Proposal for a Council Regulation (EC) imposing a definitive anti-dumping duty on imports of magnesium oxide originating in the People's Republic of China
Date: 1999-06-11
Institutions: European Commission
Subjects: China, anti-dumping duty, chemical compound, import, magnesium

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 11.06.1999
COM(1999) 289 final

Proposal for a

COUNCIL REGULATION (EC)

imposing a definitive anti-dumping duty on imports of magnesium oxide
originating in the People's Republic of China

(presented by the Commission)

EXPLANATORY MEMORANDUM

1. Triggered by a complaint

from EUROMETAUX, definitive anti-dumping
measures were imposed on 14 June 1993 taking the form of a variable anti-
dumping duty based on a minimum price of 112 ECU/ tonne according to the
dumping margin found. The current
review investigation was initiated on
18 June 1998.

2. For the purpose of establishing normal value, India has been selected as an
appropriate reference country. The dumping margin established for the Chinese
exporters amounts, as a percentage of the CIF Community-frontier import price,
to 41,9%. The investigation has shown that there is a likelihood of continuation of
dumping, although the minimum price introduced in 1993 has had as effect a
slight increase of the prices of Chinese exporters on the Community market. It can
be assumed that this increase was also due to the fact that the Chinese authorities
introduced a licence system similar to an export tax.

3. On the injury side, the investigation established that, although the situation of the
Community industry has improved in some areas (production, production
capacity, average sales prices per tonne, profitability and investments), some other
economic factors did not develop favourably such as capacity utilisation, market
share, employment and closing stocks. Furthermore, Chinese sales prices in the
Community market undercut the Community industry’s sales prices considerably.
Therefore, it can be concluded that the Community industry was not able to
recover from the effects of the previous dumping practices due to continued
dumping, undercutting and price pressure on the Community prices.

4. Furthermore, Chinese sales prices to the US market, where the licence system also
applies, were on a CIF basis considerably lower than the sales prices in the
Community market. These low prices in the US, the fact that the actual Chinese
sales price in the Community market without this export licence tax and another
local tax is very low and the big resources in the PRC, lead to the conclusion that
there is a high likelihood of a recurrence of injurious dumping, should the
measures be allowed to lapse.

5. Finally it should be noted that only one user of agricultural CCM cooperated in
the Community interest investigation. This significant lack of interest appears to
suggest that the negative impact on CCM users is rather limited.

6. The consultation of Member States in the Advisory Committee has shown that a

majority of Member States were in favour of the continuation of measures.

7.

It is therefore proposed that the Council adopts the attached Regulation.

2

Proposal for a

COUNCIL REGULATION (EC)

imposing a definitive anti-dumping duty on imports of magnesium oxide
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 and in particular Article 11 (2) thereof,

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

Whereas:

A. PROCEDURE

1. Measures in force

(1)

(2)

1

2

3

In June 1993, definitive anti-dumping measures were imposed by Council
Regulation (EEC) No 1473/932 on imports of caustic calcined magnesium
oxide (hereinafter referred to as «CCM ») originating in the People’s Republic
of China. These measures took the form of a variable duty, i.e. the duty was
imposed on those imports which were below the minimum import price
specified in the Regulation subject to review. The minimum import price was
based on the normal value calculated.

2.

Request for a review

Following the publication of a notice of impending expiry of the anti-dumping
measures in force on imports of CCM originating in the People’s Republic of
China3, the Commission received a request in March 1998 to review these
measures pursuant to Article 11(2) of Council Regulation (EC) No 384/96
(hereinafter referred to as the « Basic Regulation »).

OJ L 56, 6 March 1996, p. 1, as last amended by Regulation (EC) 905/98, OJ No L 128,
30 April 1998, p.18.
OJ L 145, 17.06.1993, p.1.
OJ C 383, 17.12.1997, p.9.

3

(3)

(4)

(5)

(6)

The request was lodged by EUROMETAUX acting on behalf of Community
producers whose collective output of the product concerned constitutes 100%
of the Community production of this product.

The request was based on the grounds that the expiry of the measures would
be likely to result in the recurrence of dumping and injury to the Community
industry. Having determined, after consulting the Advisory Committee, that
sufficient evidence existed for the initiation of a review, the Commission
initiated an investigation through the publication of a notice of initiation4
pursuant to Article 11(2) of the Basic Regulation.

3.

Investigation

The Commission officially advised the complaining Community producers,
the exporters and producers in the exporting country and the importers as well
representative associations known to be concerned, and the
as their
representatives of the exporting country of the initiation of the review. 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. In
addition, the producers in India, which was chosen as an analogue country,
were advised and sent questionnaires. The Commission also gave the parties
directly concerned the opportunity to make their views known in writing and
to request a hearing.

All Community producers replied to the questionnaire. Replies were also
received from three Chinese exporters, Liaoning Metals & Minerals Import &
Export Corp., Citic Trading Co. Ltd. and Liaoning Foreign Trade Corp.
(hereinafter referred to as the “Chinese exporters”), one related importer and
one related trader replied to the questionnaires. The level of co-operation
amounted, according to EUROSTAT data, to more than 87% of the overall
imports from the People’s Republic of China. Three unrelated importers,
Frank & Schulte Benelux from the Netherlands, Timab Industries S.A. from
France and GBC Ltd.
from the United Kingdom, also replied to the
questionnaire and made their views known in writing. No reply was obtained
from the users of the product with the exception of Timab Industries, which
itself imported the product in question.

(7)

The Commission services sought and verified all information they deemed
necessary for the purpose of a determination of the continuation or recurrence
of dumping and injury and of the Community interest. Investigations were
carried out at the premises of the following companies:

4

OJ C 190, 18.06.1998, p.4.

4

(a)

Community producers:

–

–

–

–

Grecian Magnesite SA, Athens, Greece,

Magnesitas Navarras, Pamplona, Spain,

Magnesitas de Rubián, Sarria (Lugo), Spain,

Styromag GmbH, St. Katharein an der Laming, Austria.

(b)

Producers in the analogue country

–

Tamil Nadu Magnesite Ltd., Salem, India.

(c)

Unrelated importers into the Community

–

–

–

Frank & Schulte Benelux, Capelle a/d Ijssel, Netherlands,

Timab Industries S.A., St. Malo, France (also a user of the
product concerned),

GBC Ltd., Ewell (Surrey), United Kingdom.

(d)

Related importers and traders

–

–

Citic Germany GmbH, Bad Homburg, Germany,

Lutz Mineralien GmbH, Schifferstadt, Germany.

(8)

The investigation of dumping covered the period from 1 July 1997 to
30 June 1998 (hereinafter referred to as “IP”). The examination of the situation
of the Community industry covered the period from 1 January 1994 up to the
end of the IP (hereinafter referred to as “IIP”)

B. PRODUCT UNDER CONSIDERATION AND LIKE PRODUCT

1. Product under consideration

(9)

The product concerned by this proceeding is a form of magnesium oxide,
namely natural caustic calcined magnesite (CCM), which is processed from
naturally occurring magnesium carbonate or magnesite. In order to produce
CCM, magnesite has to be mined, crushed, sorted and then burned in a kiln at
temperatures of 700 to 1.000° C. The result is CCM with various magnesium
oxide (“MgO”) contents or grades. The main impurities in CCM are SiO2,
Fe2O3, Al2O3, CaO and B2O3 (silicon oxide, iron oxide, aluminium oxide,
calcium oxide and boron oxide respectively). CCM is mainly used in
agriculture for animal feeding or as a fertiliser and for industrial applications
in the construction industry for flooring and insulating boards as well as in the
pulp, paper and abrasives producing industries.

5

(10)

Furthermore, CCM is not chemically uniform. However, no clear dividing
lines were found enabling the classification of CCM into different products.
The boundary between the grades is blurred by overlapping usage since users
do use, for identical purposes, magnesite of different grades and from different
sources of supply.

(11) Although CCM originating in the People’s Republic of China which was sold
in the Community market differed in terms of MgO content, overall this did
not entail any significant differences in the basic physical characteristics, the
interchangeability, the perception or the marketing of the product concerned.
As in the previous investigation, all grades and types of CCM should therefore
be considered as one single product for the purpose of this investigation.

2. Like product

(12)

(13)

(14)

It was found that there were no basic differences in the physical and chemical
characteristics and the uses of CCM exported to the Community and the
product produced and sold in the domestic market of the analogue country.
Furthermore, there were no differences between the product concerned and the
product produced and sold by the complaining Community industry in the
Community market. In this respect,
the investigation has confirmed the
conclusion of the previous investigation that users could process both the
imported product and the Community-produced product without any
alterations in their production process.

Some unrelated importers stated that CCM from the People’s Republic of
China was not alike to CCM produced and sold by the Community industry.
They claimed that these could not be considered as alike, since the raw
material (MgCO3) in the People's Republic of China was readily accessible in
massive deposits, while the Community raw material had to be extracted from
narrow veins. Furthermore,
the MgO content of Chinese magnesite was
naturally higher.

Though the methods of extraction, the magnesite content of the deposit and the
production process may vary from producer to producer, and this world-wide,
these differences do not have a significant bearing on the end product and are
not such as to justify the claim of some unrelated importers that the production
of CCM in the People’s Republic of China is unique in terms of the methods
and processes used and the chemical and physical characteristics of the
magnesite. This is confirmed by the fact that both the Community producers
and the Chinese exporters have a number of common customers.

(15)

Therefore, CCM exported to the Community on the one hand and the product
produced and sold by the Community industry in the Community market and
the product produced and sold in the domestic market of the analogue country,
on the other hand, are interchangeable and have to be considered a single like
the Basic Regulation.
product within the meaning of Article 1(4) of

6

C. DUMPING

1.

Preliminary remarks

(16)

In accordance with Article 11(2) of the Basic Regulation, the investigation
examined whether there were grounds for concluding that, in the absence of
measures, there was a likelihood of a continuation or recurrence of dumping.

(17)

(18)

2. Analogue country

importers

In order to establish the normal value, account was taken of the fact that for
this investigation the normal value for imports from the People’s Republic of
China had to be based on data from a market economy third country. In this
respect, Turkey was envisaged in the notice of initiation of this review as an
appropriate market economy third country for the determination of normal
submitted that Turkey was
value. However, a number of
inappropriate on the ground that the access to raw materials in Turkey is more
difficult than in the People’s Republic of China. Consequently, as the the
mines in Turkey do not enjoy the same natural advantages as in the People's
Republic of China, the extraction and processing costs in Turkey are higher
than in Chinese mines. As an alternative, one importer suggested Slovakia,
where the natural conditions were alleged to be comparable to the People's
Republic of China. Others suggested that the normal value should be based on
domestic sale prices of limestone or dolomite in Germany, which is mined and
processed like the CCM in the People's Republic of China and has a similar
use.

In view of the comments of the importers on the choice of Turkey as analogue
country, co-operation was not only sought
in Turkey, but also in other
countries where CCM was known to be produced in sufficient quantities. In
particular, a request for co-operation was addressed to three known producers
in Turkey, two in Brazil, one in Slovakia and two in India. No reply was
obtained from Brazil, while the Slovakian producer declared not to be in the
position to provide the requested information with respect to the IP. The sole
Turkish producer of CCM willing to cooperate indicated a domestic sales
volume which could not be considered as representative in relation to Chinese
exports to the Community, while another Turkish producer only produced a
different form of MgO namely deadburned magnesite. Finally, one Indian
producer agreed to provide the information requested in the questionnaire.

(19) As far as the proposal to use the domestic sales prices of the limestone or
dolomite in Germany is concerned, it should be pointed out that limestone and
dolomite cannot be considered as being alike to CCM as their chemical
characteristics are different.

(20)

The domestic sales of the Indian co-operating producer have been found to
represent significantly more than 5% of the total Community imports from the
People's Republic of China during the IP. The Indian market of CCM appeared
to be a competitive market where at least five domestic producers of CCM
compete against each other. The magnesite,
the
production of CCM, is easily available in large quantities in open cast mines

the raw material

for

7

(21)

(22)

close to the plants. The extraction and production process of the Indian
producer is very similar to that of the Chinese producers.

The Chinese exporters submitted that Turkey, though not entirely suitable,
should have been maintained as analogue country on the grounds that the
normal value established in India would not have any link with the one found
in Turkey in the previous investigation. However, as previously stated, sales in
Turkey were too low to be representative and therefore there was no
alternative to the selection of another analogue country.

that

The Chinese exporters raised the argument
the co-operating Indian
producer is entirely state-owned and hence the prices of CCM in India are
controlled by the Government. It is indeed true that the company in question is
state-owned. However,
it operates in a market economy context and its
domestic sales are made in competition with a number of companies, which do
not belong to the Indian government. It was not found that the state ownership
resulted in any distortion of costs or prices charged.

(23)

In the light of the above, the Commission considers that India is an appropriate
analogue country for the purpose of establishing normal value.

(24)

(25)

(26)

3. Normal value

For the sole grade of CCM which is produced and sold in India, normal value
has been determined on the basis of the prices paid or payable by independent
customers in the domestic market for the sales of the like product which have
been found to be made in sufficient quantities and in the ordinary course of
trade. For the other grades, which are not produced by the co-operating
company, normal value has been determined by applying an adjustment factor
to the normal value determined on the basis of the grade produced by the co-
operating company. Since a higher MgO content corresponds to a higher
quality and therefore a more valuable product, it has been found reasonable to
establish the amount of the adjustment as a direct proportion of the MgO
content for the various grades exported from the People's Republic of China.

4. Export price

Exports of CCM to the Community by the co-operating Chinese exporters
represented around 87% of the total imports of the product in question from
the People’s Republic of China, as estimated by the questionnaire responses
and EUROSTAT data concerning CN code 2519 90 90 TARIC heading 10/80
under which the imports of the product under investigation are recorded.

For the two co-operating exporters whose sales in the Community were all
made to unrelated importers, the export price was established on the basis of
the price actually paid or payable for the product sold for export to the
unrelated importers.

(27) With regard to the exporter whose sales to the Community were all made to its
related importer in the Community who in turn sold to a related trader, the
export price has been constructed by deducting from the resale price to the

8

first independent buyer all costs between importation and resale incurred by
both the related importer and the related trader as well as a reasonable amount
for profit so as to establish a reliable export price in accordance with Article
2(9) of the Basic Regulation. The amount for profit has been calculated by
importers on
reference to that realised by the co-operating independent
average, i.e. 9 % on the sales turnover of the related trader.

5. Comparison

(28)

(29)

(30)

(31)

The weighted average normal value per grade was compared to the weighted
average export price of the corresponding grade of CCM at a FOB port
in accordance with Article 2 (11) of the Basic
producing country level,
Regulation.

For the purpose of ensuring a fair comparison between normal value and
export price, account was taken of differences in factors, which were claimed
and demonstrated to affect comparability in accordance with Article 2(10) of
the Basic Regulation. In this respect, adjustments were made for inland and
ocean freight, insurance, handling, loading and ancillary costs and credit costs.
Furthermore, since the producers in the People’s Republic of China have
easier access to raw material, the Commission considered that an additional
allowance should be made in order to take into account the lower costs of
extraction of the magnesite ore resulting from a more favourable ore recovery
ratio in the People's Republic of China as compared to India. Consequently,
having found that the ore recovery ratio in India is similar to that found in
Turkey, which was used as reference country in the previous investigation and
in the absence of any other new facts provided by the interested parties, it has
been decided to apply the same adjustment to the normal value as requested by
Chinese parties in the previous investigation, i.e. a reduction of 20% of the
extraction cost as found in India.

Finally, a request of the Chinese exporters for an adjustment for difference in
the level of trade was found justified, but a precise calculation was not
considered necessary, given that this is an expiry review and considering that
there was still a significant dumping margin if such adjustment had been
made.

6. Dumping margin

The comparison of normal value and export price showed the existence of
dumping, the dumping margin being equal to the amount by which normal
value, so established, exceeded the price for export to the Community. The
dumping margin found, as a percentage of the CIF Community-frontier import
price, was substantial.

9

D. LIKELIHOOD OF RECURRENCE OR CONTINUATION OF

DUMPING

(32)

it

is considered likely that

the
Further to the analysis of the existence of dumping during the IP,
likelihood of continuation of dumping, should the measures in question be
removed, was examined. On the basis of the information supplied by the
exporters,
the Chinese exports of CCM will
continue to be made either at the same or even at lower prices than during the
IP. This is supported by the fact that US official statistics showed that the FOB
Chinese export prices to this country, which is one of the main destinations of
CCM from the People's Republic of China, were on average considerably
lower than the corresponding prices of Chinese exports to the Community
during the IP.

(33) On the basis of the fact that the exports of CCM originating in China have
been found to be made at dumped prices during the IP and that, according to
the information provided by the exporters, a slight decline of the Chinese
export prices to the Community is forecast and considering the Chinese
pricing policy applied for third countries where no anti-dumping measures are
in force,
is concluded that dumping is likely to continue, should the
measures in force be removed.

it

(34)

In addition, the abolition of the export licence system mentioned below would
probably lead to a drop of Chinese export prices to around 75 ECU/ tonne,
which would be tantamount to a further increase of dumping.

E. DEFINITION OF THE COMMUNITY INDUSTRY

(35) According to Article 4(1) of the Basic Regulation, the term « Community
industry » shall be interpreted as referring to the Community producers as a
whole of the like product or to those of them whose collective output of the
products constitutes a major proportion, as defined in Article 5(4) of the Basic
Regulation, of the total Community production of those products. The
investigation confirmed that the applicant Community producers represented
100% of the Community production of CCM. Therefore, they constitute the
Community industry within the meaning of Articles 4(1) and Article 5(4) of
the Basic Regulation.

F. ANALYSIS OF THE SITUATION IN THE COMMUNITY CCM

MARKET

(36)

Firstly,
it should be noted that most of the specific data relating to the
Community industry for the IIP have been calculated on the basis of the data
of three Community producers Grecian Magnesite, Magnesitas Navarras and
Magnesitas de Rubián. The fourth Community producer, Styromag, was only
established as an independent company in 1996 as a result of the bankruptcy
of the company Magindag in 1994, which was also a producer of CCM. Since

10

the economic situation of

to present a coherent picture of

information was only available for Styromag as from 1996 onwards and in
order
the
Community industry,
inappropriate to take
the Commission considered it
Styromag’s information into account for the purpose of the analysis of the
situation of the Community industry. Data from Styromag have been included
in the determination of total Community consumption and have been reflected
in the analysis of price undercutting, which covers the IP. It can also be stated
that the analysis of the situation of the Community industry set out below
would not have differed, if extrapolated data for Styromag for the years 1994
and 1995 had been included in the analysis.

1. Consumption in the Community market

(37)

The total consumption of CCM in the IP was calculated on the basis of:

• the sales volume of the Community industry in the Community market,

• the imports into the Community of CCM from the People’s Republic of

China, and

• the imports into the Community of CCM from all other third countries.

(38) On this basis, consumption rose from 328.000 tonnes in 1994 to 356.000
tonnes in the IP, a level close to that established for the previous investigation
period (368.000 tonnes). The period 1994 to 1996 was characterised by a
continuous growth of consumption up to 422.000 tonnes
in 1996.
Consumption in the Community was pushed up by the influence of weather
conditions on the demand for low grades of CCM which are mainly used in
agriculture and by the potential development of a number of new industrial
markets found. After the peak, demand decreased by 18% in 1997, but
partially recovered in the IP.

(39)

Finally, it can be stated that Community consumption of CCM used for the
two applications was relatively evenly split, i.e. about 50% of the consumption
was used for agricultural purposes, while the other half was destined for
industrial uses.

2. Imports from the country concerned

(a) Import volume, import share and market share of the imports concerned in

the IIP

(40)

The volume of imports of CCM originating in the People’s Republic of China
increased from 86.089 tonnes in 1994 to 110.592 tonnes in the IP, equivalent
to an increase of about 28 % during the IIP. The volume imported during the
IP is near the level of the previous investigation period in the original
investigation (120.000 tonnes).

(41)

The share of CCM imported from the People’s Republic of China in terms of
volume among all imports into the Community was between 77% and 82%
during the IIP. The highest import share was reached in the peak demand year

11

the time of the previous
of 1996. However,
investigation period, the import share of the People’s Republic of China
accounted only for around 54% .

it should be noted that at

(42)

The market share of the imports from the People’s Republic of China in the
Community market rose from 1994 to the IP from 26,3% to 31%. This is
equivalent to an overall increase of 4,7 points during the IIP. In 1996, in the
year with the exceptionally high demand, the Chinese market share reached
36,4%. In the previous investigation, imports from the People’s Republic of
China held a market share of 32% in the IP.

(b) Price evolution and price behaviour of

the imports of

the product

concerned

(i)

Price evolution of the imports concerned

(43) According to EUROSTAT information, the Chinese average CIF sales prices
into the Community significantly increased between 1994 and 1995 and
decreased continuously thereafter. The average sales prices of the imports
concerned increased thus during the IIP by about 14%.

(44)

(45)

It was argued that the Chinese export licence system which was allegedly
introduced after the anti-dumping duties had been imposed would have
progressively limited the supply of Chinese CCM into the Community thereby
pushing up the Chinese sales prices to the Community. However, as
mentioned above, the Chinese import volume increased by 28% during the IIP
and, although Chinese import prices into the Community increased after the
imposition of the measures in 1993 until 1995, they decreased continuously
since.

(ii) Price behaviour of the exporters

In order to determine the price behaviour of the exporters in relation with the
Community producers' price behaviour, both the exporters' prices and the
Community industry's prices were analysed for the IP. In this analysis, sales of
the Community industry and sales of the Chinese co-operating exporters to
unrelated importers in the Community, as well as the resales by related
importers to unrelated customers, considered to be at the same level of trade,
were used. For this analysis, the product was grouped into two categories
according to its use for agricultural and industrial applications. On this basis,
the sales prices for CCM produced and sold by the Community industry were
compared to the sales prices of Chinese CCM used for the same purpose.

(46)

It should be noted that the co-operating Chinese exporters sold a significant
share of their export volume to the Community via customers located outside
the Community at a FOB-Chinese border level. Hence, adjustments had to be
made in order to come to a CIF Community frontier level on the basis of the
information of the cooperating importers and exporters.

(47)

The weighted average CIF prices of the imports concerned were compared to
the prices of the Community producers, adjusted for differences in delivery

12

terms, for those markets where both parties realised sales, since only in such
markets a meaningful comparison could be carried out. The investigation
established that the overall average sales prices of the Chinese exporters for
both uses were lower than those of the Community industry. In particular, it
was established that, in relative terms, the average difference between the
prices of Chinese exports and the Community industry’s prices was bigger for
CCM used in the industrial sector than for CCM used in the agricultural
sector.

(48)

Finally, the analysis of the co-operating importers’ questionnaire responses
revealed that, for significant sales of CCM used for agricultural purposes, the
exporters’ CIF sales price was just at the minimum price level of 112 ECU/
tonne, suggesting that these prices were limited by the anti-dumping measures
presently applicable.

(49) Despite the fact that the exporters' prices were not reflecting that Chinese
CCM was of a higher purity than the CCM produced by the Community
industry,
to be necessary to apply an
adjustment factor. Such an adjustment had been claimed by the Community
industry.

the Commission did not deem it

3. Economic situation of the Community industry

(a) Production

(50) Comparing the situation at the beginning and at the end of the IIP, the total
production of CCM has been relatively stable from 1994 to the IP. The
production rose by 6% from around 207.000 tonnes to around 219.000 tonnes
in the period mentioned above.

(b) Production capacity

(51)

The production capacity of the Community industry rose from 265.000 tonnes
in 1994 to 280.000 tonnes in the IP. This is equivalent to an increase of around
6% during the IIP.

(c) Capacity utilisation

(52) At 78%, capacity utilisation of the Community industry amounted to about the
same level in 1994 and in the IP. However, capacity utilisation rose to 89%
and 88% respectively in 1995 and 1996.This was the result of an expectation
of strong sales in this period, which in particular in 1996, did not materialize.
Since then, the capacity utilisation of the Community industry decreased
continuously.

(d) Sales by volume

(53)

The total sales volume of the Community producers went up from around
209.000 tonnes in 1994 to almost 211.000 tonnes in the IP. The sales volume
it has decreased
considerably increased between 1994 and 1995, but
continuously since.

13

(e) Market share

(54)

(55)

(56)

The Community industry’s market share in the Community market decreased
from 63% in 1994 to 58% in the IP. This is equivalent to a decrease of five
percentage points during the IIP. In 1996, the year with the especially high
demand,
the Community industry’s market share dropped down to 50%.
Although in the following year the Community industry regained the lost
percentage points, the share of the Community industry has again shown a
downward trend since 1997.

(f) Price development

The investigation showed that the Community producers’ average selling price
of CCM rose by 7% from 1994 to the IP. The Community industry’s sales
prices reached a peak in 1996 due to the high demand of the market in that
year. While the prices for agricultural CCM increased during the IIP by 13%,
the sales prices for CCM used for industrial purposes rose by 6%. However,
whereas
for agricultural CCM showed a relatively stable
development after the peak in 1996, prices for CCM used for industrial
purposes dropped by 5%.

the prices

(g) Profitability

For the purpose of the profitability analysis, sales of certain by-products of the
CCM production of the Community industry were taken into account with the
result of decreasing CCM specific costs and increasing CCM related profits.
However, the Community industry claimed that these sales were only of a
temporary character
immediately. The Commission
considered that, due to the considerable amount of sales of by-products, both
in value and volume terms, which had been marketed over an extended period
of time, they had to be reflected in the CCM profitability analysis with the
result that the profitability realised on CCM sales increased.

and could cease

(57) On this basis, the profitability of the Community industry, expressed as a
percentage of net sales, increased during the IIP from a weighted average loss
of 4,0% in 1994 to a profit of 5,2% in the IP. The profit situation of the
Community industry as a whole has improved by 9,2 percentage points during
the IIP. However, the Community industry considers a yearly profit rate of
10% as necessary to maintain their activities.

(h) Employment

(58)

Employment in the Community industry declined by 6,7% during the IIP.

(i) Stocks

(59)

The closing stocks of the Community producers went up from 24.788 tonnes
in 1994 to 34.240 tonnes in the IP which amounts to an increase of about 38%
in the IIP. Closing stocks increased continuously from 1994 to 1997, but
dropped then in the IP.

(j) Investments

14

(60)

The figure of total investments of the Community industry went up by about
23% within the time period from 1994 to the IP. The Community industry has
invested strongly, particularly in the years 1995 and 1996. The investments
mainly concerned the improvement and further
the
production process in order to economise costs. Part of the Community
industry installed modern filters in their kilns to reduce environmental
pollution.

rationalisation of

(k) Export activity of the Community industry

(61)

The Community industry’s exports of CCM to third countries show a
relatively stable development. The yearly exports during the IIP amounted to
about 8.000 to 11.000 tonnes per year.

(l) Conclusion

(62) After the imposition of a variable anti-dumping duty in 1993, the situation of
the Community industry has improved during the IIP. Economic factors such
as production, production capacity, average sales prices per tonne, profitability
and investments showed a positive development. Both production and
production capacity have increased by about 6% during the IIP, while the
average sales prices rose by about 7% in the same period. After two years of
losses, the Community industry’s sales have been profitable again since 1996.
It is likely that this was due to the reduction of personnel and the investments
made in the previous year in order to rationalise production. The Community
industry’s sales volume and the capacity utilisation reached in the IP the same
level as in 1994. Nevertheless, the above analysis also shows that this is not
the case for all
in particular from 1996 onwards a
downward trend has occurred.

indicators and that

(63)

(64)

In fact, capacity utilisation, market share, employment and closing stocks did
not develop favourably. The Community industry lost about 5 percentage
points of the Community market during this period. The Community industry
employed 6,7% less personnel in the IP as compared to 1994. The closing
stocks of the Community industry continuously rose between 1994 and 1997 -
the overall
increase in the IIP amounted to 38%. Furthermore, capacity
utilisation by the Community industry decreased constantly from 1995
onwards, i.e. even in 1996, the year of the high demand, capacity utilisation
did not rise to more than 88%.

The investigation established that, although the situation of the Community
industry has improved in some areas, some other economic factors did not
develop so favourably. This has to be seen in conjunction with the low prices
of the Chinese imports, which were made close to the minimum price and
which exerted price pressure on the Community industry. This has prevented
the Community industry from fully recovering from the effects of the previous
dumping practices.

(65)

It was alleged that the Community industry improved its situation in the
Community market despite the continued presence of imports from the
country concerned. In this respect, it can be noted that, although the anti-

15

dumping measures have contributed to the improvement of the economic
situation of the Community industry, their effect has, as shown above, been
diluted. This argument is supported by the fact that imports from the People’s
Republic of China increased by 28% during the IIP thereby gaining 4,7
percentage points in terms of market share in the same period.

4. Import volumes and import prices from other third countries

(a) Import volume

(66)

The import volume of CCM from other third countries increased in the IIP
from about 25.000 tonnes in 1994 to 26.000 tonnes in the IP. This is
equivalent
to an increase of about 4%. Due to the above-described high
demand for CCM in 1996, imports from other third countries reached a peak
in that year with more than 33.000 tonnes.

(67)

The market share of imports from other third countries was 8% from 1994 to
1996 and decreased by one percentage point in 1997. The market share for
these countries has thus been relatively stable during the IIP.

(b) Sales prices for imports from third countries

(68) According to EUROSTAT, the average sales price for imports from third

countries rose by 43% in the IIP.

5. Conclusion

(69) Compared with the figures of

the previous

investigation, Community
consumption has shown a relatively stable development. It was alleged that the
demand in the Community expanded rapidly between 1995 and 1996, thereby
exceeding the Community industry’s capacity, which made an increase of
Chinese CCM imports inevitable. It should be noted, however,
the
capacity utilisation rate of the Community industry was about 89% in 1995
and dropped continuously since. It can therefore be concluded that Community
consumption did not have a major influence on the situation of the Community
industry during the IIP.

that

(70) Moreover, it seems that it was rather the decreasing Chinese import prices
from 1995 onwards that made the Chinese import volume increase. In any
event, no such significant increase in demand occurred in the period up to the
IP, which could explain the increase in imports and market share of Chinese
CCM as established during the investigation.

(71)

The Community industry undertook considerable efforts to improve its
competitiveness towards the main Chinese competitors and competitors from
other third countries. These efforts are particularly visible when looking at the
extent of investments during the IIP. From 1994 to 1997, the Community
industry invested considerable amounts in order to modernise and rationalise
its production facilities. However, due to the continued dumped imports from
the People’s Republic of China, these efforts have not been entirely successful.
situation.
remained
The Community

vulnerable

industry

in

a

16

(72)

(73)

(74)

(75)

(76)

G. LIKELIHOOD OF RECURRENCE OF INJURY

1. Analysis of the situation of the exporting country concerned

(a) The Chinese Licence System

In April 1994, the MOFTEC (Ministry of Foreign Trade and Economic Co-
operation) and the CCCMMC (China Chamber of Commerce of Metals,
Minerals and Chemicals Importers and Exporters) introduced an export licence
system for all exports of certain minerals which is basically identical to an
export quota system. All different sorts of magnesia,
including caustic
calcined magnesite, have been covered by this licence system since. In 1998,
the licence fee was about 37 ECU/ tonne CCM. This implies that, if the
minimum price of 112 ECU/ tonne is met, the actual sales price without
licence fee would be around 75 ECU/ tonne.

Furthermore, according to EUROMETAUX, the Liaoning Province where
most of the producers are situated, introduced in 1995 another local tax which
in 1997 amounted to around 15 ECU/ tonne. It has been argued that this
licence system is sufficient to reduce the risk of renewed injurious dumping.

EUROMETAUX claimed that the Chinese licence system for magnesite could
be abolished soon and feared that Chinese exports of magnesite would, as a
consequence of the abolition, increase in volume and considerably decrease in
prices, should the anti-dumping measures not be continued.

The exporters argue that the licence system has brought stability and reliability
in the exports of magnesite from the People’s Republic of China and that there
is no reason to assume that the system would be dropped soon. They further
stated that the exporters would, if the anti-dumping measures did not continue
and the licence system dropped, certainly not drop their prices in a stable
market as the one in the European Community and suddenly voluntarily
abstain from making higher gains.

In view of the above arguments and in view of the nature of the above
described system which is run autonomously by the government of the
exporting country, it must be stated that the existence or abolition of an export
licence system cannot have any influence on the decision of the Community
institutions whether or not to renew anti-dumping measures. However, the
analysis of this system merely underlined the potential of the Chinese
exporters to sell CCM at very low prices.

(b) Chinese exports to third countries

(77)

The Commission have, on the basis of US trade statistics, analysed the
Chinese CCM exports to the USA. These imports accounted for 67% of the
world-wide CCM imports into the USA in 1997 and to 63% in 1998 until
August.

(78)

The total volume of Chinese exports to the USA went up from 72.477 tonnes
in 1994 to 89.440 tonnes in 1997 which is equivalent to an increase of 23 %.

17

In 1995, Chinese exports to the USA increased to an absolute maximum of
more than 96.000 tonnes, a volume at about the same level as the volume of
Chinese exports to the Community, while the trend was decreasing in 1996
again.

(79)

Even though the Chinese CIF sales prices to the United States increased from
1994 to 1995 by 80% starting from a very low level, they have decreased since
and remained considerably below the EU minimum price of 112 ECU/ tonne
imposed in 1993.

(80) A price comparison for all types of CCM shows, according to EUROSTAT, a
Chinese average sales price in the Community market which is about one third
higher than the average sales price in the US market. Therefore, there appears
to be no reason to believe that, in the absence of measures, Chinese prices
would not drop to levels comparable to the prices for imports into the US, in
particular as import prices into the Community have been found to be partially
very close, if not equal, to the minimum price, i.e. they appear to be only at
that level because of the existence of the minimum price.

(c) Production, capacity, capacity utilisation and stocks

(81)

inter alia,

in order to establish the level of production,

The Commission sent questionnaires to eight Chinese producers and trading
the
companies,
production capacity, the capacity utilisation and the stocks. However, the
Commission could not determine the production levels of the Chinese
producers nor the exact capacity, capacity utilisation and stocks, since three of
the four co-operating companies are pure trading companies and only one
company itself produces CCM. The other producers did not cooperate. Since
this did not allow for a representative analysis of the Chinese CCM production
and since no official statistics was available, the Commission had, according
to Article 18 of the Basic Regulation, to use the information available.

(82)

Therefore, it was decided that the information provided in the request for
review reflecting industry and market research information should be used.
According to these sources, production in the last few years can be estimated
to be at around 600.000 tonnes annually, of which only 200.000 tonnes are
destined for the Chinese domestic market.

(83) On the same basis, information from the request for review had to be used in
capacity utilization and stocks.
determining the production capacity,
According to the same source,
the production capacity of the Chinese
producers amounted to more than 700.000 tonnes per year. As far as the
capacity utilisation is concerned, the Chinese producers have substantial idle
production capacities. Chinese stocks of CCM amounted to around 500.000
tonnes.

2. Conclusion on the recurrence of injurious dumping

(84)

The Chinese export prices to the other main market for CCM, the USA, for
which the export licence system is also applicable, were very low between
1994 and mid 1998. Even though these prices increased from 1994 to 1997 by

18

about 70% starting from a very low level, they still remained considerably
below the EU minimum price imposed in 1993 and the actual Chinese export
prices to the Community.

(85)

Furthermore, given the nature of the Chinese licence system, whose abolition
would alone allow the Chinese CIF sales prices to drop by about 37 ECU/
tonne, the huge raw material reserves and the large Chinese unused production
capacities demonstrate that there is a significant potential that the Chinese
exporters resume injurious imports again. Therefore, it was concluded that, in
the absence of the measures, there is a likelihood of a recurrence of injurious
dumping and that the measures in force should, for that reason, be maintained.

(86)

(87)

(88)

H. COMMUNITY INTEREST

1. Introduction

In accordance with Article 21 of the Basic Regulation,
it was examined
whether a prolongation of the existing anti-dumping measures would be
against the interest of the Community as a whole. The determination of the
Community interest was based on an appreciation of all the various interests,
such as the Community industry, the importers and traders, the users of the
product concerned. In order to assess the likely impact of a continuation of the
measures, the Commission services requested information from all interested
parties mentioned above.

It should be recalled that, in the previous investigation,
the adoption of
measures was considered not to be against the interest of the Community.
Furthermore, it should be noted that the present investigation is a review, thus
analysing a situation in which anti-dumping measures have already been in
place. Consequently, the timing and nature of the present investigation has
allowed an assessment of any negative impact on the parties concerned by the
anti-dumping measures imposed.

The Commission sent questionnaires to 24 importers, of which three unrelated
importers
fully co-operated. Furthermore,
questionnaires were sent to two user organisations, CEFIC and EMFEMA.
However, they did not reply to the questionnaire.

related importer

and one

(89) On this basis, it was examined, whether, despite the findings on dumping,
injury and continuation or recurrence of injurious dumping respectively,
compelling reasons existed which would lead to the conclusion that it is not in
the Community interest to maintain measures in this particular case.

2. Interests of the Community Industry

(90)

The results of the investigation allow for the conclusion that, without the
continuation of the measures, the situation of the Community Industry will
continue to be vulnerable or will even deteriorate.

19

(91)

(92)

(93)

The Community industry has been suffering from low priced dumped imports
of CCM from the People’s Republic of China. The objective of the anti-
dumping measures under review, that is, to re-establish fair competition in the
Community market between the Community producers and their exporting
counterparts in third countries, has not been fully met as has been shown
above.

The Community industry has been making considerable efforts to improve its
productivity in recent years, in an attempt to lower its cost of production and
to enhance its competitiveness in this price sensitive market. Rationalisation
efforts and investments were made and the SG & A costs of the Community
industry declined during the IIP. Furthermore, one Community producer in
Greece who took part in the previous investigation went bankrupt, the mother
company of the newly participating Austrian Community producer Styromag,
Magindag, had gone bankrupt,
in 1994, and Styromag had to be
completely restructured. The Community industry has not been in a position to
make a reasonable profit during the IIP.

too,

that

the fact

in particular

In view of the nature of the economic difficulties experienced by the
Community industry,
it was prevented from
recovering from the unhealthy situation caused by the dumped imports, the
Commission services consider that, in the absence of intervention, the further
deterioration of the situation of the Community industry is quite likely, given
the level of losses incurred by them over an extended period. This could entail
a severe reduction in the numbers of employees. In the course of this
investigation it has been established that the Community industry is viable, but
continues to be in precarious situation, and that it is highly probable that,
without the continuation of anti-dumping measures to correct the effects of
dumped imports,
the financial situation of the Community industry will
deteriorate. Thus, the existence of the Community industry and many jobs may
ultimately be at risk.

(94)

Furthermore, the continuing restructuring efforts made by the Community
industry show that it is not ready to abandon this segment of production. The
maintaining of anti-dumping measures would therefore be in the interest of the
Community industry.

3. Interests of importers and traders

(95) On the one hand, some importers and traders are against the prolongation of
the anti-dumping measures arguing that a fixed minimum price distorts
international trade and increases artificially the import price of the product
concerned. They claimed that the Community industry constantly decreased its
prices during the IIP, whereas the Chinese producers were not in the position
to compete with the Community industry, as they were constrained by the
minimum price. It should be noted, however, that the importers could not
provide any evidence for this argument. On the contrary, the investigation
revealed that the Community industry’s sales prices have increased during the
IIP by about 7% and the Chinese market share in the Community during the
IIP rose by about 5%.

20

(96) On the other hand, some other importers and one importing user stated that the
anti-dumping measures had created a certain price stability in the Community
market for CCM. Moreover, the minimum price has enabled the Community
industry to continue with its production and thereby maintained competition
between Chinese and Community producers.

(97)

It is therefore concluded that the cost situation of the importers of the product
concerned has not been negatively influenced by the imposition of the anti-
dumping measures. It is likely that a continuation of the measures will not lead
to a deterioration of their cost situation in the future.

4. Interests of users

(98) None of the Community users answered to the questionnaire sent by the
Commission services during the current
investigation nor provided any
evidence on the incidence on their cost of production of the measures in force.
Following the lack of substantiated information submitted by the users
concerning the impact of the measures in force on the structure of the cost of
production using CCM, a subsequent analysis was not performed. However,
since the users did not respond, it can be assumed that the anti-dumping
measures did not have any negative influence on their cost situations.

(99)

In any case, the result of the present anti-dumping measures has not been to
close the Community market from imports, but rather to level the unfair trade
practices and to prevent the distorting effects of dumped imports. In this
specific case, it seems that the measures did not prevent imports from the
country concerned to enter the Community market. As mentioned above,
imports from the People’s Republic of China increased significantly, by 28%,
during the IIP.

(100) Furthermore, it was found that, in view of the fact

that the Community
industry has a significant market share, is viable and has invested significant
amounts to improve their competitiveness, and given the presence of other
suppliers located outside of the Community, the risk of a general supply
shortage is very low.

(101) Since the measures have been in place for a certain period and would be
maintained at the same level, it can be concluded that this would not imply a
deterioration, if at all, of the situation of the users.

5. Consequences for competition in the Community market

(102) As far as the competitive environment in the Community market is concerned,
the measures proposed below are not such as to foreclose the Community
market to the exporters under review, and therefore it will allow the continued
presence of these exporters in the market. It should be recalled that
the
importers and users have always enjoyed the presence of a number of
competitors in the market. The Community industry, even when exploiting its
entire production capacity, could only satisfy about 80 % of the demand in the
Community market. Imports from third countries will therefore always be
necessary. Thus, even if the existing anti-dumping measures were continued,

21

the exporters of the country concerned would be able to further export to the
Community at fair prices.

6. Conclusion on Community interest

(103) On the basis of the information available and having analysed all the various
interests involved, the Commission services state the following: On the one
hand, a continuation of the anti-dumping measures is likely to result in a stable
price for CCM in the Community market which, over the duration of the
measures in force, appears not to have had any negative effects on the
economic situation of users and importers. However, on the other hand,
the
leaving the Community industry without adequate protection against
dumped imports, would not only further aggravate its difficulties, but could
even lead to its disappearance. The price advantage for users resulting from
the non-imposition of anti-dumping measures does not compensate for the
benefit achieved by the removal of the trade distortion caused by the dumped
imports.

I. ANTI-DUMPING MEASURES

(104) All parties concerned were informed of the essential facts and considerations
on the basis of which it was intended to recommend the maintenance of the
existing measures. They were granted a period within which to make
representations subsequent to disclosures. The comments of the parties were
the findings have been modified
considered and, where appropriate,
accordingly.

(105)

It follows from the above that, as provided for by Article 11(2) of the Basic
the anti-dumping measures in the form of a variable duty
Regulation,
associated to a minimum import price of 112 ECU/ tonne on imports of CCM
originating from the People’s Republic of China imposed by Regulation
(EEC) No 1473/93 should be maintained, but expressed in the new European
currency EURO. The new minimum price is therefore to be 112 EURO/ tonne.

HAS ADOPTED THIS REGULATION:

Article 1

1.

2.

A definitive anti-dumping duty is hereby imposed on imports of magnesium
oxide originating in the People’s Republic of China falling within CN code ex
2519 90 90 (Taric code 2519 90 90 10).

The amount of the duty shall be the difference between 112 EURO per tonne
and the net, free-at-Community-frontier price before customs clearance, if the
latter price is lower.

22

3.

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

Article 2

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

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

Done at Brussels,

For the Council
The President

23