surfactants, and catalysts. Recently, the U.S. International Trade Commission (USITC) launched investigations (701-TA-721 and 731-TA-1689) into imports of alkyl phosphate esters (including TCPP fire retardants) from China, for price dumping (anti-dumping & counter vailing actions have been requested by certain EU and US producers of TCPP) and further the USITC is now investigating several companies suspected of importing TCPP and other tariffed goods without the appropriate duties or tariffs being paid.
As we understand, a decision on these investigations is expected by either the end of September or mid-November 2024. The outcome of which could have a significant impact on the spray foam industry. Importers involved in these investigations may face increased costs or restricted supply of these materials. Furthermore, homebuilders and general contractors (GCs) that require contractors and their products to comply with all relevant national, state, and local laws, including tariff and duty regulations, may disqualify certain foam products for not being in compliance.
To ensure your compliance and avoid potential issues, we suggest obtaining a verification statement from your foam suppliers, that the products you have been purchasing since 2018, as well as those you are currently buying, adhere to all applicable duty and tariff regulations.
Quadrant’s Commitment to Compliance
Quadrant Performance Materials has and will continue to adhere to all relevant duties and tariffs for any imported materials used in our spray foam systems and other products. We verify and ensure the payment of these duties and tariffs, to maintain transparency and compliance.
If you have any questions or need further clarification on this issue, please do not hesitate to contact us.
Quadrant Performance Materials
200 Industrial Blvd, McKinney, TX 75069
(972)542-0072
September 11, 2024
Epoxy Antidumping Update
Early antidumping ruling is somewhat negative for Olin, Westlake: KeyBanc
Sep. 11, 2024 9:35 AM ETOlin Corporation (OLN) Stock, WLK StockBy: Rob Williams, SA News Editor
A preliminary finding by the U.S. Commerce Department on whether imports of epoxy resin from several Asian countries were dumped in the United States is “moderately negative” for chemical makers Olin (NYSE:OLN) and Westlake (NYSE:WLK), according to analysts at KeyBanc Securities.
The Commerce Department on Sept. 10 concluded that government subsidies are being provided to producers and exporters of epoxy resins from Taiwan, India and China, but not South Korea, which was below the allowed threshold. The department will issue a final determination by Jan. 21.
“The announcement is a negative read for both Westlake (WLK) and Olin (OLN) as the proposed countervailing subsidy rates will not affect South Korea, the largest exporting country,” Aleksey Yefremov, analyst at KeyBanc, said in a Sept. 10 report. “We had earlier expected Olin (OLN) and Westlake (WLK) to each see approximately $75 million to $150 million annualized ebitda benefit from import duties on epoxy resins in the U.S. and EU.”
The U.S. Epoxy Resin Producers Ad Hoc Coalition, which consists of Olin (OLN) and Westlake (WLK), in April filed antidumping duty and countervailing duty petitions with the Commerce Department on imports of epoxy resin from China, India, South Korea, Taiwan and Thailand.
The Commerce Department’s preliminary proposal suggests a countervailing subsidy of about 109% for epoxy resins originating from China, about 1%-3% from Taiwan and about 2% from India except for those produced by Champion Advanced Materials, which will see a counter subsidy rate of about 114%.
Importantly, the European Union investigation is pending with a decision likely next year, according to KeyBanc.
“The benefit of tariffs will be fairly inconsequential unless the EU imposes a more meaningful duty than the U.S.,” KeyBanc said. “In the best-case scenario, we wouldn’t expect more than $30 million-$50 million annualized ebitda benefit for key producers, starting at some point in 2025.”
Olin (OLN) and Westlake’s (WLK) joint petition alleged that imports of epoxy resin from the targeted countries were being sold in the United States at less than fair value, or dumped.
The countervailing duty petition alleged that the governments of the targeted countries provide countervailable subsidies for the production and export of epoxy resin.
Olin (OLN) and Westlake (WLK) together alleged that domestic industry was materially injured and is threatened by the imports with further material injury.
More on Olin, Westlake Corporation, etc.
- Westlake Corporation (WLK) Q2 2024 Earnings Call Transcript
- Olin Corporation (OLN) Q2 2024 Earnings Call Transcript
- Olin Corporation 2024 Q2 – Results – Earnings Call Presentation
- Westlake, major PVC pipe makers accused of price-fixing in lawsuit
- Westlake raised at RBC as rate cuts seen driving stronger demand
September 8, 2024
Epoxy Resin Anti-dumping Analysis
Epoxy Resin Anti-dumping in an Era of Keen Economic Protectionism
Jane Denny : Aug 19, 2024 2:35:26 PM
Petrochemical TrendsNorth American Chemical MarketEpoxy Resin
European and US-based epoxy resin producers have triggered anti-dumping investigations against Asian producers in a bid to stop cheap imports. Meanwhile, India—the subject in the US complaint—claims to be a victim of dumping activity, too.
Last month, US-based chemical manufacturing companies Olin and Westlake and Spolchemie—based in the Czech Republic—submitted data to the European Commission (EC) outlining uncompetitive practice. Following the complaint, the EC initiated investigations into trading by producers in China, South Korea, Taiwan, and Thailand.
The move follows the initiation of a probe into the same countries—with the addition of Indian epoxy resin producers—by the US Department of Commerce and the US International Trade Commission in April 2024.
India’s Ministry of Commerce meanwhile, has initiated an anti-dumping investigation into liquid epoxy resin imports from the same countries as those under European Union (EU) and US scrutiny, and Saudi Arabia too.
Source: ResourceWise
What Is Anti-dumping?
Dumping occurs when imported products are made available to buyers at prices lower than fair market value. Investigations are triggered when domestic producers raise concerns about the prices of foreign goods sold in their domestic markets.
Under EU conditions, there is a two-step test to ascertain whether dumping has occurred. Firstly, the export price of a product must be lower than its selling price in the exporting country. Secondly, the product’s availability in the market must have been injurious to the domestic producer community’s business.
If investigators find that dumping has occurred, measures are put in place to mitigate the problem.
China’s Capacity Growth Key
Jennifer Hawkins, Chemicals Sector Business Manager at ResourceWise, points to China’s significant increase in epoxy resin capacity in recent years, as shown in the infographic above.
“The growth in China’s domestic capacity has forced producers in South Korea and Taiwan to export their epoxy resins to other markets outside China—their erstwhile customer. At the same time, China, historically a net importer of epoxy resins, has started to export volumes to other regions too,” says Hawkins.
White Paper Download
Download Hawkins’ analysis of EU and US ADD investigations and International Trade Commission conference submissions, including insight from her epoxy resin market contacts.
In our 2022 blog post, How Will New Capacities Reshape the Epoxy Resin Market?, we explored China’s extra epoxy resin production capacity. With more of that planned expansion now realized, an oversupply scenario has replaced the tightness in global supply that triggered the expansions.
Back then, we predicted that “a supply glut… will undoubtedly create fierce competition, drive prices down, and possibly encourage a rise in exports.” This has now come to fruition.
Source: ResourceWise
China’s current spot liquid and solid epoxy resin prices are close to their lowest price point over the past near-decade, back in 2016. And even then, the drop was relatively fleeting. Both products have remained low and relatively flat since the close of 2023, as they have in Northeast Asia.
Modest rises have been seen in North American and European pricing structures this year. However, as the graph below shows, North American prices alone did not see any significant increase up to the end of 2023, which producers there have maintained to this day.
Measures to Protect
Anti-dumping duties are imposed by authorities within the country—in the case of the US—or region—such as the EU trading block. They are designed to level up the prices of incoming goods with those produced and sold domestically.
In the EU, producers selling into the region may be taxed according to transaction value or per specific amount of the product. The exporter may even agree to sell products at a minimum price.
In both Europe and the US, complainants sought an investigation into the level of dumping by China, South Korea, Taiwan, and Thailand. They seek adjudication on the question of whether dumped imports have caused material injury to the domestic epoxy resin industry.
The US-focused scrutiny was initiated following a complaint by Olin and Westlake. Unlike the EU complaint, the US complaint requests an investigation of India’s alleged dumping activities.
European Epoxy Resin Anti-dumping
In the EU-focused complaint—in which Spolchemie is a complainant alongside Olin and Westlake—it is alleged that exporting producers from Asian countries have injured European epoxy resin producers. The countries claim that they are selling products in the EU market at unfairly low prices, which significantly undercuts the prices of European producers.
| Country | Dumping margins alleged |
| China | From 140% |
| Korea | From 10% |
| Taiwan | From 20% |
| Thailand | From 60% |
∗ See our free-to-download white paper for upper margins alleged
Epoxy Resins Plant Shutdowns
Speaking to the EU complaint, Olin Epoxy & International president Florian Kohl president said: “Although this issue is not unique to epoxy, nor to the EU, the significant volume of what we believe are unfairly dumped imports of epoxy resin have a seriously negative impact on the EU.”
In March 2023, Olin announced plans to cease operations at its Cumene facility in Terneuzen, Netherlands. and solid epoxy resin production at its facilities in Gumi, South Korea, and Guaruja, Brazil.
At the time, the company described it as a “step to right-size our global epoxy asset footprint to the most cost-effective asset base to support our strategic operating model.” However, as part of that announcement, Olin referenced the softness of global epoxy demand and the surplus supply in the market.
Source: ResoureWise
Market Dynamics At Play
In the US-focused complaint, the country’s Department of Commerce has been asked to assess allegations involving exponentially higher margins.In part, the elevated price tags attached to epoxy resins in the US account for the significant price gap compared to all other regions.
In fact, global epoxy resin price graphs from the chemicals business intelligence platform OrbiChem360 indicate the price differential between North American products and Asian output is several thousand dollars. With Asian producers subject to lower output costs, that price gap creates an opportunity for exports to US buyers.
| Trading Partner | Dumping Margin alleged |
| China | From 266.37% |
| India | From 9.92% |
| Korea | From 35.29% |
| Taiwan | From 91.15% |
| Thailand | From 143.73% |
∗ See our free-to-download white paper for upper margins alleged
Subsidized Industry and Anti-competition
According to a report by the US International Trade Administration (ITA), all countries under investigation for anti-dumping (except Thailand) will also be tested for Countervailing Duties (CVD). Also termed anti-subsidy duties, they are designed to counter the negative effects of subsidies.
The suggestion is that within all the countries named in the US complaint except Thailand, respective governments are propping up the epoxy resin sector with incentives. Established under World Trade Organization (WTO) rules, a subsidy includes grants, loans or tax credits.
Anti-dumping Duties: A Trending Solution
Anti-dumping measures are being implemented with increasing frequency as companies—and nations—seek to protect regional and local market shares.
In 2023, the EC proposed duties of between 6.6% and 24.2% for Chinese polyethylene terephthalate (PET) producers found to be importing goods at uncompetitive prices.
Similarly, the EC’s recent initiation of provisional anti-dumping duties against the majority of China’s biodiesel and hydrotreated vegetable oil (HVO) exporters has rocked natural product markets. Our blog post, Oleochemicals Volatility on the Horizon, explores the impacts.
Countries also rely on other means to halt the import of goods from competitor nations. In a blog post, India Halts Imports For Key Intermediate Chemical From China, we explored the Bureau of Indian Standards ruling, which has halted China’s PTA imports.
Future-gazing: Epoxy Resin Supply Chain
China continues to roll out expansion plans that were set in motion before the current downturn. Those expansions are rendering deals formerly made between China and countries such as South Korea and Taiwan unnecessary today. Producers that previously found buyers in China are now looking further afield.
China’s producers, who are faced with a weak domestic market, are also looking for customers in Europe and the US. If offering products at prices significantly lower than domestic producers wins the sale, they will likely do that.
If epoxy resins are subject to provisional anti-dumping duties after the investigations, how will Asia respond? Will the region’s producers still offer products at prices that bear the duty charge and remain attractive to buyers?
Only time will tell…
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