COMMISSION DECISION No 283/2000/ECSC

of 4 February 2000

imposing a definitive anti-dumping duty on imports of certain flat rolled products of iron or non-alloy steel, of a width of 600 mm or more, not clad, plated or coated, in coils, not further worked than hot-rolled, originating in Bulgaria, India, South Africa, Taiwan and the Federal Republic of Yugoslavia and accepting undertakings offered by certain exporting producers and terminating the proceeding concerning imports originating in Iran

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

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

Having regard to Commission Decision No 2277/96/ECSC of 28 November 1996 on protection against dumped imports from countries not members of the European Coal and Steel Community(1), as amended by Commission Decision No 1000/99/ECSC(2), and in particular Articles 8 and 9 thereof,

After consulting the Advisory Committee,

Whereas:

A. PROCEDURE

1. Initiation

(1) On 7 January 1999, the Commission announced by means of a notice (hereinafter referred to as the "Notice of Initiation") published in the Official Journal of the European Communities(3) the initiation of an anti-dumping proceeding with regard to imports into the Community of certain flat rolled products of iron or non-alloy steel, of a width of 600 mm or more, not clad, plated or coated, in coils, not further worked than hot-rolled, originating in Bulgaria, India, Iran, South Africa, Taiwan and the Federal Republic of Yugoslavia (hereinafter referred to as "Yugoslavia").

(2) The proceeding was initiated as a result of a complaint lodged by Eurofer on behalf of Community producers representing a major proportion of the total Community production of the product concerned within the meaning of Articles 4(1) and 5(4) of Commission Decision (EC) No 2277/96/ECSC, hereinafter referred to as the "Basic Decision". The complaint contained evidence of dumping of the product concerned and of material injury resulting therefrom, which was considered sufficient to justify the initiation of a proceeding.

2. Investigation

(3) The Commission officially advised the exporting producers in the exporting countries (hereinafter referred to as the "exporting producers") and importers as well as their representative associations known to be concerned, the representatives of the exporting countries and the complaining Community producers of the initiation of the proceeding. The Commission sent questionnaires to all these parties and to those who made themselves known within the time limit set in the Notice of Initiation. Pursuant to Article 6(5) of the Basic Decision, the Commission also gave the parties directly concerned the opportunity to make their views known in writing and to request a hearing.

(4) Certain exporting producers, complaining Community producers and importers submitted comments in writing.

All interested parties who requested a hearing within the time limit set and who indicated that they were likely to be affected by the result of the proceeding and that there were particular reasons why they should be heard, were granted such a hearing.

(5) All parties were informed of the essential facts and considerations on the basis of which it was intended to recommend

(i) the imposition of definitive anti-dumping duties on imports from Bulgaria, India, South Africa, Taiwan and Yugoslavia,

(ii) the acceptance of an undertaking offered by an exporting producer in Bulgaria and

(iii) the termination of the proceeding against imports from Iran.

In accordance with the provisions of Article 20 of the Basic Decision parties were also granted a period within which they could make representations subsequent to this disclosure.

(6) The oral and written comments submitted by the parties were considered and, where appropriate, the definitive findings have been modified accordingly.

(7) The Commission sought and verified all the information it deemed necessary for the purpose of a definitive determination.

Verification visits were carried out at the premises of the following companies:

- Complaining Community producers:

- Aceralia Corporacion Sid., Madrid, Spain

- British Steel Plc, London, United Kingdom

- Cockerill Sambre SA, Brussels, Belgium

- Hoogovens Steel BV, IJmuiden, Netherlands

- ILVA Spa, Genoa, Italy

- Sidmar NV, Gent, Belgium

- Salzgitter AG, Salzgitter, Germany

- Stahlwerke Bremen GmbH, Bremen, Germany

- SOLLAC, Paris, France

- Thyssen Krupp Stahl AG, Duisburg, Germany

- Exporting producers:

(a) Bulgaria

Kremikovtzi Corp, Sofia

(b) India

Essar Steel Ltd, Hazira

Tata Iron & Steel Company Ltd, Calcutta

Steel Authority of India Ltd, New Delhi

(c) Iran

Mobarakeh Steel Company, Esfahan

(d) South Africa

Iscor Ltd, Pretoria

Highveld Steel & Vanadium Corp Ltd, Witbank

(e) Taiwan

China Steel Corp, Kaohsiung

Yieh Loong Enterprise Co., Ltd, Kaoshiung

(f) Yugoslavia

In view of the particular situation in Yugoslavia, no investigation was carried out at the premises of Sartid a.d., the only exporting producer in that country that made itself known to the Commission.

- Unrelated importer - user company in the Community:

Marcegaglia Spa, Gazoldo degli Ippoliti, Italy

- Importers related to the exporting producers:

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(8) The investigation of dumping covered the period from 1 January 1998 to 31 December 1998 (hereinafter referred to as the "investigation period"). The examination of injury covered the period from 1 January 1995 up to the end of the dumping investigation period (hereinafter also referred to as the "period examined").

B. PRODUCT CONCERNED AND LIKE PRODUCT

1. Product concerned

(9) The product concerned is certain flat rolled products of iron or non-alloy steel, of a width of 600 mm or more, not clad, plated or coated, in coils, not further worked than hot-rolled (hereinafter "hot-rolled coils"). This product is currently classifiable within CN codes 72081000, 7208 25 00, 7208 26 00, 7208 27 00, 7208 36 00, 72083710, 7208 37 90(4), 72083810, 7208 38 90, 7208 39 10, 7208 39 90.

(10) Hot-rolled coils are generally obtained in steel mills by hot rolling semi-finished steel products after the final rolling pass or after pickling or continuous annealing. Hot-rolled coils are wound into a regular coil.

For steel mills, which produce a great range of flat products of steel, hot-rolled coils are used as a pre-material for manufacturing other steel products (wide and narrow strips, all cold rolled products, tubes, etc.). Hot-rolled coils can be of various grades and dimensions. The vast majority of imports from third countries into the Community consist of "structural steels" (such as S235 and S275 according to "Euronorm" EN 10025) and "mild steels" (such as DD11, DD12, DD13 according to EN 10011 and the "Deutsche Industrie-Norm" DIN 1614/1). Coils are conventionally between 1.5 and 15 mm thick and from 600 to 2050 mm wide. Each of the CN codes listed above corresponds to a specific product type as differentiated by width and thickness within the above ranges.

(11) The product concerned is also classified into two distinct categories according to its finishing: black hot-rolled coils (hereafter referred to as "black coils") which are the basic product and pickled hot-rolled coils (hereafter referred to as "pickled coils") which, after being hot-rolled, go through an additional surface treatment called pickling. The distinction between black coils and pickled coils is also reflected in the structure of the combined nomenclature as coils classified under the two categories belong to specific and separate CN codes.

(12) Although imports from the countries concerned are mainly black coils, the investigation showed that imports cover all the CN codes and thus all the different products listed above. Notwithstanding the fact that each CN code corresponds to a distinguishable type of hot-rolled coil, it was found that they all have identical or similar physical and technical characteristics, uses and applications. Accordingly, all types of hot-rolled coils form one single product falling under the CN code listed in recital (9) above.

2. Like product

(13) The investigation has shown that the hot-rolled coils imported from the countries concerned are identical to or comparable to the Community-produced products, in particular in terms of the grades and the range of dimensions available.

(14) Some exporting producers claimed that the product concerned which they produce and sell is not interchangeable and not comparable as such with the Community-produced product. They claimed that the production process of the Community producers was more advanced and even used different technology, thus producing a higher quality product. They mentioned that users sometimes had to re-roll the imported products before they could be processed further. They therefore claimed that their product was not a like product to that of the complaining Community producers.

(15) Obviously, any difference in the production process resulting in surface or chemical defects may lead to a lower market value. However, the investigation showed that, in general both the Community-produced product and the imported product still have the same basic physical characteristics and uses, even though the products are not identical, in particular in terms of quality, across suppliers and across shipments of a given supplier. This, however, cannot lead to the conclusion that hot-rolled coil imported from the countries concerned is not a like product to that produced by the Community industry and sold in the Community.

(16) The investigation also showed that the grades and dimensions of the product concerned imported from the countries concerned are identical or comparable to the products sold on the domestic market of the countries concerned.

(17) On this basis, it was concluded that hot-rolled coils produced in the countries concerned and sold on the domestic markets of these countries, hot-rolled coils exported to the Community from these countries and hot-rolled coils produced and sold by the complaining Community producers on the Community market, are alike within the meaning of Article 1(4) of the Basic Decision.

C. DUMPING

1. Normal Value

(18) In order to establish normal value, it was first determined for each of the cooperating exporting producers whether the total volume of the domestic sales of the product concerned was representative in accordance with Article 2(2) of the Basic Decision, i.e. whether these sales represented at least 5 % of the sales volume of the product concerned exported to the Community.

It was then examined for each exporting producer whether total domestic sales of each product type constituted 5 % or more of the sales volume of the same type exported to the Community.

For those product types meeting the 5 % test, it was established whether sufficient sales had been made in the ordinary course of trade in accordance with Article 2(4) of the Basic Decision.

Where, per product type, the weighted average selling price was equal to or higher than the weighted average unit cost and where the volume of domestic sales equal to or above unit cost represented at least 80 % of sales, normal value was established on the basis of the weighted average prices actually paid for all domestic sales. Otherwise, normal value was established on the basis of the weighted average prices actually paid for the profitable domestic sales only unless, per product type, the volume of profitable transactions was lower than 10 % of the sales volume.

(19) For those product types where the volume of domestic sales was lower than 5 % of the volume exported to the Community, or where the volume of profitable domestic sales was less than 10 %, domestic sales of those product types were considered insufficient within the meaning of Article 2(3) of the Basic Decision and were therefore disregarded. In these cases, normal value was based on the weighted average of the prices charged by other exporting producers in the country concerned, if they had representative domestic sales of the corresponding product type made in the ordinary course of trade in accordance with Article 2(1) of the Basic Decision.

(20) Where, per product type, there were insufficient sales or no representative domestic sales by other exporting producers in the country concerned, normal value was constructed on the basis of the costs of manufacturing incurred by the exporting producer concerned for the exported product type in question plus a reasonable amount for selling, general and administrative (SG& A) costs and profits in accordance with Article 2(3) and (6) of the Basic Decision. In general, for each exporting producer, the SG& A were based on its representative domestic sales and the profit margin based on its representative domestic sales made in the ordinary course of trade. However, in one case, there was only one cooperating exporting producer in the country concerned without representative domestic sales. Therefore, the weighted average of the SG& A and profit of the other cooperating exporting producers were used, to the extent that these producers had representative sales and sales in the ordinary course of trade respectively.

2. Export price

(21) Where export sales to the Community were made directly to independent importers export prices were established on the basis of the prices actually paid or payable by these importers in accordance with Article 2(8) of the Basic Decision.

(22) Where export sales were made to importers in the Community which were related to the exporting producer, the export prices were constructed on the basis of the prices at which the imported products were first resold to independent buyers in the Community, in accordance with Article 2(9) of the Basic Decision. Adjustments were made for all costs incurred between importation and resale, including a reasonable margin for SG& A plus profit.

3. Comparison

(23) For the purposes of a fair comparison due allowance, in the form of adjustments, was made for differences claimed under Article 2(10) of the Basic Decision and demonstrated to affect price comparability. On this basis, adjustments were made with regard to import charges and indirect taxes, discounts, rebates, transport, insurance, handling, loading and ancillary costs, packing, credit, after-sales costs and commissions.

(24) Two companies in India claimed an allowance for import charges. Pursuant to Article 2(10)(b) of the Basic Decision these requests were partially granted to the extent that it was proved that the materials on which import duties were payable had been physically incorporated into the products concerned sold on the domestic market and that the import duties had not been collected or refunded in respect of the product exported to the Community.

(25) One Indian company requested an adjustment for differences in quantities on the grounds that the quantities sold per invoice on the domestic market were smaller than the quantities sold per shipment on the Community market. It was claimed that sales to the Community were made at a lower price due to the larger quantities involved. Since no link was demonstrated with discounts or rebates, as required by Article 2(10)(c) of the Basic Decision, this request had to be rejected.

(26) The two exporting producers in South Africa contended that various rebate schemes applied to domestic sales of the product concerned and that the normal value should be reduced accordingly. Adjustments could only be made to the extent that their link with the sales under investigation was proved.

(27) The exporting producer in Yugoslavia claimed that the value of their exports should be calculated using the alleged market exchange rate. However, as the rate used in the financial accounts was the official exchange rate and as the companies were not able to present sufficient evidence demonstrating that the correct rate to be used was the market exchange rate, it was decided to use the official exchange rate to calculate the export price.

4. Dumping margins

a) General method

(28) In accordance with Article 2(10) and (11) of the Basic Decision, the dumping margins were established on the basis of a comparison between the weighted average normal value per product type and the weighted average export price at ex-factory level for the same product type and at the same level of trade.

(29) For exporting producers concerned by the proceeding who did not reply to the Commission's questionnaire, did not make themselves known or did not supply necessary information during the investigation, the dumping margin was determined on the basis of the facts available in accordance with the provisions of Article 18(1) of the Basic Decision.

A comparison of Eurostat figures with the data on the volume of exports to the Community supplied by the cooperating exporting producers was made in order to establish per exporting country concerned the level of cooperation in the current investigation. As a result, for all countries subject to investigation, with the exception of Taiwan, it was found that the overall level of cooperation was high. The Commission therefore considered it appropriate to set the dumping margin for the non cooperating companies at the level of the highest individual dumping margin established for a cooperating exporting producer in the country concerned, since there was no reason to believe that a non cooperating exporting producer had dumped at a level lower than the highest level found. Since for Taiwan the level of cooperation was found to be low, in fact significantly below 50 %, the level of the residual dumping margin was set at the level of the highest quarterly dumping margin found in that country.

The above approach was also considered necessary in order to avoid creating a bonus for non-cooperation and an opportunity for circumvention.

b) Dumping margins per country

(30) The dumping margins, expressed as a percentage of the CIF price at Community frontier level, are:

(31)

Bulgaria

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(32)

India

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(33)

South Africa

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(34)

Taiwan

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(35)

Yugoslavia

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(36) Iran

As set out in recital (69) below, it was found that the imports from Iran were below the de minimis threshold foreseen in Article 5(7) of the Basic Decision. Therefore, it was not considered necessary to carry out a dumping determination with respect to this country.

D. COMMUNITY INDUSTRY

1. Determination of the relevant Community market

(37) For the purposes of establishing whether the Community industry had suffered injury and, in this context, for determining consumption and the various economic indicators related to the situation of the Community industry, it had to be examined whether production of this industry destined for the captive market should be excluded for the purposes of this analysis or whether injury and consumption should be assessed in relation to the entire production of the Community industry.

(38) There are sixteen producers of hot-rolled coils in the Community. Around 70 % of the hot-rolled coils manufactured by these producers are used in a captive market, i.e. they are further transformed by these producers in an integrated process (hereinafter referred to as "captive market"). These hot-rolled coils follow an internal process of transfers to downstream processing works, for which no invoices are issued since the transfers occur within the same legal entity. The remaining production (hereinafter referred to as "free market") is sold to both related and unrelated parties.

(39) In this respect, the complainant claimed that two separate markets should be distinguished. It claimed that the hot-rolled coils destined for a captive market were not in direct competition with dumped imports. Consequently, the imports subject to investigation could not affect this market. In parallel, the complainant has claimed that the remaining production was sold on the free market where competition with dumped imports takes place. The main purchasers on the free market are independent cold-rolling mills such as tube makers, steel service centres (hereinafter referred to as "SSC's"), steel merchants and stockholders. Only the hot-rolled coils sold on the free market are subject to the complaint.

(40) Exporting producers and importers of hot-rolled coils onto the Community market claimed that the definition of the product concerned and the like product covered all hot-rolled coils. They claimed in particular that there was no clear separation between the captive and free markets and that the definition of the free market made by the complainant was arbitrary. They therefore requested that the assessment of the Community market should include the captive market and the free market taken together.

(41) In support of this claim, reference was made to the Gimelec judgment(5) of the European Court of Justice. They stated that in the above-mentioned ruling, the Court referred to the following factors to rule out the existence of two separate markets:

- the product concerned was sold on the same market and used for the same purposes;

- the Community producers sold the product concerned both to related and unrelated customers and charged more or less the same price;

- companies on the downstream market used to buy the product concerned not only from related Community suppliers but also from importers or other unrelated producers.

(42) Some exporting producers claimed that, in the light of the above judgement, the legal conditions to separate the markets were not met in the present case. They considered that Community producers could choose, depending on market conditions, to sell alternatively to the free and captive markets since Community production of the two categories of hot-rolled coils is alike. It was claimed that the alleged movements between the two segments of the market legally prevented the exclusion of part of Community production from the examination of injury, and in particular from Community consumption.

(43) In this respect the Commission made the following findings:

(a) Given the high level of integration existing in the steel industry in general and in the production of the product concerned in particular, the Community producers of the product concerned merely physically transferred, without invoicing, hot-rolled coils intended for the captive market. No invoices were issued since the parties involved did not have separate legal identities. As a result, there were, within the captive market, no prices for transfers comparable to those in the free market.

(b) The Community industry did not produce for stockpiling hot-rolled coils which could subsequently be delivered either for captive use or sold on the free market. This is because all users of hot-rolled coils, including the integrated processes of the Community industry, have technical constraints for the production of downstream products. As a result, movements, if any, of hot-rolled coils between the two markets are insignificant.

(c) The investigation showed that the integrated Community producers did not purchase the product concerned for the captive market from independent parties inside or outside of the Community. As a result hot-rolled coils intended for the captive market were not in competition with other hot-rolled coils available in the Community. Consequently, the captive market can clearly be distinguished from the free market.

(44) On this basis the Commission considers that the separation between the free and the captive market is fully in line with the requirements of the Basic Decision and the Community institutions past practice.

(45) For the purposes of establishing the economic indicators relevant for the injury analysis such as development of sales, profitability, etc., the Commission considered whether sales from Community producers to related parties having separate legal entities, should in general be included in the determination of the free market. It was found that such sales were made at more or less the same prices as those charged to independent parties. In addition, in line with claims by certain exporting producers the investigation has confirmed that these related parties are free to source their purchases from either related or unrelated suppliers in or outside the Community. Consequently, it was concluded that sales from Community producers to related parties having separate legal entities were in competition with sales from independent suppliers such as those located in the countries concerned and that these sales should therefore be included in the determination of sales in the free market.

(46) One Community producer claimed, however, that its sales to related parties should be considered as belonging to the captive market. It was argued that the prices invoiced to its related parties were not the market prices and were significantly different from those applied to independent customers. The producer added that the parent company did not allow any related parties to purchase hot-rolled coils from independent parties on the free market. Consequently, hot-rolled coils sold to related parties were not affected by any direct competition from other hot-rolled coils. They should therefore be excluded from the determination of the free market.

(47) The investigation confirmed that the policy of that group was not to allow its related parties to purchase hot-rolled coils on the free market. Furthermore, the analysis of sales prices showed that the prices invoiced to these related parties were in many instances significantly different from market prices charged to independent parties. Moreover, all the sales were made to related users who used the products captively without reselling them onwards, as such. Consequently, the Commission concluded that the sales of the hot-rolled coils concerned could not be considered as being sold on the free market and should therefore not be included in the determination of the free market.

(48) In conclusion, hot-rolled coils used by Community producers as pre-material for further transformation in an integrated process within one single legal entity were considered to be part of a captive market. The same applies to sales by the aforementioned Community producer who could demonstrate that its sales to a related customer did indeed belong to a captive market. All other sales of the producers in the Community were considered to be part of the free market. Consequently, the situation of the Community industry in terms of the development of the various economic indicators such as production, sales, market share and profitability was examined with respect to the free market.

(49) It should be noted that the above findings regarding the separation and the determination of the above markets are reflected in the data collected in the framework of the ECSC Treaty, in particular for the surveillance of the steel markets. Indeed, such data differentiates the use of the hot-rolled coils basically along the same lines.

2. Definition of the Community industry

a) Total Community production

(50) Several exporting producers claimed that a number of producers in the Community should be excluded from the definition of Community production given that they had imported hot-rolled coils from the countries concerned.

(51) The Commission found that none of the producers investigated had imported hot-rolled coils from the countries concerned during the period examined. However, certain SSC's and tube producers related to these Community producers had made such imports during that period.

(52) In line with the findings on the definition of the relevant Community markets outlined in recitals (37) to (49), the investigation confirmed, however, that these related parties had acted independently from the producers related to them in their operations on the free market. Consequently, the purchases could not affect the status of the said companies as Community producers of the product concerned.

(53) Accordingly, it was considered that there were no grounds for excluding any producers from the definition of Community production of hot-rolled coils. In accordance with Article 4(1) of the Basic Decision all sixteen producers operating in the Community market represent total Community production.

b) Community industry

(54) The complaint was lodged on behalf of eleven out of the sixteen Community producers of hot-rolled coils while the remaining five supported the complaint.

(55) The Commission received ten replies to questionnaires from the complainant Community producers. One small producer decided not to provide the Commission with a response.

(56) Two of the ten Community producers that replied to the Commission's questionnaire, were unable to provide all data requested during the investigation in a format which would allow its aggregation with the data available for the other Community producers.

(57) Some exporting producers claimed that at least one Community producer included in the definition of the Community industry set out above received preferential treatment in relation to the requirements imposed on interested parties during anti-dumping investigations. In particular they argued that the said Community producer did not provide the Commission with a reply to its questionnaire within the statutory deadlines for the imposition of provisional duties. They considered that this constitutes discriminatory treatment and violates Article 6(2) of the Basic Decision.

(58) It should be noted that all the Community producers included in the definition of the Community industry replied to the Commission's questionnaire within the deadlines set forth in the Basic Decision and therefore within the deadline for the imposition of provisional measures. The Commission considers that all interested parties in the present proceeding in similar situation were given equal treatment. Consequently, any claims suggesting an infringement to Article 6(2) of the Basic Decision and discriminatory treatment by the Commission are not founded.

(59) In conclusion, the eight Community producers having fully cooperated in the investigation make up the Community industry for the purposes of this proceeding and they accounted for around 65 % of the total Community production of the product concerned.

(60) These producers are accordingly considered as the Community industry and are referred to as such hereinafter as they represent a major proportion of total Community production within the meaning of Article 4(1) of the Basic Decision.

E. INJURY

1. Apparent consumption

(61) Apparent consumption of hot-rolled coils in the Community was established on the basis of the total sales made by the 16 Community producers on the free market and total imports of the product concerned into the Community as indicated in the Eurostat import statistics and the exporting producers' replies to the questionnaires.

(62) From 1995 up to the investigation period, apparent consumption in the Community increased by 9 %, namely from 18,4 million tonnes to 20,1 million tonnes. In 1995 the free market was characterised by exceptionally high sales prices and good demand, particularly for Community-produced hot-rolled coils. The following year, however, the volume of the market decreased by 11 %.

(63) Between 1996 and the investigation period, apparent consumption increased steadily. The main growth occurred between 1996 and 1997 when the market increased by 22 %. Between 1997 and the investigation period, it increased by only 0,4 %.

2. Imports from the countries concerned

a) Negligible imports

(64) Based on the provisions of Articles 3(4) and 5(7) of the Basic Decision, the assessment of whether or not imports were negligible was made in relation to apparent consumption of the product concerned on the Community market.

(65) On the basis of Eurostat statistics imports originating in three exporting countries, namely India, Iran and South Africa, were slightly above the 1 % threshold foreseen in Article 5(7) of the Basic Decision.

(66) Iran claimed that it was inappropriate to use Eurostat statistics in assessing its market share given that an on-the-spot investigation carried out at the premises of the only exporting producer operating in that country confirmed significantly lower export volumes to the Community. Accordingly, as was the case in past proceedings, they argued that the Commission should assess the Iranian market share on the basis of the findings made during its on-the-spot investigation.

(67) India and South Africa contested the determination of apparent consumption, claiming that their imports were negligible and that they should, like Iran, be excluded from the scope of the investigation.

(68) As mentioned above, it was found that on the basis of Eurostat import statistics the market share held by Iran was just above the de minimis threshold, namely 1,2 %. However, it was also found that these statistics conflicted with the information collected and verified during the Commission on-the-spot verification for the only exporting producer in Iran. Accordingly, the Eurostat Statistics were thus not considered sufficiently precise to base the assessment of the market share held by that country exclusively on them. These statistics were therefore also compared with the information available from interested parties in the proceeding, notably the only exporting producer in Iran and its related importers based in the Community. This comparison was possible and particularly relevant in the present case because only one producer operated in Iran. As this producer and its related companies based in the Community cooperated fully in the proceeding it was possible to verify his claim by a straightforward comparison between the verified export transactions and Eurostat. This verification and comparison established export levels from Iran significantly below the de minimis threshold and concluded that any difference between the company's information and Eurostat's was not a result of exports to the Community from Iran via other third countries.

(69) Under these circumstances it was considered prudent that in order to establish the market share held by Iran, duly verified data should be used. Accordingly, it is concluded that exports from Iran are below the de minimis threshold, that any injury from imports originating in Iran could only be negligible and that the proceeding should be terminated with respect to Iran.

(70) With respect to the claim by the Indian and South African exporting producers the evidence submitted provided no grounds for considering their imports into the Community as negligible, in particular given the methodology used to determine the relevant Community market set out in recitals (37) to (49) above. Indeed, unlike in the case of Iran, the relevant Eurostat information and the replies to the Commission's questionnaire did not show imports below the de minimis threshold. Consequently, the imports from India and South Africa were considered to be above the de minimis threshold set out in Articles 3(4) and 5(7) of the Basic Decision.

b) Cumulative assessment of imports

(71) The Commission considered whether imports of hot-rolled coils originating in Bulgaria, India, South Africa Taiwan and Yugoslavia should be assessed cumulatively in accordance with Article 3(4) of the Basic Decision.

(72) It was therefore examined whether all criteria were met to cumulate imports from the countries concerned. The results of the examination showed that:

- the margin of dumping relating to each country, as shown above, was more than de minimis;

- the volume of imports from each country was not negligible when compared to Community consumption;

- the analysis of the conditions of competition between imported hot-rolled coils and the conditions of competition between imported hot-rolled coils and the like Community product also indicated that imports from the countries concerned should be cumulated. Indeed, the exporting countries concerned mainly sold hot-rolled coils on the free Community market directly to unrelated customers, such as cold rolling mills, tube makers, SSC's and steel merchants. Hot-rolled coils were also imported via related sales companies, which subsequently sold the product concerned to the same categories of customers mentioned above. The investigation showed that the Community industry was selling the like product through the same sales channels and to the same categories of customers. Finally, it was found that a similar pricing policy was followed for all these sales.

(73) Accordingly, contrary to the suggestion made by some exporting producers, the Commission concluded that all conditions justifying the cumulation of the imports from the above-mentioned countries were met.

c) Volume of the imports concerned

(74) Based on Eurostat import statistics, between 1995 and the investigation period, the volume of imports into the Community from the countries concerned increased by 229 %, namely from 0,65 million tonnes to 2,14 million tonnes. The increase of imports between 1995 and 1996 was very limited (+ 0,10 million tonnes). The main increase occurred between 1997 and the investigation period (+ 1,26 million tonnes).

(75) The analysis of the developments during the investigation period indicated that imports from all the countries concerned were made mainly during the first half of the investigation period (1,3 million tonnes); they subsequently dropped by 42 % in the second half of the investigation period but were still significantly higher than in the second half of 1997.

(76) As already mentioned in recital (11) above, the various types of hot-rolled coils are commonly classified into two distinct categories: black coils and pickled coils. The investigation showed that black coils covered around 90 % of all hot-rolled coils imported from the countries concerned.

d) Market share of imports

(77) The market share held by the exporting producers increased from 3,5 % to 10,7 % between 1995 and the investigation period. The actual increases in import volume thus allowed the countries concerned to gain 7,2 percentage points of the share of the Community market.

(78) The main increases in market share occurred between 1997 and the investigation period, when the countries concerned gained 6,3-percentage points market share.

e) Price undercutting

(79) In order to evaluate any possible price undercutting, prices of comparable types of hot-rolled coils were, as far as possible, compared under similar sales conditions on the Community market, in the same Member State and to the same customers. The prices of the exporting producer free at Community frontier were compared with the Community industry's ex-factory prices. Where necessary, exporting countries' sales prices were adjusted to a free at Community-frontier level, customs duty paid and including relevant import costs. Similarly, these prices were also adjusted to ensure comparison at the same level of trade as that of the Community industry. All adjustments were based on the evidence collected and verified by the Commission during the investigation.

(80) As already mentioned in recital (14) some exporting producers suggested that the hot-rolled coils they produced and sold on the Community market were not of a comparable quality to that of the Community industry. One exporting producer claimed that unlike the Community industry's production process, their products were not produced through continuous casting and this caused chemical and surface defects which lower the yield when the coils are processed further. In addition, the fact that they do not have an automatic "coiler" leads to thickness and width variations, and thus to a poorer quality. They submitted evidence to this effect and consequently requested a price adjustment for differences in quality in the context of the price comparisons which were made in determining price undercutting.

(81) The Commission found that, in general, a price adjustment for differences in quality was not justified, particularly as such differences were not apparent to users, and as it emerged from the investigation that any alleged difference in quality does not necessarily affect the use of the product concerned. For one particular exporting producer, however, the evidence provided indicated that the requested quality adjustment was partly justified. Although a detailed investigation of the level of the adjustment requested revealed that the claim was overestimated, based on the evidence available half of the requested adjustment could be granted.

(82) Accordingly, the results of the price comparison expressed as a percentage of Community industry prices are as follows:

- Bulgaria: 6,8 %

- India: 6,7 %

- ESSAR: 6,1 %

- Tata: 6,1 % and

- SAIL: 19,1 %

- South Africa: 5,3 %

- Iscor: 4,9 % and

- Highveld Steel: 27,0 %

- Taiwan: 4,3 %

- Yieh Long: 3,9 % and

- CSC: 7,5 %

- Yugoslavia: 12,4 %

3. Situation of the Community industry between 1995 and the investigation period

a) Production

(83) The investigation showed that Community industry's production peaked at 12,5 million tonnes in 1997. For the remainder of the period examined the Community industry's production remained stable at around 11,4 million tonnes although a fall in consumption was observed in 1996. It should be noted that this production was either sold on the free market or exported to third countries.

(84) As the production capacity of the Community industry is used for hot-rolled coils intended for both the free and the captive market, it was also considered necessary to analyse information on such captive production in order to ascertain that any drop in the production intended for the free market was not due to an increased need for the captive market.

(85) It was found that between 1995 and the investigation period, this production increased by 2 %, or by around 0,6 million tonnes. This indicated a relatively stable captive production. As regards the trends in captive production between 1997 and the investigation period, these were similar to those observed above for the production intended for the free market.

(86) Consequently, the decrease in production intended for the free market is not due to a greater need for captive production.

b) Capacity and capacity utilisation

(87) It is to be noted that production facilities can be used for products destined for both the free and the captive markets, as well as for other products not concerned by this proceeding (including other steel grades and other steel products). Capacity utilisation related to the product concerned has therefore been established on the basis of the capacities officially declared to the Commission within the framework of the ECSC Treaty. These capacities are established according to specific parameters and must not be confused with the gross or nameplate capacity. The gross or nameplate capacity is the highest possible capacity achievable without taking into account factors such as the personnel available, holiday periods, set-up times, maintenance, etc.

(88) The capacity utilisation rate of the Community industry was 87 % between 1995 and the investigation period, except in 1997 when the Community industry's production was at its peak and the rate reached 93 %. At that time, both the consumption of hot-rolled coils destined for the free market and those destined for the captive market were high.

(89) The high utilisation rates were found to be normal bearing in mind that in heavy industry, particularly in the steel industry, high capacity utilisation is necessary to reduce the impact of the high fixed costs of production.

c) Orders received and sales volume

i) Orders received

(90) In order to complement the analysis on sales, the development of the orders received by the Community industry was examined. For this purpose, the Community industry submitted data which is also available under the framework of the surveillance of the Community steel market under the ECSC Treaty. Although these data do not reflect exactly the situation with respect to the product concerned but encompassed a slightly broader category of products, it was found that this aggregation of data could be considered representative for the situation of the product concerned. These data showed that 1997 was a year where the level of orders was high as compared to the situation found during the investigation period. Contrary to the stable development of the apparent consumption between 1997 and the investigation period shown above, orders received by the Community industry declined by 17 % between 1997 and the investigation period.

(91) The above finding suggests that the economic activity of the Community industry was more regular and evenly spread throughout the year 1997 when the volume of orders received developed more in line with sales volume. Furthermore, given the existence of a time lag between orders and deliveries, the reduction in the orders received indicated a reduction of the level of the economic activity, which will be examined below.

ii) Sales

(92) During the period examined, the volume of sales slightly increased from 9,6 million tonnes to 9,7 million tonnes, an increase of 1 %.

(93) Within that period, the trend in sales volume broadly reflected the evolution of consumption. However, between 1997 and the investigation period, the Community industry's sales decreased by 12 % while consumption increased slightly.

(94) The Community industry submitted that the injury indicator concerning sales set out above has been established on the basis of transactions delivered and invoiced during the periods specified. In this context, it is important to point out that the Community industry has organised its production process in such a way that users' orders made on a given date are delivered and invoiced and thus sold to them, with a time lag of at least three months. Therefore, in order to make a meaningful assessment of the development, which occurred during any given period, not only the actual sales but also the orders received during such a period have to be analysed. It is considered that any development observed with respect to these orders is bound to translate into corresponding developments of sales with a time lag thereafter.

iii) Differentiation of type of sales

(95) The Community industry argued that in order to assess the actual injury it suffered, the development of sales for different types of hot-rolled coils under investigation, namely black coils as compared to pickled coils, should be analysed separately. The claim was that given the high share of dumped imported black coils in total imports, the development of the Community industry sales volume and sales prices for that type of coils would indicate a particularly injurious situation.

(96) Investigation of this particular issue showed that from 1995 up to the investigation period (1998), the volume of black coils sold by the Community industry on the free market decreased by 13 %, whereas the volume of pickled coils sold increased by 34 %. In absolute terms, this represents a decrease of around 1 million tonnes in sales of black coils and an increase of around 0,5 million tonnes in sales of pickled coils.

(97) It also confirmed that the share between the sales of black coils and pickled coils for the Community industry was more balanced than that of the exporting producers. From 1995 up to 1997 the share in sales volume was 70 % of black coils against 30 % of sales of pickled coils. During the investigation period this share became 60 % and 40 % respectively for black and pickled coils. This development in total sales clearly shows that during the investigation period a shift occurred from black to pickled coils, i.e. from a category of products where imports were more present to one were they were less prominent.

d) Price evolution

(98) During the period examined the Community industry's weighted average sales price decreased by 10 %. In 1995 sales prices were at their highest for ten years. They continued to follow a decreasing trend until 1997 (- 17 % and - 3 % compared to 1995 and 1996 respectively) but recovered from 1997 up to the end of the investigation period (+ 9 %).

e) Market share

(99) From 1995 up to the investigation period, the market share held by the Community industry decreased by 3,7 percentage points, dropping from 52,0 % in 1995 to 48,3 % in the investigation period.

(100) Between 1995 and 1996 and between 1996 and 1997 the market share held by the Community industry increased by 1,1 and 1,8 percentage points respectively.

(101) Between 1997 and the investigation period, however, the Community industry lost all the market share previously gained and fell to a lower level than that in 1995. The losses amounted to 6,6 percentage points. Further analysis of this situation indicated that market share was lost due to a decrease in sales both to related and unrelated customers on the Community free market.

f) Profitability

(102) The average return on sales made by the Community industry for the product concerned from 1995 up to the investigation period decreased by 39 %. The high profits (20,7 %) achieved in 1995 were the result of high prices on the market at that time. In 1996, despite a downturn in the market and a reduction in sales prices (- 15 %), the Community industry remained profitable. However, the recovery in sales volume in 1997 did not allow that industry to increase its profit margin since its sales prices again decreased by 3 %.

(103) During the investigation period profitability recovered slightly from its 1997 level. The increase in sales prices during the investigation period (9 % compared to 1997) allowed the Community industry to achieve a profit margin of 12,9 %. The Community industry claimed that this level of profit was reasonable.

(104) Some exporting producers suggested that the Community industry achieved an extremely high level of profitability during the investigation period and that the development of this indicator alone should have warranted immediate termination of the proceeding. They said that such profit was significantly higher than that considered reasonable by the Commission in past anti-dumping cases involving steel products.

(105) In this respect it should be noted that the relevant provisions of the Basic Decision and the WTO Anti-dumping agreement state that the determination of injury shall be based on positive evidence of (a) the volume of dumped imports and the effect of dumped imports on prices on the Community market for like products; and (b) the consequent impact of those imports on the Community industry. Moreover, they specify that consideration shall be given to whether there has been a significant increase in the volume of dumped imports, either in absolute terms or relative to consumption in the Community. Furthermore, they also specify that consideration shall be given to whether there has been significant price undercutting by dumped imports or whether the effect of such imports was to depress prices to a significant degree or to prevent price increases. No one or more of these factors can necessarily give decisive guidance. Finally, they state that the examination of the impact of dumped imports on the domestic industry shall include an evaluation of all the relevant economic factors and indices having a bearing on the state of the industry, including the magnitude of the actual margins of dumping, actual and potential decline in sales, profit, output, market share, productivity, utilisation of capacity, factors affecting prices, etc. The Basic Decision specifically states that this list is not exhaustive, nor can any one or more of these factors necessarily give decisive guidance.

(106) In the present case, the investigation has shown that imports of dumped imports have significantly increased in absolute and relative terms. In addition, low-priced dumped imports were found to significantly undercut the Community industry's prices. All the above conditions being met, the Commission has evaluated the potential and actual developments of a number of relevant economic factors in its investigation before reaching its definitive conclusions. Accordingly, it is considered that the suggestion by some exporting producers that only the level of profitability should have warranted the termination of the proceeding is clearly against the provisions of the Basic Decision.

(107) Furthermore, the economic situation of the Community industry during the investigation period, in particular its price and profitability situation, must be seen in the light of the structure of the hot-rolled coils market and the developments that occurred in the economic situation of the Community industry during the investigation period, as set out in point 4 below.

(108) Finally, it is considered that the comparison of a specific economic indicator pertaining to the Community industry with the same economic indicator worldwide level is not relevant in the context of anti-dumping proceedings.

g) Investments and employment

(109) The investigation showed that investments were made mainly in the replacement of machinery and equipment. During the investigation period, the level of investment was similar to the 1995 level. Investments were increased by 32 % as compared to 1995, consistent with the high demand in 1997.

(110) As regards employment, the Community industry manufactures various products on the same site and with the same machinery, notably hot-rolled coils. The investigation showed that during the period examined employment for the production of the product concerned decreased by 4 %.

h) Summary of the situation of the Community industry between 1995 and the investigation period

(111) Some exporting producers claimed that a determination of injury during the investigation period could not be carried out on the basis of a comparison of the situation of the Community industry established in the years 1995 and 1997. They found that, in particular, price and profitability levels in 1995, production, capacity utilisation, sales volume and market share levels in 1997 were not representative of what their levels should be under conditions of fair competition. They thus argued that on the basis of the other findings over the entire period examined, it could not reasonably be concluded that the Community industry suffered material injury.

(112) In this respect it should be noted that, in the above claim, interested parties have not stated in which respect some economic indicators established in 1995 and 1997 could not be considered representative. They merely stated that prices and profits in 1995 and production, capacity utilisation, sales volume and market share were not representative. In other words, the above claim suggests that a significant part of the data established during the investigation carried out by the Commission should be disregarded in the present proceeding without any evidence or explanations indicating that the conditions of normal competition were not met in 1995 and 1997. Given that during its investigation the Commission found no evidence to corroborate the allegation that normal competition was not taking place on the Community market during the years 1995 and 1997, it is considered that there are no grounds to disregard such information.

(113) The Commission thus examined the developments of the economic situation of the Community industry within the period examined, and its overall economic situation between 1995 and the investigation period, on a yearly basis.

(114) The investigation showed that between 1997 and the investigation period, with a slight increase in apparent consumption, the Community industry increased its sales prices by 9 % but was not able to maintain its sales volume, which decreased by 12 %. Accordingly, the Community industry lost 6,6 percentage points or 14 % of market share. Furthermore, the Community industry production decreased by 9 %, leading also to a reduced capacity utilisation. Despite these negative developments profitability increased from 6,3 % to 12,9 %.

(115) The investigation also showed that between 1997 and the investigation period imports from the countries concerned increased significantly in terms of volume (+ 143 %), leading to a doubling of their market share (+ 6,3 percentage points). Although the countries concerned increased their sales prices by 7 % they were nevertheless found to be undercutting the prices of the Community industry by 8 % on average during the investigation period.

4. Analysis of the situation of the Community industry during the investigation period

a) Preliminary remarks

(116) The Community industry claimed that prices and thus profits remained at a high level in the first half of the investigation period because apparent consumption and therefore demand was exceptionally high, even though it was not matched by a commensurate actual consumption. This led, in the first half of the investigation period, to an overstocking which was largely fed by the imports concerned, and, in the second half of the investigation period, to a significant de-stocking.

(117) Furthermore, the Community industry indicated that a more refined analysis of sales by product types and sales channels for which there is head-on competition between the Community industry and imports would be necessary in the present case to show the full extent of the injury suffered. This entails a differentiated analysis of sales of black as opposed to pickled coils, and sales channels where longer-term contracts are concluded as opposed to other sales.

(118) Finally, the Community industry claimed that a more detailed analysis of the four quarters of the investigation period was necessary given the existence of a time lag between orders placed by purchasers and deliveries made to them. It was claimed that such time lags effectively delayed the negative impact of the imports concerned. The Community industry claimed that it was therefore necessary to further investigate the development of orders received during the investigation period.

(119) All operators on the steel market agreed that business is mainly carried out on a quarterly basis. Production is organised on the basis of quarterly plans and prices. Both orders and deliveries are negotiated accordingly. Therefore, the suggestion made by some exporting producers that the partitioning of the investigation period, in particular into quarters, did not constitute an objective evaluation of the possible injury suffered by the Community industry was not founded. The above claims of the Community industry have therefore been investigated and analysed as set out below.

(120) In order to have an overview of the cyclical nature of the activity of the Community industry and to cross check the quarterly developments of its economic situation, the Commission also collected quarterly data for the period 1996 up to the second quarter of 1999.

b) Cyclical nature of the steel industry

(121) According to the complainant, there are seasonal fluctuations on the steel market in that the first two quarters of each calendar year are normally better than the last two quarters. Such seasonal fluctuations could mainly be observed in sales activity. Sales would normally be affected in the third quarter of the year due to the holiday period in the user industries, but they should pick up again in the fourth quarter. Given that some of the above allegations made by the Community industry required a quarterly analysis it was important to ensure that any development observed did not merely reflect normal quarterly fluctuations. This analysis was particularly relevant as the complainant alleged that the trends observed within the investigation period were far beyond the normal cycles.

(122) For the evaluation of the cyclical nature of the hot-rolled coil business, the Commission found that the trends in production and sales for the Community industry from 1996 up to the investigation period were as follows:

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(123) With regard to production, it was found that the third quarter did not necessarily show the lowest level of activity. In 1996 and 1997, the greatest difference found was 7 % between the first and the fourth quarter of 1996 and the trend in production was linear in those years. During the investigation period however the levels of production in the third and in the fourth quarter were far lower when compared to the first quarter, indicating that the fluctuations observed in that period were far beyond the normal seasonal fluctuations.

(124) Concerning sales volume, the downturn observed in the third and fourth quarters was even more pronounced during the investigation period. Sales activity in the second half of the investigation period was exceptionally low and far beyond the normal seasonal fluctuations.

(125) The above quarterly analysis covering the years 1996 and 1997 as well as the investigation period, shows that the trends observed during this latter period are far beyond the normal fluctuations linked to the cyclical nature of the hot-rolled coil business.

c) Apparent consumption and overstocking

(126) As indicated in recital (61) above, the development of apparent consumption on a yearly basis was quite stable, in particular between 1997 and the investigation period. It should be underlined that apparent consumption, by definition, does not reflect actual use, i.e. actual consumption of the product concerned by its users. The difference between apparent consumption and actual consumption is basically the quantity of stocks kept at various levels of the distribution chain, i.e. in the present case by importers, traders, dealers, SSCs and users.

(127) The examination of this particular issue showed that apparent consumption was significantly higher in the first two quarters of the investigation period than in the last two quarters. In addition, the comparatively steady development in apparent consumption found throughout 1997 did not occur during the investigation period. This difference in trends was particularly obvious when comparing the end of 1997 and the beginning of the investigation period, as there was a considerable increase in apparent consumption between these two time periods. This suggests an increase in stocks, whereas the reverse was true if the fourth quarter of 1997 is compared with the fourth quarter of the investigation period, indicating a significant decrease in stocks in the last two quarters of the investigation period.

(128) As it has been alleged that these stocks played a particularly important role in the development of the market during the investigation period, it was considered necessary to establish the quarterly apparent consumption not only for the investigation period but also for 1997.

(129) To confirm these findings, the relevant development should also have been established for actual consumption. However, its determination was hampered by the fact that cooperation of the various relevant interested parties in the distribution chain and at user level was not complete. Nevertheless, the Commission was able to establish the stocks held at trader's level on the basis of Eurostat information gathered in the framework of the ECSC Treaty.

(130) In line with the above findings on apparent consumption, this information showed that there was a considerable build-up of stock at trader level between the end of 1997 and the beginning of the investigation period. An increase of 29 % between fourth quarter 1997 and first quarter of the investigation period and a further increase of 11 % between the first quarter of the investigation period and the second quarter of the investigation period were observed.

(131) This information also confirmed a considerable decrease in stocks towards the end of the investigation period (- 22 %). The use of stocks became clear when comparing the level of stocks at the end of both the first and second semesters of the investigation period. A comparison of the quarterly development of stocks in 1997 with the quarterly development during the investigation period also confirms the above findings.

(132) This trend of overstocking in the first two quarters of the investigation period was confirmed in a submission received by an exporting producer under investigation and by the information from a major user of the product concerned on the Community market. This user held stocks which in the middle of the investigation period were more than double those held at the beginning of this period, while there was no indication of a significant difference in the underlying activity between the beginning and the end of the investigation period by this user.

(133) The investigation thus confirmed the Community industry's claim that considerable overstocking occurred at the beginning of the investigation period. In the first two quarters of the investigation period apparent consumption was significantly higher than actual consumption, while for the third and fourth quarters of the investigation period the difference was reversed.

(134) In absolute terms, it was found that apparent consumption during the first half of the investigation period exceeded apparent consumption in the first half of 1997 by around 1,5 million tonnes.

(135) Some interested parties claimed that the Community industry largely contributed to the overstocking observed during the first half of the investigation period. In this respect it should be noted that, as shown below, the Community industry's sales started to decline right from the beginning of the investigation period. This suggests that the Community industry did not play an important role in feeding the overstocking observed.

d) Production and capacity utilisation

(136) On a quarterly basis, production decreased by 23 % in the third quarter and by 30 % in the fourth quarter of the investigation period as compared to the first quarter of the investigation period.

(137) In line with the decrease in production, the rate of capacity utilisation also decreased by 12 % in the third quarter of the investigation period and by 17 % in the fourth quarter as compared to the first quarter of the investigation period.

(138) Similarly, it was found that production and capacity utilisation were declining when compared with the relevant quarterly activity in 1997. In the third and fourth quarters of the investigation period as compared to the third and fourth quarter of 1997, production decreased by 20 % and 11 % respectively, capacity utilisation by 12 % and 18 %.

e) Sales volume, sales prices and profitability

i) Sales volume

(139) The Community industry sales volume decreased by 32 % in the third quarter of the investigation period and by 39 % in the fourth quarter as compared to the first quarter.

(140) Furthermore, as already mentioned in the year-to-year analysis, the Community industry claimed that a more refined and differentiated analysis of its various types of sales and sales channels should be made, as this would show that the sales competing directly with the imports concerned are more affected than other sales. In addition to the differentiation between sales of black coils and pickled coils, that industry claimed that a proportion of its sales were the result of long-term delivery and sales contracts, concluded, for example, with the automobile industry. These contracts typically cover a period of up to one year, during which delivery quantities and prices are fixed. The exporting producers concerned do basically not supply the customers under such contracts.

(141) In order to carry out a detailed analysis the above mentioned types of sales were grouped and are referred to as "long-term" sales as compared to "other" sales. Similarly, the development of sales, sales prices and profitability of black and pickled coils during the investigation period were also analysed.

(142) The sales volume of long-term sales was much more stable throughout the quarters of the investigation period than the rest of the sales activity. Indeed, the decrease in long-term sales was 20 % in the third quarter and 22 % in the fourth quarter as compared to the first quarter of the investigation period. The decrease in other sales was much more pronounced namely 35 % and 43 % in the third and the fourth quarter respectively, as compared to the first quarter of the investigation period.

(143) The same was true when analysing the sales volume of black compared to pickled coils. During the investigation period the volume of pickled coils sold developed in a smoother way than that of black coils. The decrease in the sales volume of black coil was as high as 39 % in the third quarter and 44 % in the fourth quarter as compared to the first quarter of the investigation period whereas the decrease in pickled coils was limited to 21 % and 29 % respectively.

ii) Sales prices of the Community industry

(144) During the first two quarters of the investigation period sales prices of hot-rolled coils were by and large stable, namely at a level of ECU 306 and 308 per tonne respectively. Subsequently they fell down to ECU 286 per tonne during the third quarter and to ECU 254 per tonne during the fourth quarter of the investigation period. Overall this represents a decrease of 17 % during the investigation period.

(145) The analysis of prices differentiated by types of sales showed that prices for long-term sales largely remained stable in the first three quarters of the investigation period, only decreasing from ECU 320 per tonne to ECU 312 per tonne, namely a decrease of 2 %. The decrease was limited to 10 % when comparing the first and the fourth quarter of the investigation period. By contrast, prices for other sales had already decreased by 10 % between the first and the third quarter of the investigation period and by 21 % between the first and the fourth quarter of the investigation period.

(146) The comparison between the development of prices of black coils and pickled coils showed that prices of the former decreased much more than those of the latter. The result of these differing trends was that prices across categories differed significantly more at the end of the investigation period than at the beginning. Indeed, prices for pickled coils, only decreasing from ECU 328 per tonne to ECU 316 per tonne, namely a decrease of 4 %. The decrease was limited to 12 % when comparing the first and the fourth quarter of the investigation period. By contrast, prices for black coils had already decreased by 10 % between the first and the third quarter and by 22 % between the first and the fourth quarter of the investigation period.

iii) Profitability

(147) On a quarterly basis, it emerged that profitability was very good during the first half of the investigation period. Given the precipitation of price decreases throughout the subsequent quarters, profitability continued to decrease, namely from 16,8 % during the first quarter of the investigation period to - 2,6 % in the fourth quarter.

(148) The differentiation in sales showed significant decreases in profitability from the very start of the investigation period for the sales of black coils and sales other than the long term sales.

(149) The investigation showed that profitability for the long term sales was very good in the first half of the investigation period (around 21 %) and remained positive throughout the investigation period, namely 8 % in the fourth quarter of the investigation period. Similarly other sales were also profitable at around 16 % in the first half of the investigation period. In line with the development of demand for hot-rolled coils, it subsequently collapsed in the third and the fourth quarter of the investigation period to become negative (- 7 %) in the fourth quarter of the investigation period.

(150) The same observations were made on profitability differentiated for black coils and pickled coils where profitability for both types was good in the first half of the investigation period. Subsequently, profitability for pickled coils remained positive throughout the investigation period (4,5 % in the fourth quarter) whereas profitability in black coils sales significantly decreased in the third quarter of the investigation period and reached a level of losses as high as - 16,5 % in the fourth quarter of the investigation period.

(151) In conclusion, overall sales, prices and profitability all fell during the investigation period. This trend was significantly less pronounced for sales made in market segments where fewer dumped imports were present. In terms of prices and resulting profitability, the situation of the Community industry remained relatively stable during the time in which apparent consumption boomed. The investigation has also shown that the Community industry did not increase its sales volume in line with the increase in the apparent consumption. By contrast, price levels and profitability remained at a high level at a time of strong and increasing demand.

(152) The investigation also showed that the purchase prices of major cost items in the cost of production decreased during the investigation period. Notably, the price of iron ore decreased by up to 12 % and scrap by up to 40 % and the price of oil dropped to the level of 1970. Accordingly, the cost of raw material decreased limiting the level of the losses incurred, particularly during the investigation period.

(153) In order to complete the above analysis on sales volume, sales prices and profitability, it was found that these economic indicators were also declining when compared with the relevant quarterly activity in 1997. In the third and fourth quarter of the investigation period as compared to the third and fourth quarter of 1997, sales volume decreased by 24 % and 27 % respectively, sales prices were 6 % and 19 % lower. As regards profitability, it was found that it was 15 percentage points lower in the fourth quarter of the IP as compared to the fourth quarter of 1997.

(154) As shown in the chapter below, in assessing the developments in sales volume, sales prices and profitability it is important to note that there is a time lag between price negotiation with customers and invoicing and delivery by the Community industry. Thus, when considering in particular the developments in other sales the prices applied during the first quarter of the investigation period were in fact negotiated during the fourth quarter of 1997 and so on.

f) Time lag between the situation of the Community industry and the market developments

(155) As already mentioned in the year-to-year analysis above, the Community industry alleged that, in assessing its price and profitability development, the existence of a time lag between the sales of the goods and price negotiation with customers related to such sales should be considered. In practice, it was claimed, the negotiations preceded the sales by at least one quarter.

(156) The investigation has shown that smooth production planning for an effective capacity utilisation resulted in a time lag between the order and the sale. This time lag was indeed found to be around one quarter. In other words sales in the first quarter of the investigation period are the result of orders negotiated and concluded in the fourth quarter of 1997.

(157) Given the existence of this time lag, the quarterly trend established in the orders received by the Community industry showed a significant decrease during the investigation period. In line with the claim by the Community industry, this negative trend is pronounced right from the first quarter of the investigation period compared to the trend determined for sales volume and production. The volume of the orders received in the second quarter of the investigation period were 17 % lower than those received in the first quarter. Furthermore, it emerged that a relatively high level of orders was received in the fourth quarter of 1997, corresponding to deliveries/sales effected in the first quarter of the investigation period.

(158) These findings are thus consistent with the claim by the Community industry that the relatively positive economic situation during the first half of the investigation period merely reflects a healthy level of orders received during the last quarter of 1997 and the first quarter of the investigation period, namely when demand was still high.

g) Conclusion on the situation of the Community industry in the investigation period

(159) The quarterly analysis indicated that the economic situation of the Community industry deteriorated significantly during the investigation period, in particular in the second half. This deterioration went far beyond the seasonal fluctuations observed during the previous years on a quarterly basis.

(160) In particular, it was found that in the third quarter of the investigation period as compared to the average activity of the period, all the injury indicators followed a negative trend: production decreased by 10 %, capacity utilisation by 6 %, sales volume by 14 %, sales prices by 2,4 % and profitability decreased by 2,1 percentage points.

(161) Furthermore, the developments observed during the fourth quarter of the investigation period indicated that the situation of the Community industry only deteriorated further: as compared to the average activity of the investigation period, production decreased by 18 %, capacity utilisation by 10 %, sales volume by 22 %, prices by 13 % profitability became negative (- 2,6 % on net turnover), a decrease of 15,5 percentage points.

5. Developments after the investigation period

(162) As mentioned above, the overstocking which occurred during the first half of the investigation period led to a relatively positive market situation reflected in the good level of prices on the Community market during this time period. Accordingly profitability of the Community industry was still good. However, in view of the fact that this situation was not supported by an underlying positive development in the user markets but was likely to lead to negative developments after a certain time lag it was considered necessary also to confirm this scenario by analysing developments after the end of the investigation period.

(163) As pointed out by some exporting producers it was found that a certain degree of recovery occurred in the volume produced and sold by the Community industry at the beginning of 1999. However, it should be noted that the level of production and sales were significantly lower than those at the beginning of the investigation period and those of 1997. In this respect, the investigation showed that the economic situation of the Community industry continued to deteriorate after the investigation period, in particular in terms of a decrease in sales price and profitability during the two first quarters of 1999.

(164) This confirmed the negative effect of the massive overstocking which occurred at the beginning of the investigation period and the de-stocking which began during the third quarter of the investigation period and continued, despite a decrease in actual imports, throughout the first half of 1999. Apart from the effect of overstocking, the delay with which the negative development of the Community industry occurred was also due to the time lag under which the Community industry operates with its customers. This is apparent not only from the development of the injury indicators such as production, sales, prices and profitability, but also from the development of the orders received by the Community industry.

(165) Some parties have claimed that the imposition of anti-dumping measures in the present proceeding was unnecessary as the imports concerned ceased after the investigation period.

(166) The investigation showed that, based on generally available or unverified information, imports, in particular for some of the countries concerned by the present proceeding, have fallen since the beginning of the investigation period. However, this is not an unusual phenomenon in anti-dumping investigations as market participants, in particular importers, take into account the fact that investigations require prudent assessment of the market insofar as they can lead to the imposition of anti-dumping measures. The reaction of market participants can be more or less pronounced. In any event, taking into account the decrease in imports, which may be limited in time, to justify the non-imposition of anti-dumping measures would allow the exporting producers concerned to adopt a stop-and-go policy for their exports. It is considered that this would have highly disruptive effect on the Community market for any product and therefore can not in the present circumstances serve as a justification for not imposing anti-dumping measures.

(167) Finally, it has been claimed that the phenomenon of high imports concentrated in the investigation period was only short-lived. In the meantime market prices in the Community have reached levels which ensure a quick recovery of the economic situation of the Community industry.

(168) It should be noted that detailed analysis demonstrates that Community industry prices continued to deteriorate and reached very low levels during the first two quarters of 1999. This price decrease triggered considerable financial losses, which the Community industry incurred during a considerable period of time.

6. Conclusion on injury

(169) On the one hand, the year-to-year analysis of the situation of the Community industry in the period from 1995 to the investigation period showed a number of negative developments. In addition, the quarterly analysis indicated that the economic situation of the Community industry significantly deteriorated throughout the investigation period. Contrary to the suggestion made by some exporting producers and taking into account the special characteristics of the Community market in terms of oversupply and time lag between orders and deliveries these developments are representative of the economic situation of the Community industry during the whole investigation period.

(170) The investigation has also shown that these negative developments continued and even worsened after the end of the investigation period, a development which is particularly relevant in view of the functioning and the situation of the Community market. It has been ascertained that this deterioration went far beyond the seasonal fluctuations observed in previous years on a quarterly basis.

(171) To summarise, it was found that, during the third and fourth quarters of the investigation period, all the injury indicators followed a negative trend compared to the average activity of the investigation period: production decreased by 11 % and 18 % respectively, capacity utilisation by 6 % and 10 %, sales volume by 14 % and 22 %, sales prices were negotiated 2,4 % and 13 % below the average price of the investigation period and profitability decreased by 2,1 and 15,5 percentage points respectively.

(172) Similarly it was found that these economic indicators were also declining when compared with the relevant quarterly activity in 1997. In the third and fourth quarter of the investigation period as compared to the third and fourth quarter of 1997: production decreased by 20 % and 11 % respectively, capacity utilisation by 12 % and 18 %, sales prices were 6 % and 19 % and profitability was positive both in 1997 and during the investigation period but it was 15 percentage points lower in the fourth quarter of the IP as compared to the fourth quarter of 1997. All these trends were confirmed during the two quarters after the investigation period.

(173) The investigation then revealed that the above trends would have been even more negative without specific sales such as those under long term contracts or those of pickled coils, which are less affected by the imports concerned. The orders received by the Community industry for delivery in the fourth quarter of the investigation period were 31 % lower than those received for delivery in the first quarter of the investigation period.

(174) On the other hand, the year-to-year analysis has shown that average profit rates increased from 1997 to the investigation period, reaching a level of 12,9 %. Profits and sales prices remained stable during the first quarters of the investigation period.

(175) Regarding these findings, which could at first sight appear to be contrary to a finding of injury, the investigation has shown that they were in line with a high level of apparent consumption during the first semester of the investigation period which, the investigation has confirmed, was not matched by actual consumption. As a consequence, the prices and profits of the Community industry (whose sales did not develop in line with the overstocking) remained stable but were bound to deteriorate thereafter in view of the fact that the significant apparent consumption was not met by a commensurate actual consumption. Indeed, during the second part of the investigation period, apparent consumption tumbled as the massive stocks were used, which in turn provoked a significant price and profit decrease.

(176) The subsequent analysis of the economic situation of the Community industry in the first two quarters of 1999 confirmed that these negative trends were not confined to the investigation period and were the direct results of the developments during the investigation period. While production and sales volume improved somewhat compared to the second half of the investigation period, sales prices and profitability continued to decrease. It should be noted that the Basic Decision as confirmed by the jurisprudence of the Court permits the information pertaining to the time period after the end of the investigation period to be taken into account, in particular in order to establish whether trends observed during the investigation period continue.

(177) Based on the developments in the situation of the Community industry during the period from 1995 to the investigation period and during the investigation period in particular, the Commission has concluded that the Community industry has suffered injury during the investigation period. Contrary to the suggestion that the economic indicators showing injury are largely outweighed by other indicators showing lack of injury, the above detailed investigation showed that all economic indicators developed negatively, in particular profits and sales prices with a time lag of a few months. The magnitude of the injury suffered enables it to be classified as material in accordance with the provisions of Article 3(6) of the Basic Decision.

F. CAUSATION

1. Introduction

(178) In the present analysis it should be borne in mind that the product concerned is a very price sensitive product. In addition, the market for this product, as shown above, has a number of particular characteristics: the relationship between the Community industry and certain users is long-term; production set up and planning entails a certain time lag between order and delivery; and the Community industry operates more in certain market segments than the exporting producers concerned. Nevertheless, these characteristics do not call into question the fact that the products produced and sold by the Community industry and those imported by the countries concerned are like products. It only indicates that certain sales channels and certain types of product are more prone to competition from the imports concerned than others.

(179) In order to reach its conclusions on the cause of the injury suffered by the Community industry, the Commission examined the impact of the dumped imports from the countries concerned. At the same time, the impact of other known factors and their possible consequences on the situation of that industry were also analysed. Such analysis ensured that any injury caused by other factors than dumped imports would be identified and not attributed to these imports.

(180) The other factors examined were: the development of consumption, the oversupply of the Community market, the impact of hot-rolled coils imported into the Community from other third countries, the behaviour of other Community producers not included in the definition of the Community industry, the export performances of the Community industry and the world-wide situation of the steel business.

2. Impact of dumped imports

a) Impact of the volume of dumped imports and stockpiling

(181) The investigation showed that the imports concerned increased considerably, in particular between 1997 and the investigation period. While in 1995, only 0,65 million tonnes of hot-rolled coils entered the Community market from the countries concerned, representing 17 % of total imports, in 1997, this rose to 0,88 million tonnes. During the period between 1995 and 1997, the increase in the volume of hot-rolled coils imported from the countries concerned was limited to 0,2 million tonnes. During the investigation period the volume of dumped imports reached 2,1 million tonnes and covered 45 % of all imports, this represents an overall increase of 229 % for the period examined.

(182) Consequently, the major increase in imports occurred during the period 1997 to the investigation period and particularly during the first two quarters. The investigation showed that over 1,3 million tonnes were delivered onto the Community market during this six-month period. This represents more than three times the import volume of the second semester 1997. Between 1997 and the investigation period, the imports in question increased by 143 % and the market share held by the countries concerned more than doubled, namely an increase of 6,3 percentage points.

(183) During the period from 1995 to the investigation period while Community consumption increased by 9 %, the Community industry's sales volume increased by only 1 % and it thus lost 3,7 percentage points of its market share.

(184) As far as the period of the import surge (1997 to the investigation period) is concerned, it coincided with the deterioration of the Community industry's situation. Production decreased by 9 % and sales volume by 12 %. The loss in market share amounted to 6,6 percentage points and orders by 17 %.

(185) In addition, the development of import volumes, taken together with the development of apparent consumption shown earlier, indicates that the dumped imports concerned mainly fed the increase in stocks, and thus the increase in apparent consumption in the first two quarters of the investigation period, whereas the sales of the Community industry decreased from the very beginning of the investigation period.

(186) The investigation revealed that contrary to the exporting producers in question the Community industry is not very present in the traders' sales channel. As regards certain large operators, it showed that these ordered few or no hot-rolled coils from the Community industry during the third and the fourth quarter of the investigation period. This resulted in a significant drop in sales which started during the third quarter of the investigation period (- 28 %) and which continued (- 12 %) during the fourth quarter. This in turn had a significant negative influence on prices and profitability of the Community industry during the last two quarters of the investigation period.

(187) In order to fully assess this development it should be borne in mind that the development of the situation of the Community industry was particularly negative, pronounced and immediate in sales channels and for product types in which the exporting producers are mainly active. Indeed, these producers are not very active in sales channels where long-term sales contracts are concluded The Community industry has fared relatively better in these sales channels than in others, where competition from imports is more pronounced. It has also been shown above that the Community industry's sales of black coils, which account for around 90 % of the imports concerned, have been developing very negatively throughout the investigation period.

b) Impact of the import price level and functioning of the steel market

(188) The investigation showed that the situation of the Community industry remained stable in terms of prices and therefore overall profitability during the first two quarters of the investigation period, although import prices from the countries concerned continuously decreased during the whole investigation period. In this respect the investigation has shown that the development of prices and profits of the Community industry were due, on the one hand, to the general functioning of the market in terms of the time lag between orders made by and deliveries to clients and, on the other hand, by the development of stocks and thus apparent consumption during the investigation period.

(189) Concerning the general functioning of the market, it has been found that given the time lag between orders and deliveries (namely one quarter), the situation of the Community industry during the first quarter of the investigation period, basically reflected the situation of orders placed during the fourth quarter of 1997, when imports started to increase.

(190) In terms of the development of apparent consumption, it has been found that the situation of the Community market in general and of the Community industry in particular during the first quarter of the investigation period corresponded to a time period of spectacular growth in stocks - and thus apparent consumption. This allowed prices and profits to remain high despite the increase in imports which occurred at the same time. The dumped imports thus had the biggest impact on the economic situation of the Community industry when it became clear that the growth in stocks and thus in apparent consumption was not matched by a growth in actual consumption. Indeed, given the considerable fall in demand for hot-rolled coils at the end of the investigation period, Community industry prices decreased by 17 % and profitability became negative.

(191) The complainant claimed that at the end of 1997 and during the entire investigation period the exporting producers adopted a policy of systematic price decrease and were continually undercutting the Community industry's prices. This precipitated and hastened the fall in sales prices on the Community market during that period.

(192) The investigation showed that the exporting producers indeed, reduced their price during the last quarter of 1997 while the Community industry attempted to maintain its price level until June 1998. In July 1998, the Community industry reduced its sales prices. Their sales prices, which were over 300 ECU/tonne in January 1998, fell to around 250 ECU/tonne in December 1998.

(193) This dramatic decrease in prices is explained by the fact that the exporting producers continued to undercut the Community industry's prices throughout the investigation period. It is to be noted that the level of the undercutting was lower at the beginning of the investigation period and became increasingly more significant throughout the investigation period. The Community industry had to reduce its prices in order to continue participating in the market, in particular from the middle of the investigation period onwards.

(194) In this respect it is to be noted that steel is a major commodity product and the indicative base price of hot-rolled coils is published daily in specialised newspapers and is well know by all operators present on the market. The products produced and sold by the Community industry and those imported by the countries concerned are highly sensitive to price movements which are quickly transmitted through the market.

The above thus suggests that overall the findings of the investigation show that the imports concerned caused the negative development in the economic situation of the Community industry.

c) Conclusion on the impact of dumped imports

(195) It is considered that the high volumes of dumped imports, which accumulated in the Community market within a very short period, depressed prices and led to a reduced market share of the Community industry. These high import volumes allowed certain large Community-based users to accumulate stocks with negative repercussions on price negotiation with the Community industry as early as in the second quarter of the investigation period and to extend the period over which such imports depressed prices. Moreover, given the general transparency of the market, users and purchasers in the Community market became quickly aware of the low price policy applied by the exporting producers. This precipitated and hastened the fall of sales price on a market with negative results on market share and profitability of the Community industry.

(196) Consequently, it is concluded that the presence of low-priced dumped imports played an important role in the deteriorating situation of the Community industry and thus to the material injury suffered by that industry during the investigation period.

3. Impact of other factors

a) Development of consumption

(197) During the period examined apparent consumption on the Community market increased continuously by 9 %. During the period between 1997 and the investigation period apparent consumption increased by 0,4 %.

(198) Consequently, given the continuous positive development in consumption volume since 1996, it is considered that it cannot be linked to the injurious situation suffered by the Community industry during the investigation period.

b) Oversupply of the Community market

(199) Certain exporting producers claimed that there was an oversupply of the Community market at the beginning of the investigation period. They argued that the Community industry was continuously increasing its deliveries on the market and was thus the main contributing factor in the oversupply. Accordingly, they argued that the high rate of capacity utilisation of the Community producers resulting from high deliveries should exclude any injury to be attributed to imports from the countries concerned.

(200) The detailed analysis of the development in apparent consumption in 1997 as compared to the investigation period showed that during the first two quarters of the investigation period apparent consumption was 1,4 million tonnes higher than in the corresponding quarters of 1997. This comparison should be seen in the light of the fact that 1,3 million of dumped hot-rolled coils were imported from the countries concerned in the first two quarters of the investigation period whereas the corresponding volume imported in the same period in 1997 was about 0,3 million tonnes. This represents an increase of 1 million tonnes during the first half of the investigation period.

(201) Furthermore, it is recalled that traders significantly increased their stocks in the first half of the investigation period, thus participating to the oversupply of the Community market. The investigation revealed that the Community industry is not very active in the traders sales channel whereas the exporting producers sold significant quantities via traders. Accordingly, the Community industry did not feed the stocks piled by traders during the investigation period.

(202) In concl