COMMISSION REGULATION (EC) No 1071/2007
of 18 September 2007
imposing a provisional anti-dumping duty on imports of coke of coal in pieces with a diameter of more than 80 mm (Coke 80+) originating in the People’s Republic of China
THE COMMISSION OF THE EUROPEAN COMMUNITIES,
Having regard to the Treaty establishing the European Community,
Having regard to Council Regulation (EC) No 384/96 of 22 December 1995 on protection against dumped imports from countries not members of the European Community (1), (‘the basic Regulation’) and in particular Article 7 thereof,
After consulting the Advisory Committee,
Whereas:
A. PROCEDURE
1. Initiation
(1)
On 20 December 2006, pursuant to Article 5 of the basic Regulation, the Commission announced by a notice (notice of initiation) published in the Official Journal of the European Union (2), the initiation of an anti-dumping proceeding concerning imports into the Community of coke of coal in pieces with a diameter of more than 80 mm (Coke 80+) originating in the People’s Republic of China (the PRC or the country concerned).
(2)
The proceeding was initiated following a complaint lodged on 20 November 2006 by three Community producers (the complainants) representing a major proportion, in this case more than 30 %, of the total Community production of Coke 80+. The complaint contained prima facie evidence of dumping of the said product and of material injury resulting therefrom, which was considered sufficient to justify the initiation of a proceeding.
(3)
The product concerned was already subject to anti-dumping measures from June 2000 until 2004. The measures were imposed provisionally by Commission Decision No 1238/2000/ECSC (3) and definitively by Commission Decision No 2730/2000/ECSC (4) (the previous measures), but the measures were suspended in March 2004 by Commission Decision 2004/264/EC (5) due to a temporary change in market conditions. The suspension was extended by Council Regulation (EC) No 2117/2004 (6) until 15 December 2005, when the measures expired.
2. Parties concerned by the proceeding
(4)
The Commission officially advised the complaining producers and other known Community producers, the representatives of the PRC, exporting producers in the PRC, importers/traders and users known to be concerned, as well as associations known to be concerned of the initiation of the proceeding. Interested parties were given the opportunity to make their views known in writing and to request a hearing within the time limit set in the notice of initiation. One exporter in the PRC, as well as producers, users and one importer in the Community made their views known in writing. All parties who so requested within the given time limit and showed that there were particular reasons why they should be heard were granted a hearing.
(5)
In view of the apparent large number of exporting producers and importers involved in the investigation, the application of sampling techniques was envisaged in the notice of initiation, in accordance with Article 17 of the basic Regulation.
(6)
In order to enable the Commission to decide whether sampling would be necessary and, if so, to select a sample, exporting producers and importers were requested to make themselves known and to provide information as specified in the notice of initiation. Only one exporting producer came forward to cooperate. It was consequently decided that sampling was not necessary.
(7)
Also as far as the importers of Coke 80+ are concerned, given that only one importer indicated its willingness to cooperate, it was decided that sampling was not necessary.
(8)
In order to allow the sole cooperating exporting producer in the PRC to submit a claim for market economy treatment (MET) pursuant to Article 2(7) of the basic Regulation or individual treatment (IT) pursuant to Article 9(5) of the basic Regulation, if it so wished, the Commission sent a MET/IT claim form to the sole Chinese cooperating company. This exporting producer requested neither MET nor IT.
(9)
The Commission sent questionnaires to all parties known to be concerned and to all other companies that made themselves known within the deadlines set out in the notice of initiation. Replies were received from the sole Chinese cooperating exporting producer, from five Community producers, from one importer and from 36 users. In addition, several users submitted comments without replying to the questionnaire. Submissions were made also by the European Foundry Association (CAEF), acting also on behalf of its members, comprising national foundry associations from 17 EU Member States.
(10)
The Commission sought and verified all information it deemed necessary for the purpose of a preliminary determination of dumping, resultant injury and Community interest. Verification visits were carried out at the following companies:
(a)
Community producers
-
Industrial Química del Nalón, SA, Oviedo, Asturias, Spain,
-
Industrias Doy Manuel Mórate, SL, Oviedo, Asturias, Spain,
-
Italiana Coke SpA, Savona, Italy,
-
OKD, OKK, a.s., Ostrava-Přívoz, Czech Republic,
-
Productos de Fundición, S.A., Baracaldo, Vizcaya, Spain;
(b)
Unrelated importer in the Community
-
ThyssenKrupp MinEnergy GmbH, Essen, Germany;
(c)
Users in the Community
-
Rockwool International A/S and its subsidiary Rockwool A/S, Denmark; both in Hedehusene, Denmark;
-
Fritz Winter Eisengiesserei GmbH & Co, Stadttalendorf, Germany.
(11)
In the absence of any claims for MET or IT, and since a normal value for exporting producers in the PRC should be established on the basis of data from the selected analogue country, a verification visit took place at the premises of the following companies:
Producers of the analogue country USA
-
Tonawanda Coke Co., New York;
-
Erie Coke Co., Pennsylvania.
3. Investigation period
(12)
The investigation of dumping and injury covered the period from 1 October 2005 to 30 September 2006 (investigation period or IP). The examination of trends relevant for the assessment of injury covered the period from 1 January 2003 to the end of the IP (period considered).
B. PRODUCT CONCERNED AND LIKE PRODUCT
1. Product concerned
(13)
The product concerned is coke of coal in pieces with a diameter of more than 80 mm (Coke 80+) originating in the People's Republic of China (the product concerned), normally declared within CN code ex 2704 00 19.
(14)
Coke of coal in pieces with a diameter of more than 80 mm (Coke 80+) is prepared from bituminous coal which is an organic sedimentary rock extracted from the ground. Steel industry uses primarily small and medium sized coke (Coke 80-; also called blast furnace coke), whereas cast iron and isolation industries use large size coke (Coke 80+; also called foundry coke) for their cupolas. Both types of coke fall under the same CN code.
(15)
The investigation showed that all types of the product concerned, despite differences in coal raw materials qualities, differences in the production methods and different lump sizes, have the same basic technical and chemical characteristics and are used as a combustion agent for use in cupola ovens.
(16)
It is therefore concluded that the product concerned is foundry coke originating in the PRC, that is to say coke of coal in pieces with a diameter of more than 80 mm of a kind used in cupola ovens. It is also concluded that all foundry coke is one single product since it always has the same basic technical and chemical characteristics and the same use.
2. Like product
(17)
The investigation showed that Coke 80+ produced and sold in the Community by the Community industry, that produced in the PRC and sold for export to the Community and that produced and sold in the analogue country (the USA) have the same basic physical, technical and chemical characteristics and uses. They are therefore considered to be alike within the meaning of Article 1(4) of the basic Regulation.
C. DUMPING
1. Cooperation
(18)
As mentioned in recital 6, only one Chinese exporting producer cooperated in the proceeding. The export sales made by this exporting producer represented less than 30 % of the total Coke 80+ imports originating in China sold to the Community during the IP. It is therefore concluded that the level of cooperation was very low. The representatives of the PRC were informed that such low level of cooperation may lead to the application of Article 18 of the basic Regulation.
2. Normal value
(a) Analogue country
(19)
In the notice of initiation, it was envisaged to use the USA as an appropriate analogue country for the purpose of establishing normal value for the PRC and interested parties were invited to comment on the appropriateness of this choice. No comments or objections were received from any parties in this respect.
(20)
The USA has a relatively large and open domestic market for Coke 80+, with five domestic producers (during the IP) and a sufficient level of imports. In addition, similar processes as in the PRC are used for the production of the product concerned.
(21)
The suitability of other countries which were considered as possibly having Coke 80+ production was also examined. For Australia, the only country where evidence of the production of the product concerned was found, information provided by the sole Australian producer indicated that the Australian domestic market is very limited.
(22)
On the basis of the above, it was concluded that the USA was a suitable choice as an analogue country. Accordingly, cooperation was sought from the American Association of coke producers.
(b) Determination of normal value
(23)
Pursuant to Article 2(7) of the basic Regulation, normal value was established on the basis of the verified information received from two cooperating companies in the USA.
(24)
As far as the determination of normal value is concerned, the Commission first established, in accordance with Article 2(2) of the basic Regulation, that the domestic sales to independent customers of the like product manufactured by the two cooperating producers in the USA were representative, i.e. that the total volume of such sales represented at least 5 % of the total export volume of the product concerned to the Community. In this respect, it should be noted that the product concerned consists of one single product type.
(25)
The Commission subsequently examined whether the above domestic sales could be regarded as being sold in the ordinary course of trade pursuant to Article 2(4) of the basic Regulation. It was found that more than 95 % of sales by volume on the domestic market were profitable.
(26)
As a result, normal value was established as the weighted average of the ex-works domestic sale prices to unrelated customers made by the two cooperating producers in the USA.
3. Export price
(27)
In view of the limited cooperation from the PRC, the export price was mainly based on the best information available, in accordance with Article 18 of the basic Regulation. Since January 2006, there is no specific TARIC code for Coke 80+. As a consequence, Eurostat figures could not be used to calculate Chinese export prices of Coke 80+ or volume for the IP. However, detailed information on quantities and prices of Coke 80+ imported from China during the IP could be obtained from the customs authorities of importing Member States.
(28)
As such information relating to imports of the product concerned during the IP was the best information available in accordance with Article 18 of the basic Regulation, it was used to assess the volume and price of Chinese exports during the IP. However, in consideration of the fact that the sole cooperating exporting producer had submitted information on export prices, this information was also considered and was found to be in line with the information obtained from the abovementioned customs authorities. The weighted average net ex-works export price established on the basis of this data was EUR 107,73 per tonne.
4. Comparison
(29)
The normal value and export prices were compared on an ex-works basis. For the purpose of ensuring a fair comparison between the normal value and the export price, due allowance in the form of adjustments was made for differences affecting prices and price comparability in accordance with Article 2(10) of the basic Regulation. Appropriate adjustments concerning differences in physical characteristics, discounts, transport and insurance, packing, credit and after-sales costs were granted where they were found to be appropriate and supported by verified evidence.
(30)
The sole Chinese cooperating exporting producer argued that the product concerned imported from the PRC during the IP was of a different quality than the like product manufactured in the analogue country and required additional screening operations before it could be actually sold.
(31)
The chemical and dimensional quality requirements of the product concerned and of the like product manufactured in the analogue country were compared and an adjustment was granted for the quality differences found. As for the screening in Europe, no adjustment is necessary since this operation takes place after the determination of the CIF value, which is the starting point from which the ex-works export price is determined.
5. Dumping margin
(32)
The dumping margin was established on the basis of a comparison of a weighted average ex-works normal value with a weighted average ex-works export price, in accordance with Article 2(11) and (12) of the basic Regulation. The country wide dumping margin, expressed as a percentage of the CIF Community frontier price, duty unpaid, is 53,3 %.
D. INJURY
1. General
(33)
As mentioned in recital 3, anti-dumping measures were imposed in 2000 on imports of Coke 80+ originating in the PRC. Those measures were suspended in March 2004 and expired in December 2005. Therefore, in the early part of the period considered there were measures in place on imports from the country concerned.
2. Community production and Community industry
(34)
Within the Community, the like product is manufactured by seven producers. The output of these seven Community producers is therefore deemed to constitute the Community production within the meaning of Article 4(1) of the basic Regulation.
(35)
Of these seven producers, a total of five declared their interest in cooperating in the proceeding within the time limit set out in the notice of initiation and properly cooperated with the investigation. These five producers were found to account for a major proportion of the total Community production of the like product, in this case around 75 %. The five cooperating producers therefore constitute the Community industry within the meaning of Article 4(1) and Article 5(4) of the basic Regulation and will be hereafter referred to as the ‘Community industry’. The remaining two Community producers will be hereafter referred to as the ‘other Community producers’. These two other Community producers did not oppose the complaint.
3. Community consumption
(36)
Community consumption was established on the basis of the sales volumes of the Community industry’s own production destined for the Community market, the EC sales volume information obtained from the other Community producers and cross-checked against estimations made by the Community industry producers and information obtained from users, and on the basis of import volumes. As for the Chinese import volumes, there was no specific TARIC code for Coke 80+ in year 2006 and thus no Eurostat data available. Therefore, the import volumes for the IP have provisionally been established on the basis of the detailed information obtained from EC customs authorities, as mentioned in recital 27. For the years 2003 and 2005, the import volumes have provisionally been based on Eurostat data, which have been cross-checked against market data obtained during the investigation from users and importers. As for year 2004, the Eurostat data as far as import volumes are concerned are in a sharp contrast to market information obtained during the investigation from producers, importers and users. Indeed, while the market information shows that there were few Chinese imports in 2004, the Eurostat figures, on the contrary, show a significant peak of such imports in 2004. Therefore, it seems probable that after the suspension of the previous measures in March 2004, importers declared some Coke 80- under the TARIC code of Coke 80+ and thus the Eurostat data do not give an accurate picture of import volumes in 2004. For that reason, and in view of the very limited cooperation from Chinese exporting producers and importers in the Community, at this stage of the investigation, the import volumes for 2004 have been established on the basis of information provided in the complaint, which is in line with information obtained during the investigation from importers and users. The Commission will continue its investigation on the import volumes before definitive determinations are made.
(37)
On the basis of the above, it was found that the Community consumption increased over the period considered and during the IP the Community market for the product concerned and the like product was approximately 25 % higher than in 2003.
2003
2004
2005
IP
Total EC consumption (thousand tonnes) (range) (7)
1 100-1 500
1 300-1 700
1 350-1 750
1 400-1 800
Index (2003 = 100)
100
119
122
125
4. Imports from the country concerned
(a) Volume and market share of the imports concerned
(38)
Based on information available from customs authorities and from cooperating parties, the PRC has been, throughout the period considered, the only source of imports of the product concerned to the EC. Therefore, all import volumes in the EC during the period considered are deemed as originating in the PRC.
(39)
On the basis of the facts available at this stage as described in recital 36, it was found that Chinese import volumes of the product concerned into the Community increased by 45 % from 2003 (around 311 000 tonnes) to the IP (more than 452 000 tonnes).
(40)
The market share held by imports from the country concerned increased from 24 % in 2003 to 28 % during the IP, i.e. by 4 percentage points. During the IP, the market share of imports from the country concerned increased by 3 percentage points, as compared to year 2005.
2003
2004
2005
IP
Volume of imports from the PRC
(tonnes)
310 755
150 000
386 485
452 011
Index (2003 = 100)
100
48
124
145
Market share of imports from the PRC
24 %
10 %
25 %
28 %
(b) Prices
(41)
Since there is no Eurostat data available for the Chinese imports of the product concerned for 2006 (see recital 36), and in view of the very limited cooperation from Chinese exporting producers and importers in the Community, the average price of imports of the product concerned originating in the PRC has, for the IP, provisionally been established on the basis of the detailed information obtained from EC customs authorities mentioned in recital 27. For years 2003-2005, the average import price has provisionally been established on the basis of Eurostat data, which are in line with the findings of the investigation. It is noted that, as concerns the Eurostat data for year 2004, although they seem inaccurate as far as import volumes are concerned (see recital 36), for import prices the Eurostat data for year 2004 are in line with the findings of the investigation and comparisons made between price trends of Coke 80+ and Coke 80- during the whole period considered. Therefore, Eurostat data have provisionally been used for establishing the imports prices also for year 2004. The Commission, however, will still continue the investigation into import prices before definitive determinations are made.
(42)
Based on the abovementioned data, the average price of imports of the product concerned originating in the PRC more than doubled from 2003 (EUR 122/tonne) to 2004 (EUR 275/tonne), but declined significantly in 2005 (EUR 224/tonne), a trend which continued during the IP (EUR 156/tonne). In terms of percentages, the prices decreased by 35 % from 2004 to the IP; however, over the whole period considered (2003 - IP), the prices increased by 27 %.
2003
2004
2005
IP
Average cif Community frontier price of imports from the PRC (EUR/tonne)
122
275
224
156
Index (2003 = 100)
100
225
184
127
(c) Price undercutting
(43)
For the determination of price undercutting, the price data referring to the IP were analysed. The relevant sales prices of the Community industry were net prices to independent customers after deduction of discounts and rebates. Where necessary, these prices were adjusted to an ex-works level, i.e. excluding freight cost in the Community. The prices of the imports concerned, based on data available as mentioned in recital 41, were adjusted, where necessary, to cif Community frontier with an appropriate adjustment for post-importation costs (screening and customs clearance costs), as incurred by importers in the Community.
(44)
The comparison showed that during the IP, the product concerned originating in the PRC was sold in the Community at prices which undercut the Community industry's sales prices, when expressed as a percentage of the latter, by 10,2 %.
5. Situation of the Community industry
(45)
Pursuant to Article 3(5) of the basic Regulation, the Commission examined all relevant economic factors and indices having a bearing on the state of the Community industry during the period considered.
(a) Production
(46)
From a level of around 824 000 tonnes in 2003, the Community industry's production increased to a peak during 2004 of around 1 017 000 tonnes, before decreasing in 2005 and increasing again slightly during the IP. The significant increase in the production of the Community industry in 2004 can be explained by the low supply on the market due to the low imports from the PRC, and by the closure of other plants producing Coke 80+ in the Community. Overall, production increased over the period considered by 18 % to around 971 000 tonnes during the IP.
2003
2004
2005
IP
Production (tonnes)
823 728
1 016 682
953 522
971 137
Index (2003 = 100)
100
123
116
118
(b) Production capacity and capacity utilisation rates
(47)
The production capacity of the Community industry remained stable at the level of around 1,1 million tonnes throughout the period considered. Capacity utilisation was 75 % in 2003. It increased to 93 % in 2004, decreased slightly to 87 % in 2005, and picked up again to 89 % in the IP. It should be noted that this industry is particular in the sense that its production capacity utilisation rate is rather fixed, since the production process cannot be temporarily stopped.
2003
2004
2005
IP
Production capacity (tonnes)
1 092 472
1 092 472
1 092 472
1 092 472
Index (2003 = 100)
100
100
100
100
Capacity utilisation
75 %
93 %
87 %
89 %
Index (2003 = 100)
100
123
116
118
(c) Sales volume
(48)
Sales volumes by the Community industry of its own production to unrelated customers on the Community market increased sharply in 2004 (40 %), but levelled down during 2005 (decline of 12 percentage points) and the IP (decline of further 3 percentage points). Overall, the sales volumes increased by 25 % over the whole period considered, i.e. by a percentage corresponding to the growth in the Community consumption.
2003
2004
2005
IP
EC sales volume (tonnes)
658 641
921 347
845 688
825 013
Index (2003 = 100)
100
140
128
125
(d) Market share
(49)
The market share held by the Community industry remained relatively stable over the period considered, being at around 51 % both in 2003 and during the IP. A peak was experienced in 2004, due to the shortage of Chinese imports. Over the whole period considered, the Community industry has thus been able to benefit from the growth of the market, i.e. the increased Community consumption, by maintaining its market share. However, as for the IP, the Community industry lost around 2,5 % of its market share as compared to year 2005.
2003
2004
2005
IP
Market share of the Community industry
51,2 %
60,3 %
53,8 %
51,3 %
Index (2003 = 100)
100
118
105
100
(e) Growth
(50)
Between 2003 and the IP, when the Community consumption increased by 25 percentage points, the volume of sales by the Community industry on the Community market increased in equivalent amount and its market share thus remained stable. During the same time period, dumped imports gained around 4 percentage points of market share, corresponding to an increase of around 141 000 tonnes sold on the Community market.
(f) Sales prices in the Community
(51)
Average unit prices for Community industry’s sales to unrelated customers increased significantly from 2003 (EUR 154/tonne) to 2005 (EUR 244/tonne), then took a downward turn during the IP, but still remained at a level 29 % higher than in 2003 (EUR 199/tonne).
2003
2004
2005
IP
Unit price EC market (EUR/tonne)
154
192
244
199
Index (2003 = 100)
100
125
158
129
(52)
Given the level of price undercutting of the imports concerned, these imports were undoubtedly a factor affecting the Community industry's sales prices.
(g) Stocks
(53)
The level of closing stocks of the Community industry increased considerably during the period considered. The stocks increased first by 29 % in 2004, by further 41 percentage points in 2005 and by 88 percentage points during the IP. The level of inventories as compared to the annual production volume is, however, relatively insignificant (around 3,5 % in 2003 and 7,6 % during the IP). Since the Community industry's EC sales volume increased overall during the period considered, as described in recital 48, the increase in closing stocks is explained by the decrease in the Community industry's export sales during the period considered, as described in recital 70.
2003
2004
2005
IP
Closing stock (tonnes)
28 761
37 007
48 834
74 127
Index (2003 = 100)
100
129
170
258
(h) Investments
(54)
The Community industry's annual investments in the production of the like product remained stable over the period considered, at the level of around EUR 9 million per annum, except for a temporary lower level in 2004. The Community industry's investments were for the maintenance and renewal of existing equipment (partly to meet certain EU environmental legislation requirements) and not for the purpose of increasing capacity.
2003
2004
2005
IP
Net investments (EUR 1 000)
8 951
8 139
9 059
9 070
Index (2003 = 100)
100
91
101
101
(i) Profitability, return on investment, cash flow and ability to raise capital
(55)
During the period considered, profitability of the Community industry, expressed as a percentage of net sales, increased significantly from 2003 (11 %) to 2005 (18 %), but the situation changed dramatically in the IP, when the Community industry started to make losses (- 1 %). The dramatic drop in profitability achieved by the Community industry was due to steep decline in sales prices between 2005 and the IP.
(56)
The return on investments (ROI), expressed as the profit in percent of the net book value of investments, broadly followed the profitability trend.
(57)
With regard to the cash flow generated by the Community industry, a similar negative trend was found, resulting in a significant overall deterioration of the Community industry's financial situation during the IP.
(58)
The Community industry did not report any actual difficulties encountered in raising capital. However, due to the specific nature of the industry, i.e. that the production process cannot be stopped without destroying the ovens, closing down some ovens and then later restarting them would require large additional investments (estimated by the Community industry to be in the region of EUR 2 million per oven.). The Community industry estimates that the ability to raise additional capital for such investments would be limited unless there is reliance by the investors on the profitability of the Coke 80+ market. Consequently, the production capacity of the Community industry is necessarily rather fixed.
2003
2004
2005
IP
Profitability of EC sales to unrelated customers (% of net sales)
11 %
17 %
18 %
-1 %
Index (2003 = 100)
100
158
169
-8
ROI (profit in % of net book value of investments)
5 %
23 %
17 %
-9 %
Index (2003 = 100)
100
460
340
- 180
Cash flow (1 000 EUR)
17 641
13 633
34 600
4 669
Index (2003 = 100)
100
77
196
26
(j) Employment, productivity and wages
(59)
The employment level of the Community industry increased by 13 % from 2003 to the IP. When compared to the increased production, productivity of the Community industry's workforce, measured as output (tonnes) per person employed per year, remained stable. Average annual labour costs per employee increased by 9 % over the period considered.
2003
2004
2005
IP
Number of employees
680
754
734
767
Index (2003 = 100)
100
111
108
113
Productivity (tonnes/employee)
1 676
1 954
1 760
1 697
Index (2003 = 100)
100
117
105
101
Annual labour cost per employee
(1 000 EUR)
28
28
29
31
Index (2003 = 100)
100
100
105
109
(k) Magnitude of the dumping margin
(60)
Given the volume, the market share and the price of the dumped imports, the impact on the Community industry of the magnitude of the actual dumping margin cannot be considered negligible.
(61)
As indicated in recital 3, the previous anti-dumping measures were suspended in March 2004, since given the temporary change in market conditions it was considered that the injury linked to the imports of the product concerned originating in the PRC was unlikely to resume. The period for which the evolution of volumes and prices of the product concerned was then investigated was from 1 October 2002 to 30 September 2003. The suspension was extended until December 2005, when the measures expired. In light of this, it is considered that past dumping did not influence significantly the situation of the Community industry during the period considered in this investigation.
6. Conclusion on injury
(62)
Between 2003 and the IP, the volume of the dumped imports of the product concerned originating in the PRC increased by 45 % and their share of the Community market increased by around 4 percentage points. The average prices of dumped imports were lower than those of the Community industry during the period considered, except for the exceptional year 2004. Moreover, during the IP, the prices of the imports from the country concerned significantly undercut those of the Community industry. Indeed, a 10,2 % undercutting margin was found.
(63)
Most injury indicators developed positively for the Community industry up to 2005 (even though some levelling down from the exceptional year 2004 was evidenced already in 2005), but took a downward turn during the IP. This is the case especially regarding the financial indicators of the Community industry, in particular, the profitability: the profit margins of 17-18 % attained during 2004-2005 dropped dramatically during the IP, and the Community industry ended up making a loss. Also the return on investments and cash flow developed negatively. This dramatic drop was due to a steep decline in sales prices between 2005 and the IP, when the average sales prices of the like product produced by the Community industry decreased by 19 %, to the detriment of its profitability.
(64)
Also, many other injury indicators developed negatively between 2005 and the IP, albeit less markedly than the profitability: sales volume of the Community industry decreased by around 3 %, the Community industry lost 2,5 % of its market share, its average sales prices declined by 19 %. On the other hand, the production volume, capacity utilisation rate and employment showed a slightly positive development from 2005 to the IP.
(65)
In the light of the foregoing, it is provisionally concluded that the Community industry has suffered material injury within the meaning of Article 3(5) of the basic Regulation.
E. CAUSATION
1. Introduction
(66)
In accordance with Article 3(6) and (7) of the basic Regulation, the Commission has examined whether dumped imports of the product concerned originating in the PRC have caused injury to the Community industry to a degree that may be considered material. Known factors other than the dumped imports, which could at the same time have injured the Community industry, were also examined to ensure that possible injury caused by these other factors was not attributed to the dumped imports.
2. Effect of the dumped imports
(67)
Between 2003 and the IP, the volume of the imports of the product concerned originating in the PRC increased by 45 % and their share of the Community market was at significant levels during the whole period considered, i.e. constantly representing 24 % market share or more. During the IP, this market share was 28 %. The average price of these imports increased by 46 % overall between 2003 and the IP, but prices were generally lower than those of the Community industry during the period considered, expect for the exceptional year of 2004. In the IP, the average prices of imports from the PRC undercut the average Community industry prices by 10,2 %. The Community industry, in order to ensure its presence on its home market and due to the low market prices set by imports from the PRC, felt obliged to decrease its sales prices by 29 % during the IP. Nevertheless, it lost 2,5 % of its market share from 2005 to the IP.
(68)
Therefore, the effect of this unfair pricing behaviour of the dumped imports from the PRC was that the Community industry's prices were suppressed and that they could no longer cover the high cost of raw materials. This was confirmed by the plummeting profitability of the Community industry during the IP.
(69)
Based on the above, it is provisionally concluded that the low-priced imports from the PRC which significantly undercut the prices of the Community industry during the IP and which also increased in volume have had a determining role in the deterioration of the situation of the Community industry, which is reflected in the sharp decrease of profitability and deterioration of other financial indicators during the IP, as well as in loss of market share.
3. Effect of other factors
(a) Export performance of the Community industry
(70)
As can be seen from the table below, the volume of export sales of Coke 80+ by the Community industry decreased by 36 % during the period considered. However, during the IP, when the profitability of the Community industry plummeted, as explained above, the export sales picked up considerably. In addition, the level of export sales is not very important in the context of the Community industry's overall sales, representing only 10 % of total sales in the IP. It is therefore considered that the drop in these exports did not have a significant impact on the material injury suffered by the Community industry.
2003
2004
2005
IP
Export sales volume (tonnes)
140 511
103 409
56 453
90 402
Index (2003 = 100)
100
74
40
64
(b) Imports from other third countries
(71)
According to the best facts available mentioned in recital 38, there were no imports from third countries other than the PRC during the period considered. Therefore, it is concluded that imports into the EC originating in other third countries did not contribute to the material injury suffered by the Community industry.
(c) Competition from other Community producers
(72)
As indicated in recital 35, the two other Community producers did not cooperate with the investigation. These two producers, however, provided the Commission with certain information concerning their overall production and sales volumes, which was cross-checked against information obtained from the cooperating Community producers. No information was available concerning the sales prices of the other Community producers.
(73)
On the basis of the available data, it is estimated that the sales volume of the two other Community producers in the Community was in the range of 280 000 and 380 000 tonnes during the IP (8). Similarly, their corresponding market share was around 20 %. As established above, the Community industry's market share remained relatively stable over the whole period considered, whereas the Chinese imports gained market share over the same period by 4 percentage points. Therefore, the Chinese imports must logically have gained volumes mainly from other Community producers when considering the whole period. However, the 3 percentage points gain of market share obtained by the Chinese imports during the IP corresponds to a loss of market share by the Community industry of a similar magnitude (2,5 percentage points).
(74)
Given the above, and in the absence of information to the contrary, it is concluded that the other Community producers have not contributed to the injury suffered by the Community industry.
(d) Prices of raw materials
(75)
Some interested parties claimed that the injury suffered by the Community industry was attributable to the increases in the cost of raw materials. In this respect, it was found that the basic raw material used in the production of Coke 80+, coking coal, represents around 50 % of the cost of manufacturing of Coke 80+. The coking coal used by the Community industry is sourced from the USA, except for one Community industry producer, which uses locally sourced coking coal. As regards the prices of the coking coal used by the Community industry, the investigation showed that these increased significantly and constantly over the period considered, as illustrated in the table below:
2003
2004
2005
IP
Average coking coal cost (EUR/tonne of Coke 80+ produced)
77
97
126
127
Index (2003 = 100)
100
125
163
164
(76)
In this respect, it is noted that the increase in raw material prices between 2003 and 2005 could be passed on to the sales prices of the Community industry, which, as mentioned in recital 51, increased during the same period, coinciding with the higher profit margins of the Community industry. On the contrary, during the IP, despite the only 1 percentage point increase in the price of the raw material as compared to year 2005, the financial situation of the Community industry deteriorated dramatically, since its sales prices decreased significantly.
(77)
Consequently, it is considered that the prices of the raw materials did not contribute to the material injury suffered by the Community industry.
4. Conclusion on causation
(78)
In conclusion, the above analysis has demonstrated that imports from the PRC provoked a substantial price depression on the Community market during the IP, when the imports from the PRC severely undercut the Community industry prices. This price depression led to a considerable decrease in the sales prices of the Community industry, which in turn coincided with a sharp drop in the Community industry’s profitability, return on investments and cash flow. In addition, the increased Chinese imports during the IP led to a gain in market share (3 percentage points), which is reflected in a loss of Community industry's market share by a similar percentage (2,5 percentage points).
(79)
On the other hand, the examination of other factors which could have injured the Community industry revealed that none of these could have had a significant negative impact.
(80)
Based on the above analysis, which has properly distinguished and separated the effects of all known factors on the situation of the Community industry from the injurious effects of the dumped imports, it is provisionally concluded that the dumped imports originating in the country concerned have caused material injury to the Community industry within the meaning of Article 3(6) of the basic Regulation.
F. COMMUNITY INTEREST
(81)
The Commission examined whether, despite the conclusions on dumping, injury and causation, compelling reasons exist which would lead to the conclusion that it is not in the Community interest to adopt measures in this particular case. For this purpose, and pursuant to Article 21(1) of the basic Regulation, the Commission considered the likely impact of measures for all parties concerned, as well as the likely consequences of not taking measures. For reasons of confidentiality, instead of actual figures, data relating to individual importers or users are given below in ranges.
1. Interest of the Community industry
(82)
As indicated in recital 35, the Community industry is composed of five companies, with production facilities in the Czech Republic, Italy and Spain, and it employs around 750 persons directly involved in the production, sales and administration of the like product. If measures are imposed, it is expected that the price depression on the Community market will come to an end and that sales prices of the Community industry will start to recover, as a consequence of which the financial situation of the Community industry will improve.
(83)
On the other hand, should anti-dumping measures not be imposed, it is likely that the negative trend in the development of the Community industry's financial indicators, and notably its profitability, will continue. The Community industry will then be likely to continue losing market share, as it will no longer be able to follow the market prices set by dumped imports from the PRC. This will likely lead to cuts in production and investments, closure of certain production capacities and job reductions in the Community.
(84)
In conclusion, the imposition of anti-dumping measures would allow the Community industry to recover from the effects of injurious dumping found.
2. Interest of unrelated importers/traders in the Community
(85)
As indicated in recital 9, only one importer/trader submitted a questionnaire reply. On the basis of information mentioned in recital 36, during the IP, this company accounted for almost all Community imports of the product concerned.
(86)
On the basis of information submitted by the importer concerned, it was established that the proportion of imports of the product concerned from the PRC represented around 20 % of the company's total turnover during the IP. The importer/trader purchases Coke 80+ not only from the PRC but also from other sources, including the Community industry. The average profit margin attained by the importer in question, on its trading of Coke 80+, is around 5-10 %.
(87)
The cooperating importer is not in favour of the imposition of measures. However, given the very strong position this importer has in the imports of the product concerned, it would likely be able to pass on most, if not all, additional costs caused by the anti-dumping measures to users. In this respect, the imposition of an anti-dumping duty on imports from the PRC, as explained in recital 82, will most likely lead to an upwards correction of market prices. Therefore, it can be expected that importers which buy the product from the PRC will be able to pass on these duty costs to the final customer. In any case, in view of the relatively limited weight of this product in the importer's activities, and the profit margin currently attained with regard to its trading of Coke 80+, it is expected that a duty, as provisionally established, would not affect the financial situation of this economic operator to a significant extent.
3. Interest of users
(88)
As indicated in recital 9, questionnaire replies and other submissions were received from a large number of users and their associations. The Community user industry is comprised of two major sectors, namely producers of stone wool and foundries.
(a) Stone-wool producers
(89)
Users’ questionnaires were submitted by subsidiaries of Rockwool International A/S (Rockwool), the major stone wool producer group in the Community. Rockwool uses Coke 80+ in stone wool production as a combustion agent to melt stone. Stone wool is used mainly as insulation material. The profit margin attained by the whole Rockwool group during the IP was above 10 %.
(90)
It was found that Rockwool represented around 13 % of the total consumption of Coke 80+ in the Community during the IP and around 18 % of total imports of Chinese Coke 80+.
(91)
The company has 15 production plants in the Community, employing a total of around 6 600 persons. Chinese Coke 80+ is used in its plants in three EU Member States, employing altogether 2 400 employees, while the rest are using EC Coke 80+. During the IP, Coke 80+ was found to represent between 4 % and 8 % of the total costs of production of those Rockwool companies that used Chinese Coke 80+.
(b) Foundries
(92)
Foundries are estimated to represent close to 80 % of the total consumption of coke 80+ in the Community. In the foundry industry, Coke 80+ is used as a combustion agent to melt scrap for the production of ferrous castings, which are used as input in the production of parts for the automotive, engineering, machinery and public utilities sectors.
(93)
The possible impact of any anti-dumping measures on foundries was estimated based on users’ questionnaire responses received from Community foundries representing around 18 % of total consumption of Coke 80+ in the Community and also around 18 % of total imports of the product concerned from the PRC during the IP. Substantiated claims were also received from the CAEF and from the German National Foundry Association.
(94)
Coke 80+ was found to represent during the IP 3 %-6 % of the total cost of production of the foundries included in the analysis. This differs from the estimate made by the CAEF that the coke price might have a share in the production cost of castings of up to 15 %.
(c) Arguments presented by users
(95)
The first main argument put forward by the users against the imposition of measures is that the demand for coke in the Community cannot be met by the European producers alone. This has been acknowledged also by the Community industry, and it is also clearly reflected in the fact that the EC consumption during the IP was at 1,6 million tonnes (and which according to projections of users is likely to increase in the coming years), whereas the total Community production, based on information obtained from both the Community industry producers and the other Community producers (see recital 72) was at that time around 1,3 million tonnes. Given that the Community industry operates at a high capacity utilisation rate, it is evident that imports are needed to meet the user demand, even if all the EC production were consumed within the Community.
(96)
In this regard, it should be noted that the purpose of anti-dumping measures is to remedy unfair trading practices having an injurious effect on the Community industry and re-establish a situation of effective competition on the Community market, not to stop imports. As concerns the competitive environment in the Community market, it should be noted that although the effect of the imposition of anti-dumping measures would probably be that the price levels of the exports originating in the PRC in the Community would increase, the measures as proposed are not such as to close the Community market to the Chinese exporters and therefore will allow the continued presence of Chinese products in the market.
(97)
Moreover, users have argued that the imposition of measures would result in an increase in purchase costs, which could affect their competitiveness and thus compromise their manufacturing operations in the Community. It was also argued that the situation would be even more dismal for those users that cannot switch from Chinese Coke 80+ to European Coke 80+, since they would have no other option than bear the additional burden of an anti-dumping duty.
(98)
The investigation showed that Coke 80+ represents between 4 % and 8 % of the total costs of stone wool production and 3-6 % of the total costs of foundries. Therefore, even if the importers were to pass on the cost of duty fully to the users, an anti-dumping duty as proposed would cause a maximum hypothetical increase in the cost of production of both Rockwool and of foundries of around 1 %.
(99)
Furthermore, it should be noted that, in the event of a reduction or the eventual disappearance of the Community industry of Coke 80+, the available sources of supply would also be reduced with the consequent negative effect for the Community users, for which Coke 80+ is of strategic importance. In such an event, the supply of Coke 80+ in the Community could become entirely dependent on Chinese production, which would then enjoy a dominant position in the Community market. In this respect, it is considered that the existence of alternative sources of supply is vital for guaranteeing proper access to raw materials.
(100)
Information available to the Commission indicates that shortages of supply of Chinese Coke 80+ for export are currently taking place for reasons unrelated to the anti-dumping proceeding, but instead based on measures adopted by the Chinese Government to curb exports of, inter alia, the product concerned. The export tax on Coke 80+ has been increased from 5 % to 15 % as of 1 June 2007. The reduction or even disappearance of the Community industry could exacerbate such problems and create supply shortage to the user industry. On the other hand, the removal of the unfair advantages gained by the dumping practices is designed to prevent the further decline of the Community industry and thus help to maintain the availability of a wide choice of supply sources and even strengthen competition among existing producers.
(d) Conclusion
(101)
The evidence available to the Commission at this stage indicates that Coke 80+ represents only a marginal proportion of the total costs of both stone-wool producers and foundries and that therefore the impact of any anti-dumping measure on their costs of production is likely to be limited. In addition, it is not excluded that importers would carry part of the cost increase or that users could pass part or all of the increase in costs to their final customers. Therefore, it is concluded that the impact of an anti-dumping measure such as the one proposed is not likely to significantly affect the economic situation of users. In view of the limited impact of an anti-dumping measure on the costs of users, it is unlikely that any closures would take place as a result of the imposition of measures. Therefore, impact on the employment of the user industry is not likely to be significant.
4. Conclusion on Community interest
(102)
The effects of the imposition of measures are expected to enable the Community industry to improve its profitability, with consequent beneficial effects on the competitive conditions on the Community market. In view of the unfavourable financial situation of the Community industry, there is a risk that, in the absence of measures, the Community industry may close down production facilities and lay off workforce. In that event, the Community market would become more dependent on imports.
(103)
As for importers, whilst negative effects could result in the form of price increases, the extent of these may be reduced by decreasing margins or by passing part of the increase on to the user industry.
(104)
As regards users, an anti-dumping duty as proposed would have a very limited effect on their cost of production.
(105)
In light of the above, it is provisionally concluded that no compelling reasons exist for not imposing measures in the present case and that the application of measures would be in the interest of the Community.
G. PROPOSAL FOR PROVISIONAL ANTI-DUMPING MEASURES
(106)
In view of the conclusions reached with regard to dumping, injury, causation and Community interest, provisional measures should be imposed in order to prevent further injury to the Community industry by the dumped imports.
1. Injury elimination level
(107)
The level of the provisional anti-dumping measures should be sufficient to eliminate the injury to the Community industry caused by the dumped imports, without exceeding the dumping margin found. When calculating the amount of duty necessary to remove the effects of the injurious dumping, it was considered that any measures should allow the Community industry to cover its costs of production and to obtain overall a profit before tax that could be reasonably achieved under normal conditions of competition, i.e. in the absence of dumped imports. The pre-tax profit margin used provisionally for this calculation was 15,3 % of turnover, corresponding to the average profit margin attained by the Community industry during 2003-2005.
(108)
The necessary price increase was then determined on the basis of a comparison of average import price, as established for the price undercutting calculations (see recital 43), with the non-injurious price of the like product sold by the Community industry on the Community market. The non-injurious price has been obtained by adjusting the sales price of the Community industry in order to reflect the above mentioned profit margin. The difference resulting from this comparison, when expressed as a percentage of the total cif import value, amounted to 35,7 %, i.e. less than the dumping margin found.
(109)
Given that no exporting producer from the PRC requested individual treatment, a single country-wide injury elimination level was calculated for all exporters in the PRC.
2. Provisional measures
(110)
In the light of the foregoing and pursuant to Article 7(2) of the basic Regulation, it is considered that a provisional anti-dumping duty should be imposed at the level of the lowest of the dumping and injury margins found, in accordance with the lesser duty rule.
(111)
On the basis of the above, the provisional anti-dumping duty should therefore amount to 35,7 %.
3. Form of the measures
(112)
Anti-dumping measures may take different forms, while the purpose remains to remove the effects of the injurious dumping. After the IP, significant increases have been observed in the prices of Chinese imports of the product concerned; indeed beyond injurious levels. Under these circumstances and given that this market has been characterised by high price volatility in the past, it is considered that a duty in the form of a minimum import price (MIP) is the most appropriate form of measures in this case. A MIP will ensure that the product concerned is not sold at injurious prices, while at the same time it will not unduly increase prices at moments when prices are at sufficiently high levels. A MIP can be expected to bring stability to the market because it will ensure an adequate price level for the Community industry, allowing it to operate under viable economic conditions, and, at the same time, it will constitute a point of reference for importers and users to plan their economic activities sufficiently in advance.
(113)
The amount of the minimum import price results from the application of the injury margin to the export prices used in the calculation of the injury elimination level during the IP. The minimum import price thus calculated amounts to EUR 227 per tonne.
4. Implementation
(114)
As explained in recital 14, Coke 80+ is imported under the same customs nomenclature as Coke 80-. These two products are only distinguished by their size, but are destined for two different industries and are primarily manufactured by different producers in the Community. This Regulation is meant only to regulate the import of Coke 80+ entered into free circulation in the Community. Since imports of Coke 80- may contain a certain percentage of Coke 80+, there is a need to ensure that imposition of the duty of Coke 80+ does not lead to an undue application of the duties to Coke 80- in case of mixed shipments.
(115)
Therefore, the anti-dumping duty should apply to coke of coal in pieces with a diameter of more than 80 mm, when shipped in mixtures containing both coke of coal in pieces with a diameter of more than 80 mm and coke of coal in pieces with smaller diameters, unless it is determined that the quantity of coke of coal in pieces with a diameter of more than 80 mm does not constitute more than 20 % of dry net weight of the mixed shipment. The quantity of coke of coal in pieces with a diameter of more than 80 mm contained in mixtures may be determined on the basis of samples in accordance with Articles 68 to 70 of Council Regulation (EEC) No 2913/92 (9). In cases where the quantity of coke of coal in pieces with a diameter of more than 80 mm is determined on the basis of samples, the sample shall be selected in accordance with the norm ISO 18238:2006.
(116)
However, should it be found that mixed coke of coal (Coke 80+ and Coke 80-) landed and entered into free circulation into the Community under CN code ex 2704 00 19, and subsequently screened and sold as Coke 80+, it will be considered as the product concerned and will therefore be subject to the provisions of this Regulation.
5. Final provision
(117)
It is recognised that, before arriving at a definitive determination, a number of elements such as import volumes and prices, in particular for the year 2004, the effects on the Community and world markets of the recent decisions of the Chinese government in respect of coke exports, as well as the feasibility of an indexation system to be applied to MIP will require further analysis. However, the information collected and examined up to this stage of the investigation clearly shows the existence of dumping, injury, a causal link between the dumping and injury and the fact that the imposition of measures would not be against the Community interest. It is therefore concluded that the need to obtain more information and to deepen the analysis in respect of the abovementioned elements before a definitive determination is made in no way constitutes an impediment to the imposition of provisional measures.
(118)
In the interest of sound administration, a period should be fixed within which the interested parties which made themselves known within the time limit specified in the notice of initiation may make their views known in writing and request a hearing. Furthermore, it should be stated that the findings concerning the imposition of duties made for the purposes of this Regulation are provisional and may have to be reconsidered for the purposes of any definitive duty,
HAS ADOPTED THIS REGULATION:
Article 1
1. A provisional anti-dumping duty is hereby imposed on imports of coke of coal in pieces larger than 80 mm in maximum diameter (Coke 80+) originating in the People’s Republic of China and falling within CN code ex 2704 00 19 (TARIC code 2704001910). The diameter of the pieces shall be determined in accordance with the norm ISO 728:1995.
2. The amount of the provisional anti-dumping duty applicable for products described in paragraph 1 shall be the difference between the minimum import price of EUR 227 per tonne and the net, free-at-Community-frontier price, before duty, in all cases where the latter is less than the minimum import price.
3. The anti-dumping duty shall also apply to coke of coal in pieces with a diameter of more than 80 mm when shipped in mixtures containing both coke of coal in pieces with a diameter of more than 80 mm and coke of coal in pieces with smaller diameters unless it is determined that the quantity of coke of coal in pieces with a diameter of more than 80 mm does not constitute more than 20 % of dry net weight of the mixed shipment. The quantity of coke of coal in pieces with a diameter of more than 80 mm contained in mixtures may be determined on the basis of samples in accordance with Articles 68 to 70 of Council Regulation (EEC) No 2913/92. In cases where the quantity of coke of coal in pieces with a diameter of more than 80 mm is determined on the basis of samples, the samples shall be selected in accordance with the norm ISO 18238:2006.
4. In cases where goods have been damaged before entry into free circulation and, therefore, the price actually paid or payable is apportioned for the determination of the customs value pursuant to Article 145 of Commission Regulation (EEC) No 2454/93 (10), the minimum import price set out above shall be reduced by a percentage which corresponds to the apportioning of the price actually paid or payable. The duty payable will then be equal to the difference between the reduced minimum import price and the reduced net, free-at-Community-frontier price, before customs clearance.
5. The release for free circulation in the Community of the product referred to in paragraph 1 shall be subject to the provision of a security equivalent to the amount of the provisional duty.
6. Unless otherwise specified, the provisions in force concerning customs duties shall apply.
Article 2
Without prejudice to Article 20 of Council Regulation (EC) No 384/96, interested parties may request disclosure of the essential facts and considerations on the basis of which this regulation was adopted, make their views known in writing and apply to be heard orally by the Commission within one month of the date of entry into force of this regulation.
Pursuant to Article 21(4) of Regulation (EC) No 384/96, the parties concerned may comment on the application of this Regulation within one month of the date of its entry into force.
Article 3
This Regulation shall enter into force on the day following its publication in the Official Journal of the European Union.
Article 1 of this Regulation shall apply for a period of six months.
This Regulation shall be binding in its entirety and directly applicable in all Member States.
Done at Brussels, 18 September 2007.