Proposal for a Council Regulation (EC) imposing a definitive anti-dumping duty on imports of silicon metal originating in the People's Republic of China
Date: 1997-11-24
Institutions: European Commission
Subjects: China, anti-dumping duty, dumping, import, semi-metal

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 24.11.1997 
COM(97) 616 final 

Proposal for a 
COUNCIL REGULATION  (EC) 
imposing a definitive anti-dumping duty on imports of silicon metal 
originating in the People's Republic of China 

(presented by the Commission) 

EXPLANATORY MEMORANDUM 

By Regulation  (EEC)  No  2200/90  the  Council  imposed  a  definitive  anti-dumping  duty  on 
imports of silicon metal originating in the People's Republic of China. Following a complaint 
lodged by the European industry and the Commission's subsequent investigation, the Council, 
by Regulation  (EEC) Not 1607/92,  concluded  that  the  anti-dumping  duty  in force  had been 
absorbed, amended Regulation (EEC) No 2200/90 and imposed an additional duty on imports 
of Chinese silicon metal of an amount equal to that of the original duty. 

The  notice  of  initiation  of  this  review  was  published  in  the  Official  Journal  of  the 
European Communities on 27 July  1995. All interested parties were given the opportunity to 
make themselves known and to submit comments in due course. 

No Chinese exporter cooperated with the review. 

The investigation, taking into account the conclusions on dumping, injury, causality, likelihood 
of continuation  of dumping and injury  and Community interest, led to  the conclusion that it 
was  in  the  Community  interest  to  continue  to  impose  antidumping  measures,  amended 
according to the findings of the review. 

It is hereby proposed that the Council adopt the attached draft Regulation. 

Proposal for a 
COUNCIL REGULATION (EC) 
imposing a definitive anti-dumping duty on imports of silicon metal 
originating in the People's Republic of China 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty establishing the European Community, 

Having regard  to  Council Regulation  (EC) No  384/96  of 22 December  1995  on  protection 
against  dumped  imports  from  countries  not  members  of  the  European  Community1,  as 
amended by Regulation (EC) 2331/962, and in particular Articles 9, 11 and 23 thereof, 

Having  regard  to  the  proposal  submitted  by  the  Commission  after  consulting  the 
Advisory Committee, 

Whereas: 

1. 

(1) 

2. 

(2) 

A.  PROCEDURE 

Measures in force 

By Regulation  (EEC)  No  2200/903  the  Council  imposed  a  definitive  anti-dumping 
duty  on  imports  of  silicon  metal  originating  in  the  People's  Republic  of  China 
(hereinafter  referred  to  as  "China").  Following  a  complaint  lodged  by  the 
Community industry and the Commission's subsequent investigation, the Council, by 
Regulation (EEC) No  1607/924, concluded that the anti-dumping  duty in force had 
been  absorbed,  and  by  amending  Regulation  (EEC)  No 2200/90,  imposed  an 
additional duty on imports of Chinese silicon metal of an amount equal to that of the 
original duty. 

Request for a review 

Following the publication, in February  1995, of a notice of the impending expiry5 of 
the measures in force, the Commission received a request for a review lodged by the 
Comité  de  Liaison  des  Industries  de  Ferro-Alliages  (C.L.I.F.A.)  on  behalf  of 
four Community  producers  allegedly  representing  a  major  proportion  of  the  total 
production  of  the  product  concerned  in  the  Community.  The  request  contained 

OJL56,  6.3.1996, p. 1. 
OJL  317, 6.12.1996, p. 1. 
OJL  198, 28.7.1990, p. 57. 
OJL  170, 25.6.1992, p. 1. 
OJC35,  11.2.1995, p. 3. 

(3) 

3. 

(4) 

(5) 

(6) 

(7) 

evidence of dumping of the product originating in China, and of material injury likely 
to result in the event of expiry of the existing measures. This evidence was considered 
sufficient to justify the opening of a review investigation. 

On  27  July  1995,  the  Commission  announced  by  a  notice6  published  in  the 
OfficialJournal  of  the  European  Communities (hereinafter  referred  to  as  the 
"Notice of  Initiation")  the  initiation  of  an  expiry  review  of  Regulation  (EEC) 
No 2200/90  concerning  imports  into  the  Community  of  silicon  metal  originating 
in  China  and  commenced  an 
to  Article  11(2)  of 
Council Regulation  (EC)  No  3283/947,  subsequently  repealed  and  replaced  by 
Regulation (EC) No 384/96 (hereinafter  referred  to as "the Basic Regulation"). The 
Commission also decided to initiate, on its own initiative, an interim review pursuant 
to Article 11(3) of the Basic Regulation. 

investigation  pursuant 

Investigation 

The Commission officially  advised the exporting producers and importers  known to 
be  concerned  as  well  as  their  associations,  the  representatives  of  the  exporting 
country  and the complainant  Community producers, of the initiation  of the review. 
Interested  parties were given the opportunity to make their views known in writing 
and to request a hearing within the time limit set in the Notice of Initiation. A number 
of importers and two  organisations  representing the user  industry  made their views 
known  in  writing.  Hearings  were  granted  to  Community  producers  and  to  the 
Chinese exporters which had requested them. 

The  Commission  sent  questionnaires  for  the  purpose  of  a  determination  of 
dumping and  injury  to  all parties known to  be concerned  and  received  replies  from 
four complainant Community producers and two importers. 

No replies to the questionnaire were received from  any Chinese producer  of the like 
product.  A number  of Chinese  exporters  (trading  companies)  responded  within the 
time limits laid down in the questionnaires. 

The  Commission  sought  and  verified  all  information  deemed  necessary  for  the 
purpose  of a determination  of dumping and injury,  and carried  out  investigations at 
the premises of the following companies: 

(a)  Complainant Community producers 

-  Vereinigte Aluminium Werke AG, Bonn, 

Germany 

-  Ferroatlântica SL, Madrid, 

-  Pechiney Electrométallurgie, Paris, 

Spain 

France 

-  Industria Elettrica Indel SpA, Belluno, 

Italy 

OJC193,  27.7.1995, p. 3. 
OJL  349, 31.12.1994, p. 1. 

(b)  Producers in the analogue country 

ELKEM A/S, Oslo/Kristiansand, 
FESIL A/S, Trondheim, 

Norway 
Norway 

(8) 

(9) 

The investigation  of dumping  covered  the  period  from  1 July  1994 to  30 June  1995 
(hereinafter  called  "the investigation  period").  The examination  of injury  covered  the 
period from 1992 up to the end of the investigation period. 

All interested  parties  received  disclosure  of the  essential  facts  and  considerations  on 
the  basis  of  which  it  was  intended  to  recommend  the  imposition  of  definitive 
measures. Those parties were also given time to  submit their views on the  disclosure 
and,  where  requested,  were  again  heard  by  the  Commission.  The  views  expressed 
were taken into account, where appropriate. 

(10) 

Due to the complexity of the proceeding and,  in particular, the fact  that  precise  facts 
about  producers  in the  analogue  country  not  subject  to  the  investigation  had  to  be 
established,  the  investigation  could  not  be  completed  within  the  indicative  deadline 
under Article  11(5) of the Basic Regulation. 

B.  PRODUCT UNDER CONSIDERATION AND LIKE PRODUCT 

1. 

Product under consideration 

(11) 

The  product  covered  by this  proceeding  is  silicon  metal  produced  in  an  electric  arc 
furnace  by  reducing  quartz  in  the  presence  of  various  carbonaceous  products.  It  is 
marketed  in  the  form  of  lumps,  granules  or  powder  under  internationally  accepted 
technical  specifications  as regard  its purity.  On the  basis  of those  specifications  it  is 
possible to  classify  silicon metal in different  qualities,  destined  for  different  end-uses, 
namely the production  of silicones ("chemical  grade"), the production  of the  primary 
aluminium  grade  and  secondary  aluminium  grade.  Its  silicon  content  is  less  than 
99.99%  by  weight.  The  customs  classification  code  for  silicon  metal  under  the 
Combined Nomenclature during the investigation period was 2804 69 00. 

Silicon metal with a higher purity, that is, with a silicon content  exceeding 99.99% by 
weight,  used  mostly  in the  electronic  semiconductor  industry,  falls  under  a  different 

— CN code and is not covered in this proceeding 

2. 

Like product 

(12) 

The  same  international  technical  specifications  apply  both  to  the  imported  product 
referred  to in the complaint  and to silicon metal produced  in the Community.  Despite 
some  difference  in  purity  and  dimensions  between  the  Chinese  and  the  Community 
product,  their physical characteristics and applications are essentially the  same, as are 
those  of  silicon  metal  produced  and  sold  on  the  domestic  market  in  the  analogue 
country  "(Norway).  The  Community  product  and  the  imported  one  are  therefore 
"like products" within the meaning of Article  1(4) of the Basic Regulation. 

1. 

Analogue country 

C.  DUMPING 

(13) 

(14) 

(15) 

(16) 

As  China  is  a  non-market  economy  country,  the  Commission,  in  accordance 
with  Article  2(7)  of  the  Basic  Regulation,  determined  the  normal  value  on  the 
basis  of  data  collected  from  producers  in  a  market  economy  third  country 
(the "analogue country"). In the original investigation  normal value was established 
on the basis of the prices payable in the Community. 

In  the  notice  of  initiation  of  the  review  the  Commission  stated  that  Norway  was 
envisaged  as  an  appropriate  market-economy  third  country  for  the  purpose  of 
establishing  normal  value.  This  preliminary  choice  was  based  on  information 
submitted in the review application, which stated that, in terms of both cost structure 
and production technology, the Norwegian producers of the product concerned were 
amongst  the  most  advanced  in  the  world  market,  thus  enabling  a  reasonable 
assessment to be made of normal value for the product concerned. 

All  interested  parties  were  given  the  opportunity  to  comment  on  the  choice 
envisaged.  The  exporters  objected  to  this  choice.  Their  objections  were,  however, 
raised  after  expiry  of  the  time-limit  laid  down  in  the  Notice  of  Initiation.  They 
proposed  Estonia as an alternative  analogue country,  erroneously  claiming that this 
country had been the analogue country in the original investigation.  No evidence in 
respect of the representativity of Estonian production was, however, received. Other 
parties, in the course of a hearing they were granted,  even contested  that  there was 
any  production  in  Estonia.  Eurostat  statistics,  according  to  them,  only  reflected 
transhipped  exports  originating  in  other  countries.  Romania  and  Brazil  were  also 
suggested  as analogue countries, but no evidence was provided  as to why either of 
these countries would be a more suitable analogue country than Norway. 

In the course of the investigation, the Commission confirmed that Norway was one of 
the  most  important  and  efficient  silicon  metal  producers  in  the  world.  Norway 
benefits  from  low  energy  costs,  this  fact  being  of  importance  since  energy  costs 
account  for  a  large  part  of  the  manufacturing  cost  of  silicon  metal.  Moreover,  in 
particular  because  the  factories  are  generally  located  in  industrial  harbours,  the 
Norwegian  producers  benefit  from  a  good  access  to  raw  materials  and  good 
— exporting conditions. In addition, the production process in Norway is similar to the 
one now used in China, and the presence of two significant  producers competing with 
imports  ensures  normal  market  conditions.  Finally,  silicon  metal  sales  by  the  two 
cooperating Norwegian producers on their domestic market during the investigation 
period were made in significant  quantities, since they amounted to more than 5% of 
the exports from China to the Community. 

(17) 

In the light of the above, it was considered appropriate and reasonable to use Norway 
as the analogue country for  the establishment  of normal value in, respect  of exports 
from China to the Community. 

2. 

Normal value 

(18) 

(19) 

As far as the determination of normal value is concerned, the Commission established 
that the volume of the Norwegian producers'  domestic sales to unrelated  customers 
of the silicon metal grade similar to that exported from China constituted  more than 
5%  of  the  sales  volume  of  the  products  under  consideration  exported  to  the 
Community  and  were,  consequently,  "representative"  within  the  meaning  of 
Article 2(2) of the Basic Regulation. 

Subsequently,  in  accordance  with  Article  2(4)  of  the  Basic  Regulation,  the 
Commission examined whether the domestic sales of the like product had been made 
in  the  ordinary  course  of  trade,  by  assessing  the  proportion  of  sales  which  were 
profitable.  The assessment  showed  that  more  than  20%, by volume,  of  sales were 
made below the average cost. Normal value was thus established on the basis of the 
weighted  average prices actually paid for  the remaining profitable  sales only, as the 
volume of the latter exceeded  10% of those sales. Normal value was established  at 
the FOB Norwegian frontier level. 

3. 

Export price 

(20) 

Replies  to  the  questionnaire  sent  by  the  Commission  were  received  from  five 
companies  exporting the product  concerned from China.  All those companies were 
represented  by the China Chamber of Commerce for  Import  and Export  of Metals, 
Minerals & Chemicals (CCCMC). Owing to the persisting paucity and deficiencies of 
the  replies,  little  information  could  be  used.  In  particular,  replies  did  not  contain 
evidence that all sales of the product concerned to the Community had been reported. 
Nor did they did refer to the fact that some of the main Community importers might 
be  related  to  the  exporters,  a$ part  of  State-controlled  "Minemetals"  import  and 
export network.  Accordingly, in pursuance of Article  18(1) of the Basic Regulation, 
the findings with regard to export prices had generally to be based on facts available. 
In this respect, it was considered whether or not, in the absence of any other source 
of  information,  the  export  price  for  the  product  concerned  could  be  based  on 
Eurostat  import statistics. In examining the reliability of the information  provided by 
those  statistics,  the  Commission  noted  that  data  relating  to  CN  code  2804 69 00 
covered  exclusively silicon metal. Moreover,  according to the information  available, 
the characteristics of the silicon metal grade exported from China did not vary to any 
—  significant  extent during the investigation period, so that an average price was in this 

case considered to be sufficiently  accurate. 

(21) 

It was therefore  concluded that the most reasonable basis for establishing the export 
price was to  take  the  CIF Eurostat  import  value for  the  CN code  in question  and 
corresponding  statistics  for  Austria,  Finland  and  Sweden  before  their  accession  to 
the Community. 

4. 

Comparison 

(22) 

In accordance with  Article 2(10) of the Basic Regulation,  normal value and export 
price were, however,  adjusted  to take account  of differences  in factors  which were 
claimed  and  demonstrated,  on  satisfactory  evidence,  to  affect  price  comparability. 
Normal  value was indeed  adjusted  to  take into account  a difference  in the level of 
trade  when  compared  to  Chinese  export  sales,  as  Norwegian  domestic  sales  are 
generally made direct to end-users. These adjustments  were also made in respect of 
transport  and insurance costs, the corresponding costs being established on the basis 
of data  available  in the  Chinese  exporter's  responses  to  the  questionnaire,  and the 
export price thus expressed at FOB Chinese frontier level. 

5. 

Dumping margin 

(23) 

(24) 

(25) 

In  accordance  with  Article  2(11)  of  the  Basic  Regulation,  the  weighted  average 
normal value (FOB Norwegian frontier) was  compared  with  the  weighted  average 
export price (FOB Chinese  frontier). 

The comparison of the normal value with the export  price as defined  above showed 
the existence of dumping, the dumping margin being equal to the amount by which 
the normal value exceeded the price of export to the Community. 

The  dumping  margin,  expressed  as  a  percentage  of  the  CIF  export  price, 
free-at-Community  frontier,  amounted to 68.1%. 

D.  COMMUNITY INDUSTRY 

The Commission considered whether the Community producers which supported the 
request  for  a  review  and  cooperated  with  the  investigation  represented  a  major 
proportion  of  total  Community  production,  as  provided  for  in  Article  4(1)  of  the 
Basic  Regulation.  In  this  respect  it  was  found  that  the  four  producers  which 
cooperated  with  the  review  manufactured  almost  the  whole  of  the  Community's 
output.  It  was therefore  concluded  that  the  four  cooperating  producers  constituted 
the "Community industry" within the meaning of Article 4(1) of the Basic Regulation. 

1. 

Consumption in the Community market 

E.  INJURY 

(26) 

Apparent  consumption  (EU  15) of  silicon  metal  in  the  Community  market  (based 
on  questionnaire  replies,  Eurostat  data  and  market  information  available  to 
to  around 
increased  from  approximately  195 000 
the  Commission) 
256 000 tonnes  -  an  increase  of  about  32%  between  1992  and  the  end  of  the 
investigation period. 

tonnes 

2. 

Volume and market share of the dumped imports 

(27) 

It should be recalled that  Chinese exporters had absorbed  in  1992 the anti-dumping 
duty in force (see recital (1)). It has been established in the present investigation that 
the  volume  of  dumped  imports  of  silicon  metal  originating  in  China  into  the 
Community measured in metric tonnes showed an large decrease after the imposition 
of  this  additional  anti-dumping  (anti-absorption)  duty  in  1992.  However,  these 
imports subsequently recovered with a rise by 171% between  1993 and  1994, and by 
13.5% from 1994 to the end of the investigation period. Thus, between  1992 and the 
end  of  the  investigation  period,  imports  originating  in  China,  and  sold  in  the 
Community, increased  by 37% in volume.  These findings contradict  claims that  the 
imposition of additional anti-dumping measures would have resulted in the exclusion 
from  the Community market of Chinese silicon metal. 

(28) 

The estimated  market  share of these imports into the Community  market,  based on 
apparent consumption, increased from 3.7% in 1992 to 3.8% during the investigation 
period- a rise of 3%. 

3. 

Prices of dumped imports 

(29) 

(30) 

As was explained in recitals (20) and (21), the paucity and deficiencies  of the replies 
to the questionnaires received from the Chinese exporters obliged the Commission to 
establish  the  export  price  on the basis of  statistical  figures  (Eurostat  and  Austrian, 
Finnish  and  Swedish  national  statistics).  The investigation  has  shown that  after  the 
review of the measures in  1992, Chinese duty-unpaid prices had increased by 12.5% 
in  1993.  However,  from  1994  up  to  the  end  of  the  investigation  period,  they 
decreased again to close to the level of 1992. From 1992, the year of the introduction 
of additional anti-dumping measures, up to the end of the investigation period those 
prices increased by only 4%. 

The Commission also compared the prices of Chinese imports with the prices of the 
Community producers in order to determine whether the former  undercut the latter. 
For this purpose,  it  was first established  which of the Community  produced  silicon 
metal was  equivalent,  in terms  of  specifications  and  uses, to  the  imported  Chinese 
product  (standard  grade used in the aluminium industry).  Since Chinese imports are 
all  of  standard  quality  the  price  comparison  was  made  only  with  standard  quality 
—  products of the Community industry. The weighted average ex-works producers' sale 
prices in the Community were then compared to the weighted  average import prices 
of  the  Chinese  product,  adjusted  to  duty-paid  net  ex-warehouse  levels  in  the 
Community at the same level of trade. For this analysis, four markets were examined 
representing the most important markets (Germany, United Kingdom, France, Italy). 

(31) 

On the  above  basis,  it  was  found  that  Chinese  import  prices  did  not  undercut  the 
Community  producers  prices  during  the  investigation  period.  However,  when 
analysing actual resale prices to the first independent buyer of Chinese silicon metal, 
charged by a major unrelated importer representing  11% of the total Chinese imports 
and who cooperated  with the investigation,  it was found  that  its prices were about 
7%  lower  than  the  corresponding  Community  industry  prices.  In  addition,  it  is 
important  to  note  that  on  the  Community  market,  a fixed anti-dumping  duty  of 

ECU 396 per tonne, representing  51% of the CIF price, was in force.  Consequently, 
if these measures were to lapse, undercutting would occur by a percentage of not less 
than 30%. 

4. 

Situation of the Community industry 

(a) 

General 

(32) 

A number of interested  parties have pointed  out  that  the Community industry  does 
not suffer  injury any more, as the demand for silicon metal has changed since the end 
of the investigation period, leading to a supply shortage and a considerable increase 
in prices. 

It  should  be noted  that,  pursuant  to  Article  6(1)  of the Basic  Regulation,  it  is the 
practice of the Community institutions to base their analysis on dumping and  injury 
on  the  situation  prevailing  during  the  investigation  period.  Such  an  approach  is 
justified  by the fact  that  the exact  effect  of  developments  such  as those mentioned 
above  can  only  be  established  within  the  framework  of  a  properly  conducted 
investigation in which all interested parties can put forward  their views and in which 
the information submitted can be verified and analysed. 

(33) 

In  this  case,  the  volatility  of  the  silicon  metal  market  justifies  the  Community's 
approach,  as  no  conclusions  can  be  drawn  from  these  alleged  price  fluctuations 
without investigation. 

(34) 

The  Commission  took  account  of  the  following  economic  indicators  in  order  to 
determine the state of the Community industry: 

(b) 

Production 

(35) 

increased 

from  approximately  98 000 

to 
Community  production 
approximately  122 000 tonnes between  1992 and the end of the investigation period, 
an increase of 24.1%.  The output figures for this period reveal a slowdown in 1993 
(-1.2%),  followed  by a general  increase  as  a result  of a favourable  outlook  on the 
world  market.  Two  of  the  Community  producers  who  participated  in  the  first 
investigation ceased their activities in  1992, while another restructured  a production 
— plant in Spain in 1993. The other Community producers have maintained a stable rate 

tonnes 

or have slightly increased their production. 

(c) 

Capacity, capacity  utilization 

(36) 

Production  capacity of Community industry increased by 5% between  1992 and the 
end of the investigation  period.  This is mainly due to  the restructuring  in  Spain. In 
addition,  between  1992  and  the  end  of the  investigation  period  capacity  utilisation 
increased by 18% for the reason given above. 

10 

(d) 

Stocks 

(37) 

The  volatility  of  the  market  and  the  expectations  of  the  Community  industry 
concerning the likely development of the Community market are shown by the trend 
in stocks. In this regard, stocks held by the Community industry grew by 47% during 
the period  1992 to the end of the investigation period, increasing from approximately 
11  600 tonnes to approximately  17 000 tonnes. 

(e) 

Sales 

(38) 

Sales  by  the  Community  industry  on  the  Community  market  increased  from 
approximately 80 800 tonnes in 1992 to approximately  111 200 tonnes to the end of 
the investigation period, an increase of 37.6% over the period of investigation. 

(f) 

Market share 

(39) 

The increase in sales volume resulted in a slight increase in market share from 39.8% 
in 1992 to 41.1% of the market during the investigation period. 

(g) 

Average sales price and price trends 

(40) 

As regards the development of Community industry, prices increased by 3%, after the 
imposition  of  additional  anti-dumping  duties  on  imports  originating  in  China. 
However,  between  1993  and  1994,  they  decreased  by  3%.  Over  the  period 
considered, the Community industry sales price increased by 2%. 

(h) 

Profitability 

(41) 

Between  1992  and  1993  the  Community  industry  registered  an  overall  weighted 
average  loss  of  21.7%  and  22%  respectively,  for  sales  of  silicon  metal  in  the 
Community market. The restructuring of a plant in Spain and a slight upward trend in 
market prices did not bring the Community industry out of a loss-making situation in 
1993 and  1994. During and up to the end of the investigation period, the Community 
industry registered a weighted average loss of 13.4%. 

(42) 

The weighted  average losses between  1992 and the end of the  investigation  period 
— decreased  by  38%.  Nevertheless,  the  Community's  silicon-metal  industry  has  not 

made any profit over the last ten years. 

(i) 

Employment 

(43) 

The  employment  situation  deteriorated  steadily  between  1992  and  1994,  since the 
total workforce of the entire Community industry was reduced by 7%. 

11 

5. 

Conclusion 

(44) 

After the imposition of measures the Community industry improved its position as to 
production,  capacity  utilization,  and  sales.  Nevertheless,  it  should  be  noted  that 
capacity and  market  share  have  stagnated.  The Community  industry  was unable  to 
increase  its  prices  to  a  satisfactory  level  even  after  the  imposition  of  these 
measures,  owing  to  the  fact  that  the  Chinese  continued  to  lower  their  prices.  In 
addition,  following  the  substantial  increase  in  the  volume  of  stocks,  the  loss  in 
employment  and the  accumulation  of new financial losses,  it  is  concluded  that  the 
Community industry  continues  to  suffer  material  injury  within  the  meaning  of 
Article 3(1) of the Basic Regulation. 

F.  CAUSATION 

(45) 

The Commission  examined  whether  the injury  suffered  by the  Community  industry 
was  caused  by  dumped  Chinese  imports  or  whether  other  factors  had  caused  or 
contributed to that injury. 

1. 

Effect of dumped imports 

(46) 

(47) 

The silicon metal produced  by the Community and the silicon metal imported  from 
China are in direct competition with each other, essentially on the basis of prices. This 
is explained by the fact that there are no significant  differences  in quality between the 
imported product and the Community produced one. The imported product is aimed 
at the same customers, namely aluminium smelters. 

Since  silicon  metal  is  a  commodity,  its  market  is  highly  price-sensitive  and, 
consequently,  low  prices  charged  by  certain  vendors  have  a  generally  depressive 
effect  on  the  market.  The  investigation  has  shown  that  after  the  review  of  the 
measures  in  1992,  Chinese  duty-unpaid  prices  had  increased  by  12.5%  in  1993. 
However, from 1994 up to the end of the investigation period, they decreased almost 
to the level of 1992. 

Between  1992  (see  recital  (29)),  the  year  of  the  introduction  of  additional 
anti-dumping  measures,  and  the  end  of  the  investigation  period,  the  prices  only 
__ increased by 4%. Consequently, their level had a clearly depressive effect  on the price 

of silicon metal in the Community market. 

(48)  Moreover,  if one analyses the period between  1993 and the end of the investigation 
period,  Chinese  prices  fell  by  7%,  while  the  Community  market  prices  increased 
by 3%. This fact  shows the capacity of Chinese exporters to partly absorb the  effect 
of the anti-dumping duties in force. 

(49) 

The Community industry tried to increase their prices in  1993, but had to follow the 
Chinese pricing policy.  So, in 1994 the Community industry had attempted to reduce 
its financial loses by decreasing prices and trying to improve its sales. 

12 

(50) 

(51) 

(52) 

Furthermore,  owing to the price depression  exerted  by Chinese imports and despite 
the  increased  consumption  of  silicon  metal  in  the  Community  market,  the 
Community industry continued to suffer from losses or. barely managed to cover their 
production costs. 

Chinese  exporters  argued  that  there  is  no  injury  or  likelihood  of  recurrence  of 
injury  suffered  by  the  Community  industry  due  to  imports  from  China,  because 
the  Community  industry  has  increased  its  production  of  silicon  metal,  particularly 
since 1992. 

However,  as  it  was  mentioned  before  (see  recital  (35)),  the  Community  industry 
increased their own production between  1992 and the end of the investigation period 
by 24.1%, in a market which grew up by 32% (see recital (26)). At the same time, the 
stocks  of  the  Community  industry  increased  by  46.6%  (see  recital  (37)).  The 
Community  industry  expected,  on  account  of  a  favourable  market  situation,  to 
increase  their  sales  accordingly.  On  the  contrary,  they  were  forced  to  increase 
their  stocks, 
the 
Chinese  imports,  which  continued  to  enter  the  Community  market  at  low  prices 
before anti-dumping duty. 

the  depressed  prices  dictated  by 

instead  of  following 

(53) 

In conclusion,  the Chinese dumped  imports have clearly had  a depressive  effect  on 
the  market  price  in the  Community  and  have  had  an impact  on  the  poor  financial 
situation of the Community industry. 

2. 

Effect  from  other factors 

(54) 

Imports  of  silicon  metal from countries  producing  silicon  metal,  other  than  China, 
have  entered  the  Community  in  the  period  from  1992  up  to  the  end  of  the 
investigation period. The market share of Norwegian imports (calculated on the basis 
of the apparent  consumption figures  in recital (26) above) increased from 22.1%  in 
1992 to 27.7% up to the end of the investigation period. Imports originating in Brazil 
fell during the same period from 10.4% to 7.3%. The same situation prevailed for the 
other two important exporters of silicon metal into the Community,  South Africa and 
Australia. Their imports fell from  14.8% to 9.2% and from 4.1% to 3% respectively. 

(55) 

Chinese exporters  argued  that  silicon  metal from Russia  and  the  Ukraine  may also 
__ have caused injury  to the Community industry. However, the Commission considers 
that  the quality of silicon  metal  from  Russia  and the Ukraine  is not  comparable to 
European or Chinese silicon metal. The standard quality exported by China contains 
0.5%  of iron,  compared  with  between  0.8% to  1% for  the  Russian  and  Ukrainian 
product.  The abovementioned  imported products need  special treatment  before they 
can be compared to the European and Chinese product. 

Indeed,  it  was  established  that  anti-dumping  measures  are  not  applied  in  the 
United States of America to silicon metal originating in Russia, owing to the fact that 
these  products  have to  be treated  and  purified  before  being used  by the  aluminium 
smelting industry. 

13 

(56) 

In addition, the Commission examined the Eurostat  import  statistics and established 
that  imports originating  in Russia  and the Ukraine are not  carried  out  on a regular 
basis.  In  1992  there  were  no  imports from Russia  or  the  Ukraine.  According  to 
market  information,  actual  production  capacity  in  the  two  countries  seems  to  be 
limited to  100 000 tonnes per year. Thus, it seems unlikely that significant  quantities 
would be shipped from Russia and Ukraine. 

(57) 

Lastly, it was established that the market share of South Africa  had decreased owing 
to  production  problems,  and  that  Norway  increased  its  market  share,  but  with  the 
highest CIF price shown in Eurostat. 

(58)  No  other  factors  were  found  which  would  have  negative  influence  on  the 

Community industry. 

3. 

Conclusion 

(59) 

Given  the  simple  production  process  involved,  the  maturity  and  simplicity  of 
through  similar  sales  channels  in  the  Community,  and 
the  product  offered 
the  transparency  of  the  market,  the  Commission  considers  that  the  Chinese 
low-priced  imports policy had  a substantial  negative  impact  on the  situation  of the 
Community industry. 

Even  if  certain  imports  originating  in other  countries  may have  contributed  to  the 
negative  situation  of the  Community  industry,  it  must  be  concluded  that  the  price 
suppression,  due  to  the  Chinese  imports  has,  taken  in  isolation,  clearly  caused 
material injury to the Community industry. 

G.  CONTINUATION OF DUMPING/INJURY 

1. 

General 

(60) 

(61) 

Exporters  argued  that  in  order  to  determine  whether  there  is  a  likelihood  of 
continuation  of dumping and injury  the market trend  has to be analysed  throughout 
the period between  1988 and the end of the investigation period. 

In this respect the Commission examined the level of imports into the Community of 
15  over  a  four-year  period  and  especially  after  the  imposition  of  the  additional 
anti-dumping  measures  due to  the absorption.  This period  can be  considered  to be 
long  for  the  purposes  of  establishing  injury  indicator  trends  in 
sufficiently 
anti-dumping investigations. 

2. 

Chinese position in the world market 

(62) 

Past experience, combined with the present situation, show that the Chinese industry 
has  continued  to  export  silicon  metal  into  the  Community  at  dumped  prices.  An 
anti-dumping  investigation  carried  out  by  the  United  States  administration  has 
established, in  1991, that Chinese exports had been dumped and anti-dumping duties 
at  a  rate  of  134% were  imposed.  Chinese  exports  to  the  United  States  decreased 
dramatically after the imposition of these measures. 

14 

(63) 

(64) 

China is by far  the biggest  supplier  of silicon  metal  in the world.  In  1994, Chinese 
exports were approximately  116 000 tonnes. The lion's share of these exports goes to 
Japan which purchased 83 763 tonnes, or 72% of total Chinese exports in 1994. Until 
1993, Chinese  sales to  {he other  Asian countries had  increased  sharply  while sales 
into  the US  market  remained  depressed  due to  anti-dumping  duties  in  force  since 
1991. Sales to the Community recovered  in  1994 despite the continued  existence of 
anti-dumping duties. 

Chinese  exports  of  silicon  metal  into  Japan  stagnated  in  1993  and  1994,  totalling 
86 400 tonnes  and  82 600 tonnes  respectively.  The  same  occurred  in Australia.  In 
South  Korea  the  Chinese  exports  decreased  over  the  same  period.  All the  above 
corroborates  the  fact  that  the  Japanese  and  other  Asian  markets  are  saturated,  a 
finding  which  is confirmed  by the  fact  that  patterns  of  export  volumes  to  China's 
main clients, namely Japan, South Korea and Australia, showed a substantial increase 
up to 1993 and stability thereafter. 

3. 

Chinese capacity of production 

(65) 

The exporters argued  that  numerous Chinese factories  have been closed  down and 
that production  capacity in China has been reduced. Moreover,  increasing domestic 
consumption  of  silicon  metal  in  China  would  result  in  smaller  quantities  being 
available for  export.  The  same  exporters  argued  that  an increase  in demand  in the 
Community  is  expected  by  the  end  of  the  decade  and  that,  consequently,  the 
Community industry will not have the capacity to supply sufficient  quantities. 

(66)  According to market information,  the Chinese production of silicon metal decreased 

from  450 000 tonnes in  1989 to 250 000 tonnes in  1994. It is likely that  as soon as 
the measures in the Community and the United States lapse, the Chinese may convert 
production from other alloys to silicon metal and regain previously held high levels of 
production, which could be exported to the Community. 

4. 

Likelihood of continuation of dumping 

(67) 

As regards dumping,  it  should  be recalled that,  during the investigation  period, the 
imports  concerned  originating  in  China  have  continued  to  be  dumped,  at  a  level 
similar to that established during the investigation into absorption of the original duty 
-_ rate  carried  out  in  1992.  Moreover,  the  prices  of  Chinese  imports  into  Austria, 
Sweden and Finland  shortly before their accession to the Community were also low 
and  likely to  have been  dumped.  It  is therefore  considered  highly  likely that  if the 
measures were to  expire this would  lead to  a continuation  of  dumping,  within the 
meaning of Article 11(2) of Basic Regulation. 

15 

5. 

Likelihood  of continuation  of injury 

(68) 

(69) 

Chinese imports continued to be low-priced and to suppress the Community prices of 
silicon  metal  even  after  the  imposition  of  additional  anti-dumping  duties.  Chinese 
import prices were the lowest in the Community market over the period from 1992 to 
the end of the investigation period. Even with a small percentage  of the Community 
consumption, they have had an important effect  on the downward trend of the prices. 
Finally,  if the measures of a fixed amount  of ECU 396  per tonne were to  lapse,  an 
undercutting of 30% would occur. 

Furthermore, given the present huge capacity of Chinese production and the existence 
of high anti-dumping duties in the United States, it is very likely that the Chinese will 
try  to  increase  their  sales  into  the  Community  market  at  very  low  prices  if  the 
measures  lapse,  leading  to  an  aggravation  of  price  depression  on  the  Community 
market and consequently a growing  injury to the Community industry. 

The trend of imports into Sweden and Finland before and after their accession to the 
Community  confirms  the  likelihood  of  such  a  development.  Between  July  and 
December  1994, Sweden imported 493 tonnes, in contrast to the period from January 
to  June  1995,  when  no  imports  from  China  were  declared.  The  same  situation 
prevailed in Finland, where in the last semester of  1994 2 097 tonnes were imported 
from China,  whereas  no  imports were  declared  for the first semester  of  1995.  It  is 
obvious that the volume of Chinese imports is strongly influenced  by the existence or 
absence  of  anti-dumping  measures.  It  is  therefore  concluded  that  at  least  a 
continuation of the injury suffered  by the Community industry will  occur  should the 
anti-dumping duties in force be allowed to expire. 

6. 

Conclusion 

(70) 

On the basis of the above it is therefore considered that, if the anti-dumping measures 
currently in force were to lapse, the Chinese  exporters would  continue  to  export  to 
the  Community  market  at  very  low  prices.  This  would  have  as  a  consequence  the 
continuation  of  price  depression  on  the  market  causing  further  injury  to  the 
Community industry. 

H.  COMMUNITY  INTEREST 

1. 

General 

(71) 

Pursuant to Article 21(1) of the Basic Regulation, the Commission examined,  on the 
basis of all evidence submitted, whether it could clearly be concluded  that it was not 
in the Community interest to continue to apply measures. 

For  this  purpose,  the  Commission  considered  the  impact  of  existing  measures  and 
other  possible  measures,  and  the  consequences,  for  all  parties  involved  in  the 
proceeding, of not taking measures. 

16 

2. 

Consequences for the Community industry 

(72) 

(73) 

The purpose  of anti-dumping  measures is to  remedy  an unfair  trading practice that 
has an injurious  effect  on a Community industry.  Such a remedy should result in the 
re-establishment  of  a  situation  of  effective  competition  which,  as  such,  is  in  the 
interest of all the operators in the Community. 

In the course of this investigation it has been established that the Community industry 
continues to suffer  injury, and that it is highly probable that, without the continuation 
of anti-dumping  measures to  correct  the effects  of dumped  imports,  the  precarious 
financial  situation  of  the  Community  industry  will  further  deteriorate.  Thus,  the 
existence  of  the  Community  industry  as  a  whole  may • ultimately  be  at  risk. 
Two companies which took part in the previous investigations do not exist any more. 
It  is  also  the  Commission's  opinion  that  if  fewer  producers  are  present  in  the 
Community market, competition may be reduced commensurately. 

(74) 

On the basis of the facts established, it is reasonable to conclude that if the measures 
are allowed to lapse, there will be further  factory  closures and job losses in addition 
to those which have already occurred. 

(75)  When examining the Community interest  in relation to the Community industry, the 
Commission  had  to  take  future  developments  into  consideration.  On  the  basis  of 
studies for  the future  of the  silicon metal industry  world-wide  it  can  reasonably be 
assumed that the use of this product could increase by possibly around 5% per year. 

(76) 

Furthermore,  the  ongoing  restructuring  efforts  made  by  the  Community  industry 
show that it is not ready to abandon this segment of production, and therefore action 
against the adverse effects of dumped imports is necessary. 

3. 

Impact on the users 

(77) 

(78) 

(79) 

No  individual  user  submitted  any  substantiated  information  during  the  current 
investigation.  One  Community  user  association  and  two  national  user  associations 
submitted information requesting the termination of the measures. 

A United Kingdom aluminium producers'  association claimed that the quality of the 
__ silicon  metal  imported  from  China justified  a  price  lower  than  that  for  the  same 
product  originating  in other countries.  This allegation was not  substantiated  by any 
evidence.  In  addition,  neither  in  the  original  investigation  nor  in  the  present 
investigation  was  it  established  that  there  was  a  significant  difference  in  quality, 
justifying  different  pricing between  Chinese  silicon  metal  and  that  originating  from 
other sources. This claim has to be rejected. 

The  same association  also  argued  that  the  international  competitive  position  of the 
aluminium products produced in the Community is damaged by the imposition of the 
anti-dumping measures. It was however established that the silicon metal used for the 
production  in  the  Community  of  aluminium  for  export  can  enter  the  Community 
without  any  duty,  under  the  inward  processing  arrangements.  This  argument  has 
therefore been dismissed. 

17 

(80) 

(81) 

(82) 

A  user  claimed  that  it  is  against  the  Community  interest  to  continue  imposing 
anti-dumping  duties on Chinese imports of silicon metal,  owing to  the fact  that the 
Community  industry  would  not  be  able  to  supply  the  Community  market  with 
sufficient  quantities.  It  was  found  that,  owing  to  the  presence  of  other  extra 
Community suppliers, the risk of a general supply shortage is very low. 

As far as the competitive  environment  of the Community market  is concerned, user 
industries and other economic operators have always enjoyed  the presence of a wide 
range of competitors in the market, since the Community industry, even exploiting its 
entire  production  capacity,  could  only  satisfy  roughly  50%  of  the  demand  on  the 
Community market. 

Imports from third countries will therefore always be necessary. After  the imposition 
of anti-dumping measures, producers located in China would be able to promote their 
exports  to  the  Community  at  fair  prices.  The only  anti-dumping  measures  in  force 
against  imports  into  the  Community  of  silicon  metal  are  those  applied  on  imports 
originating in China and Brazil. 

The incidence of the measures in force  on the structure of the cost  of production at 
the aluminium smelters in particular was examined.  This analysis showed that for the 
production  of  aluminium  226  and  231,  representing  50%  of  total  aluminium 
production, a weight of between 5.5% to 6% of silicon metal is required.  The value 
of  silicon  metal  used  in this  production  represents  5.2%  of  the  overall  cost  of the 
aluminium. The incidence of the existing measures on the price of an aluminium alloy 
which included  only silicon metal  originating  in China accounts  for  1.7%.  This is a 
relatively  small  percentage  of  the  total  production  costs,  which  points  to  the 
conclusion  that  any  effect  on  users  of the  existing  anti-dumping  measures  remains 
very limited. 

4. 

Impact on importers 

(83) 

Only a limited number of importers made their views on Community interest known 
to  the  Commission.  One  of  them  cooperated  in  the  determination  of  dumping 
and injury. 

(84) 

One company  located  in the United  Kingdom  and  no longer  importing  the product 
__ explained that the prices charged by the Chinese exporters FOB are such as to give 

only a slightly lower price. 

It further  claimed that  since the imposition of the measures, a price increase of over 
GBP 300 per metric tonne has occurred. Moreover, it maintained that the imposition 
of  measures  had  conferred  little  benefit  on  the  Community  industry,  as  the  main 
suppliers  of  the  Community  market  are  Norway  and  South  Africa.  They  would, 
allegedly, have used the imposition of anti-dumping measures on the Chinese imports 
in order to dominate the British market. 

18 

It  has  to  be  pointed  out  that  after  the  imposition  of  the  additional  anti-dumping 
measures and up to the investigation period a weighted average increase of only 9.8% 
was  recorded  on  all  imports  of  silicon  metal  into  the  Community  market. 
Furthermore,  the  Community  industry  increased  its  prices  by  2%  during  the  same 
period  (recital  (40)).  It  has  already  been  established  (recital  (57))  that  the  market 
share of  South  Africa  decreased  owing  to  production  problems,  and  that  Norway 
increased its market share, but with however the highest CIF Eurostat price. 

These arguments have to be rejected. 

5. 

Impact on the competitive environment 

(85)  With respect to the competitive situation on the Community market, the Commission 
considered whether the existing measures and their continuation might affect  effective 
competition.  First,  it  should  be  recalled  that  after  five  years  of  anti-dumping 
measures silicon metal of Chinese origin was still available on the Community market. 
Other  exporters  had  increased  their  presence  in  that  market.  Consequently,  the 
Commission came to the conclusion that it does not appear to be realistic to  foresee 
acute  supply  shortages  in  the  silicon  metal  market,  nor  any  negative  effect  on 
effective competition. 

6. 

Conclusion on Community interest 

(86) 

On the basis of the above facts and considerations, in particular, and having examined 
the  arguments  submitted  by  the  Community  industry,  Community  downstream 
industry and importers of the product concerned, it is considered that, on balance, it 
is in the overall Community interest that the anti-dumping measures on silicon metal 
originating in China should not be allowed to expire. 

I.  ANTI-DUMPING MEASURES 

1. 

Injury elimination level 

(87) 

(88) 

During  the  investigation  period,  it  was  established  that  the  return  on  sales  of  the 
product concerned was negative because the selling prices charged by the Community 
industry were below the verified cost of production. 

In order to obtain a non-injurious  reference  level for  export  prices, the Commission 
established first the Community industry's actual cost of production. With respect to 
a reasonable level of profit, one Community producer claimed that a minimum pre-tax 
profit  of 7.5%» on sales was required  for  it to remain competitive.  The Commission 
used a rate of 6.5% on turnover, a rate which is considered to be sufficient  given the 
mature  nature  of  the  product,  requiring  only  modest  investment  in  research  and 
development or in production equipment. 

(89) 

The price, determined by adding 6.5% profit to the average cost of production of the 
Community industry, was duly adjusted  to take account  of differences  in the level of 
trade between the imports and the sales of the Community industry. 

19 

(90) 

On  this  basis,  the  injury  margin  was  determined  by  taking  into  account  the  CIF 
Chinese prices (Eurostat data) and amounted to 49% of the CIF price of the imports 
in question.  According to  the present  injury  margin, which is lower than the actual 
dumping margin, the actual measures would have to be ECU 376.5/tonne, instead of 
ECU 396/tonne which is the level of the measures in force. 

2. 

Definitive duties 

(91) 

(92) 

(93) 

Considering the conclusions on dumping, injury,  causality, likelihood of continuation 
of  dumping  and  injury  and  Community  interest  outlined  above,  the  Commission 
considers  it  necessary  to  continue  to  impose  anti-dumping  measures  which 
should restore  effective  and  fair  competitive  conditions  on  the  Community 
silicon-metal market. 

Referring  to  Article  8  of  the  Basic  Regulation,  the  Chinese  traders  proposed  an 
undertaking  or  the  imposition  of  a  variable  duty.  The  lack  of  cooperation,  as 
demonstrated by the inadequacy of the Chinese replies to the questionnaires, indicates 
that  efficient  monitoring  of  undertakings  would  be jeopardized.  Furthermore,  the 
previous behaviour of the Chinese traders does not make the imposition of a variable 
duty appropriate. 

On the basis of the above, and taking into account the fact that those measures have 
been in force  since  1992 at the current level, it is considered  more appropriate that 
the  anti-dumping  measures  on imports  of  silicon  metal  originating  in  China  should 
take the form  of an ad-valorem  anti-dumping duty, the rate of which should be set 
at 49%. 

(94) 

The Council confirms the above conclusions, 

HAS ADOPTED THIS REGULATION: 

Article 1 

1. 

2. 

3. 

A  definitive  anti-dumping  duty  is  hereby  imposed  on  imports  of  silicon  metal 
originating in the People's Republic of China, falling within CN code 2804 69 00. 

The  rate  of  the  definitive  anti-dumping  duty  applicable  to  the  net,  free-at-
Community-frontier  price, before duty, shall be 49%. 

Unless  otherwise  specified,  the  provisions  in  force  concerning  customs  duties 
shall apply. 

20 

Article 2 

This  Regulation  shall  enter  into  force  on  the  day  following  that  of  its  publication  in  the 
OfficialJournal of the European Communities. 

This Regulation shall be binding in its entirety and directly applicable in all Member States. 

Done at Brussels, 

For the Council 
The President 

21 

ISSN 0254-1475 

COM(97) 616 final 

DOCUMENTS 

EN 

02  11  10  08 

Catalogue  number  :  CB-CO-97-635-EN-C 

ISBN  92-78-27761-4 

Office  for  Official  Publications of the European  Communities 

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