Chinese dumping duties affect pulp producers in Canada China's imposition of new dumping duties on a type of wood pulp used to make cloth, cellophane, tires and other products will affect several large producers in Canada, the United States and Brazil. Fortress Paper Ltd. and Tembec Inc., along with two private dissolving pulp producers in the Maritimes, face 13-per-cent interim duties. Several large firms in the U.S. will be subject to duties of around 20 per cent, while the duty for a South American producer is 6.8 per cent. Vancouver-based Fortress" shares, already down substantially from their 2013 high of $12.08, hit a nearly five-year low, closing at $5, down 63 cents, or 11.1 per cent, in trading Wednesday on the Toronto Stock Exchange. The company said it's considering a legal challenge against the duty and will work with the federal government to have it reviewed by the World Trade Organization. "We wholly disagree with China's Ministry of Commerce's conclusion that Canadian dissolving pulp producers are dumping exports into China and have expressed this view to the minister in the strongest manner," president and CEO Chadwick Wasilenkoff said. Under international trade rules, dumping refers to selling exported goods below prices in the producer's home market. Under WTO rules, duties can applied by importing countries if the dumping is harming their domestic producers. Fortress said the decision "represents an unsupported assessment of injury to China's dissolving pulp market and the allegations of dumping activities by Canadian producers." It cited a report by Canadian economist Michael Stone that claims changes in dissolving pulp prices were largely driven by cotton prices and a weak global textile fibre market. He said Chinese producers are at a competitive disadvantage due to the high cost of imported wood fibre, not dumping by foreign producers. Fortress said the duty won't reduce wood fibre costs for Chinese producers and may significantly hurt the country's large viscose fibre producers. China accounts for 45 per cent of global dissolving pulp demand. The company said it has 10 days to make an initial decision on its options, which include challenging the duty, a lengthy process that could take years if it goes to the global trade body. A final duty decision by the Chinese is expected in February, about a year after it first began to review the actions of foreign producers. In the meantime, Fortress will convert its Specialty Cellulose mill in Quebec to also make kraft pulp for paper-making. "This is a challenging time for Fortress Paper, but we have prepared for this eventuality and have implemented a strategy which should mitigate the short-term adverse effects of the ministry's preliminary determination," Wasilenkoff added. The plant near Ottawa was converted from paper grades in 2011 just after prices peaked for dissolving pulp. Since then, China's economic growth has slowed and dissolving pulp prices have plummeted by more than a third to about US$880 per tonne, while paper and specialty pulp prices have surged. In addition to fetching lower prices, dissolving pulp is more costly to produce because it uses more fibre and chemicals, while the extra processing time also reduces output by up to 25 per cent. Paul Quinn of RBC Capital Markets said duties will also apply to U.S. producers Buckeye, Georgia-Pacific, Weyerhaeuser, Rayonier and Cosmpolis but the impact should be "less negative than expected." While prices in China will likely rise, it will should create opportunities for North American and Brazilian producers to gain market share in other markets. "It could resemble musical chairs for commodity dissolving pulp producers in 2014," he wrote in a report. Quinn said Fortress Paper's strategy could partially offset the impact of the duties, but paper pulp customers may seek additional concessions for dealing with a producer that may swing back to the production of dissolving pulp. Meanwhile, the analyst said Rayonier could switch its mill over the next few years to fluff, the key ingredient in diapers. That could increase its competition with producers like Domtar Corp. Tembec could be immediately reached for comment.