Proposal for a Council Regulation imposing a definitive anti-dumping duty on imports of certain grain oriented electrical sheets originating in Russia
Date: 2003-01-16
Institutions: European Commission
Subjects: Russia, anti-dumping legislation, anti-dumping measure, import (EU), sheet, third country

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 16.01.2003
COM(2003) 8 final

Proposal for a

COUNCIL REGULATION

imposing a definitive anti-dumping duty on imports of certain grain oriented electrical
sheets originating in Russia

(presented by the Commission)

EXPLANATORY MEMORANDUM

(1) On 20 Feb. 1996, antidumping measures on ‘Grain Oriented Electrical sheets (GOES of a
width of more than 500 mm) originating in Russia’ were imposed by Commission Dec. No
303/96/ECSC, at a duty rate of 40.1% of the net, free-at-Community frontier price.

An undertaking (including a quantitative clause), offered in connection with such imports was
accepted from 2 exporters (Viz Stal and NLMK) and the state trader (VO Promsyrio import).

(2) An expiry review under article 11.2 was initiated on 20 Feb. 2001, together with an article
11.3 interim review on the form of the measures.

(3) On 6 Aug. 2002 and 8 Oct. 2002, partial interim reviews on Market Economy Status
(limited to dumping) were initiated after requests from the 2 above mentioned Russian
exporters.

(4) After investigation of the expiry review under article 11.2, covering a period from 1997
until the end of the Investigation Period (year 2000), evidence of continuation of dumping
was established together with the likelihood that a repeal of measures would lead to increased
imports at dumped prices with a continuation or recurrence of injury to the Community
industry.

(5) It is considered appropriate that the interim review on the form of the measures under
article 11.3 will be brought to a conclusion, together with the MES reviews now ongoing. In
the meantime, the existing Undertaking should remain in place.

(6) In the light of the above, it is proposed that the Council decides to maintain the existing
anti-dumping measures.

2

Proposal for a

COUNCIL REGULATION

imposing a definitive anti-dumping duty on imports of certain grain oriented electrical
sheets originating in Russia

THE COUNCIL OF THE EUROPEAN COMMUNITIES,

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) and (3) thereof,

After consulting the Advisory Committee,

Whereas:

1.

(1)

(2)

A. PROCEDURE

Previous investigation and measures in force

By Decision No 303/96/ECSC2, the Commission imposed a definitive anti-dumping
duty on imports into the Community of certain grain oriented electrical sheets
(“GOES”) originating in Russia and falling within CN codes 7225 11 00 and 7226 11
10. The rate of the anti-dumping duty imposed was 40.1%. An undertaking offered in
connection with such imports was accepted.

In view of the expiry of the Treaty establishing the European Coal and Steel
Community on 23 July 2002, the Council, by Regulation (EC) No 963/20023, decided
that anti-dumping proceedings initiated pursuant
to Commission Decision No
2277/96/ECSC (“basic Decision”) and still in force on that date shall be continued and
be governed by the provisions of Regulation (EC) No 384/96 of 22 December 1995 on
protection against dumped imports from countries not members of the European
Community (the “basic Regulation”) with effect of 24 July 2002. Likewise, any anti-
dumping measures resulting from pending anti-dumping investigations shall be
governed by the provisions of the basic Regulation from 24th July 2002.

2.

Requests for reviews

1

2

3

OJ L 56, 6. 3. 1996, p.1, as last amended by Regulation (EC) No 2238/2000 (OJ L 257, 11.10.2000, p.
2).
OJ L 42, 20.2.1996, p. 7.
OJ L 149, 7.6.2002, p. 3, as last amended by Regulation (EC) No 1310/2002 (OJ L 192, 20.7.2002, p.
9).

3

(3)

(4)

(5)

(6)

Following the publication of a notice of the impending expiry of the anti-dumping
measures in force on imports of GOES originating in Russia4,
the Commission
received a request to review the measures pursuant to Article 11(2) of the basic
Decision.

The request was lodged by the European Confederation of Iron and Steel Industries
(Eurofer) (“the applicant”) on behalf of producers representing a major proportion of
the Community production of the product concerned. The request was based on the
grounds that the expiry of measures would be likely to result in a continuation and/or
recurrence of dumping and injury to the Community industry.

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 the basic Regulation5.

At the same time a decision to open an Article 11(3) investigation was taken by the
Commission on its own initiative in order to examine the appropriateness of the form
of the measures6. During the course of the ongoing investigations, the Commission
received requests for Market Economy Treatment (MET) pursuant to Article 11(3) of
the basic Regulation by Viz Stal and Novolipetsk Iron and steel Corporation. These
requests were made on the grounds that the exporting producers concerned would now
fulfil these requirements and that their dumping margins had consequently decreased
substantially. As a result of these requests for MET the Commission decided to initiate
specific interim reviews in accordance with Article 11(3) of the basic Regulation,
limited in scope to the investigation of dumping of these exporting producers.
Therefore, it is considered appropriate to only decide on the results of the expiry
review (which was initiated on 20 February 2001)at this stage. The interim review
limited to the form of the measures on the other hand will be concluded together with
the MET reviews, thereby taking into account the current economic circumstances of
the exporters.

3.

Present investigation

(a) Procedure

(7)

(8)

The Commission officially advised the Community producers requesting the review,
the exporting producers, the importers, the suppliers and the users known to be
concerned, as well as the representatives of the exporting country, of the initiation, and
gave interested parties the opportunity to make their views known in writing and to
request a hearing within the time limits set out in the notice of initiation.

(b)

Interested parties and verification visits

The Commission sent questionnaires to the parties known to be concerned and to all
known producers of the product concerned in Brazil, the Czech Republic, India, Japan,
the Republic of Korea, Poland and the United States of America, these countries being
considered as potential analogue countries
investigation. The
Commission received replies from the four Community producers, requesting the

in the present

4

5

6

OJ C 216, 28.7.2000, p. 2.
OJ C 53, 20.2.2001, p. 13.
OJ C 53, 20.2.2001, p. 13.

4

review,
the two exporting producers in Russia, one supplier and from ten user
companies in the Community. Additionally, two Community importers both related to
one of the Russian exporting producers replied to the questionnaires. Finally, one
producer of GOES in Brazil replied to the questionnaire.

(9)

The Commission sought and verified all the information it deemed necessary for the
purposes of the likely continuation or recurrence of dumping and injury and the
determination of the Community interest. Verification visits were carried out at the
premises of the following companies:

Community producers requesting the review:

–

–

–

–

Acciai Speciali Terni S.p.A., Terni, Italy

EBG Gesellschaft für elektromagnetische Werkstoffe mbH, Gelsenkirchen,
Germany

Orb Electrical Steels Limited, Newport, United Kingdom

Ugo S.A., Isbergues, France

Supplier:

–

Thyssen Krupp Stahl AG, Duisburg, Germany

Users:

–

–

Alstom T & D SA, Saint-Ouen, France

Blum GmbH, Vaihingen, Germany

Exporting producers in Russia:

–

–

Novolipetsk Iron and Steel Corporation (NLMK), Lipetsk

VIZ STAL, Ekaterinburg

Other co-operating company, situated in a third country:

–

Duferco Investment SA, Lugano, Switzerland (Import co-ordinator within
Duferco Group)

Analogue country producer:

–

ACESITA SA, Sao Paulo and Timoteo, Brazil

(10)

The following companies also co-operated to the investigation but were not visited:

Users:

–

–

Alstom T & D SA, Le Petit Quevilly, France

Brush Transformers Limited, Loughborough, United Kingdom

5

–

–

–

–

–

–

Cogent Power Ltd, Bilston, United Kingdom

France Transfo S.A., Maizières-les-Metz, France

Hawker Siddeley Power Transformers Limited, London, United Kingdom

Société Nouvelle Transfix S.A., Toulon, France

South Wales Transformers Limited, Blackwood, United Kingdom

Surahammars Bruks AB, Surahammar, Sweden

(11) 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 measures. They
were also granted a period within which to make representations subsequent to these
disclosures. The comments of the parties were considered and, where appropriate, the
findings have been modified accordingly.

(c)

Investigation period

(12)

The investigation into the continuation and/or recurrence of dumping and injury
covered the period from 1 January 2000 to 31 December 2000 (“IP”). The examination
of the trends relevant for the assessment of likelihood of a continuation and/or
recurrence of injury covered the period from 1997 to the end of the IP (“analysis
period”).

B. PRODUCT CONCERNED AND LIKE PRODUCT

1.

Product concerned

(13)

(14)

The product concerned is the same as in the original investigation, i.e. grain oriented
cold-rolled sheets and strips of silicon-electrical steel with a width of more than 500
mm originating in Russia, falling within CN codes 7225 11 00 and 7226 11 10. This
product is used for electromagnetic appliances and in installations such as power and
distribution transformers.

In the rather complex manufacturing process of GOES, grain structures are orientated
uniformly in the direction of the rolling of the sheet or of the strip in order to allow it
to conduct a magnetic field with a high degree of efficiency. The product in question
has to comply with specifications concerning the magnetic induction, the pile factor as
well as the highest admissible level of re-magnetisation losses. In general, both sides
of the product are covered with a thin isolating coating.

2.

Like product

(15) GOES produced and sold in the Community by the Community producers requesting
the review and GOES produced in Russia and sold in the Community by the exporting
producers are considered to be like products, within the meaning of Article 1(4) of the
basic Regulation. It was also established that GOES produced and sold domestically in
the market economy third country (the “analogue country”), i.e. Brazil (see recitals
(20) to (28) below), had the same basic physical and technical characteristics as GOES
produced in Russia and exported to the Community. Therefore, they were considered
to be like products within the meaning of Article 1(4) of the basic Regulation.

6

C. LIKELIHOOD OF CONTINUATION OF DUMPING

1.

Preliminary remarks

(16) According to Article 11(2) of the basic Regulation, the purpose of an expiry review is
to determine whether dumping prevailed during the IP and whether the expiry of the
measures is likely to lead to a continuation or recurrence of dumping.

(17)

In this regard, the volumes exported to the Community during the present IP were
examined. During the original IP,
the share of Russian GOES exports on the
Community market amounted to 7.4% of the Community consumption, while the
market share of Russian imports of GOES in the Community during the present IP was
2.2%. This is, however, still significant, i.e. above the de minimis threshold defined in
Article 5 (7) of the basic Regulation.

(18)

The level of co-operation in the present proceeding was high. Both known Russian
exporting producers co-operated and replied to the Commission questionnaire. The
replies of both companies were verified on-the-spot.

2.

Likelihood of continuation of dumping

(19)

(20)

In the context of the likelihood of a continuation of dumping, it was investigated
whether dumping of exports from Russia was currently taking place. This was on the
grounds that, if dumping was taking place now, this could be an important indication
that dumping would be likely to continue and increase in the future, should the
measures be allowed to expire.

(a) Analogue country

The dumping margin calculated in the original investigation resulted in a single
country-wide margin concerning all imports into the Community of GOES originating
the same
in Russia. In accordance with Article 11(9) of the basic Regulation,
methodology was employed as in the original investigation. Accordingly, normal
value was determined on the basis of information obtained in an appropriate analogue
country selected in accordance with Article 2(7) of the basic Regulation.

(21) Brazil was selected as an appropriate analogue country in the original investigation.
As indicated in the notice of initiation, the Commission envisaged to use Brazil as an
appropriate analogue country also in the present investigation.

(22) One exporting producer objected to the choice of Brazil, arguing that the domestic
market of GOES of the Czech Republic or Poland would be more similar to the
Russian market.

(23)

(24)

The other exporting producer opposed to the choice of Brazil, arguing that because of
the existence of only one producer of the product concerned in Brazil the level of
competition on that domestic market was low.

The Commission, as mentioned above in recital (8), sent questionnaires to all
producers known to produce the product concerned in other third countries, including
the Czech Republic and Poland. These producers were invited to co-operate in the
present proceeding and to provide information on production and domestic sales of

7

GOES. However, none of these producers were willing to provide such information
and to co-operate in the present investigation.

(25)

Therefore, it should be noted that, although the investigation confirmed the existence
of only one producer of GOES in Brazil, no co-operation at all was received from
other producers in any other potential analogue country. Therefore, the information
provided by the producer in Brazil was considered the best and most reliable one
which was available for the purpose of determining normal value.

(26) Alternatively, the first mentioned exporting producer argued that in case of non co-
operation in both proposed countries, the Czech Republic and Poland, export prices of
the product concerned from these countries to the Community should be used to
establish the normal value in accordance with Article 2(7) of the basic Regulation.
However, due to the non co-operation, export prices would have been to be based on
Eurostat data instead of actual and verified figures. In this regard, it was considered
that the use of Eurostat data would result in less accurate findings, due to the fact that
export prices are recorded on a general basis without making any distinction between
differences having an influence on the export price, such as different product qualities
or level of trade. Since the producer in Brazil co-operated in the present proceeding it
was considered more appropriate to use actual, verified data of this producer, which
resulted therefore in more precise findings. Accordingly, the use of either Czech
Republic or Poland had to be rejected.

(27)

Furthermore, it was found that the production volume and production process in Brazil
were comparable to the ones in Russia. Indeed, the production process is virtually the
same worldwide. As mentioned in recital (15), it was also established that the product
produced and sold on the domestic market in Brazil was a like product to GOES
produced in Russia and exported to the Community. Furthermore, domestic sales of
GOES on the Brazilian market were representative as compared to the Russian exports
to the Community. Brazil was also used as an analogue country in the original
investigation.

(28) Consequently, the Commission had no reason to believe that the choice of Brazil was
not appropriate. Considering the above, and in the absence of any alternatives, Brazil
was selected as the most appropriate analogue country.

(b) Normal value

(29)

In accordance with Article 2(1) of the basic Regulation, it was considered whether
domestic sales of GOES in Brazil could be seen to be made in the ordinary course of
trade by reason of price. For so doing the Commission examined whether domestic
sales were profitable. For this purpose the full cost of production per unit during the IP
was compared to the average unit sales price of the IP. It was found that sales were
made at a profit. The investigation also revealed that all sales were made to
independent customers. As a result
the prices paid or payable for GOES by
independent customers on the Brazilian domestic market in the ordinary course of
trade were used to determine the normal value in accordance with Article 2(1) of the
basic Regulation.

(c)

Export price

8

(30) During the original investigation three exporters/producers, of which one was a trader,
co-operated. The present investigation revealed that the trader had ceased its export of
the product concerned to the Community prior to the current IP. Therefore, the export
price in the present investigation was established on the basis of the information
submitted by the remaining two exporting producers in Russia, which both co-
operated.

(31) One of these Russian exporting producers exported the product concerned to the
Community via two independent traders, both of which engaged merely in the re-
invoicing to end-users in the Community and other third countries. For this exporting
producer, export prices were determined on the basis of the prices charged to the first
independent customers, i.e. the unrelated traders. Thus, export prices were established
on the basis of the price actually paid or payable for the product concerned when sold
for export to the Community in accordance with Article 2(8) of the basic Regulation.

(32)

(33)

The other Russian exporting producer was largely owned and controlled by a related
holding/trading company in Switzerland. All exports were made via the Swiss
company to two related importers in the Community, which resold the product
concerned to the final customers in the Community. Therefore, export prices were
constructed on the basis of re-sale prices to the first independent customer in the
Community in accordance with Article 2(9) of the basic Regulation.

Furthermore the related company in Switzerland imported the product concerned into
the Community via its two Community based importing companies. It carried out the
functions of a trader and an adjustment was made to the export price by deducting a
commission from the export price to take account of the functions performed by it. As
far as the two related importers in the Community are concerned, selling, general and
administrative costs were deducted. In addition, for each related Community importer
involved, a reasonable profit margin was deducted. Since no unrelated importer co-
operated in the proceedings and in the absence of any other more reliable information,
a profit margin of 5% was considered reasonable.

(34) During the original investigation, the above exporting producer was not related to any
importer in the Community or in third countries and therefore, the determination of the
export price was originally based on prices actually paid or payable in accordance with
Article 2(8) of the basic Regulation.

(d) Comparison

(35)

(36)

In order to allow a fair comparison between normal value and export price, account
was taken of differences in factors, which were found to affect prices and price
comparability in accordance with Article 2(10) of the basic Regulation.

In this regard, it was found that the GOES produced and sold in Brazil had slightly
different features with regard to thickness and the maximum core loss under certain
specific electrical conditions. Therefore, adjustments for slight physical differences
between GOES sold on the Brazilian domestic market and those exported from Russia
into the Community were made. In addition, adjustments relating to export duties and,
in case of the unrelated Russian exporting producer, also to credit costs, were made as
they affected the export prices assessed for the exporting producers.

(e) Dumping margin

9

(37) A comparison was made between the weighted average normal value and the weighted
average export price on an ex-works basis. The comparison showed that exports from
Russia of GOES to the Community have been dumped at a substantial margin during
the IP. The dumping margin was equal to the amount by which the normal value
exceeded the prices for exports to the Community. The single country-wide weighted
average dumping margin exceeded 80% and was thus even slightly higher than the
dumping margin found during the original investigation.

3.

Development of imports should measures expire

(38)

It was also examined how imports of GOES from Russia would develop should the
measures expire. For that purpose the exports to the Community and third countries as
well as on the domestic market were examined. Consideration was also given to the
price behaviour of the Russian exporting producers on the different markets.

(a) Evolution of export volume and prices to the Community

(39) As mentioned above in recital (1), an undertaking offered by the Russian exporting
producers in the original investigation had been accepted by the Commission. The
undertaking consisted mainly in an annual quantitative limitation, i.e. export quantities
of the product concerned after imposition of the definitive measures were limited to a
ceiling fixed in the undertaking. In spite of the undertaking, and the fact that export
volumes remained stable, they nevertheless continued to be made at dumped prices.
There was therefore no reason to believe that, in case the measures in force were
repealed, prices would increase to non-dumped levels. On the contrary, without the
limitation of the quota, import volumes into the Community are likely to increase
significantly, which would very likely lead to further downwards price pressure.

(40)

(41)

(b) Evolution of sales volume and prices on the domestic market and on markets of

third countries

It was found that a major part of the exports are likely to be directed to the Community
for reasons of the different price levels in the respective markets. Furthermore, it was
found that access to a number of potential export markets is restricted due to the
existence of considerably high custom tariffs. Despite of these restrictions, exports to
third countries exceeded those to the Community and domestic sales during IP. In
addition, the recent appreciation of the Euro makes exports to the Community more
attractive than those to third countries. All these factors indicate that any increased
export volumes would be likely to be directed to the Community market should
measures under investigation be repealed.

Sales on the Russian domestic market and exports to third countries have increased
since 1997, while exports to the Community decreased after the imposition of the anti-
dumping measures and stayed relatively stable at a very low level due to the
undertaking. Demand on the Russian domestic market, though risen since 1997, has
always been far too weak to absorb the output volumes of the Russian exporting
producers. The total volume of Russian domestic sales has always been clearly below
the total export volume (to all countries). As mentioned below in recital (82), Russian
producers increased their production capacities during the analysis period, which lead
to significant spare capacities and accumulated stocks during the current investigation
period. A major part of the available stocks is likely to be exported to the Community,
should measures lapse. Furthermore, and given the high spare capacities, Russian

10

producers could easily further increase their production volume to a level exceeding
that which the domestic market or other potential third markets could absorb. In fact,
and as mentioned below in recital (82), the capacity installed during the IP reached a
level sufficient to meet the entire demand of GOES in the Community. It is therefore
in
not unreasonable to conclude that export volumes would increase in future,
particular to the Community, should access to the market be free due to the expiry of
the current measures.

(42) As mentioned below in recital (83),

the Russian GOES producers have a well
developed selling organisation in the European Community, which facilitates the
selling and distribution of the product concerned in the Community market.

(43) Accordingly, due to the anticipated increasing volume of imports into the Community
in the absence of measures and hence of available supply,
it can reasonably be
expected that prices will follow a further downward trend, if the measures are allowed
to lapse.

4.

Conclusion on the likelihood of a continuation of dumping

(44)

Imports of Russian GOES during the IP were still dumped, despite the measures
imposed. It was established that dumping continued and that
there is a strong
likelihood that it would also continue should measures be allowed to lapse. Moreover,
exports of Russian GOES to the Community are likely to increase significantly and
likelihood be dumped at
in all
prices of these additional
significant levels, should the anti-dumping measures lapse.

import quantities will

D. COMMUNITY INDUSTRY

(45)

The four Community producers that co-operated in the investigation represented 100%
of the Community production of GOES during the IP. Therefore, they constitute the
Community industry within the meaning of Article 4(1) and Article 5(4) of the basic
Regulation.

E. SITUATION OF THE COMMUNITY INDUSTRY

1.

Community consumption

(46) Community consumption was calculated on the basis of the cumulated volume of sales
on the Community market by the Community industry and of total import volumes
reported by Eurostat or by cooperating exporting Russian producers.

(47) On this basis, Community consumption expressed in tonnes increased by 5% between
1997 and 1999, from around 186 000 to 195 500 respectively. It then dropped by 4.9%
to reach around 186 000 in the IP. Detailed data are as follows.

Consumption

in tonnes

1997

186 087

1998

183 648

1999

195 601

2000 (IP)

186 220

indexed

100

99

105

100

2.

Imports from Russia

Volume of imports

11

(48) On the basis of the information from Eurostat and submitted by cooperating exporting
producers, the import volumes from Russia varied between around 3 750 tonnes and
6701 tonnes during the analysis period. Detailed import data are as follows.

Volume

in tonnes

1997

5 238

1998

6 701

1999

5 899

2000 (IP)

3 750

indexed

100

128

113

72

Market share of imports

(49)

The market share of imports from Russia was in the region of 2 to 3.6% during the
analysis period.

Quality improvement of Russian products and pricing behaviour of Russian
exporters

(50)

In the original investigation, GOES from Russia were sold in substantial quantities as
second choice material on the Community market, due to quality deficiencies. This led
the Commission to grant price adjustments when assessing price undercutting and
injury elimination margin. As a consequence of the investments made by Russian
producers to improve their facilities, the GOES now imported from Russia is first
quality material in the vast majority of cases.

(51) On the basis of Eurostat figures, prices of imports, expressed in Euro/tonne, decreased
sharply from 954 in 1997 to 862 in 1998 and 741 in 1999, a drop of more than 200
Euro/tonne in absolute terms within two years. Then prices partially recovered,
reaching 860 in 2000, a level still below by around 10% that achieved in 1997.
Detailed data are as follows.

Unit
/imports

prices

1997

in Euro/tonne

954

1998

862

1999

741

2000 (IP)

860

indexed

100

90

78

90

(52)

The Commission also compared Russian import prices, as extracted from the replies to
the questionnaires (CIF basis) to the prices charged by the Community industry for the
same product (ex-works basis). In order to take account of the variety of GOES, the
products sold by the Community industry and imported from Russia were classified
into categories, according to the thickness and the maximum core loss under certain
specific electrical conditions. Comparison was then made, in similar conditions of
trade and on a per category basis, between the weighted average selling prices of both
imported products and Community industry products. On this basis, the Russian
import prices were found significantly below those of the Community industry.

3.

Imports from other third countries

(53)

import volumes of GOES from all

third countries other than Russia
The total
decreased during the analysis period from around 44 300 tonnes in 1997 to around
38600 tonnes in the IP. Substantial quantities of these imports either originated in
Japan or were classified by Eurostat as ‘declared under secret origin’. The
Commission verified that
imports did not originate in Russia. The
remaining imports were mainly originating in Poland or the Czech Republic. Imports
from Poland varied during the analysis period, between a minimum of around 1 600

these secret

12

(54)

(55)

(56)

tonnes in 1999 and a maximum of around 4 800 tonnes in the IP. Imports from the
Czech Republic sharply decreased all over the analysis period from around 7 000
tonnes in 1997 to less than 2 000 tonnes in the IP.

In the IP, the market share of imports from third countries other than Russia amounted
to 20.7%; Japan, 11.2%; Poland, 2.6% and the Czech Republic, 1.1%. Market share of
imports under secret origin reached 4.7% in the IP.

Prices of imports from Japan and of imports ‘declared under secret origin’ as well as
imports from other sources were substantially higher than those of the Community
industry.

Following a trend similar to that observed for prices of the Community industry on the
Community market (see recital (58)), prices of imports from Poland decreased
between 1997 and 1999 and then slightly increased in the IP, to reach a level still
below that achieved in 1997. These prices were slightly below those of the
Community industry but significantly higher than prices of imports from Russia.

(57)

Prices of imports from the Czech Republic remained more or less stable at a level
below those of the Community industry and of the imports from Poland, but higher
than that of imports from Russia in the same year.

(58) Detailed data on volumes (expressed in tonnes) and on prices (expressed in

Euro/tonne) of imports from third countries other than Russia are as follows:

Other third
imports

Japan

1997

1998

1999

2000 (IP)

Volumes

15 357

10 730

15 109

20 859

Prices

1 324

1 428

1 362

1 348

Secret Area

Volumes

18 774

19 303

18 200

8 801

Prices

1 386

1 471

1 390

1 359

Poland

Volumes

2 455

Prices

1 101

3 224

1 027

1 588

Czech Republic
Volumes

7 038

5 540

2 724

Prices

929

928

994

923

Others

Volumes

Prices

Total

676

1 739

1 718

1 577

1 800

1 481

4 863

1 070

1 964

959

2 121

1 484

Volumes

44 300

40 515

39 421

38 608

Prices

1 282

1 355

1 335

1 303

4.

Situation of the Community industry

Restructuring of the Community industry

(59)

It is recalled that in the original investigation, it was found that between 1990 and the
end of the investigation period (end of April 1994), the Community industry suffered

13

material injury which consisted mainly of a decline in sales with a resulting loss of
market share as well as price depression. These factors together led to a decline in
profits and, overall, financial losses.

(60)

Since the current anti-dumping measures were imposed, the Community industry has
undergone a restructuring programme aimed at
improving its competitiveness.
Following a merger which was approved by the Commission on 8 October 19997,
three of the four Community producers became part of the Thyssen Krupp Steel group.

Production and stocks

(61)

Production of GOES slightly decreased between 1997 and 1998 and then increased to
a level of around 220 000 tonnes in the IP. This represents an increase of 3% over the
analysis period. Detailed data are shown below.

Production

in tonnes

1997

212 891

1998

211 655

1999

220 734

2000 (IP)

220 176

indexed

100

99

104

103

(62)

Taking into account the fact that the Community industry generally used a production
is therefore
to order system which had the effect of minimising stock levels,
considered that the development of the level of stocks is not a relevant factor having a
bearing on the state of the Community industry. Indeed, stocks usually consisted of
merchandise which was merely to be delivered to customers which had already
ordered the products.

it

Capacity

(63) As the production facilities used in the manufacturing of GOES are also used for
producing other products, it was not possible nor meaningful to establish the capacity
and utilisation of capacity that related specifically to the product concerned.

(64) However, the assessment of the total level of capacity for producing both GOES and
other products showed that the Community industry continued to have spare capacity
available which would have allowed it to produce GOES in greater quantities.

Sales

(65)

Sales of GOES on the Community market increased by around 10 percent between
1997/1998 and 1999 from a level of around 136 500 tonnes in 1997 and 1998 to
around 150 000 tonnes in 1999. They fell sharply by about 5% in the IP to less than
144 000 tonnes, in line with Community consumption. Detailed figures are reported
below.

Sales

in tonnes

1997

136 549

1998

136 432

1999

150 281

2000 (IP)

143 862

indexed

100

100

110

105

Market share

7

See website DG COMP. (http://europa.eu.int/comm/competition/mergers/cases).

14

(66) Community industry market share rose by 3.4 percentage points from 73.4% in 1997
to 76.8% in 1999 before increasing slightly again to 77.3% in the IP, an additional
gain of 0.5 percentage point in that year. Detailed data are reported below:

Market share

in %

1997

73.4

1998

74.3

1999

76.8

2000 (IP)

77.3

indexed

Prices

100

101

105

105

(67) Community industry prices on the Community market developed as follows:

Unit prices

in Euro/tonne

1997

1 140

1998

1 122

1999

1 044

2000 (IP)

1 089

indexed

100

98

92

96

(68)

Prices of GOES in the Community decreased by around 8% between 1997 and 1999
from a level of 1 140 Euro/tonne in 1997 to 1 044 Euro/tonne in 1999, an overall loss
of around 100 Euro/tonne in absolute terms in only two years. This decrease has to be
seen in the light of the overall instability of the world steel market, which resulted in a
general fall in prices of steel products in the years 1998/1999. However, taking
account of the fact that the prices of Russian imports were the lowest during the
analysis period (see recital (51) and (58) above), it is clear that the prices of Russian
imports also exerted a negative pressure on the prices of the Community industry in
this period.

Profitability

(69)

The overall profitability of the Community industry for its sales on the Community
market decreased in the analysis period, as shown below.

Profitability

in %

(70)

1997

2.6.

1998

4.3

1999

1.7

2000 (IP)

1.8

Taking into account the degree of sophistication of the manufacturing process which is
necessary to produce GOES, a level of 8% of profit was found reasonable for this
industry to maintain its viability. The level attained in 1997 cannot be considered
representative as in that year it was mainly influenced by the high financial losses
registered by one Community producer which experienced difficulties with its supply
of raw materials. In the same year, the other Community producers all registered
profits of the satisfactory level of around 8% on average. With regard to development
of profitability and its decline from 1998 to the IP, reference is also made to the
explanation provided in recital (77) and (80) below.

Cash flow, ability to raise capital and wages

(71)

Figures for Cash flow and wages developed as follows:

Cash flow

1997

n.r.

1999

80

2000 (IP)

103

1998

100

15

Wages

1997

100

1998

98

1999

94

2000 (IP)

103

No specific problems were encountered as regards ability to raise capital during the
analysis period. It should also be recalled that 3 of the Community producers belong to
a larger group.

Investments and return on investments

(72)

To accompany the strong restructuring programme undertaken,
industry made significant investments in order to rationalise production and sales.

the Community

Return on
investment (%)

1997

n.r.

1998

12.2

1999

4.0

2000 (IP)

3.6

Productivity and employment

(73) Detailed data on productivity and employment were as follows.

Index 1997=100

1997

Productivity

Number of
employees

100

100

1998

106

94

1999

115

90

2000 (IP)

115

90

(74) Due to the major restructuring efforts undergone by the Community industry after the
review, productivity
the anti-dumping measures currently under

imposition of
improved during the analysis period by 15% overall.

(75) Restructuring also led to a reduction by 10% in the number of employees over the

same period.

Export activity of the Community industry

(76)

The Community industry was very active on third country markets, exporting around
one third of its production of GOES. This shows that this industry is well established
and able to meet competition on a global basis. Confronted to the international steel
crisis, its exports decreased by 7% from around 78 000 tonnes in 1997 to around
73000 tonnes in 1999 and then increased to around 76 000 tonnes in the IP. Detailed
data on export volumes of the Community industry were as follows:

Export

Volumes in
tonnes

1997

78 209

1998

73 774

1999

72 961

2000 (IP)

76 345

indexed

100

94

93

98

Magnitude of dumping and recovery from past dumping

16

(77) As concerns the impact on the situation of the Community industry of the magnitude
of the actual margin of dumping found during the IP, it should be noted that the
margin found for Russia is higher than that found in the original IP (see recital (37)).
The situation of the Community industry improved to a certain extent after the
it has not completely recovered. Therefore, should
imposition of measures, but
measures be repealed,
the impact of the dumping margin found in the current
investigation would be significant.

Growth

(78)

It is recalled that Community consumption increased by 5% between 1997 and 1999
and then dropped by 4.9% in the IP, going back to a level close to that achieved in
1997.
The sales volume of the Community industry followed a similar trend in this period,
the decline between 1999 and 2000 being however less marked than the decrease in
consumption in these years.

5.

Conclusion on the situation of the Community industry

(79)

(80)

In terms of volumes, the introduction of the anti-dumping measures on imports of the
product concerned from Russia enabled an improvement in the economic situation of
the Community industry between 1997 and 1999. This allowed the Community
industry to improve its production by 3.7% and its sales to the Community market by
10%. It also improved its market share by 3.4 percentage points in the same period.
However,
this trend reversed in the IP (production –0.3%, deliveries to the
Community –4.3% percentage points) while consumption decreased by 4.9% in the
same time (see recital (47)).

The financial situation of the Community industry initially improved after the
imposition of the measures. However,
instability
experienced by the world steel market, the Community industry's prices, which were
also subject to the downward pressure of prices of imports from Russia, decreased by
around 8% between 1997 and 1998. Despite the significant restructuring efforts
undertaken by the Community producers, their substantial gains in productivity as well
as their improved situation in terms of sales volumes, the drop in prices resulted, from
1998 to the IP, in a steady decline in the profitability of the Community industry.

in the wake of

the general

(81)

It is therefore concluded that despite the improvement observed subsequent to the
imposition of anti-dumping measures, the Community industry is still in a weakened
situation.

F. LIKELIHOOD OF CONTINUATION AND/OR RECURRENCE OF INJURY

(82) Bearing in mind that GOES production facilities can also be used to manufacture other
products (see recital (63) above), it was not meaningful to accurately assess the
the Russian exporters in relation only to the product
production capacity for
concerned. Nevertheless, as referred to in recital (41), the GOES producers in Russia
have increased their total available capacity (destined both to the product concerned
and to other products)by around 10% in the analysis period. The level attained now far
exceeds what their domestic market or other potential third markets could absorb.
Indeed, the level of capacity now reached would be sufficient to meet the entire
demand of GOES in the Community. As already pointed out in recital (40), Russian

17

GOES producers have significant spare capacity available which they could use to
supply export markets. Indeed, if these additional volumes were directed towards the
Community market, they could very well go beyond the significant levels found in the
original investigation.

(83)

Since 1994, the Russian GOES producers have developed their selling organisation in
the European Community. For instance, one of the exporting producers has now its
own related selling organisation in the Community. Taking account of the investments
made for that purpose, it is therefore clear that Russian producers intend to develop
their sales on the EU market.

(84) As in the IP, the Russian producers are still selling GOES on the Community market at
prices substantially below those of the Community producers, such a price behaviour
combined with their capacity to sell increased quantities would likely result in price
depression on the Community market, as found in the original investigation, if the
measures in force were allowed to lapse.

(85) As shown in recitals (59) to (81), the Community industry is still in a precarious
situation, in particular as regards its profitability. It is likely that if the Community
industry was exposed to increased volumes of imports from Russia at dumped prices
this would result in a deterioration of its financial situation as found in the original
investigation. On this basis, it is therefore concluded, that the repeal of the measures
would in all likelihood result in the continuation, and/or recurrence of injury to the
Community industry.

G. COMMUNITY INTEREST

1.

Introduction

(86)

In accordance with Article 21 of the basic Regulation, it was examined whether a
prolongation of the anti-dumping measures in force would be against the interests of
the Community as a whole.

This analysis was based on an appreciation of all the various interests involved, i.e.
those of the Community industry, of its suppliers of raw materials, of the importers
and of the users of the product concerned. For the purpose of this analysis, the
Commission requested information from all identified interested parties.

(87)

It should also be noted that, in the context of an expiry review, the scrutiny of a
situation in which anti-dumping measures have been in place allows assessment of any
negative, undue impact of the anti-dumping measures in force on the parties
concerned.

2.

Interests of the Community industry

(88) As shown in the analysis of its situation above, the Community industry was able at
in
the beginning of the analysis period to improve its situation and to restore,
particular, a satisfactory level of profitability. This shows that this industry is capable
of benefiting from the protection offered by anti-dumping measures against unfair
trade practices.

(89)

The Community industry has also shown its willingness and resolution to consolidate
its competitive presence both on the Community market and worldwide. Since the

18

original investigation, the industry has undergone a major restructuring programme
and it is now controlled by two independent financial groups in order to centralise and
secure the sourcing of the GOES raw material with Thyssen Krupp Group and to pool
investment
in higher technical grades and performance improvement (core loss
reduction). Indeed, the merging of three of the complainants under the same holding
company was intended to create a larger entity which could compete more effectively
with other GOES producers (around 11) on the world market.

(90)

It is clear that the Community industry was still in a vulnerable situation during the
analysis period and that it needed to maintain an adequate volume of production and of
deliveries both on its domestic market and on export markets to keep the charge of its
fixed costs at a sustainable level and to remain competitive. In other words, the efforts
undertaken by the Community industry both to rationalise its production and to
restructure would be wasted if renewed and increased dumping would prevent it to
reach a sufficient sales volume.

(91)

In conclusion, taking into account the current viability of the Community industry and
its strong efforts to remain competitive both at European and world level
is
considered that
if measures lapse the Community industry’s situation would be
jeopardised by a subsequent expected increase in imports of GOES from Russia.

it

3.

Interests of the upstream industries

(92) Only one supplier replied to the Commission’s questionnaire. This company, which
belongs to the same holding company as the three Community producers mentioned
above (see recital (60)), produces different qualities of steel and in particular the raw
material necessary for manufacturing GOES. It is now the only remaining important
producer of this quality of steel in the European Community as the other large steel
groups have abandoned its production.

This company has made substantial investments in order to rationalise and develop
production of silicon electrical steel. This investment occurred at the same time as the
merger mentioned above (see recital (60)). It can be seen as part of the group overall
efforts to improve its competitive position.

From the above, it is clear that this supplier of silicon-electrical steel is closely
dependent on the situation of the Community industry. Moreover, as it is difficult to
shift from the production of silicon-electrical steel to the production of other qualities
of steel without incurring significant costs, any reduction in the production of GOES
would lead to a knock-on effect on employment.

(93)

It is therefore concluded that it is also in the interests of the suppliers that the measures
remain in force.

4.

Interest of importers of GOES

(94) No independent importer co-operated in this investigation. On the basis of information
available, it is to be noted that the product concerned, which is in general imported by
specialised steel importers/traders, represents only a small part in the diverse range of
the steel products they handle. It is thus considered that the continuation of anti-
dumping measures would have no more than a minimal impact, if any, on the overall
situation of the importers/traders in question.

19

5.

Interests of the user industries

(95) Around 40 users of GOES received a questionnaire tailored to their activity.

Nine responses were received by the Commission, covering less than 20% of the total
consumption of GOES in the Community.

(96)

The downstream industry can be divided in two main sectors:

–

–

The first cuts GOES according to pre-defined shapes and assembles these
pieces to manufacture transformer cores which are then resold to transformer
producers for further processing;

the other produces transformers. This industry either utilises the cores
manufactured by the companies mentioned above or manufactures the cores
themselves before manufacturing the transformers.

(97)

The sector of manufacturers of transformer cores developed recently. There are few
operators and only one company, related to one of the complainants, co-operated in
the investigation. Although GOES are the most significant item in cost terms in the
manufacture of transformer cores, there is no indication that this sector is subject to
specific pressures aimed at reducing its prices. In fact, these operators who supply the
transformer manufacturers are closely dependent on the prices that
transformer
manufacturers can get for their final products.

(98) By contrast, the sector of transformer manufacturers is a long-established industry
which traditionally supplies the large energy producers. This transformer industry in
general, belongs to large industrial groups, which have a worldwide presence. Some of
them have set up single purchasing organisations which concentrate all orders for the
group in order to improve their negotiating position towards producers of GOES.
There are also some smaller groups or companies.

GOES represent a substantial item in the total cost of the final products of this industry
(from 10 to 30% depending on the type of transformer). The main concern expressed
by this industry was to operate in a fair competitive market, which allowed it to
produce and sell quality products.

(99)

In this respect, certain users of GOES alleged that they had been confronted in the IP
by a shortage of supply from the part of certain Community producers due to a
perceived lack of available capacity. Others argued that it was not possible to import
GOES from other sources. However they did not submit any evidence supporting
these allegations. In any event, this is in clear contradiction with the findings of the
current investigation. Indeed, as set out at recital (64), the Community industry had
available capacities in the analysis period, allowing it to produce higher quantities of
GOES. In addition, it was also possible to import GOES from other sources such as
Poland and the Czech Republic (see recital (58)). These allegations are therefore
unfounded.

(100) As regards the competitive situation on the Community market of GOES, some users
argued that the continuation of measures, by limiting exports from Russia, would
maintain GOES prices artificially high. This would hamper their own competitiveness
on the Community market. However, on the basis of Eurostat figures, the volume of
imports from third countries appeared to be rather limited so that the market share of

20

European users did not deteriorate nor did their volume of export sales go down.
Average prices of imported transformers also appeared to be almost stable. It therefore
appears that the existing anti-dumping measures did not erode the competitiveness of
this industry.

(101)

In addition, the fact that the Thyssen Krupp group was both the sole producer of
silicon electrical steel in the Community and owner of three of the four Community
producers of GOES was also criticised.

The specific situation of the Thyssen Krupp group has been analysed in detail by the
Commission with regard to provisions of the ECSC Treaty concerning competition
(see recital (60) and recital (89)). No new or further information was made available
the competitive situation had
during the investigation which would indicate that
changed since the above mentioned examination by the Commission. Therefore these
criticisms are also unfounded.

(102) On the basis of the above, it appears that the situation of the users is not significantly
affected by the measures. There is in addition no indication that their continuation will
have a different impact in the future.

(103)

(104)

If measures were to be repealed the situation of the Community industry risks to be
weakened further by a continuation/recurrence of dumped imports. Indeed, as noted at
recital (92) above and taking account the specific nature and the complexity of GOES
manufacturing, the number of available sources of supply of GOES is rather limited at
world level. Should the Community industry decrease its activity, this would make
users of GOES progressively more dependent on imported materials.

the

In this regard, it should also be noted that the product concerned can be considered as
a strategic product for the user industries. In fact, GOES is a unique product which
cannot, in the majority of its applications, be substituted by any alternative material.
Indeed,
complicated manufacturing process makes grain oriented steel
significantly different from most other steel grades. GOES are used mainly in the
manufacture of power and distribution transformers. It is therefore a key element in a
strategic sector underpinning the energy distribution infrastructure. It is therefore in
the sources of supply in the
the interest of the European user industries that
Community are not further weakened by a continuation or recurrence of dumped
imports.

6.

Conclusion

(105) Taking account of the above facts and considerations,

it

is concluded that

the

prolongation of the measures is not against the interest of the Community as a whole.

H. FORM OF THE MEASURES

(106) The present investigation was limited to Article 11(2) of the basic Decision8. As
mentioned above (see recital (6)), the investigations in the framework of Article 11(3)
on the appropriateness of the form of the measures and the MET status will be
is recalled that by Commission Decision No
continued.

In this context,

it

8

replaced by the basic Regulation (Regulation (EC) No 384/96 of 22 December 1995)after expiry ECSC
treaty.

21

303/96/ECSC of 19 February1996 the Commission accepted an undertaking which
should be maintained pending the outcome of the reviews under article 11(3).

I. ANTI-DUMPING MEASURES

(107) All parties concerned were informed of the essential facts on the basis of which it is
intended to recommend the maintenance of existing measures in their present form.
They were also granted a period to make representations subsequent to this disclosure.
No new arguments were received.

(108)

It follows from the above that, as provided for by Article 11(2) of the basic
Regulation, the anti-dumping measures applicable to imports of GOES originating in
Russia, imposed by Decision No 303/96/ECSC, should be maintained.

HAS ADOPTED THIS REGULATION:

Article 1

1.

2.

3.

A definitive anti-dumping duty is hereby imposed on imports of grain oriented cold-
rolled sheets and strips of silicon-electrical steel with a width or more than 500 mm
originating in Russia and falling within CN codes 7225 11 00 (sheets of a width of
600 mm or more) and 7226 11 10 (sheets of a width of more than 500 mm but less
than 600 mm).

The rate of the definitive anti-dumping duty shall be 40.1% of the net, free-at-
Community frontier price, before duty (Taric additional code: 8877).

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

Article 2

Notwithstanding Article 1, the duty shall not apply to imports of the products concerned
exported and invoiced direct to buyers in the Community by the following companies (both
under Taric additional code 8878):

–

–

Novolipetsk Iron and Steel Corporation (NLMK), Lipetsk

Viz Stal, Ekaterinburg

22

This Regulation shall enter into force on the day following that of 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

23