Council Regulation (EC) No 398/2004 of 2 March 2004 imposing a definitive anti-dumping duty on imports of silicon originating in the People's Republic of China
Date: 2004-03-02
Institutions: Council of the European Union
Subjects: China, anti-dumping duty, import, originating product, semi-metal

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Official Journal of the European Union

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COUNCIL REGULATION (EC) No 398/2004

of 2 March 2004

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

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European
Community,

Having regard to Council Regulation (EC) No 384/96 of 22
December 1995 on protection against dumped imports from
countries not members of the European Community (1) (basic
Regulation), and in particular Article 11(2) thereof,

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

Whereas:

PROCEDURE

Measures in force

(1)

(2)

By Regulation (EC) No 2496/97 (2), the Council imposed
a definitive ad valorem anti-dumping duty on imports of
silicon originating in the People's Republic of China
(PRC or China). The rate of the definitive duty applicable
to the net free-at-Community frontier price, before duty,
was 49 %. It should be noted that the original measures
were imposed by Regulation (EC) No 2200/90 (3), and
that Regulation (EC) No 2496/97 concluded an expiry
review.

Request for a review

Following the publication, in March 2002, of a notice (4)
of the impending expiry of the anti-dumping measures
in force on imports of silicon originating in the People's
Republic of China, the Commission received a request
for a review pursuant to Article 11(2) of the basic Regu-
lation. The request was lodged on 9 September 2002 by
Euroalliages
the Ferro-Alloy
Industry) (the applicant) on behalf of producers repre-
senting 100 % of the Community production of silicon
metal. The request alleged that the expiry of measures
would be likely to result in a continuation or recurrence
of dumping and injury to the Community industry.

(Liaison Committee of

(1) OJ L 56, 6.3.1996, p. 1. Regulation as last amended by Regulation

(EC) No 1972/2002 (OJ L 305, 7.11.2002, p. 1).

(2) OJ L 345, 16.12.1997, p. 1.
(3) OJ L 198, 28.7.1990, p. 57. Regulation amended by Regulation

(EC) No 1607/92 (OJ L 170, 25.6.1992, p. 1).

(4) OJ C 67, 16.3.2002, p. 34.

(3)

(4)

(5)

(6)

(7)

Having determined, after consultation of the Advisory
Committee, that sufficient evidence existed for the initia-
tion of a review, the Commission announced the initia-
tion of an expiry review (5), pursuant to Article 11(2) of
the Basic Regulation and commenced an investigation.

Investigation

Procedure

The Commission officially advised the complainant
Community producers, exporting producers in the PRC,
importers/traders, user industries, and associations of
users known to be concerned, as well as the representa-
tives of the Chinese Government of the initiation of the
review. Interested parties were given the opportunity to
make their views known in writing and to request a
hearing within the time limit set out in the notice of
initiation.

Questionnaires were sent to all the parties that were offi-
cially advised on the initiation of the review and to
those who requested a questionnaire within the time
limit set out in the notice of initiation.

Replies to the questionnaire were received from the
three applicant Community producers, one exporting
producer, one importer and two producers
in the
analogue country.

Interested parties and verification visits

The Commission sought and verified all the information
it deemed necessary for the purpose of the determin-
ation of the likelihood of continuation or recurrence of
dumping and injury and of the Community interest.
Verification visits were carried out at the premises of the
following companies:

(a) E x p or t i ng p r odu c e r

Dalian DC Silicon Co., Ltd — Dalian, PRC

(b) R e la t e d Imp or te r

Dow Corning Ltd, Barry, Wales, United Kingdom

(c) Pr odu c e r s i n t h e a n a l og u e c ou n t r y

Fesil ASA, Trondheim, Norway

Elkem ASA, Oslo, Norway

(d) Commu ni ty p r odu c e r s

Invensil, Pechiney Group, Paris, France

Ferroatlantica, Madrid, Spain

R W Silicium, Pocking, Germany

(5) OJ C 246, 12.10.2002, p. 9.

(8)

(9)

(10)

(11)

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Investigation period

(13)

The investigation regarding the continuation or recur-
rence of dumping and injury covered the period from 1
October 2001 to 30 September 2002 (IP). The examina-
tion of the trends relevant for the assessment of a likeli-
hood of a continuation or recurrence of injury covered
the period from 1 January 1998 up to the end of the IP
(period under consideration).

Comments regarding the different grades of the product
under consideration and the like product were made,
one by the Government of China and the other by the
China Chamber of Commerce of Metals, Minerals and
Chemicals
these
submissions were not accompanied by any supporting
evidence. Furthermore, they were only made at a very
late stage of
the proceeding. For these reasons the
comments received regarding the product under consid-
eration were rejected.

Importers and Exporters. However,

Proceeding concerning other countries

In October 2002 an anti-dumping proceeding with
regard to imports into the Community of silicon origin-
ating in Russia was initiated. On 10 July 2003, by
Council Regulation (EC) No 2229/2003 (1), a provisional
anti-dumping duty of between 22,7 % and 23,6 % was
imposed.

(14)

LIKELIHOOD OF A CONTINUATION OF DUMPING

In accordance with Article 11(2) of the basic Regulation,
it was examined whether dumping was currently taking
place and,
the
measures would be likely to lead to a continuation of
dumping.

if so, whether or not

the expiry of

Product under consideration and like product

Preliminary remarks

the current classification set out

The product under consideration is the same as in the
original investigation, i.e. silicon metal originating in the
PRC, classifiable within CN code 2804 69 00 (silicon
content less than 99,99 % by weight). Purely by reason
in the Customs
of
nomenclature,
it should read ‘silicon’. Silicon with a
higher purity, that is containing by weight not less than
99,99 % of silicon, used mostly in the electronic semi-
conductor industry, falls under a different CN code and
is not covered by this proceeding.

Silicon is produced in electric submerged arc furnaces
in the
with carbothermic reduction of quartz (silica)
It is
presence of various types of carbon reductants.
marketed in the form of
lumps, grains, granules or
powder according to internationally accepted technical
its purity. Silicon is used
specifications as
regards
industry for
primarily by two industries, the chemical
the production of methylchlorosilanes or trichlorosilanes
and tetrachlorosilicon, and the aluminium industry for
the production of aluminium alloys, primary and
the production of
secondary smelters,
intended for
in particular the
casting alloys for different industries,
automotive industry.

(12) As in the previous expiry review, the investigation has
shown that the silicon, produced in the PRC and sold
domestically, as well as that exported to the Community,
the silicon produced and sold on the domestic market of
the analogue country (Norway) and that manufactured
and sold in the Community by the applicant Community
producers have the same basic physical and chemical
characteristics, and the same basic uses. They are there-
fore considered to be like products within the meaning
of Article 1(4) of the basic Regulation.

(1) OJ L 339, 24.12.2003, p. 3.

(15) Of the six Chinese exporting producers named in the
complaint, only one cooperated. Based on Eurostat data,
its volume of exports represented more than 80 % of
total Chinese exports to the EU. No information was
submitted by any other Chinese exporting producer and
therefore the findings relating to their situation had to
be established on the basis of the facts available,
in
accordance with Article 18 of the basic Regulation.

(16) During the IP of the previous expiry review, the volume
of silicon imports from the PRC to the Community was
10 199 tonnes. After
the anti-
dumping measures the imports concerned decreased to
4 168 tonnes in 1998, but they had increased again to
14 454 tonnes by the end of the IP.

the imposition of

(17)

investigation, Chinese imports had a
In the original
market share of 9,3 % in the IP. The market share of the
imports concerned accounted for 3,8 % of total Com-
munity consumption during the IP of
the previous
expiry review. In the period following the imposition of
the anti-dumping measures, this market share decreased
to 1,4 % in 1998, but during the IP it increased again
and accounted for 3,9 % of total Community consump-
tion of the product under consideration.

Dumping during the IP

(18)

In accordance with Article 11(9) of the basic Regulation
the Commission used the same methodology as in the
original investigation.

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Analogue country

(19)

Since the PRC is an economy in transition, normal value
had to be based on information obtained in an appro-
priate market economy third-country in accordance with
Article 2(7) of the basic Regulation.

(20) As in the previous expiry review, in the notice of initia-
tion of this expiry review, Norway was proposed as
analogue country for
the purposes of establishing
normal value.

(21)

The Chinese exporting producer opposed this proposal
and argued that Brazil or South Africa would be more
appropriate choices, mainly because competition and
market conditions in these countries were more compar-
able with the situation in the PRC. The Community
industry objected to Brazil and South Africa on the
grounds of the strong devaluation of the local currency
in Brazil and the lack of competition in South Africa,
since there was only one company producing the
product under consideration. Moreover, none of
the
known producers in these two countries agreed to coop-
erate in the proceeding, although they had been invited
by the Commission to do so. Consequently, Brazil and
South Africa could not be retained as analogue coun-
tries.

(22) With respect to Norway, it was found that it was one of
the largest producers of silicon in the world, with two
competing local producers. It was also established that
Norway was an open market without import duties for
silicon and that there were sizeable imports from Brazil
and the PRC. It should also be noted that Norway has a
natural advantage in terms of access to cheap energy,
whereas no submission was made to suggest that the
PRC enjoyed a similar advantage.

(23)

It is therefore concluded that Norway constituted an
Commission
appropriate
silicon in
contacted the two known producers of
Norway and both agreed to cooperate.

analogue

country.

The

for

value was constructed, this was done by adding a reason-
able amount
selling, general and administrative
expenses (‘SG&A’) and a reasonable margin of profit to
the cost of production in Norway. In all cases SG&A and
profit were established pursuant to the first method set
out in Article 2(6) of the Basic Regulation.

Export price

(25) As regards the exports to the Community, most sales by
the cooperating exporting producer in the PRC were
sales to a related company in the Community which
further processed the imported silicon into silicones.
These export prices would not normally be used for the
establishment of the export price because they might be
influenced by the relationship. However, since it was
found that the prices charged were in line with market
prices as reported in specialised magazines, as well as
with the prices charged by another Chinese exporting
producer that did not cooperate but exported to the
same company in the EU during the IP, it was decided to
use these prices for the calculation of the export price.
The export price was thus established on the basis of the
data from the cooperating exporting producer, the non
cooperating exporting producer and the remaining Euro-
stat data. It should be noted that the volume of the
exports by the cooperating exporter constituted 80 % of
the imports registered by Eurostat and was higher than
the total volume of the product under consideration
imported from the PRC during the IP of the previous
expiry review.

Comparison

(26)

For the purposes of ensuring a fair comparison between
the normal value and the export price at an ex-works
level, due allowance in the form of adjustments was
made for differences that were claimed and demon-
strated to affect prices and price comparability in accord-
ance with Article 2(10) of the basic Regulation. Adjust-
ments were made in respect of
insurance,
handling and credit costs.

transport,

Normal value

(24) As far as the determination of

the normal value is
concerned, it was first established that the volume of the
Norwegian producers' domestic sales compared with the
exported volume from the PRC was representative.
Normal value was established either on the basis of the
weighted average price paid in the ordinary course of
trade by independent customers or on the basis of
constructed normal value where these domestic sales
were not profitable. In this respect, it should be noted
that constructed normal value had to be used only for a
minor proportion of the exports. In cases where normal

Dumping margin

(27)

In accordance with Article 2(11) of the basic Regulation,
the dumping margin was established on the basis of a
comparison of the weighted average normal value with
the weighted average export prices, as determined above.
This comparison showed the existence of dumping. The
dumping margin, expressed as a percentage of the cif
Community frontier price duty unpaid, was significant,
i.e. 12,5 %, although well below the level found in the
previous investigations.

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Conclusion

(28)

The investigation has revealed that the import volume of
the product under consideration from China was higher
than in the IP of the previous expiry review and that it
had clearly remained at dumped levels. The investigation
did not reveal any reason why the level of dumping
would disappear or decrease if the measures were to be
repealed. It was therefore concluded that there was a
likelihood of continuation of dumping.

leading independent research group, which estimated the
production capacity at around 600 000 tonnes in 2002.
The Chinese production volume was estimated at around
400 000 tonnes in that year. On this basis, the Chinese
capacity utilisation rate is between 33 % and 66 % and
on the best case scenario their spare capacity is at least
half of
It also
the total Community consumption.
appeared that Chinese production capacity could be
rapidly increased further if warranted by market condi-
tions.

Development of

imports

should measures be

repealed

(29)

It was also considered appropriate to examine whether
there would be an increase in Chinese import volumes
should the existing measures be repealed. For
this
purpose the following factors were assessed: the evolu-
tion of export and/or production capacity and export
behaviour of Chinese exporting producers on third
country markets.

Export sales and spare capacity of cooperating exporter

(30)

The investigation showed that the cooperating company
exported 100 % of its production of the product under
consideration, mainly to the EU. It also became apparent
that this company had considerable excess production
capacity which had recently been doubled. It should also
be noted that the vast majority of exports to the EU
were made under inward processing relief to a related
company which used the product under consideration
for further processing.
In other words, these exports
never entered into free circulation on the Community
market but they competed with silicon sold by other
operators on the Community market. The repeal of the
measures would thus be an additional incentive for this
exporter to ship further quantities of the product under
consideration to the Community market either for free
circulation or for inward processing.

(32)

(33)

Consequently, the large production capacity available in
the PRC demonstrates that producers are able to quickly
increase production and direct it to any export market,
including, if the measures are repealed, the Community
market.

Since no information was provided by Chinese sources
and given that little public information is available about
it should be noted that
the Chinese silicon industry,
according to the Basic Regulation, and in particular
Article 18 thereof, the above conclusions rely mainly on
the best information available, namely the information
contained in the complaint.

Exports to third countries

(34) On the basis of Chinese export trade data it was estab-
lished that total worldwide exports of Chinese silicon
increased by 43 %, from 271 626 tonnes in 1998 to
387 444 tonnes in 2002 (1). Export prices to the world
market are 30 % below the export prices to the Com-
munity, so that exporters would have an incentive to
increase exports to the Community rather than to third
countries should the measures be repealed.

(35) Moreover, a fall of almost 4 % in the Chinese export
prices of the product under consideration was observed,
i.e. from USD 829 per tonne in 1998 to USD 799 per
tonne in 2002 (1).

Chinese production and capacity utilisation

(36)

(31) According to the application for the expiry review,
which in this respect was based on information in the
Metal Bulletin of August 2001, the total Chinese produc-
tion capacity for the product under consideration is
around 1 203 000 tonnes per year. The application for
the expiry review also referred to information from a

This clearly shows that, if the measures were repealed,
the Chinese exporters would have an incentive to target
the Community market in the light of the anti-dumping
measures just imposed on the US market and the recent
increase from 5 to 20 % in the customs duty imposed by
Russia on Chinese imports of the product under consid-
eration.

(1) In the absence of the monthly breakdown for the IP, annual data

has been used.

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(37)

(38)

(39)

Export prices to the Community

incentive for

It should also be noted that the generally prevailing
price level for the product under consideration in the
Community makes the Community market a very attrac-
tive one. This is a further
increasing
exports to the Community either by increasing produc-
tion or by diverting to the Community those sales which
are currently exported to third countries. Moreover,
export prices to third countries were found to be lower
than those to the Community. However, the attractive,
relatively high prices on the Community market are not
likely to be maintained in the long term since,
if
measures were lifted, the numerous Chinese exporters
would compete with each other in order to increase
their shares on the Community market. Consequently it
is very likely that all operators present on the Com-
munity market would have to reduce their prices accord-
ingly.

Trade defence measures applied by third countries

The export behaviour of Chinese producers on other
significant markets for the product under consideration
was also investigated. In this respect the United States of
America initiated a review of the anti-dumping duty on
silicon from the PRC in 1999. The investigation estab-
lished very high margins of dumping (up to 139 %).
in February 2003, anti-dumping measures
Therefore,
were renewed against
the product under
consideration with the conclusion that the removal of
the measures would lead to continuation of injurious
dumping (1).

imports of

Furthermore,
in 2002 the Russian administration
completed an anti-dumping investigation with regard to
imports of silicon from the PRC with a recommendation
that an anti-dumping duty of 25 % be
imposed.
However,
following consultations with the Chinese
authorities, the import duty of 5 % has been increased to
20 %. This is a clear indication that the Chinese expor-
ters would have to find other markets to sell the product
under consideration.

(40)

In the light of the above, it may be concluded that there
is pressure on Chinese exporting producers to find alter-
native export markets.

lower prices than those to the Community, there is a
strong likelihood that Chinese exporting producers
would substantially increase their dumped exports of the
product under consideration to the Community if
existing measures were repealed. In addition, the exports
of the product under consideration by Chinese exporters
are limited by the new anti-dumping measures in force
in both the United States of America and Russia.
In
summary, it is highly probable that imports to the Com-
munity from China will resume in significant quantities
and at dumped prices, should the measures be repealed.

DEFINITION OF THE COMMUNITY INDUSTRY

(42)

The three complainant Community producers replied to
the questionnaires and fully cooperated in the investiga-
tion. During the IP, they represented 100 % of the Com-
munity production. During the IP, one of the three Com-
munity producers imported the product under consid-
eration from other third countries, principally from
South Africa. However, it was found that these imports
were essentially made to supplement products that it
supplied to its Community customers. These imports
decreased over the period under consideration, particu-
larly between 1998 and 1999 when they dropped by
half,
following the installation of new Community
production facilities by the producer under considera-
tion, and its strategic commitment to produce and sell
more silicon in the Community market. During the IP
the volume of the product under consideration imported
by the producer in question represented only 2,1 % of
the Community industry's sales of silicon within the
Community (3,5 % of the sales of the producer in ques-
tion) and 1,9 % of the Community industry's production
of the product under consideration (3,2 % of the produc-
tion of the producer in question). In view of the above,
it is concluded that the imports made this producer did
not affect its status of Community producer.

(43) On this basis, the three complainant Community produ-
cers constitute the Community industry within the
meaning of Article 4(1) and Article 5(4) of the basic
Regulation.

Conclusion

SITUATION OF THE COMMUNITY MARKET

Community consumption

(41)

The investigation has shown that the PRC has continued
its dumping practices during the IP. Given the fact that
the PRC has considerable spare production capacity, and
that Chinese exports to third countries are made at even

(1) US Federal Register/Volume 68, No 25, 11 February 2003.

(44)

Community consumption was based on the combined
volume of supplies made by the Community industry in
the Community, and imports from China and other
third countries (based on Eurostat).

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Table 1

Community consumption (based on sales volumes)

Tonnes

Index

Y/Y trend

1998

1999

2000

2001

IP

290 684

325 234

388 938

373 950

371 540

100

112

134

129

128

+ 12 %

+ 20 %

– 4 %

– 1 %

Source: Verified questionnaire replies and Eurostat.

(45)

EU consumption of silicon peaked in the year 2000 at almost 390 000 tonnes before falling back
again in both 2001 and the IP to end at 371 540 tonnes. In total there was a 28 % increase over the
whole period under consideration, but a 4 % decline between 2000 and the IP.

Imports from China

Volume, market share and prices

(46)

Based on information from Eurostat, volumes imported from China during the period under consid-
eration increased from 4 168 tonnes to 14 454 tonnes. The market share of the Chinese imports,
which was around 4 % in the previous expiry review increased over the period under consideration
from 1,4 % to 3,9 % during the IP. Prices first decreased by 8 percent from 1998 to 2000, and then
increased again to finish at a higher level than in 1998 at the end of the IP.

Table 2

Imports from China (based on Eurostat)

Imports from China

Volume, tonnes

1998

4 168

1999

3 560

2000

5 969

2001

9 709

IP

14 454

Indexed

100

85

143

232

347

Market Share

1,4 %

1,1 %

1,5 %

2,6 %

3,9 %

Price, EUR/tonne

Indexed

1 044

100

953

91

964

92

1 142

1 158

109

110

Price evolution of the imports.

(47)

Following the imposition of an anti-dumping duty in 1997, prices of silicon originating in China
remained lower than the Community industry's prices. The difference with Community industry's
prices was 2 % during the IP. This differential was established on the basis of average sales prices
(ex-works) of the Community industry with Chinese import prices derived from Eurostat, adjusted
for post importation cost, customs, and anti-dumping duties. It should be noted that the sales prices
indicated above were calculated on the basis of both the sales made to Community users on the
Community market and the sales of Chinese silicon destined for inward processing. No anti-
dumping duty was applied to the latter sales. Nevertheless, it should be noted that the average price
of Chinese silicon released for free circulation on the Community market was found to be extremely
low at around EUR 870 per tonne.

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Economic situation of the Community industry

Production, production capacity and capacity utilisation

Table 3

Production

Tonnes

Index

Y/Y trend

1998

1999

2000

2001

IP

107 303

129 285

143 268

147 811

143 818

100

120

134

138

134

+ 20 %

+ 14 %

+ 3 %

– 3 %

Source: Verified questionnaire replies of Community industry.

(48) Over the period under consideration, Community industry production increased by 34 %, but did
fall by 3 % between 2001 and the IP. During the IP Community industry production of silicon repre-
sented 38,7 % of Community consumption.

Table 4

Production capacity

Tonnes

Index

Y/Y trend

1998

1999

2000

2001

IP

125 000

142 300

158 000

165 600

162 000

100

114

126

132

130

+ 14 %

+ 12 %

+ 5 %

– 2 %

Source: Verified questionnaire replies of the Community industry.

(49)

Production capacity increased each year, except for the IP when there was a small fall. In all, capa-
city increased by a total of 30 % over the period under consideration as a result of investment deci-
sions made in 1998.

Table 5

Capacity utilisation

Percentage utilised

85,8 %

90,9 %

90,7 %

89,3 %

88,8 %

1998

1999

2000

2001

IP

Index

100

106

106

104

103

Source: Verified questionnaire replies of the Community industry.

(50)

The above table shows that during the period under consideration capacity utilisation increased by
three percentage points. The main increase occurred between 1998 and 1999. Between 2000 and
the IP capacity utilisation decreased by around two percentage points.

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Sales volume and sales prices

Table 6

Sales volume

Tonnes

Index

Y/Y trend

1998

1999

2000

2001

IP

86 718

114 587

133 568

128 219

136 421

100

132

154

148

157

+ 32 %

+ 17 %

– 7 %

+ 6 %

Source: Verified questionnaire replies of the Community industry.

(51)

(52)

The Community industry's sales to unrelated customers in the Community increased by 57 %
between 1998 and the IP.

Sales to related companies remained stable and represented less than 6 % of all sales of silicon
during the period under consideration.

Table 7

Community industry sales prices of silicon

EUR/tonne

Index

Y/Y trend

1998

1 415

1999

1 184

2000

1 231

2001

1 271

IP

1 185

100

84

87

90

84

– 16 %

+ 4 %

+ 3 %

– 7 %

Source: Verified questionnaire replies of the Community industry.

(53)

In the period 1998 to the IP, the average sales prices of silicon charged by the Community industry
on the Community market saw a significant fall of 16 %. Average prices fell sharply in 1999 to
reach a low of EUR 1 184 per tonne, before recovering to EUR 1 271 per tonne by 2001. Prices
then fell by 7 % during the IP, to finish at an equivalent level to that seen in 1999. The sharp
decrease in sales prices and the increase in the cost of production played a significant role in the
deterioration of the financial situation of the Community industry.

Market share

Table 8

Market share

Percentage of market

29,8 %

35,2 %

34,3 %

34,3 %

36,7 %

1998

1999

2000

2001

IP

Index

100

118

115

115

123

Source: Verified questionnaire replies of the Community industry.

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(54)

The market share held by the Community industry increased from 29,8 % in 1998 to 36,7 % in the
IP in line with its increased production and sales volumes due to a new facility opened in the Com-
munity. A large increase took place between 1998 and 1999 (+5,4 % of the market) with the intro-
duction of new EU manufacturing facilities. A smaller rise (+2,4 percentage points) took place
between 2001 and the IP.

Stocks

Tonnes

Index

Y/Y trend

Table 9

Stocks

1998

1999

2000

2001

IP

32 768

33 140

27 803

33 186

23 118

100

101

85

101

71

+ 1 %

– 16 %

+ 19 %

– 30 %

Source: Verified questionnaire replies of the Community industry.

(55)

(56)

The above table shows that during the period under consideration stocks were reduced by 29 %.
Apart from the year 2000, stocks were at around 33 000 tonnes, until the IP when they fell to just
over 23 000 tonnes.

Stocks, which had represented around 38 % of the Community industry's EU sales volume in 1998,
fell to below 17 % of EU sales during the IP. This fall is mainly explained by the fact that stocks
usually build up at the end of each calendar year to allow for reduced production volumes during
the winter months when energy costs peak. The IP ended in September, i.e. before the full effect of
stock build-up is felt.

Profitability and cash flow

(57) During the period under consideration profitability expressed as a percentage of net sales value

developed as follows:

Table 10

Profitability

Percentage profit

1998

12,6 %

1999

1,8 %

2000

5,0 %

2001

1,7 %

IP

– 2,1 %

Y/Y trend

– 10,8 %

+ 3,2 %

– 3,3 %

– 3,8 %

Source: Verified questionnaire replies of the Community industry.

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(58)

Save for the year 2000, profitability deteriorated continuously over the whole period from a profit
of 12,6 % in 1998 to a loss of 2,1 % in the IP. In 2000, the 4 % sales price increase compared to
1999, plus lower production costs due to increased investments allowed for an improved return on
sales. In 2001, profits fell due to rising production costs, particularly in energy and consumable
prices, not being reflected by a comparable increase in sales prices. In fact, average costs rose by
EUR 80 per tonne that year, whilst EUR 40 per tonne could be passed on to the customers. During
the IP prices fell, sending the Community industry into a loss-making situation despite a decrease in
average cost of production.

Cash flow

EUR (in '000)

Index

Y/Y trend

Table 11

Cash flow

1998

17 005

1999

8 962

2000

15 028

2001

5 876

IP

6 070

100

53

88

35

36

– 47 %

+ 68 %

– 61 %

+ 3 %

Source: Verified questionnaire replies of the Community industry.

(59)

Cash flow deteriorated by 64 % during the period under consideration, and followed a similar trend
as that for profitability.

Investments, return on investments and ability to raise capital

Table 12

Investments

EUR (in '000)

32 750

15 539

15 625

1998

1999

2000

2001

8 559

IP

7 072

Index

Y/Y trend

100

47

48

26

22

– 53 %

+ 1 %

– 45 %

– 17 %

Source: Verified questionnaire replies of the Community industry.

(60)

The significant investments during the period 1998 to 2000 were primarily aimed at increasing EU
production capacity on the back of the favourable conditions in 1998 and on a positive develop-
ment of the Community silicon market which the Community industry had expected at that time.
This increased capacity was also used to reduce the reliance of the Community industry on imported
silicon. Indeed, these expected improvements can be seen in the trend for Community consumption
which increased by 34 % in this period (1998 to 2000).

(61)

The investigation showed that the operating return on investments, including cumulated deprecia-
tion, during the period under consideration deteriorated in line with the development of profit-
ability.

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Table 13

Return on investments and ability to raise capital

Percentage return

39,1 %

14,7 %

20,4 %

1998

1999

2000

2001

9,1 %

IP

– 5,7 %

Y/Y trend (percentage points)

– 24 %

+ 6 %

– 11 %

– 15 %

Source: Verified questionnaire replies of the Community industry.

(62)

The companies which make up the Community industry are all part of larger groups. As such, their
ability to raise capital is determined by the financial situation of these groups as a whole. These
larger groups reported no problems with raising capital during the period under consideration.
However, problems were reported with receiving funding for new projects in the silicon sector in
particular. This seems to be supported by the negative development of the financial situation of the
Community industry and by data verified during the investigation. These data are summarised in
Table 12 and show that investments in the IP were only 22 % of their level in 1998.

Employment, productivity and wages

Table 14

Employment

Employees

Index

Y/Y trend

1998

588

100

1999

634

108

2000

673

114

2001

682

116

IP

685

116

+ 8 %

+ 6 %

+ 2 %

+ 0 %

Source: Verified questionnaire replies of the Community industry.

(63)

The above table shows that employment increased by 16 % during the period under consideration.
The main increase occurred in the period from 1998 to 2000 due to the increased production
capabilities, but it did not grow further significantly during the IP.

(64) Given that production increased at a greater rate than employment, productivity increased by 15 %

over the same period, as shown in the table below:

Table 15

Productivity

Tonnes

Index

Y/Y trend

1998

182

100

1999

204

112

2000

213

117

2001

217

119

IP

210

115

+ 12 %

+ 5 %

+ 2 %

– 4 %

Source: Verified questionnaire replies of the Community industry.

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(65) During the period under consideration the average wages of the employees of the Community

industry increased by less than 1 % per annum, i.e. by less than the rate of inflation.

Table 16

Wages

EUR/employee

32 537

30 610

33 162

35 048

33 740

1998

1999

2000

2001

IP

Index

Y/Y trend

100

94

102

108

104

– 6 %

+ 8 %

+ 6 %

– 4 %

Source: Verified questionnaire replies of the Community industry.

Magnitude of dumping margins

(66) 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 China is
significant. Therefore, should measures be repealed, the impact of the dumping margin found in the
current investigation would be significant as the duty is 49 % on the cif price of imports from
China.

Export activity of the Community industry

(67)

The investigation showed that the export activity of the Community industry developed as follows:

Table 17

Community industry exports

Tonnes

Index

Y/Y trend

1998

6 446

1999

6 776

2000

5 803

2001

6 285

IP

3 209

100

105

90

98

50

+ 5 %

– 14 %

+ 8 %

– 49 %

Source: Verified questionnaire replies of the Community industry.

(68)

Community industry exports of silicon fell by half over the period under consideration, mainly in
the IP. Whilst in comparative terms, this fall might appear dramatic, in absolute terms it represents
a fall from a small number of sales, namely less than 4,8 % of all sales in 2001 to even fewer sales
of less than 2,4 % during the IP. Whilst the reduced exports may have had some impact on the
economic situation of the Community industry, any such influence will be limited. Sales prices and
profitability on the Community market were much more significant for the deterioration of the
situation of the Community industry. A reduction in the export volumes, which were already
marginal before the IP, will have had little or no influence on the situation of the Community
industry.

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Import volumes and prices from other third countries

(69)

Import volumes of silicon into the Community from countries other than China, together with their
average prices, developed as follows:

Table 18

Imports into the Community from other third countries (volume)

Tonnes

1998

1999

2000

2001

IP

Brazil

Russia

Norway

43 536

56 709

67 663

50 849

52 089

10 798

6 272

14 172

16 907

18 006

92 200

115 385

124 790

122 677

114 254

South Africa

12 234

6 225

5 539

6 203

2 674

Other third countries

41 029

22 495

37 236

39 385

33 643

Total

199 797

207 086

249 400

236 021

220 666

Source: Eurostat.

Table 19

Imports into the Community from other third countries (average price)

EUR/tonne

Brazil

Russia

Norway

South Africa

Other third countries

Total

Source: Eurostat.

1998

1 173

1 048

1 341

1 198

1 273

1 266

1999

1 040

963

1 207

1 161

1 205

1 152

2000

1 158

1 131

1 197

1 241

1 165

1 179

2001

1 231

999

1 201

1 149

1 210

1 193

IP

1 098

929

1 199

1 149

1 156

1 146

(70) Whilst the total import volumes of silicon from third countries other than China increased during
the analysis period from about 200 000 tonnes in 1998 to 221 000 tonnes in the IP, the market
share of these imports fell from around 69 % to 59 % over this period. The major exporters to the
Community have been Norway, Brazil, South Africa, and Russia. Only imports from Russia had
average import prices significantly lower than those of the Community industry during the IP. As
indicated in recital 47, the price of Chinese silicon released for free circulation on the Community
market was significantly lower than the import prices from other third countries, referred to in
Table 19.

Conclusion

(71) As explained and shown above, from 1998 to 2000 the Community industry was able to benefit
from a 34 % market growth and significant increase in its sales volume and market share. Thereafter
however, sales volume and market share stagnated and the financial situation of the Community
industry (prices, profitability, and cash flow) deteriorated.

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(72) On closer examination it can be seen that the main positive developments for the Community
industry took place between 1998 and 2000. From 2000 onwards, no real improvements were
noticeable

(73)

The improvements seen between 1998 and 2000 can be directly attributed to decisions taken by the
Community industry in 1998 to invest in additional Community production facilities. Between
1998 and 2000 EU production capacity increased by 26 % from (125 000 tonnes to 158 000
tonnes). These decisions were taken in response to the anti-dumping measures on imports of silicon
from China which, as outlined in recital 1, had been extended in 1997. The Community industry
was also making good profits on its EU sales of silicon in 1998 (see recital 58). Therefore, it can be
seen that the Community industry was able to benefit from the anti-dumping measures on imports
silicon from China. From 2000 to the IP, the situation of the Community industry deteriorated, in
particular with prices which fell EUR 46 per tonne, profitability which fell 7,1 percentage points,
cash flow which fell by 59 %, and investments which declined by 55 %. By the IP the Community
industry found itself in a loss-making situation. For these reasons, it is considered that during the IP,
the Community industry found itself in a very fragile and vulnerable position.

LIKELIHOOD OF RECURRENCE OF INJURY

(74)

The volume of dumped imports from China considerably increased during the period under consid-
eration and it is likely that without anti-dumping measures in place considerable increased volumes
of the product concerned would be shipped to the Community market at very low prices, undercut-
ting the Community industry prices. In view of the level of the anti-dumping duty in force, the price
differential between the imported product and the one produced by the Community industry could
be more than 35 % if the measure were allowed to expire.

(75) As outlined in recital 31, it is estimated that latent capacity in China is sufficient to supply 50 % of
Community demand for silicon. Were the current measures to lapse, there is a threat that a signifi-
cant proportion of unused production capability would be used to flood the Community market
with silicon from the PRC. The information from Eurostat suggests that, where imports are made
with suspension of duties, Chinese silicon was entered into the Community at an average price of
EUR 870 per tonne. There is no reason to believe that future prices would be higher than this if the
measure lapsed. When examining the impact of such additional low-priced imports on the situation
of the Community industry, the following should be borne in mind: This industry is already in a
fragile position due to the presence of dumped imports from both Russia and China. The arrival of
such a quantity of dumped imports from China would immediately cause a further severe price
depression on the EU market as the Community industry would first try to maintain its market
share rather than reduce its production. This would in turn further erode the Community industry's
profitability, which would experience even greater losses than the 2,1 % loss seen during the IP.
Even in the short term the Community industry could be forced out of the market in view of its
untenable financial situation reflected in, amongst others, the decrease in profitability (- 14,7 percen-
tage points) during the period under consideration.

(76)

It is recalled that at recital 28 it was concluded that Chinese silicon continued to be dumped on the
EU market, at recital 41 that these imports would be likely to increase substantially were the
measures to lapse, and at recital 73 that the Community industry found itself in a fragile position.
Whilst the current measures are sufficient to remove any injury to the Community industry from
Chinese imports, it is concluded that, a repeal of measures would lead to a recurrence of injury
resulting from the dumped imports from the PRC.

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COMMUNITY INTEREST

Preliminary remark

(77)

(78)

In accordance with Article 21 of the Basic Regulation it was examined whether a prolongation of
the existing anti-dumping measures would be against the interest of the Community as a whole. The
determination of Community interest was based on an appreciation of all the various interests
i.e. those of the Community industry, the importers/traders as well as the users and
involved,
suppliers of the product under consideration.

It should be recalled that, in the previous review, the adoption of measures was considered not to
be against the interest of the Community. Furthermore, as the present investigation is an expiry
review, it allows analysis of a situation in which anti-dumping measures have already been in place
and to assess any undue negative impact on the parties concerned by the current anti-dumping
measures.

(79) On this basis it was examined whether, despite the conclusion on the likelihood of a 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.

Interests of the Community industry

(80)

The Community industry has proven to be a structurally viable industry, able to adapt to the chan-
ging conditions on the market. This was confirmed in particular by the positive development of its
situation at a time when effective competition had been restored after the imposition of anti-
dumping measures on imports originating in China and by the industry's investment in additional
production capacity in 1998. However, it can be concluded that, without the continuation of anti-
dumping measures, its situation will in all likelihood deteriorate severely.

Interests of unrelated importers/traders

(81)

The Commission services sent out questionnaires to nine unrelated importers/traders, and associa-
tions. No answers were received to these questionnaires, nor did any other importers/traders make
themselves known.

(82)

In these circumstances, it was concluded that the measures in force did not manifestly affect impor-
ters or traders and therefore the continuation of measures would not affect these parties.

Interests of users

(83)

The Commission services sent out questionnaires to 15 users and users' associations. Only two
incomplete answers were received from users, and one general submission from a users' associations.
From these replies, it emerged that silicon accounted for about 10 % of the users' cost of production.
They also showed that both user companies were profitable even with the current anti-dumping
duties on silicon from China. These submissions did not contain comments on the possible impact
of removing the measures. Moreover, the submission did not contain any information on what
impact the existence of measures had on these two users. Furthermore, no information was received
as to whether any duty could have been passed on to the users' customers.

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(84)

(85)

The reply from the users association stated that it would be in the Community interest to have as
many different sources of silicon as possible. They also stated that they assumed that the expiry of
measures would not lead to a recurrence of injurious dumping of silicon from China. However, no
evidence to support this assumption was provided.

In light of (i) the low response rate to the questionnaires sent, (ii) the incomplete nature of those
submissions received, (iii) the lack of verifiable data in support of an expiry of the measures in force,
it is concluded that the continuation of the duties would not have a significant effect on users.

Conclusion

(86) Given the above, it is concluded that there are no compelling reasons, on the grounds of Com-

munity interest, against the maintenance of the anti-dumping measures.

(87)

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 silicon originating in China, imposed by Regulation (EC)
No 2496/97, should be maintained,

ANTI-DUMPING MEASURES

HAS ADOPTED THIS REGULATION:

Article 1

A definitive anti-dumping duty is hereby imposed on imports of silicon falling within CN code

1.
2804 69 00 originating in the People's Republic of China.

The rate of the definitive anti-dumping duty applicable to the net, free-at-Community-frontier price,

2.
before duty, shall be 49 %.

3.

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

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

Article 2

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

Done at Brussels, 2 March 2004.

For the Council

The President

M. CULLEN