Proposal for a Council Regulation imposing definitive anti-dumping duties on imports of silicon carbide originating in the People's Republic of China, the Russian Federation and Ukraine and prolonging the undertaking accepted by Commission Decision 94/202/EC
Date: 2000-04-18
Institutions: European Commission
Subjects: China, USSR, Ukraine, anti-dumping duty, semi-metal

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 18.04.2000
COM(2000) 231 final

Proposal for a

COUNCIL REGULATION

imposing definitive anti-dumping duties on imports of silicon carbide originating in the
People's Republic of China, the Russian Federation and Ukraine and prolonging the
undertaking accepted by Commission Decision 94/202/EC

(presented by the Commission)

EXPLANATORY MEMORANDUM

On 10 April 1999, the Commission initiated an expiry review investigation of the measures in
force in respect of these imports after receipt of a request made by the Community producers
indicating that the expiry of the measures would likely lead to a continuation or recurrence of
injurious dumping.

The attached proposal for a Council Regulation is based on the findings on dumping, injury
and Community interest and on the analysis of the possible effects of the removal or
maintenance of the measures in force.

The investigation confirmed the likelihood of recurrence of injurious dumping should the
measures be repealed in respect of the country concerned.

It is, therefore, proposed that the Council adopt the attached proposal for a Regulation by
which the existing measures would be prolonged.

2

Proposal for a

COUNCIL REGULATION

imposing definitive anti-dumping duties on imports of silicon carbide originating in the
People's Republic of China, the Russian Federation and Ukraine and prolonging the
undertaking accepted by Commission Decision 94/202/EC

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 Articles 9 and 11(2) thereof,

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

Whereas:

A. PREVIOUS INVESTIGATION

(1)

By Regulation (EC) No 821/942as last amended by Regulation (EC) No 1786/973,
following an expiry review, the Council imposed definitive anti-dumping duties on
imports of silicon carbide, falling within the CN code 2849 20 00, originating in the
People's Republic of China (hereinafter referred to as "China"), the Russian Federation
(hereinafter referred to as "Russia") and Ukraine. At the same time, the Commission
accepted an undertaking offered by the government of Russia, in conjunction with
V/O Stankoimport, Moscow, Russia.

B. PRESENT INVESTIGATION

(2)

1

2

3

4

Following the publication in October 19984 of a notice of the impending expiry of the
measures in force, the Commission received a request for a review lodged by the
European Chemical Industry Council (CEFIC) on behalf of producers representing a
major portion of the Community production of silicon carbide (hereafter “the applicant
Community producers”). The request was based on the grounds that the expiry of the
measures would be likely to result in the continuation or recurrence of dumping and
injury to the Community industry.

OJ L 56, 6.3.1996, p.1. Regulation as last amended by Regulation (EC) No 905/98 OJ L 128, 30.4.1998,
p. 18.
OJ L 94, 13.4.1994, p. 21.
OJ L 254, 17.9.1997, p. 6.
OJ C 316, 14.10.1998, p. 4.

3

(3)

(4)

(5)

Having determined, after consulting the Advisory Committee, that sufficient evidence
the Commission initiated an investigation
existed for the initiation of a review,
pursuant to Article 11 (2) of Council Regulation (EC) No 384/96 (hereinafter referred
to as the Basic Regulation) through the publication of a notice of initiation5.

The investigation of the possibility of a continuation and/or recurrence of dumping
covered the period from 1 January 1998 to 31 December 1998 (hereinafter referred to
as “investigation period” or "IP"). The examination of trends relevant for the
assessment of any continuation and/or recurrence of injury (hereinafter referred to as
“injury investigation period” or "IIP") covered the period from 1 January 1995 to
31 December 1998.

The Commission officially advised the applicant Community producers, the exporters
and exporting producers in China, Russia and the Ukraine, the importers known to be
concerned, and the representatives of the exporting countries concerned 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,
as well as to the co-operating exporting producer in the analogue country Brazil. The
Commission also gave the parties directly concerned the opportunity to make their
views known in writing and to request a hearing.

(6)

All the applicant Community producers replied to the questionnaire, as well as four
importers, two traders associated to a related importer and six users. In addition, three
other importers made their views known in writing.

(7) With respect

to the exporting countries concerned,

the following companies

cooperated in the investigation:

a) Exporting producers:

–

–

Zaporozhsky Abrasivny Combinat, Zaporozhye, Ukraine

Volzhsky Abrasive, Volzhsky, Volgograd Region, Russia

b) Exporter:

–

Stankoimport, Moscow, Russia

c) Related importer:

–

Mineral Abrasive Rohstoff, Kuppenheim, Germany

d) Producer in the analogue country:

–

Casil S/A Carbureto de Silicio, São Paulo, Brasil

(8)

(9)

No exporting producer located in China co-operated in the investigation.

The Commission sought and verified all information it deemed necessary for the
purpose of a determination of the continuation or recurrence of dumping and injury

5

OJ C 99, 10.4.1999, p. 18.

4

and of the Community interest. Verification visits were carried out at the premises of
the following companies:

a) Applicant Community producers:

–

–

Elektroschmelzwerk Kempten GmbH, München, Germany

Navarro SA, Madrid, Spain

b) Unrelated importers in the Community

–

–

Intermat S.A, Hody, Belgium

Imexco Ullrich GmbH, Saarbrücken, Germany

c) Traders associated to a related importer

–

–

Mineralien-Werke GmbH Kuppenheim, Kuppenheim, Germany

Mineralien-Werke Duisburg GmbH, Duisburg, Germany

d) Users in the Community

–

–

Carborundum Schleifmittelwerke GmbH, Düsseldorf, Germany

Sebald & Co. GmbH, Marktredwitz, Germany

– Werner Kessl Giessereibedarf, Trabitz, Germany

C. PRODUCT CONCERNED AND LIKE PRODUCT

(10)

(11)

(12)

The product concerned by this proceeding is silicon carbide, falling within CN code
2849 20 00 (hereinafter referred to as "silicon carbide” or the “product concerned").

The production process of silicon carbide is such that
the output automatically
comprises a variety of qualities of silicon carbide which can be segregated into two
main grades: crystalline and metallurgical. The crystalline grade, which is further
classified under the types black and green, is normally used in the manufacturing of
abrasive tools, grinding wheels, high quality refractory products, ceramics, plastic
materials etc., while the metallurgical grade is normally used in foundry and blast
furnace operations as a silicon carrier. As in the previous investigations, both grades
have to be considered as forming one product for the purpose of this investigation.

In this respect, the Commission also examined whether nitrified silicon carbide blocks
should be considered as falling under the product description as outlined above. It was
found that, even if these nitrified silicon carbide blocks are made of silicon carbide,
the silicon carbide undergoes a specific additional production process giving the
blocks different physical and chemical characteristics as compared to silicon carbide.
On this basis it has been concluded that they do not fall under the product definition as
outlined above. This conclusion is supported by the fact that nitrified silicon carbide
blocks are imported under a separate customs heading, namely CN code 6902 90 00.

5

(13) As the previous investigation has shown, the product produced and sold by the
applicant Community producers on the Community market is alike in all respects to
the silicon carbide imported from the three countries concerned and also to the product
sold on the domestic market of the market economy third country, i.e. Brazil. All these
products should therefore be considered one like product within the meaning of
Article 1 (4) of the Basic Regulation.

D. LIKELIHOOD OF CONTINUATION AND/OR RECURRENCE OF DUMPING

(a) Preliminary remarks

(14)

(15)

In accordance with Article 11(2) of the Basic Regulation, the purpose of this type of
review is to determine whether, or not, the expiry of the measures would lead to a
continuation or recurrence of injurious dumping.

In examining whether there is a likelihood of continuation of dumping if measures
were removed, it is necessary to verify whether dumping exists at present and/or
whether any such dumping is likely to continue. In this respect it should be noted that
all three exporting countries continued to export to the Community during the IP. The
level of imports from Russia, which was only slightly below the level in the previous
investigation, was considered sufficient for a reliable and representative picture to be
obtained for the IP and for the prognosis whether such findings were likely to apply
for the future ("continuation test"). For China and Ukraine, whose volume of imports
was relatively low, the findings on dumping for the IP were supplemented by an
examination of whether the removal of measures would likely lead to a recurrence of
dumping ("recurrence test").

(b) Analogue country

(16)

Since the three countries concerned are considered to be non-market economy
countries, normal value had to be established in accordance with Article 2 (7) (a) of
the Basic Regulation, i.e. based on information obtained in a market economy third
country where the product was produced and sold.

(17) After examination of

the Commission
concluded that Brazil was the appropriate choice of analogue country for the following
reasons:

the world-wide silicon carbide market,

–

–

–

the size of its domestic market makes Brazil a representative country for the
establishment of normal value for the countries concerned;

domestic prices in Brazil are governed by normal market forces given the level
of demand in the market and the existence of competing producers;

in terms of the range of qualities of silicon carbide and its basic physical and
chemical characteristics, the product manufactured in Brazil can be considered
identical to the product exported from the countries concerned.

(18) On this basis, it was concluded that Brazil was a reasonable and appropriate choice as
an analogue country in order to establish normal value for imports of silicon carbide
originating in China, Russia and the Ukraine.

6

(c) Normal value

(19) Normal value was calculated on the basis of the data of the co-operating Brazilian

company.

(20)

First of all, it was examined whether the domestic sales made by the co-operating
Brazilian company were representative when compared to the imports into the
Community from the three countries concerned. This was found to be the case for each
grade of silicon carbide, i.e. crystalline and metallurgical, exported from the countries
subject to investigation to the Community.

(21)

It was then examined whether the relevant sales could be considered as having been
made in the ordinary course of trade, comparing domestic prices and costs of
production for each grade of silicon carbide.

(22)

For crystalline silicon carbide the sales were made in the ordinary course of trade and
normal value was therefore based on the actual price on the Brazilian market.

(23) As the sales of metallurgical silicon carbide in the Brazilian domestic market were
made at a net sales price that was lower than the cost of production, these actual prices
could not be used to establish normal value. It was consequently necessary to calculate
a constructed normal value for the grade in question, in accordance with Article 2(3)
of the Basic Regulation. The calculation has been made on the basis of the costs of
manufacturing incurred by the Brazilian exporting producer plus a reasonable amount
for selling, general and administrative costs (SG&A) and for profits. To this end, the
Commission used the actual SG&A expenses incurred and the domestic profit margin
realised on the basis of those domestic sales of crystalline silicon carbide which have
been made in the ordinary course of trade.

(d) Export price

(24)

(25)

(26)

In all cases where exports of silicon carbide were made to independent customers in
the Community, the export price was established in accordance with Article 2(8) of the
Basic Regulation, i.e. on the basis of export prices actually paid or payable.

For the purpose of determining the export price, the Commission did not take into
consideration the sales made by the Russian exporting producer to its related importer
in the Community due to insufficient co-operation concerning dumping aspects.
Consequently, the export price has been determined in accordance with Article 18(1)
on the basis of the remaining sales.

Since no co-operation was received from any Chinese producer, the export price had
to be determined in accordance with Article 18(1) of the Basic Regulation. The
Commission found that Eurostat figures were the best
information available and
export prices were established on that basis.

(e) Comparison

(27)

For the purpose of ensuring a fair comparison between the normal value and the export
price, due allowances in the form of adjustments were made for differences affecting
price comparability, in accordance with Article 2(10) of the Basic Regulation. On this
basis, an adjustment to the normal value was made for packaging costs while the
export price was adjusted for freight, discounts, packaging and commission expenses.

7

(f) Dumping margin

(28) A dumping margin was determined for Russia and Ukraine respectively, by comparing
the weighted average normal value with the weighted average export price to the
Community.

(29)

(30)

The comparison showed the existence of significant dumping margins with regard to
imports originating from both countries. These margins were even higher than those
established in the previous investigation.

For China a comparison between the average Brazilian normal value of silicon carbide
per tonne and the average export price per tonne based on Eurostat data for silicon
carbide originating in China, showed a significant dumping margin.

(g) Likelihood of continuation and/or recurrence of dumping

(31) As outlined above, imports into the Community from the countries concerned were
levels, which implies a likelihood of continuation of
still dumped at significant
dumping,
in particular for Russia. However, as far as Ukraine and China are
concerned, the import volumes during the IP were comparatively low (below 1% of
Community consumption). Therefore it was further examined whether there was also a
likelihood of recurrence of dumping through increased imports.

(i) China

(32)

In the absence of co-operation from the Chinese exporting producers, the Commission
based its analysis on information provided in the review request as well as on
information obtained from specialised press and market studies submitted by
interested parties in the course of the investigation.

(33) According to the above-mentioned sources, China has a large production capacity of
silicon carbide which represented around 40% of the world-wide production capacity
in the IP. The same sources rate the actual Chinese production at about 70% of its
potential.

(34) Under these circumstances, the Chinese producers are capable of producing additional
quantities, which would represent around 70% of the Community consumption during
the IP.

(35) Currently the Chinese exports of silicon carbide already strongly dominate the US and
Japanese markets and it is unlikely that their domestic consumption will increase
significantly in the coming years. These markets cannot,
therefore, absorb any
additional quantities.

(36) With respect to Chinese exports to third countries, the Commission analysed the
situation on the US market which is, in terms of volume, the most important export
market for Chinese exports of silicon carbide.

(37) Concerning the export prices, the investigation has established that Chinese exports to
the US are mainly of the metallurgical grade, i.e. the lower grade. It was further found
that the price of the Chinese material sold on the US market was substantially below
the normal value established in Brazil and also lower
than the price of the
metallurgical grade of silicon carbide sold by the Community producers on the

8

Community market. It was also lower than the CIF prices actually offered for Chinese
imports into the Community. Thus, imports into the US would be dumped to a larger
degree than Chinese imports into the Community. In this respect, it should finally be
noted that a considerable part of the Community consumption also consists of the
metallurgical grade.

(38)

The key factors found are thus the large unused production capacity, the substantial
Chinese export volumes to the US and the low level of the export prices to the US
(even lower than the Chinese export prices to the Community). On this basis, it is
more than likely that exports in significant quantities will recur (by using idle
production capacities and/or by redirecting exports currently destined for the US),
should measures be repealed. The current Chinese export prices charged to the US can
serve as an indication of the price level of any future exports to the Community.
Consequently, there is a likelihood of recurrence of high dumping for significant
volumes.

(ii) Ukraine

(39)

(40)

(41)

The known exporting producer from the Ukraine co-operated in the investigation and
investigation. The
provided information which the Commission used in its
Commission also based its analysis on information provided in the review request as
well as on information obtained from the specialised press and market studies.

the capacity utilisation of this exporting
The investigation has established that
producer was less than 60% during the IP. In terms of quantities, and given the total
Community consumption, it would be in a position to produce additional volumes
representing around 6% of the Community consumption during the IP.

The investigation has established that the largest export market for the Ukraine is the
Czech Republic. The IP exports to the Czech Republic amounted to a quantity which
corresponded to between 2% to 5% of the Community consumption. Since only a part
of these exports were directly sold by the co-operating Ukrainian exporting producer,
the official trade statistics of these countries were used in order to determine the
average Ukrainian export prices. These were found to be significantly lower than the
prices of silicon carbide produced and sold by the Community industry on the
Community market and also lower than the Ukrainian export prices charged in the
Community.

(42)

The Ukrainian exports to the Czech Republic give a clear indication of their potential
export behaviour on the Community market, both in terms of volume and value, in
case measures were repealed.

(43) Given the attractiveness of the Community market in terms of prices compared to
other markets, it is concluded that current import volumes into the Community from
Ukraine are likely to increase substantially should measures be repealed. There is no
indication that the future export prices would be higher than the current dumped
Ukrainian export prices to the Community. It has therefore to be concluded that there
is a likelihood of recurrence of dumping in significant volumes for the Ukraine.

9

(h) Conclusion

(44)

In view of the above it has been established that there is likelihood of continuation of
dumping with respect to Russia and, as far as Ukraine and China are concerned, there
is likelihood of recurrence of dumping, should the measures be repealed

E. DEFINITION OF THE COMMUNITY INDUSTRY

(45)

(46)

the two applicant producers
The investigation confirmed that during the IP,
represented the totality of Community production of silicon carbide. Therefore, they
constitute the Community industry within the meaning of Article 4 (1) and
Article 5 (4) of the Basic Regulation.

It should be noted that two out of the four Community producers representing the
Community industry in the previous investigations ceased their silicon carbide related
operations a few months after the imposition of the measures currently in force. These
two producers were Pechiney Electrometallurgie in France and Samatec in Italy.

F. THE SITUATION IN THE COMMUNITY MARKET

1. Consumption in the Community

(47)

The apparent Community consumption of silicon carbide was established on the basis
of the sales volumes of the Community industry on the Community market, as well as
imports into the Community of silicon carbide from the countries concerned and all
other third countries.

(48) On this basis, consumption increased by 8% during the IIP. In this respect, it should be
noted that the silicon carbide market has overall been a stable market during the period
investigated. Only 1998 (the IP) showed an increase in consumption which can be
explained by the increased activity of the steel industry and should thus be considered
exceptional. The exceptional character of the consumption in 1998 is confirmed by
figures available for the first six months of 1999 which are comparable to the levels
reached in 1996 and 1997.

2. Imports from the countries concerned

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

(49)

The import volume of silicon carbide originating in the countries concerned went
down significantly from 37,886 tonnes in 1995 to 15,492 tonnes in the IP, equivalent
to a decrease of about 59% during the IIP. This decrease is especially marked for
China and the Ukraine. By comparison, the relatively small decrease of the Russian
import volume (-7%) can be explained by the acceptance of an undertaking from the
Russian exporter Stankoimport limiting Russian imports to a non injurious level, all
other imports originating in Russia being subject to anti-dumping duties.

(50)

The overall market share of the imports from the countries concerned in the
Community decreased by 39% between 1995 and the IP. The market share of China
and Ukraine fell below 1%, while the market shares of imports from Russia remained
relatively stable between 5 to 10.

10

(b) Price evolution of the imports concerned and related price behaviour

(i) Price evolution of the imports concerned

(51) On the basis of Eurostat figures, a price evolution has been established for the IIP.
This analysis was however hampered by the fact that the relevant CN code does not
distinguish between the different grades of silicon carbide. On the basis of the
information collected in the course of the investigation, it has been established that
imports originating in China mostly consist of metallurgical (i.e. lower) grades while
imports originating in the two other countries concerned cover both metallurgical and
crystalline grades.

(52) On this basis Eurostat figures showed that the Russian prices increased by 11%
between 1995 and the IP, while the average prices of exports from China and Ukraine
decreased by 28% and 8%, respectively.

(ii) Price behaviour

(53)

In order to examine the exporters' price behaviour in relation to the one of the
Community industry, a price comparison was made and it was established that, during
the IP, the prices of the imports concerned (at a customs and antidumping duty paid
level) were on average significantly below the Community industry’s sales prices.
More specifically, it was found that the Russian imports made in the framework of the
undertaking (i.e. exempt from anti-dumping duties) were made at prices considerably
below those of the Community industry. All these sales were of crystalline grades.
However, the price of the additional import volume of the product under consideration
originating in Russia, mostly of metallurgical grade, was found to be higher than
Community industry’s prices, even when discounting the antidumping duty

3. Economic situation of the Community industry

(a) Production

(54)

The production of silicon carbide by the Community industry has increased by 13,4%
between 1995 and the IP. The largest increase took place in 1996, after the imposition
of the measures currently in force. Since then production remained relatively stable. It
should, however, be noted that the evolution of the production during the year 1996
was not matched by a similar evolution of the sales volume.

(b) Production capacity

(55)

The production capacity remained stable during the IIP. In this respect it should be
noted that the production capacity under consideration is exclusively dedicated to the
production of silicon carbide.

(c) Capacity utilisation

(56)

The capacity utilisation rose by 13,4% during the IIP, corresponding to the increase of
production.

11

(d) Sales volume

(57)

The sales volume of the Community industry on the Community market increased by
14.5% during the IIP. The increase was most remarkable between 1997 and the IP,
when Community consumption expanded. In this respect, it should be noted that the
expansion of the sales volume concerned mainly the low grades.

(e) Market share

(58)

The Community industry’s market share in the Community market slightly increased
by around 2 percentage points during the IIP, reaching a level of around 30% of the
total Community market.

(f) Price development

(59)

(60)

(61)

The average sales price of the Community industry, while showing a clear increase
after the imposition of the measures currently in force in 1995 and 1996, then
decreased again towards the IP, leading to an overall decrease of 7%.

This development should be seen in the light of a change of product-mix of the
Community industry’s sales. The investigation has established that the Community
producers increased their proportion of sales of lower grades which resulted in a
decrease of the average sales price. When disregarding this product-mix effect, the
prices have actually increased during the year 1996, but afterwards went down for the
lower grade, while remaining stable for the higher grade. The price trend over the
whole IIP was accordingly stable with a peak during the year 1996.

It should also be noted that while the average Community industry price is
significantly higher
the Community
industry’s sales also include highly specific grades which are significantly more
expensive than the average, thus having likewise a strong impact on the average sales
price.

than the prices of the imports concerned,

(g) Employment

(62)

Employment decreased by 9% during the IIP.

(h) Investments

(63)

The investments were especially high during the years 1995 and 1996, in which the
Community industry had to change its production processes in order to comply with
the requirements of the environmental Community legislation. During the years 1997
and IP, the investments were then mainly related to the improvement and renewal of
existing equipment. It is therefore concluded that the Community industry continued
to invest in order to further improve its production processes.

(i) Profitability

(64)

The profitability of the Community industry, expressed as a percentage of net sales,
while increasing between 1995 and 1996, fell afterwards to slightly below break even
during the IP. This trend can be linked with the price evolution.

12

4. Import volume, market shares and import prices from other third countries

(a) Import volume and market shares

(65)

(66)

The import volume of silicon carbide from other third countries increased during the
IIP by around 30,000 tonnes, representing an increase of 27%. In terms of market
shares, these third countries gained about 9 percentage points.

It should be noted that 80% of these imports originate only from three countries,
namely Norway, Venezuela and the Czech Republic. In terms of quantities, Norway is
the most significant, but its import volume as well as its market share remained stable
during the IIP. However, the Venezuelan imports increased by 163% during the IIP,
more than doubling their market share which reached around 10% during the IP. As
far as the Czech imports and market share is concerned they increased fivefold during
the same period reaching a level of around 6% during the IP. The market shares of
these three countries increased by 35% and have been fluctuating between around 30%
to 50% of the Community market.

(b) Sales prices of imports from third countries

(67)

The import price evolution of the three most significant exporting countries is as
follows. The Norwegian prices have always remained at a high level during the IIP
which is consistent with the fact that their exports are mostly of high grades. The
the product under consideration originating in the Czech Republic
prices of
significantly decreased during the IIP (-35%), whilst
the price decrease of the
Venezuelan imports amounted to 9%, the prices from these two latter countries being
at a very low level as compared to the prices of the Community industry.

5. Conclusion on the situation in the Community market

(68)

The measures currently in force have had a significant positive impact on the
Community industry since the year 1995. Indeed, most of the economic factors
analysed showed a positive development from 1995 to IP: the production volume and
the production capacity utilisation increased by 13%, the sales volume increased by
15%, and there was a slight gain of market shares. However, the positive trend was
diluted by, in particular, low sales prices of the Community industry. This explains
why the profitability of the Community industry did not improve in line with the
trends and remained at around break-even.

(69) As to the exporting countries concerned, two of them (China and Ukraine) lost
significant sales volume and their market shares are now minimal. The Russian
imports have decreased less drastically and have remained stable at a market share of
around 5 to 10%. In terms of prices, imports from the countries concerned have been
made at low prices as compared to those of the Community industry.

(70) During this period, imports from other third countries have increased. This especially
concerns imports from Venezuela and the Czech Republic which during the last two
years of the IIP significantly increased their market shares, and this at
low and
decreasing sales prices.

(71)

It can thus be concluded that the Community industry could not fully recover from the
effects of injurious dumping for the reasons explained above and is therefore still in a
fragile situation.

13

G. LIKELIHOOD OF CONTINUATION AND/OR RECURRENCE OF INJURIOUS
DUMPING

1. The situation of the countries concerned

(72)

In order to assess the likely effect of the expiry of the measures in force, and taking
into account that the Community industry is still in a difficult situation having regard,
in particular, to its profitability, the following elements were considered.

(a) China

(73)

(74)

In accordance with the findings explained under recitals (30) to (36) above, the large
and unused production capacity constitutes a potential for Chinese exporters to raise
their production and export volumes to the Community in the future. Furthermore,
having regard to these findings with respect to the export behaviour on third country
markets, namely the US, both in terms of volume and prices, it appears that the
Community market will be highly attractive for the Chinese exporters should measures
lapse.

It was also considered whether the fact that, since the beginning of 1999, exports of
silicon carbide from China are subject to a local licence system operated for certain
minerals and rare earths, could have any possible effects on the future pricing of the
Chinese exporters. In this respect, it is considered that the system described above is
run autonomously by the government of the exporting country and that its existence
cannot have any influence on the decision of the Community institutions whether or
not injurious dumping would recur.

(b) Russia and Ukraine

(75)

(76)

(77)

In accordance with the findings explained under recitals (37) to (42) above, the unused
production capacity for both countries constitutes a potential for Russian and
Ukrainian exporters to raise their production and export volumes to the Community in
the future. Furthermore, having regard to their export behaviour on third country
markets, mainly the Czech Republic, both in terms of volume and prices, it appears
that the Community market will be highly attractive also for these exporters should
measures lapse.

Since the imposition of the measures, the imports into the Czech Republic originating
in Russia and the Ukraine have multiplied by 6.5 in terms of volume reaching a level
corresponding to 6% of the Community consumption.

Should the measures be repealed, the Russian and Ukrainian exporters will be able to
re-direct some of their significant exports to the Community and market
their
production surplus, and this at prices which will undercut the Community industry's
prices, as indicated by their price behaviour on third country markets. Moreover, it
should be noted that the best quality Russian silicon carbide (crystalline grade),
imported into the Community free of anti-dumping duties within the framework of the
undertaking, is currently sold at a significantly lower price than the price of the
corresponding grades of the Community industry.

14

2. Conclusion on the likelihood of continuation and/or recurrence of injurious dumping

(78)

In view of the above, namely the following factors:

–

–

–

–

–

should the measures be repealed there is a likelihood that imports from the
three countries concerned will continue at dumped prices because there has
been a continuation of dumping and no reasons are apparent as to why
dumping would stop in the near future;

there is a likelihood that the import volumes will rise significantly because
there are clear indications that the three countries concerned have the potential
to raise their production and export volumes in view of their large unused
production capacity and the significant exports to third country markets;

this is reinforced by their export behaviour in these third country market after
the imposition of the anti-dumping measures currently in force;

furthermore, it is also likely that the prices charged by the exporters from the
countries concerned,
in the absence of anti-dumping measures, would be
significantly below the prices of the Community industry considering, on the
one hand, the price behaviour of these exporters on their major export markets
and, on the other hand, the low prices (even including duty) that they currently
apply to their exports to the Community market. In addition, the Community
market being stable in terms of demand, an increase of supply of silicon
carbide on the market will certainly have a price-depressing impact;

the Community industry improved markedly
although the situation of
following the imposition of the measures under consideration, it could not
maintain its profitability and is thus still in a delicate situation;

it is concluded that, should the measures be repealed, there is a likelihood of recurrence of
injurious dumping

H. COMMUNITY INTEREST

1. Preliminary remark

(79)

(80)

In order to assess the likely impact of a continuation or repeal of the measures, the
Commission requested information from all interested parties mentioned above. The
Commission sent questionnaires to 40 importers (including two associated traders) and
22 users of the product concerned. Six importers replied to the questionnaires, while
four of them provided the Commission with information. As to the users, six of them
replied to the questionnaires and data were verified.

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 of a situation in which anti-dumping
measures have already been in place. Consequently the present investigation should
allow any undue negative impact on the parties concerned by the current anti-dumping
measures to be identified.

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(81) On this basis it was examined, whether, despite the conclusions on dumping, on the
situation of the Community industry and on the recurrence of injurious dumping,
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

(82)

(83)

It is considered that a repeal of the anti-dumping measures imposed in the previous
investigation would be likely to result in the recurrence of injurious dumping and that
consequently the situation of the Community industry, which has improved but is still
fragile, will deteriorate.

The Community industry has developed the production of a very high quality silicon
carbide. Together with one non-Community-based producer, it is currently the only
one to be able to produce and supply the Community market with such high quality
products. It is used for very specific and newly developed applications in the field of
the electronic and advanced ceramics sector. These two market segments are the
greatest area of growth from which the Community industry will certainly continue to
benefit in the coming years. But even if they represent high added value markets, they
still represent a low volume of sales, which is not sufficient to cover the entire
production cost, bearing in mind that both high grade and low grade silicon carbide
result from one production process. It is therefore important to ensure that unfair trade
practices do not impede the high-volume market segment for lower grades which have
also to be sold at a reasonable price in order to sustain the viability of the Community
industry.

(84)

Indeed, all players in the sector seem to agree on the fact that if measures were
repealed, competition will be particularly fierce at the low grade level. Accordingly it
can be expected that the Community industry would lose significant volume and
market shares on this segment with the consequence that
its situation would be
seriously endangered.

(85) Given the above, it appears justified to prolong the existing measures in order to ward
off the adverse effects of dumped imports which could endanger the existence of the
Community industry. It has also to be considered that if the industry disappears, there
will also be a negative impact on the downstream industry, since the latter will become
totally dependent on imports from third countries.

3. Interests of importers

(86) Out of

the forty importers (including two associated traders) who received
questionnaires, five replied. Four of them are clearly in favour of the continuation of
the measures, arguing that if the measures are repealed, the market would be flooded
by cheap and low quality product which would cause a disruption of the market. One
importer opted for a neutral position.

(87)

In view of the low level of co-operation and taking into account the above comments,
it is concluded that the economic situation of the importers of the product concerned
would in general not be unduly and negatively influenced by the continuation of the
measures.

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4. Interests of the users

(88)

The downstream industry is mainly active in three different market segments: the
abrasive segment (i.e. polishing applications), the refractory segment (i.e. lining in
furnaces) and the metallurgical segment where silicon carbide is used as an alloy. This
last segment represents the largest in the Community but covers the lowest quality
grade silicon carbide.

(89) With regard to the impact of the anti-dumping duties on users, the low level of co-
operation as well as the comments given by the co-operating companies indicate that
the measures currently in force did not have a significant negative impact on the users
of silicon carbide. In this respect it should be noted that none of the users claimed that
there had been a general price increase and/or reduction of their profitability since
measures had been imposed five years ago.

(90)

(91)

In more detail, concerning the six co-operating users one did not give any comments
on the situation whereas three clearly claimed to be in favour of the continuation of the
measures. They were of the opinion that in case the measures were repealed, the
Community industry would have to discontinue its operation and, consequently, that
they would lose their source of supply for the high grade silicon carbide used for the
high end applications. In this respect, as already explained above, apart from the
Community industry only one other third-country producer is in the position of
producing and selling comparable grades on the Community market. This latter would
eventually remain the only producer to supply the Community market, with the risk of
a monopolistic position. In addition, this latter producer is part of an international
group which is also strongly active on the downstream markets. There could therefore
be a risk that competition in the sector could become more and more difficult for the
‘independent’ users.

Two users were in favour of repealing the measures. One, active in abrasive
applications, argued that without anti-dumping measures in place, it would be possible
to find cheaper raw materials to better compete with comparable imported applications
using the cheapest silicon carbide. The other, active on the metallurgical market,
claimed a shortage of material in the Community. The above should be analysed in the
light of the fact
that silicon carbide represents on average 20% of the cost of
production of abrasive applications and that it is currently available – free of anti-
dumping duty – from numerous different sources covering a significant part of the
Community consumption including Community producers, third countries and even
partially free of duty from Russia.

(92)

In view of the above, it can be concluded that the continuation of the measures is
generally not against the interests of the users of silicon carbide.

5. Conclusion on Community interest

(93)

Leaving the Community industry without any protection would most likely not only
weaken its position, but could even lead to its disappearance, as happened for two of
the Community producers involved in the previous investigation.

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(94) As to the users and importers of silicon carbide, it appears that the imposition of the
measures in general did not have any undue negative effects on their economic
situation. A significant number of the co-operating users and importers are even in
favour of the continuation of the measures.

(95)

Therefore, it is concluded that there are no compelling reasons of Community interest
against the continuation of the measures.

I. ANTI-DUMPING MEASURES

(96) All parties concerned were informed of the essential facts and considerations on the
basis of which the maintenance of the existing measures is based. They were granted a
period within which to make representations subsequent
to the disclosure. No
comments were received which were of a nature to change the above conclusions.

(97)

(98)

(99)

It should be recalled that by Commission Decision 94/202/EC the undertakings
offered by the Russian government in conjunction with the company Stankoimport
have been accepted. These undertakings are still applicable.

The exporter concerned as well as the authorities of the exporting country have been
informed that the continuation of the definitive anti-dumping measures pursuant to
Article 11(2) of the Basic Regulation also implies that the company would remain
bound by the terms of its undertaking. No comments were received in this respect.

It follows from the above that, as provided for by Article 11(2) of the Basic
Regulation, the anti-dumping measures currently in force with regard to imports of
silicon carbide originating in China, Russian and Ukraine imposed by Regulation (EC)
No 821/94, as last amended by Regulation (EC) No 1786/97 should be maintained.

HAS ADOPTED THIS REGULATION:

Article 1

1. A definitive anti-dumping duty is hereby imposed on imports of silicon carbide, falling
within CN code 2849 2000, originating in the People’s Republic of China, The Russian
Federation and the Ukraine.

2. The amount of the duty applicable to the net, free-at-Community-frontier price, before
customs clearance, shall be as follows:

People’s Republic of China: 52.6%,

The Russian Federation: 23.3% (Taric additional code 8747)

The Ukraine: 24%.

3. The duty shall not apply to imports of the product concerned as defined in this article,
exported to the Community by the company V/O Stankoimport, Moscow, Russia (Taric
additional code 8746).

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

Article 2

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

Article 3

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

Done at Brussels,

For the Council
The President

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