Iofina revealed that a preliminary determination from China's Ministry of Commerce (MOFCOM) regarding an Iofina Chemical product, namely hydriodic acid (HI), concluded that Iofina Chemical and the other HI manufacturers from the USA and Japan, had been selling HI in China at below market value.
Preliminary dumping duties of 118.8% and 41.1% have been imposed with immediate effect against USA and Japanese importers respectively. Iofina believes this preliminary determination and the tariff imposed is incorrect and will investigate all means to reverse this decision before the final determination in the autumn of this year.
Given the recent deterioration of the USA-China trade relationship, the conclusion on the matter is unclear, Iofina said. Its best guess at the moment is that there will be a small negative effect on profitability of slightly more than US$100,000 from the board's current expectations in 2018.
“The preliminary determination in the hydriodic acid anti-dumping inquiry in China is extremely disappointing. We continue to refute these claims and will investigate and pursue all options to remedy the situation," said Dr Tom Becker, the president and chief executive officer of Iofina.
On the plus side, Iofina expects to produce 260-265 tonnes of its IOflo crystalline iodine in the first half of 2018 and 315-340 tonnes in the second half of the year; in the whole of 2017 the company produced 503 tonnes of crystalline iodine so this represents a big increase and assumes no contribution from IO#5, where management is pondering options to optimise production from this plant.
Furthermore, spot prices continue to strengthen for iodine and are trading on or above the US$25/kg level for large volume purchases.
''Our IOsorb plants are performing well and we are pleased that our expected production of near 600MT [metric tons] of crystalline iodine in 2018 is in line with analyst predictions in the market. The production from IO#7 has resulted in a lowering of our total per unit iodine production costs and this coupled with higher iodine prices and an increase in year-on-year production are all positive for Iofina's profitability,” Dr Becker said.
House broker not overly concerned by Chinese issue
House broker finnCap said the effect of the Chinese ruling will be small, accounting for less than 3% of projected underlying earnings, and that it saw no need to alter its forecasts.
“More important drivers for 2018 earnings will be the iodine, which continues to improve, further production increases from IO#7 and whether IO#5 returns to production,” the broker said.
Shares were down 3.7% at 15.5p in mid-morning trading.
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