COMMISSION DECISION No 891/92/ECSC of 30 March 1992 imposing a provisional anti-dumping duty on imports of certain semi-finished products of alloy steel, originating in Turkey and Brazil

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Coal and Steel Community,

Having regard to Commission Decision No 2424/88/ECSC of 29 July 1988 on protection against dumped or subsidized imports from countries not members of the European Coal and Steel Community (1), and in particular Article 11 thereof,

After consultation within the Advisory Committee as provided for by the above Decision,

Whereas:

A. PROCEDURE

(1) In February 1990 the Commission received a complaint lodged by the European Confederation of Iron and Steel Industries (Eurofer) on behalf of producers whose collective output constitutes the majority of Community production of the products in question. The complaint contained evidence of dumping and of material injury resulting therefrom, which was considered sufficient to justify the initiation of a proceeding. The Commission accordingly announced, by a notice published in the Official Journal of the European Communities (2), the initiation of an anti-dumping proceeding concerning imports into the Community of certain semi-finished products of special engineering alloy steel, of rectangular (including square) cross-section, hot-rolled or obtained by continuous casting, falling within CN codes ex 7224 90 09 and ex 7224 90 15, originating in Turkey and Brazil and commenced an investigation.

(2) The Commission officially so advised the exporters and importers known to be concerned, the representatives of the exporting countries and the complainants and gave the parties directly concerned the opportunity to make known their views in writing and to request a hearing.

(3) All of the producers/exporters and some importers known to the Commission made their views known in writing. Several producers/exporters requested a hearing which was granted.

(4) No submissions were made by or on behalf of Community purchasers or processors of the products concerned.

(5) The Commission sought and verified all information it deemed to be necessary for the purpose of a preliminary determination and carried out investigations at the premises of the following companies:

EEC producers:

- Saarstahl AG, Voelklingen, Germany,

- Thyssen Edelstahlwerke AG, Krefeld, Germany,

- Edelstahlwerke Buderus AG, Wetzlar, Germany,

- Krupp Stahl AG, Bochum, Germany,

- Kloeckner Stahl GmbH, Georgsmarienhuette, Germany,

- Ascometal, Paris La Défense, France,

- ILVA SpA, Sesto S. Giovanni, Italy.

Non-EEC producers/exporters:

in Brazil:

- Villares Indústrias de Base SA (Vibasa), Sao Paulo,

- Aços Anhanguera SA, Sao Paulo,

- Companhia Aços Especiais Itabira (Acesita), Belo Horizonte,

- Aços Finos Piratini SA, Porto Alegre.

in Turkey:

- Asil Çelik, Istanbul.

(6) The Commission requested and received detailed written submissions from the complainant Community producers and some importers and verified the information therein to the extent considered necessary.

(7) The investigation of dumping covered the period from 1 April 1989 to 31 March 1990.

(8) Due to the complexity of the proceeding, in particular the difficulties met by the Commission in obtaining, from some of the interested parties the relevant data, the investigation exceeded the normal period of one year laid down in Article 7 (9) of Decision No 2424/88/ECSC.

B. PRODUCT UNDER CONSIDERATION, LIKE PRODUCT

(9) The products concerned by the proceeding are semi-finished products of rectangular (including square) cross-section, hot-rolled or obtained by continuous casting. Semi-finished products of alloy steel, also known as alloy engineering steel billets, are those steels used to make engineering components. A large proportion of engineering steels are ultimately destined for the automobile and heavy vehicle industries as components for engines, gear boxes, transmission and steering parts. Other and applications are mining, energy, aerospace and mechanical engineering. Alloy steel is on the market in a multitude of alloys for different applications, e.g. special engineering steels such as heat treatable steels, cast hardened steels, nitriding steels, steels for flame and induction hardening, roller bearing steels, spring steels, steels for bolts and nuts etc.

(10) Engineering steels are produced in forms of rectangular (including square) billets, bars and coils. Only rectangular billets are considered as semi-finished products in the sense of this proceeding. Alloy steel billets are to be distinguished from bars of alloy steel which consist basically of the same product but further processed.

(11) During the course of the investigation it became apparent that the words 'special engineering' and nothing to the term 'alloy steel' and that there are no other products falling under tariff headings 7224 90 09 and 7224 90 15. Therefore the product definition can be simplified in the interests of clarity to be: semi-finished products of alloy steel, of rectangular (including square) cross-section hot-rolled or obtained by continuous casting, falling within CN codes 7224 90 09 and 7224 90 15.

(12) The Commission found that the semi-finished products of alloy steel produced by the Community industry are like in all essential physical and technical characteristics to those imported from Turkey and Brazil, which are also like to those sold for consumption on the Turkish and Brazilian markets.

C. DUMPING

1. Normal value

(a) Turkey

(13) The Turkish producer was found to sell significant quantities on a profitable basis on the domestic market. Therefore, domestic sales prices were chosen for the determination of normal value.

(14) The inflation rate in Turkey was over 70 % per annum during the investigation period. In order to eliminate the effects of inflation, normal value was determined for the shortest possible meaningful period, i.e. on a per month basis.

(b) Brazil

(15) In the case of all four Brazilian producers, normal values had to be constructed because substantial sales had been made at a loss or there were no representative sales of the like products exported to the Community on the domestic market.

(16) Normal value was determined by adding a reasonable amount for selling, general and administrative expenses and profit to the cost of production. As only one of the four Brazilian companies concerned showed an operating profit during the reference period, the profit margin retained for this company was also applied for all other companies.

(17) The constructed value was calculated on the basis of average figures for cost and profit and was established on a monthly basis in order to take account of the effects of inflation.

2. Export prices

(18) The export prices for the Turkish and Brazilian producers for every export transaction to independent Community customers were determined on the basis of the prices actually paid or payable.

(19) In the case of the Turkish producer six alloy steel grades accounted for approximately 70 % of the total Turkish export sales to the Community. The Commission decided, therefore, in agreement with the Turkish producer, to base the dumping calculations on these six alloy steel grades.

3. Comparison

(20) Normal values and export prices of the Turkish and Brazilian producers were adjusted to net ex-works level in order to take account of differences in conditions and terms of sale and were compared on a transaction by transaction basis.

(21) Where the companies concerned could show pertinent evidence, allowances for import charges and indirect taxes borne by materials physically incorporated in the like product and refunded on export were granted in accordance with Article 2 (10) (b) of Decision No 2424/88/ECSC.

(22) A Brazilian producer claimed that, in accordance with Article 2 (10) (c) (III) of Decision No 2424/88/ECSC, its normal value should be reduced by the cost of credit granted for the sales under consideration on the domestic market because there were no comparable costs incurred on their export transactions to the Community.

(23) The Commission rejected the claim because it considers that the payment terms agreed in the sales contracts are directly related to the sales under consideration and that the cost of the credit granted to the customers is normally accounted for in the sales price. Furthermore it was verified that the Brazilian producer had calculated the cost of the credit terms granted and increased the sales price to its clients accordingly. As the Commission, for the purpose of comparison, has not directly allocated these costs to the constructed normal value, it is of the opinion that with regard to credit cost, normal value and export price have been established on a perfectly comparable basis.

4. Dumping margins

(24) The dumping margins were calculated as being the total amount by which the normal values exceeded the prices for export to the Community.

(25) The weighted average margins of dumping established and exressed as a percentage of the total cif value of the imports were as follows:

- Asil Çélik, Ístanbul, Turkey 33,7 %

- Villares indústrias de Base SA

(Vibasa), Sao Paulo, Brazil 7,4 %

- Aços Anhanguera (Villares) SA,

Sao Paulo, Brazil 15,0 %

- Aços Especiais Itabira (Acesita),

Belo Horizonte, Brazil 37,9 %

- Aços Finos Piratini SA, Porto Alegre,

Brazil 1,7 %.

D. INJURY

1. Volume of dumped imports and market shares

(a) Cumulation

(26) The Commission is of the opinion that for the determination of the impact on the Community industry, the cumulative effect of all the imports has to be taken into consideration. In analyzing whether cumulation was appropriate, the Commission considered the comparability of the imported products and took further into consideration the extent to which each imported product competed in the Community with the like product of the Community industry. In addition, it was taken into account that the behaviour on the Community market of all exporters was similar and that their market position was as such not negligible.

(27) Accordingly, the Commission concluded that regard should be paid to the effect of the dumped imports cumulated from all the countries and all exporters concerned.

(b) Volume and market shares of dumped imports

(28) The evidence available to the Commission shows that the combined imports into the Community from Turkey and Brazil increased from 10 578 tonnes in 1985 to 69 391 tonnes in 1989 and 77 234 tonnes in the investigation period (April 1989 to March 1990). Over the same period Turkish imports went up from 3 880 tonnes to 20 959 tonnes and Brazilian imports from 6 698 tonnes to 56 275 tonnes.

(29) The only Turkish producer known to the Commission claimed that his direct shipments dispatched to the Community during the investigation period amounted to only 14 152 tonnes as verified by the Commission and that this quantity ought to be retained for the determination of its import volume and market share, the official trade statistics (Eurostat) being unreliable.

(30) The Commission considers that in this case the Eurostat Statistics reflect in a reliable manner the total quantities of the products in question originating in Turkey which have been imported into the Community.

(31) Discrepancies with dispatch figures of the producer can stem from the time lag between the date of shipment in the country of origin and customs clearance in the Community as well as from redirection of exports towards the Community. The Commission therefore relied on the quantities recorded by Eurostat.

(32) The imports concentrated on the German, Italian and United Kingom markets, the German market being the most affected with 46 290 tonnes representing 60 % of the total dumped imports.

(33) In terms of market shares based on total apparent Community consumption, the market penetration of the dumped imports increased from 1,2 % in 1985 to 7,8 % in 1989 and 8,7 % during the investigation period. On the German market alone, the impact of the dumped imports reached 13,7 %, an increase of 11,1 percentage points within two years only. The individual market shares developed from 0,5 % in 1985 to 2,4 % in the investigation period in the case of Turkey. The Brazilian market share rose from 0,8 % to 6,3 % over the same period.

2. Price undercutting

(34) The Commission established price undercutting by comparing the exporter's prices of semi-finished products of alloy steel with the corresponding weighted average prices for the identical product sold by the Community producers on an ex-works basis. The comparison was carried out with prices cif Community border, customs cleared including port and handling charges and for every transaction made by the exporters during the investigation period.

(35) The weighted average undercutting margins established, broken down by exporters, are:

- Asil Çelík, Ístanbul, Turkey 16 %

- Villares Indústrias de Base SA

(Vibasa), Sao Paulo, Brazil 22 %

- Açoes Anhanguera (Villares) SA,

Sao Paulo, Brazil 26 %

- Aços Especiais Itabira (Acesita),

Belo Horizonte, Brazil 15 %

- Aços Finos Piratini SA, Porto Alegre,

Brazil 9 %.

3. Situation of the Community industry

(a) Sales and market shares

(36) From a cyclical downturn which bottomed out in 1987, consumption in the Community picked up rapidly in 1988 and reached its peak in 1989 with the increase of 16 % compared to the trough in 1987. While in the beginning of the recovery, the complainant Community producers were also able to expand their sales, they were rapidly lagging behind the overall evolution of demand because of the massively increasing inflow of dumped imports. Up to the investigation period their sales even fell below the level of 1987 which led to a significant loss of market share which decreased from 84 % in 1986 to 71 % in the investigation period.

(b) Capacity utilization

(37) Between 1987 and the investigation period capacity utilization of the complaining Community producers generally improved. This was, however, mainly achieved by streamlining production facilities, restructuring efforts of the sector and plant closures in Germany and Italy mainly induced by the continued lack of satisfactory profitability in the presence of the low-priced imports.

(c) Prices of Community producers

(38) Between 1985 and 1987 the conjunctural downturn of demand in the Community led to a pronounced slump of prices in the Community. Although the subsequent improvement in demand allowed some Community producers to raise their prices, the possible price increase were suppressed by the competition of the dumped imports and their significant price undercutting to the extent that prices in the investigation period scarcely exceeded the price levels in 1985.

(d) Profitability

(39) Because of the pressure on prices, Community producers had difficulties in generating satisfactory returns. In most cases, the achievable price increases were insufficient even to cover the rise in wage and raw material cost. This situation led in some cases to increasing financial losses, in others profit margins were reduced to or remained at a marginal level insufficient for a healthy development of the sector in the longer run. In particular, efforts to restructure and rationalize were in a number of cases severly hampered.

(40) The Commission took into account that certain Community producers which, because of their electric arc technology in the steelmaking phase could rely heavily on ferrous scrap inputs, found a certain relief on the cost side from the fall in international scrap prices combined with the devaluation of the US dollar against Community currencies. The resulting cost advantages partially explain the variation in Community producer's profitability. However, the temporary cost advantages of this nature enjoyed by some Community producers cannot overshadow the overall injurious effects of the low priced imports.

4. Conclusions

(41) The preliminary examination of the facts on injury shows that the Community industry was suffering a significant loss of market share, the prevention of price increases to cover the rise in wage and raw material costs and a deterioration of the financial results.

The Commission therefore concludes that the Community industry was suffered material injury.

5. Causation

(42) The negative effects suffered by the Community industry coincide with the rapid increase of the dumped imports originating in Brazil and Turkey. In fact, while imports from Brazil and Turkey increased by a factor of 7, the Community industry lost market shares and suffered important price undercutting. In a highly price sensitive market, such undercutting is extremely detrimental. The loss in market share is in sharp contrast with the brisk increase of consumption in the Community between 1987 and the investigation period.

(43) The Commission also examined whether other factors than the dumped imports might have caused injury to the Community industry. With regard to the volume and prices of imports originating in other third countries, it was found that these imports also increased. However, their market share was extended between 1985 and the investigation period by only 1,6 percentage points against an increase by 7,5 percentage points of the dumped imports. There is, furthermore, no indication that imports from other sources than Brazil and Turkey have been dumped.

(44) The Commission also established that within the restructuring process of the sector a certain shift of market share between Community producers has apparently also occured. On the basis of global market figures relating to the product under consideration in the Community, it can be assessed that about 2,9 percentage points of the total loss of 12 percentage points of the complainants are attributable to the expansion of other non-complaining EC producers. This expansion, however, is significantly lower than that of the dumped imports and cannot, therefore, have had a comparable impact on the complainant industry. In fact, under these conditions, it has to be concluded that the imports in question, through the effects of dumping, have caused material injury to the Community industry.

E. COMMUNITY INTEREST

(45) Production of semi-finished alloy steels is a highly specialized branch of the ECSC steel industry. Its total output represents about 12 % of the bulk raw steel production of the Community. The performance of the sector has a non-negligible influence through its linkages on the situation of the ECSC steel industry as a whole. Downstream, the industry is of vital importance for the Community manufacturing industry. It supplies the metal-processing industry with a wide range of special alloy steels, specifically designed for the various applications. Its products are fundamental for mechanical and electrical engineering, the automotive industry, shipbuilding, the aerospace industry and for other metallic articles. Constant research and development has to be carried out to cope with the requirements of the high-tech downstream industries for high-performance materials. In general the industry must be capable of supplying about 600 different alloy steel grades to satisfy the specific needs of its customers and to develop new products to follow the progress in production techniques and increasing quality requirements for the finished products. The industry branches vitally depending on these products represent about 45 % of the total labour force and 40 % of the total production value of Community manufacturing industry.

(46) It is clearly in the interest of the Community that the production of alloy steels, with its widespread ramifications in other essential setors of the manufacturing industry, continue under healthy conditions and that the efficiency of the sector not be further weakened by unfair trade practices. It is therefore considered in the Community's interest to take defensive action against the dumped imports.

(47) The Commission is furthermore of the opinion that protection of the Community industry against unfair price competition is also in the interest of the consumers of the products concerned. The imports against which action is to be taken represent a rather limited range of basic alloy steel grades, which however provide for the ground capacity utilization of the production equipment. Besides the necessity to guarantee the longer-run security of supplies and the maintenance of quality standards of the basic products, the industry must also be in the position to supply its wide range of specialities at reasonable prices. Phasing out the production of the lower-grade mass products would necessarily lead to a significant deterioration of the cost structure within the coupled production process and would entail significant price increases for the downstream consumers for essential materials.

(48) The Turkish producer claimed that, except for the significant increase within the investigation period, its market share in the Community has always been at a de minimis level and that after the reference period its market share has again been reduced to a level too insignificant to cause injury to the Community industry such that in the actual situation it could not be in the Community's interest to take protective action.

(49) The Commission considers that, given the volatile nature of the trade pattern in steel products as shown by the sudden increase of Turkish exports of the dumped products, there would be no guarantee to prevent the recurrence of injurious dumping should the investigation be concluded without protective measures. An exemption from anti-dumping measures of imports originating in Turkey because of a reduction in volume during the ongoing investigation would also be discriminatory towards the Brazilian producers/exporters in the light of recital (26).

(50) On the basis of this consideration, the Commission considers that the interests of the Community call for protective measures against dumped imports of semi-finished products of alloy steel in the form of provisional anti-dumping duties.

F. PROVISIONAL DUTY

(51) Having established that the dumped imports under consideration have caused material injury to the Community industry and that it is in the Community's interest to take action, the measures envisaged should be sufficient to eliminate the injury caused. However, the measures should not exceed the dumping margins. Since the main cause of the injury is the price undercutting of the Community industry's prices by the exporters, it is considered necessary to eliminate price undercutting where possible. Therefore, the prices of the exporters should be increased by their price undercutting margin or their dumping margin, whichever is the lower. On this basis, the Commission considers that the following provisional duties should be imposed:

Turkey 16,0 %

Brazil 15,0 %

with the exception of

- Villares Indústrias de Base SA

(Vibasa), Sao Paulo, Brazil 7,4 %

- Aços Finos Piratini SA,

Porto Alegre, Brazil 1,7 %

(52) A period should be fixed within which the parties concerned may make their views known and request a hearing. Furthermore, it should be stated that all findings made for the purpose of this Decision are provisional and may have to be reconsidered for the purpose of any definitive duty which the Commission may propose,

HAS ADOPTED THIS DECISION:

Article 1

1. A provisional anti-dumping duty is hereby imposed on imports of certain semi-finished products of alloy steel, of rectangular (including square) cross-section, hot-rolled or obtained by continuous casting, falling within CN codes 7224 90 09 and 7224 90 15 and originating in Turkey and Brazil.

2. The rate of the duty, based on the free-at-Community-frontier price, not cleared through customs, shall be:

- 16,0 % for imports of semi-finished products of alloy steel originating in Turkey,

- 15,0 % for imports of semi-finished products of alloy steel originating in Brazil (Taric additional code: 8625).

3. Notwithstanding paragraph 2, the rate of the provisional anti-dumping duty shall be:

- 7,4 % for products manufactured by Villares Indústrias de Base SA (Vibasa), Sao Paulo, Brazil (Taric additional code: 8624),

- 1,7 % for products manufactured by Aços Finos Piratini SA, Porto Alegre, Brazil (Taric additional code: 8623).

4. The provisions in force concerning customs duties shall apply.

5. The release for free circulation in the Community of the products referred to in paragraph 1 shall be subject to the provision of a security, equivalent to the amount of the provisional duty.

Article 2

Without prejudice to Article 7 (4) (b) and (c) of Decision No 2424/88/ECSC, the parties concerned may make known their views in writing and apply to be heard orally by the Commission within one month of the date of entry into force of this Decision.

Article 3

This Decision shall enter into force on the day following its publication in the Official Journal of the European Communities.

Subject to Articles 11, 12 and 13 of Decision No 2424/88/ECSC, Article 1 of this Decision shall apply for a period of four months, unless the Commission adopts definitive measures before the expiry of that period. This Decision shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels, 30 March 1992. For the Commission

Frans ANDRIESSEN

Vice-President

(1) OJ No L 209, 2. 8. 1988, p. 18 and corrigendum in OJ No L 273, 5. 10. 1988, p. 19. (2) OJ No C 144, 14. 6. 1990, p. 5.