U.S. Initiates Anti-Dumping Investigation on Chinese MDI: Potential Impacts

Dow and BASF have petitioned the U.S. Department of Commerce and the U.S. International Trade Commission (USITC) to impose anti-dumping duties on diphenylmethane diisocyanate (MDI) imported from China. According to their petition submitted on February 12, Chinese MDI is being sold in the U.S. at unfairly low prices, undermining domestic manufacturers' ability to achieve market-based returns.

While Covestro and Huntsman also produce MDI in the U.S., they are not part of this newly formed MDI Fair Trade Alliance.

The petition primarily targets Wanhua Chemical Group, which, along with its affiliates, accounted for 97% of Chinese MDI imports into the U.S. in the second half of 2024. It also highlights that a significant portion of these imports were facilitated by Wanhua Chemical America Inc.

The petition alleges dumping margins ranging from 305.81% to 507.13%. The USITC's preliminary hearing is expected on March 5, 2025, while the earliest potential suspension of anti-dumping duty liquidation could take effect on April 23, 2025.

Currently, Chinese MDI imports are already subject to a 25% tariff under Section 301, imposed during former President Donald Trump's first term. Additionally, these imports may face an additional 10% tariff under Trump's proposed broader tax plan on Chinese goods.

Between 2022 and 2024, U.S. imports of Chinese MDI rose from 163,887 tons to 198,761 tons, marking a 21% increase.

The global MDI market is highly concentrated among a few key producers:

- Wanhua Chemical – 3.5 million tons/year

- BASF – 2.07 million tons/year

- Covestro – 1.77 million tons/year

- Huntsman – 1.37 million tons/year

- Dow – 1.11 million tons/year

- Mitsui Chemicals – 610,000 tons/year

- Tosoh Corporation – 470,000 tons/year

- Karoon (Iran) – 40,000 tons/year

BASF has been expanding its MDI capacity in China. Its upgraded Chongqing MDI facility is expected to commence operations by the end of 2024, increasing capacity to 530,000 tons/year. Additionally, the company is upgrading its Shanghai facility to boost crude MDI capacity to 401,760 tons/year.

BASF and Dow have also made substantial investments in the U.S.:

- BASF is in the final phase of a nearly $1 billion MDI capacity expansion at its Geismar, Louisiana facility.

- Dow opened a new MDI plant in Freeport, Texas, in 2023, replacing and expanding its older facility in La Porte, Texas.

As of 2024, total U.S. MDI production capacity stands at 1.8 million tons/year, while North American MDI demand is estimated at 1.83 million tons.

The petition covers all forms of diphenylmethane diisocyanate (MDI), including polymeric, monomeric, and modified variants, regardless of:

- Distillation process

- Acid content

- Reactivity

- Functional properties

- Freezing stability

- Physical form (liquid or solid)

- Viscosity

- Purity and molecular weight

MDI may contain additives such as catalysts, solvents, plasticizers, antioxidants, flame retardants, pigments, diluents, thickeners, fillers, softeners, or toughening agents. However, MDI mixtures where MDI content is less than 40% by weight are excluded from the investigation.

Additionally, MDI that has undergone partial chemical reactions with polyols or polyamines (resulting in products with an NCO content below 10% by weight) is also excluded.

The investigation will also cover MDI processed in third countries if such processing (e.g., blending, dilution, additive introduction, or removal) does not fundamentally alter the product's classification.

Relevant products fall under U.S. Harmonized Tariff Schedule (HTSUS) codes 2929.10.8010 and 3909.31.0000, but may also be classified under codes 3506.91.5000, 3815.90.5000, 3824.99.2900, 3824.99.9397, 3909.50.5000, 3911.90.4500, 3920.99.5000, and 3921.13.5000.

In 2024, China exported 268,000 tons of polymeric MDI to the U.S., representing 22% of China's total polymeric MDI exports and 7.7% of Wanhua Chemical's total MDI capacity.

If the U.S. imposes anti-dumping duties or significantly increases tariffs, Wanhua may redirect exports from its Hungary facility (400,000 tons/year capacity) to the U.S. while increasing Chinese exports to Europe. This strategy could lead to higher logistics costs for Wanhua but would have limited impact on its overall sales and profitability, given that the existing tariff on Chinese MDI is already 31.5%.

Additionally, since 2025, MDI producers including Wanhua, BASF, Huntsman, and Covestro have raised prices due to rising costs in logistics, raw materials, and energy.