CELEX: 51997PC0616
Language: en
Date: 1997-11-24
Title: Proposal for a Council Regulation (EC) imposing a definitive anti-dumping duty on imports of silicon metal originating in the People's Republic of China

COMMISSION OF THE EUROPEAN COMMUNITIES
                                   Brussels, 24.11.1997
                                   COM(97) 616 final
                           Proposal for a
                COUNCIL REGULATION (EC)
imposing a definitive anti-dumping duty on imports of silicon metal
          originating in the People's Republic of China
                   (presented by the Commission)
 ---pagebreak---  ---pagebreak---                             EXPLANATORY MEMORANDUM
By Regulation (EEC) No 2200/90 the Council imposed a definitive anti-dumping duty on
imports of silicon metal originating in the People's Republic of China. Following a complaint
lodged by the European industry and the Commission's subsequent investigation, the Council,
by Regulation (EEC) Not 1607/92, concluded that the anti-dumping duty in force had been
absorbed, amended Regulation (EEC) No 2200/90 and imposed an additional duty on imports
of Chinese silicon metal of an amount equal to that of the original duty.
The notice of initiation of this review was published in the Official Journal of the
European Communities on 27 July 1995. All interested parties were given the opportunity to
make themselves known and to submit comments in due course.
No Chinese exporter cooperated with the review.
The investigation, taking into account the conclusions on dumping, injury, causality, likelihood
of continuation of dumping and injury and Community interest, led to the conclusion that it
was in the Community interest to continue to impose antidumping measures, amended
according to thefindingsof the review.
It is hereby proposed that the Council adopt the attached draft Regulation.
 ---pagebreak---                                              Proposal for a
                                 COUNCIL REGULATION (EC)
               imposing a definitive anti-dumping duty on imports of silicon metal
                            originating in the People's Republic of China
THE COUNCIL OF THE EUROPEAN UNION,
Having regard to the Treaty establishing the European Community,
Having regard to Council Regulation (EC) No 384/96 of 22 December 1995 on protection
against dumped imports from countries not members of the European Community1, as
amended by Regulation (EC) 2331/962, and in particular Articles 9, 11 and 23 thereof,
Having regard to the proposal submitted by the Commission after consulting the
Advisory Committee,
Whereas:
                                         A. PROCEDURE
1.       Measures in force
(1)      By Regulation (EEC) No 2200/903 the Council imposed a definitive anti-dumping
         duty on imports of silicon metal originating in the People's Republic of China
         (hereinafter referred to as "China"). Following a complaint lodged by the
         Community industry and the Commission's subsequent investigation, the Council, by
         Regulation (EEC) No 1607/924, concluded that the anti-dumping duty in force had
         been absorbed, and by amending Regulation (EEC) No 2200/90, imposed an
         additional duty on imports of Chinese silicon metal of an amount equal to that of the
         original duty.
2.       Request for a review
(2)     Following the publication, in February 1995, of a notice of the impending expiry5 of
         the measures in force, the Commission received a request for a review lodged by the
         Comité de Liaison des Industries de Ferro-Alliages (C.L.I.F.A.) on behalf of
        four Community producers allegedly representing a major proportion of the total
         production of the product concerned in the Community. The request contained
    OJL56, 6.3.1996, p. 1.
    OJL 317, 6.12.1996, p. 1.
    OJL 198, 28.7.1990, p. 57.
    OJL 170, 25.6.1992, p. 1.
    OJC35, 11.2.1995, p. 3.
 ---pagebreak---          evidence of dumping of the product originating in China, and of material injury likely
        to result in the event of expiry of the existing measures. This evidence was considered
         sufficient to justify the opening of a review investigation.
(3)      On 27 July 1995, the Commission announced by a notice6 published in the
         OfficialJournal of the European Communities (hereinafter referred to as the
         "Notice of Initiation") the initiation of an expiry review of Regulation (EEC)
         No 2200/90 concerning imports into the Community of silicon metal originating
         in China and commenced an investigation pursuant to Article 11(2) of
         Council Regulation (EC) No 3283/947, subsequently repealed and replaced by
         Regulation (EC) No 384/96 (hereinafter referred to as "the Basic Regulation"). The
         Commission also decided to initiate, on its own initiative, an interim review pursuant
         to Article 11(3) of the Basic Regulation.
3.       Investigation
(4)      The Commission officially advised the exporting producers and importers known to
         be concerned as well as their associations, the representatives of the exporting
         country and the complainant Community producers, of the initiation of the review.
         Interested parties were given the opportunity to make their views known in writing
         and to request a hearing within the time limit set in the Notice of Initiation. A number
         of importers and two organisations representing the user industry made their views
         known in writing. Hearings were granted to Community producers and to the
         Chinese exporters which had requested them.
(5)      The Commission sent questionnaires for the purpose of a determination of
         dumping and injury to all parties known to be concerned and received replies from
         four complainant Community producers and two importers.
(6)     No replies to the questionnaire were received from any Chinese producer of the like
         product. A number of Chinese exporters (trading companies) responded within the
        time limits laid down in the questionnaires.
(7)     The Commission sought and verified all information deemed necessary for the
         purpose of a determination of dumping and injury, and carried out investigations at
        the premises of the following companies:
         (a)    Complainant Community producers
                - Vereinigte Aluminium Werke AG, Bonn,                Germany
                - Ferroatlântica SL, Madrid,                          Spain
                - Pechiney Electrométallurgie, Paris,                 France
                - Industria Elettrica Indel SpA, Belluno,             Italy
    OJC193, 27.7.1995, p. 3.
    OJL 349, 31.12.1994, p. 1.
 ---pagebreak---        (b)    Producers in the analogue country
              ELKEM A/S, Oslo/Kristiansand,                           Norway
              FESIL A/S, Trondheim,                                   Norway
 (8)   The investigation of dumping covered the period from 1 July 1994 to 30 June 1995
       (hereinafter called "the investigation period"). The examination of injury covered the
       period from 1992 up to the end of the investigation period.
 (9)   All interested parties received disclosure of the essential facts and considerations on
       the basis of which it was intended to recommend the imposition of definitive
       measures. Those parties were also given time to submit their views on the disclosure
       and, where requested, were again heard by the Commission. The views expressed
       were taken into account, where appropriate.
(10)   Due to the complexity of the proceeding and, in particular, the fact that precise facts
       about producers in the analogue country not subject to the investigation had to be
       established, the investigation could not be completed within the indicative deadline
      under Article 11(5) of the Basic Regulation.
         B. PRODUCT UNDER CONSIDERATION AND LIKE PRODUCT
1.    Product under consideration
(11)  The product covered by this proceeding is silicon metal produced in an electric arc
      furnace by reducing quartz in the presence of various carbonaceous products. It is
      marketed in the form of lumps, granules or powder under internationally accepted
      technical specifications as regard its purity. On the basis of those specifications it is
      possible to classify silicon metal in different qualities, destined for different end-uses,
      namely the production of silicones ("chemical grade"), the production of the primary
      aluminium grade and secondary aluminium grade. Its silicon content is less than
      99.99% by weight. The customs classification code for silicon metal under the
      Combined Nomenclature during the investigation period was 2804 69 00.
      Silicon metal with a higher purity, that is, with a silicon content exceeding 99.99% by
      weight, used mostly in the electronic semiconductor industry, falls under a different
     — CN code and is not covered in this proceeding
2.    Like product
(12)  The same international technical specifications apply both to the imported product
      referred to in the complaint and to silicon metal produced in the Community. Despite
      some difference in purity and dimensions between the Chinese and the Community
      product, their physical characteristics and applications are essentially the same, as are
      those of silicon metal produced and sold on the domestic market in the analogue
      country "(Norway). The Community product and the imported one are therefore
      "like products" within the meaning of Article 1(4) of the Basic Regulation.
 ---pagebreak---                                       C. DUMPING
1.    Analogue country
(13)  As China is a non-market economy country, the Commission, in accordance
      with Article 2(7) of the Basic Regulation, determined the normal value on the
      basis of data collected from producers in a market economy third country
      (the "analogue country"). In the original investigation normal value was established
      on the basis of the prices payable in the Community.
(14)  In the notice of initiation of the review the Commission stated that Norway was
      envisaged as an appropriate market-economy third country for the purpose of
      establishing normal value. This preliminary choice was based on information
      submitted in the review application, which stated that, in terms of both cost structure
      and production technology, the Norwegian producers of the product concerned were
      amongst the most advanced in the world market, thus enabling a reasonable
      assessment to be made of normal value for the product concerned.
(15)  All interested parties were given the opportunity to comment on the choice
      envisaged. The exporters objected to this choice. Their objections were, however,
      raised after expiry of the time-limit laid down in the Notice of Initiation. They
      proposed Estonia as an alternative analogue country, erroneously claiming that this
      country had been the analogue country in the original investigation. No evidence in
      respect of the representativity of Estonian production was, however, received. Other
      parties, in the course of a hearing they were granted, even contested that there was
      any production in Estonia. Eurostat statistics, according to them, only reflected
      transhipped exports originating in other countries. Romania and Brazil were also
      suggested as analogue countries, but no evidence was provided as to why either of
      these countries would be a more suitable analogue country than Norway.
(16)  In the course of the investigation, the Commission confirmed that Norway was one of
      the most important and efficient silicon metal producers in the world. Norway
      benefits from low energy costs, this fact being of importance since energy costs
      account for a large part of the manufacturing cost of silicon metal. Moreover, in
      particular because the factories are generally located in industrial harbours, the
      Norwegian producers benefit from a good access to raw materials and good
     — exporting conditions. In addition, the production process in Norway is similar to the
      one now used in China, and the presence of two significant producers competing with
      imports ensures normal market conditions. Finally, silicon metal sales by the two
      cooperating Norwegian producers on their domestic market during the investigation
      period were made in significant quantities, since they amounted to more than 5% of
      the exportsfromChina to the Community.
(17)  In the light of the above, it was considered appropriate and reasonable to use Norway
      as the analogue country for the establishment of normal value in, respect of exports
      from China to the Community.
 ---pagebreak--- 2.    Normal value
(18)  As far as the determination of normal value is concerned, the Commission established
      that the volume of the Norwegian producers' domestic sales to unrelated customers
      of the silicon metal grade similar to that exported from China constituted more than
      5% of the sales volume of the products under consideration exported to the
      Community and were, consequently, "representative" within the meaning of
      Article 2(2) of the Basic Regulation.
(19)  Subsequently, in accordance with Article 2(4) of the Basic Regulation, the
      Commission examined whether the domestic sales of the like product had been made
      in the ordinary course of trade, by assessing the proportion of sales which were
      profitable. The assessment showed that more than 20%, by volume, of sales were
      made below the average cost. Normal value was thus established on the basis of the
      weighted average prices actually paid for the remaining profitable sales only, as the
      volume of the latter exceeded 10% of those sales. Normal value was established at
      the FOB Norwegianfrontierlevel.
3.    Export price
(20)  Replies to the questionnaire sent by the Commission were received from five
      companies exporting the product concerned from China. All those companies were
      represented by the China Chamber of Commerce for Import and Export of Metals,
      Minerals & Chemicals (CCCMC). Owing to the persisting paucity and deficiencies of
      the replies, little information could be used. In particular, replies did not contain
      evidence that all sales of the product concerned to the Community had been reported.
      Nor did they did refer to the fact that some of the main Community importers might
      be related to the exporters, a$ part of State-controlled "Minemetals" import and
      export network. Accordingly, in pursuance of Article 18(1) of the Basic Regulation,
      thefindingswith regard to export prices had generally to be based on facts available.
      In this respect, it was considered whether or not, in the absence of any other source
      of information, the export price for the product concerned could be based on
      Eurostat import statistics. In examining the reliability of the information provided by
      those statistics, the Commission noted that data relating to CN code 2804 69 00
      covered exclusively silicon metal. Moreover, according to the information available,
      the characteristics of the silicon metal grade exported from China did not vary to any
     — significant extent during the investigation period, so that an average price was in this
      case considered to be sufficiently accurate.
(21)  It was therefore concluded that the most reasonable basis for establishing the export
      price was to take the CIF Eurostat import value for the CN code in question and
      corresponding statistics for Austria, Finland and Sweden before their accession to
      the Community.
 ---pagebreak--- 4.   Comparison
(22) In accordance with Article 2(10) of the Basic Regulation, normal value and export
     price were, however, adjusted to take account of differences in factors which were
     claimed and demonstrated, on satisfactory evidence, to affect price comparability.
     Normal value was indeed adjusted to take into account a difference in the level of
     trade when compared to Chinese export sales, as Norwegian domestic sales are
     generally made direct to end-users. These adjustments were also made in respect of
     transport and insurance costs, the corresponding costs being established on the basis
     of data available in the Chinese exporter's responses to the questionnaire, and the
     export price thus expressed at FOB Chinesefrontierlevel.
5.   Dumping margin
(23) In accordance with Article 2(11) of the Basic Regulation, the weighted average
     normal value (FOB Norwegian frontier) was compared with the weighted average
     export price (FOB Chinese frontier).
(24) The comparison of the normal value with the export price as defined above showed
     the existence of dumping, the dumping margin being equal to the amount by which
     the normal value exceeded the price of export to the Community.
     The dumping margin, expressed as a percentage of the CIF export price,
     free-at-Community frontier, amounted to 68.1%.
                           D. COMMUNITY INDUSTRY
(25) The Commission considered whether the Community producers which supported the
     request for a review and cooperated with the investigation represented a major
     proportion of total Community production, as provided for in Article 4(1) of the
     Basic Regulation. In this respect it was found that the four producers which
     cooperated with the review manufactured almost the whole of the Community's
     output. It was therefore concluded that the four cooperating producers constituted
     the "Community industry" within the meaning of Article 4(1) of the Basic Regulation.
                                     E. INJURY
1.   Consumption in the Community market
(26) Apparent consumption (EU 15) of silicon metal in the Community market (based
     on questionnaire replies, Eurostat data and market information available to
     the Commission) increased from approximately 195 000 tonnes to around
     256 000 tonnes - an increase of about 32% between 1992 and the end of the
     investigation period.
 ---pagebreak--- 2.    Volume and market share of the dumped imports
(27)  It should be recalled that Chinese exporters had absorbed in 1992 the anti-dumping
      duty in force (see recital (1)). It has been established in the present investigation that
      the volume of dumped imports of silicon metal originating in China into the
      Community measured in metric tonnes showed an large decrease after the imposition
      of this additional anti-dumping (anti-absorption) duty in 1992. However, these
      imports subsequently recovered with ariseby 171% between 1993 and 1994, and by
       13.5% from 1994 to the end of the investigation period. Thus, between 1992 and the
      end of the investigation period, imports originating in China, and sold in the
      Community, increased by 37% in volume. Thesefindingscontradict claims that the
      imposition of additional anti-dumping measures would have resulted in the exclusion
      from the Community market of Chinese silicon metal.
(28)  The estimated market share of these imports into the Community market, based on
      apparent consumption, increased from 3.7% in 1992 to 3.8% during the investigation
      period- ariseof 3%.
3.    Prices of dumped imports
(29)  As was explained in recitals (20) and (21), the paucity and deficiencies of the replies
      to the questionnaires receivedfromthe Chinese exporters obliged the Commission to
      establish the export price on the basis of statistical figures (Eurostat and Austrian,
      Finnish and Swedish national statistics). The investigation has shown that after the
      review of the measures in 1992, Chinese duty-unpaid prices had increased by 12.5%
      in 1993. However, from 1994 up to the end of the investigation period, they
      decreased again to close to the level of 1992. From 1992, the year of the introduction
      of additional anti-dumping measures, up to the end of the investigation period those
      prices increased by only 4%.
(30)  The Commission also compared the prices of Chinese imports with the prices of the
      Community producers in order to determine whether the former undercut the latter.
      For this purpose, it was first established which of the Community produced silicon
      metal was equivalent, in terms of specifications and uses, to the imported Chinese
      product (standard grade used in the aluminium industry). Since Chinese imports are
      all of standard quality the price comparison was made only with standard quality
     — products of the Community industry. The weighted average ex-works producers' sale
      prices in the Community were then compared to the weighted average import prices
      of the Chinese product, adjusted to duty-paid net ex-warehouse levels in the
      Community at the same level of trade. For this analysis, four markets were examined
      representing the most important markets (Germany, United Kingdom, France, Italy).
(31)  On the above basis, it was found that Chinese import prices did not undercut the
      Community producers prices during the investigation period. However, when
      analysing actual resale prices to the first independent buyer of Chinese silicon metal,
      charged by a major unrelated importer representing 11% of the total Chinese imports
      and who cooperated with the investigation, it was found that its prices were about
       7% lower than the corresponding Community industry prices. In addition, it is
      important to note that on the Community market, a fixed anti-dumping duty of
 ---pagebreak---        ECU 396 per tonne, representing 51% of the CIF price, was in force. Consequently,
       if these measures were to lapse, undercutting would occur by a percentage of not less
       than 30%.
4.     Situation of the Community industry
(a)    General
(32)   A number of interested parties have pointed out that the Community industry does
       not suffer injury any more, as the demand for silicon metal has changed since the end
       of the investigation period, leading to a supply shortage and a considerable increase
       in prices.
       It should be noted that, pursuant to Article 6(1) of the Basic Regulation, it is the
      practice of the Community institutions to base their analysis on dumping and injury
       on the situation prevailing during the investigation period. Such an approach is
      justified by the fact that the exact effect of developments such as those mentioned
       above can only be established within the framework of a properly conducted
      investigation in which all interested parties can put forward their views and in which
      the information submitted can be verified and analysed.
(33)   In this case, the volatility of the silicon metal market justifies the Community's
      approach, as no conclusions can be drawn from these alleged price fluctuations
      without investigation.
(34)  The Commission took account of the following economic indicators in order to
      determine the state of the Community industry:
(b)   Production
(35)  Community production increased from approximately 98 000 tonnes to
      approximately 122 000 tonnes between 1992 and the end of the investigation period,
      an increase of 24.1%. The output figures for this period reveal a slowdown in 1993
      (-1.2%), followed by a general increase as a result of a favourable outlook on the
      world market. Two of the Community producers who participated in the first
      investigation ceased their activities in 1992, while another restructured a production
     — plant in Spain in 1993. The other Community producers have maintained a stable rate
      or have slightly increased their production.
(c)   Capacity, capacity utilization
(36)  Production capacity of Community industry increased by 5% between 1992 and the
      end of the investigation period. This is mainly due to the restructuring in Spain. In
      addition, between 1992 and the end of the investigation period capacity utilisation
      increased by 18% for the reason given above.
                                              10
 ---pagebreak---  (d)     Stocks
 (37)   The volatility of the market and the expectations of the Community industry
        concerning the likely development of the Community market are shown by the trend
        in stocks. In this regard, stocks held by the Community industry grew by 47% during
        the period 1992 to the end of the investigation period, increasing from approximately
         11 600 tonnes to approximately 17 000 tonnes.
 (e)    Sales
 (38)   Sales by the Community industry on the Community market increased from
        approximately 80 800 tonnes in 1992 to approximately 111 200 tonnes to the end of
        the investigation period, an increase of 37.6% over the period of investigation.
(f)     Market share
(39)    The increase in sales volume resulted in a slight increase in market sharefrom39.8%
        in 1992 to 41.1% of the market during the investigation period.
(g)    Average sales price and price trends
(40)   As regards the development of Community industry, prices increased by 3%, after the
        imposition of additional anti-dumping duties on imports originating in China.
       However, between 1993 and 1994, they decreased by 3%. Over the period
       considered, the Community industry sales price increased by 2%.
(h)     Profitability
(41)   Between 1992 and 1993 the Community industry registered an overall weighted
       average loss of 21.7% and 22% respectively, for sales of silicon metal in the
       Community market. The restructuring of a plant in Spain and a slight upward trend in
       market prices did not bring the Community industry out of a loss-making situation in
        1993 and 1994. During and up to the end of the investigation period, the Community
       industry registered a weighted average loss of 13.4%.
(42)   The weighted average losses between 1992 and the end of the investigation period
      — decreased by 38%. Nevertheless, the Community's silicon-metal industry has not
       made any profit over the last ten years.
(i)    Employment
(43)   The employment situation deteriorated steadily between 1992 and 1994, since the
       total workforce of the entire Community industry was reduced by 7%.
                                               11
 ---pagebreak--- 5.      Conclusion
(44)    After the imposition of measures the Community industry improved its position as to
        production, capacity utilization, and sales. Nevertheless, it should be noted that
        capacity and market share have stagnated. The Community industry was unable to
        increase its prices to a satisfactory level even after the imposition of these
        measures, owing to the fact that the Chinese continued to lower their prices. In
        addition, following the substantial increase in the volume of stocks, the loss in
        employment and the accumulation of newfinanciallosses, it is concluded that the
        Community industry continues to suffer material injury within the meaning of
        Article 3(1) of the Basic Regulation.
                                        F. CAUSATION
(45)    The Commission examined whether the injury suffered by the Community industry
        was caused by dumped Chinese imports or whether other factors had caused or
        contributed to that injury.
1.      Effect of dumped imports
(46)    The silicon metal produced by the Community and the silicon metal imported from
        China are in direct competition with each other, essentially on the basis of prices. This
        is explained by the fact that there are no significant differences in quality between the
        imported product and the Community produced one. The imported product is aimed
        at the same customers, namely aluminium smelters.
(47)    Since silicon metal is a commodity, its market is highly price-sensitive and,
        consequently, low prices charged by certain vendors have a generally depressive
        effect on the market. The investigation has shown that after the review of the
        measures in 1992, Chinese duty-unpaid prices had increased by 12.5% in 1993.
        However, from 1994 up to the end of the investigation period, they decreased almost
        to the level of 1992.
        Between 1992 (see recital (29)), the year of the introduction of additional
        anti-dumping measures, and the end of the investigation period, the prices only
     __ increased by 4%. Consequently, their level had a clearly depressive effect on the price
        of silicon metal in the Community market.
(48)    Moreover, if one analyses the period between 1993 and the end of the investigation
        period, Chinese prices fell by 7%, while the Community market prices increased
        by 3%. This fact shows the capacity of Chinese exporters to partly absorb the effect
        of the anti-dumping duties in force.
(49)    The Community industry tried to increase their prices in 1993, but had to follow the
        Chinese pricing policy. So, in 1994 the Community industry had attempted to reduce
        its financial loses by decreasing prices and trying to improve its sales.
                                                12
 ---pagebreak--- (50)     Furthermore, owing to the price depression exerted by Chinese imports and despite
        the increased consumption of silicon metal in the Community market, the
         Community industry continued to suffer from losses or. barely managed to cover their
        production costs.
(51)    Chinese exporters argued that there is no injury or likelihood of recurrence of
        injury suffered by the Community industry due to imports from China, because
        the Community industry has increased its production of silicon metal, particularly
        since 1992.
(52)    However, as it was mentioned before (see recital (35)), the Community industry
        increased their own production between 1992 and the end of the investigation period
        by 24.1%, in a market which grew up by 32% (see recital (26)). At the same time, the
        stocks of the Community industry increased by 46.6% (see recital (37)). The
        Community industry expected, on account of a favourable market situation, to
        increase their sales accordingly. On the contrary, they were forced to increase
        their stocks, instead of following the depressed prices dictated by the
        Chinese imports, which continued to enter the Community market at low prices
        before anti-dumping duty.
(53)    In conclusion, the Chinese dumped imports have clearly had a depressive effect on
        the market price in the Community and have had an impact on the poor financial
        situation of the Community industry.
2.      Effect from other factors
(54)    Imports of silicon metal from countries producing silicon metal, other than China,
        have entered the Community in the period from 1992 up to the end of the
        investigation period. The market share of Norwegian imports (calculated on the basis
        of the apparent consumption figures in recital (26) above) increased from 22.1% in
         1992 to 27.7% up to the end of the investigation period. Imports originating in Brazil
        fell during the same period from 10.4% to 7.3%. The same situation prevailed for the
        other two important exporters of silicon metal into the Community, South Africa and
        Australia. Their imports fell from 14.8% to 9.2% andfrom4.1% to 3% respectively.
(55)    Chinese exporters argued that silicon metal from Russia and the Ukraine may also
     __ have caused injury to the Community industry. However, the Commission considers
        that the quality of silicon metal from Russia and the Ukraine is not comparable to
        European or Chinese silicon metal. The standard quality exported by China contains
        0.5% of iron, compared with between 0.8% to 1% for the Russian and Ukrainian
        product. The abovementioned imported products need special treatment before they
        can be compared to the European and Chinese product.
        Indeed, it was established that anti-dumping measures are not applied in the
        United States of America to silicon metal originating in Russia, owing to the fact that
        these products have to be treated and purified before being used by the aluminium
        smelting industry.
                                              13
 ---pagebreak--- (56)  In addition, the Commission examined the Eurostat import statistics and established
     that imports originating in Russia and the Ukraine are not carried out on a regular
     basis. In 1992 there were no imports from Russia or the Ukraine. According to
     market information, actual production capacity in the two countries seems to be
      limited to 100 000 tonnes per year. Thus, it seems unlikely that significant quantities
     would be shippedfromRussia and Ukraine.
(57) Lastly, it was established that the market share of South Africa had decreased owing
     to production problems, and that Norway increased its market share, but with the
     highest CIF price shown in Eurostat.
(58) No other factors were found which would have negative influence on the
     Community industry.
3.   Conclusion
(59) Given the simple production process involved, the maturity and simplicity of
     the product offered through similar sales channels in the Community, and
     the transparency of the market, the Commission considers that the Chinese
     low-priced imports policy had a substantial negative impact on the situation of the
     Community industry.
     Even if certain imports originating in other countries may have contributed to the
     negative situation of the Community industry, it must be concluded that the price
     suppression, due to the Chinese imports has, taken in isolation, clearly caused
     material injury to the Community industry.
                   G. CONTINUATION OF DUMPING/INJURY
1.   General
(60) Exporters argued that in order to determine whether there is a likelihood of
     continuation of dumping and injury the market trend has to be analysed throughout
     the period between 1988 and the end of the investigation period.
(61) In this respect the Commission examined the level of imports into the Community of
     15 over a four-year period and especially after the imposition of the additional
     anti-dumping measures due to the absorption. This period can be considered to be
     sufficiently long for the purposes of establishing injury indicator trends in
     anti-dumping investigations.
2.   Chinese position in the world market
(62) Past experience, combined with the present situation, show that the Chinese industry
     has continued to export silicon metal into the Community at dumped prices. An
     anti-dumping investigation carried out by the United States administration has
     established, in 1991, that Chinese exports had been dumped and anti-dumping duties
     at a rate of 134% were imposed. Chinese exports to the United States decreased
     dramatically after the imposition of these measures.
                                            14
 ---pagebreak--- (63)    China is by far the biggest supplier of silicon metal in the world. In 1994, Chinese
        exports were approximately 116 000 tonnes. The lion's share of these exports goes to
        Japan which purchased 83 763 tonnes, or 72% of total Chinese exports in 1994. Until
        1993, Chinese sales to {he other Asian countries had increased sharply while sales
        into the US market remained depressed due to anti-dumping duties in force since
        1991. Sales to the Community recovered in 1994 despite the continued existence of
        anti-dumping duties.
(64)    Chinese exports of silicon metal into Japan stagnated in 1993 and 1994, totalling
        86 400 tonnes and 82 600 tonnes respectively. The same occurred in Australia. In
        South Korea the Chinese exports decreased over the same period. All the above
        corroborates the fact that the Japanese and other Asian markets are saturated, a
        finding which is confirmed by the fact that patterns of export volumes to China's
        main clients, namely Japan, South Korea and Australia, showed a substantial increase
        up to 1993 and stability thereafter.
3.      Chinese capacity of production
(65)    The exporters argued that numerous Chinese factories have been closed down and
        that production capacity in China has been reduced. Moreover, increasing domestic
        consumption of silicon metal in China would result in smaller quantities being
        available for export. The same exporters argued that an increase in demand in the
        Community is expected by the end of the decade and that, consequently, the
        Community industry will not have the capacity to supply sufficient quantities.
(66)    According to market information, the Chinese production of silicon metal decreased
        from 450 000 tonnes in 1989 to 250 000 tonnes in 1994. It is likely that as soon as
        the measures in the Community and the United States lapse, the Chinese may convert
        production from other alloys to silicon metal and regain previously held high levels of
        production, which could be exported to the Community.
4.      Likelihood of continuation of dumping
(67)    As regards dumping, it should be recalled that, during the investigation period, the
        imports concerned originating in China have continued to be dumped, at a level
        similar to that established during the investigation into absorption of the original duty
     -_ rate carried out in 1992. Moreover, the prices of Chinese imports into Austria,
        Sweden and Finland shortly before their accession to the Community were also low
        and likely to have been dumped. It is therefore considered highly likely that if the
        measures were to expire this would lead to a continuation of dumping, within the
        meaning of Article 11(2) of Basic Regulation.
                                                15
 ---pagebreak--- 5.   Likelihood of continuation of injury
(68) Chinese imports continued to be low-priced and to suppress the Community prices of
     silicon metal even after the imposition of additional anti-dumping duties. Chinese
     import prices were the lowest in the Community market over the period from 1992 to
     the end of the investigation period. Even with a small percentage of the Community
     consumption, they have had an important effect on the downward trend of the prices.
     Finally, if the measures of a fixed amount of ECU 396 per tonne were to lapse, an
     undercutting of 30% would occur.
(69) Furthermore, given the present huge capacity of Chinese production and the existence
     of high anti-dumping duties in the United States, it is very likely that the Chinese will
     try to increase their sales into the Community market at very low prices if the
     measures lapse, leading to an aggravation of price depression on the Community
     market and consequently a growing injury to the Community industry.
     The trend of imports into Sweden and Finland before and after their accession to the
     Community confirms the likelihood of such a development. Between July and
     December 1994, Sweden imported 493 tonnes, in contrast to the period from January
     to June 1995, when no imports from China were declared. The same situation
     prevailed in Finland, where in the last semester of 1994 2 097 tonnes were imported
     from China, whereas no imports were declared for the first semester of 1995. It is
     obvious that the volume of Chinese imports is strongly influenced by the existence or
     absence of anti-dumping measures. It is therefore concluded that at least a
     continuation of the injury suffered by the Community industry will occur should the
     anti-dumping duties in force be allowed to expire.
6.    Conclusion
(70) On the basis of the above it is therefore considered that, if the anti-dumping measures
     currently in force were to lapse, the Chinese exporters would continue to export to
     the Community market at very low prices. This would have as a consequence the
     continuation of price depression on the market causing further injury to the
      Community industry.
                             H. COMMUNITY INTEREST
1.    General
(71) Pursuant to Article 21(1) of the Basic Regulation, the Commission examined, on the
      basis of all evidence submitted, whether it could clearly be concluded that it was not
      in the Community interest to continue to apply measures.
      For this purpose, the Commission considered the impact of existing measures and
      other possible measures, and the consequences, for all parties involved in the
      proceeding, of not taking measures.
                                            16
 ---pagebreak--- 2.      Consequences for the Community industry
(72)    The purpose of anti-dumping measures is to remedy an unfair trading practice that
        has an injurious effect on a Community industry. Such a remedy should result in the
        re-establishment of a situation of effective competition which, as such, is in the
        interest of all the operators in the Community.
(73)    In the course of this investigation it has been established that the Community industry
        continues to suffer injury, and that it is highly probable that, without the continuation
        of anti-dumping measures to correct the effects of dumped imports, the precarious
        financial situation of the Community industry will further deteriorate. Thus, the
        existence of the Community industry as a whole may • ultimately be at risk.
        Two companies which took part in the previous investigations do not exist any more.
        It is also the Commission's opinion that if fewer producers are present in the
        Community market, competition may be reduced commensurately.
(74)    On the basis of the facts established, it is reasonable to conclude that if the measures
        are allowed to lapse, there will be further factory closures and job losses in addition
        to those which have already occurred.
(75)    When examining the Community interest in relation to the Community industry, the
        Commission had to take future developments into consideration. On the basis of
        studies for the future of the silicon metal industry world-wide it can reasonably be
        assumed that the use of this product could increase by possibly around 5% per year.
(76)    Furthermore, the ongoing restructuring efforts made by the Community industry
        show that it is not ready to abandon this segment of production, and therefore action
        against the adverse effects of dumped imports is necessary.
3.      Impact on the users
(77)    No individual user submitted any substantiated information during the current
        investigation. One Community user association and two national user associations
        submitted information requesting the termination of the measures.
(78)    A United Kingdom aluminium producers' association claimed that the quality of the
     __ silicon metal imported from China justified a price lower than that for the same
        product originating in other countries. This allegation was not substantiated by any
        evidence. In addition, neither in the original investigation nor in the present
        investigation was it established that there was a significant difference in quality,
       justifying different pricing between Chinese silicon metal and that originating from
        other sources. This claim has to be rejected.
(79)    The same association also argued that the international competitive position of the
        aluminium products produced in the Community is damaged by the imposition of the
        anti-dumping measures. It was however established that the silicon metal used for the
        production in the Community of aluminium for export can enter the Community
        without any duty, under the inward processing arrangements. This argument has
        therefore been dismissed.
                                                 17
 ---pagebreak--- (80)    A user claimed that it is against the Community interest to continue imposing
        anti-dumping duties on Chinese imports of silicon metal, owing to the fact that the
        Community industry would not be able to supply the Community market with
        sufficient quantities. It was found that, owing to the presence of other extra
        Community suppliers, the risk of a general supply shortage is very low.
(81)    As far as the competitive environment of the Community market is concerned, user
        industries and other economic operators have always enjoyed the presence of a wide
        range of competitors in the market, since the Community industry, even exploiting its
        entire production capacity, could only satisfy roughly 50% of the demand on the
        Community market.
        Imports from third countries will therefore always be necessary. After the imposition
        of anti-dumping measures, producers located in China would be able to promote their
        exports to the Community at fair prices. The only anti-dumping measures in force
        against imports into the Community of silicon metal are those applied on imports
        originating in China and Brazil.
(82)    The incidence of the measures in force on the structure of the cost of production at
        the aluminium smelters in particular was examined. This analysis showed that for the
        production of aluminium 226 and 231, representing 50% of total aluminium
        production, a weight of between 5.5% to 6% of silicon metal is required. The value
        of silicon metal used in this production represents 5.2% of the overall cost of the
        aluminium. The incidence of the existing measures on the price of an aluminium alloy
        which included only silicon metal originating in China accounts for 1.7%. This is a
        relatively small percentage of the total production costs, which points to the
        conclusion that any effect on users of the existing anti-dumping measures remains
        very limited.
4.      Impact on importers
(83)    Only a limited number of importers made their views on Community interest known
        to the Commission. One of them cooperated in the determination of dumping
        and injury.
(84)    One company located in the United Kingdom and no longer importing the product
     __ explained that the prices charged by the Chinese exporters FOB are such as to give
        only a slightly lower price.
        It further claimed that since the imposition of the measures, a price increase of over
        GBP 300 per metric tonne has occurred. Moreover, it maintained that the imposition
        of measures had conferred little benefit on the Community industry, as the main
        suppliers of the Community market are Norway and South Africa. They would,
        allegedly, have used the imposition of anti-dumping measures on the Chinese imports
        in order to dominate the British market.
                                              18
 ---pagebreak---      It has to be pointed out that after the imposition of the additional anti-dumping
     measures and up to the investigation period a weighted average increase of only 9.8%
     was recorded on all imports of silicon metal into the Community market.
     Furthermore, the Community industry increased its prices by 2% during the same
     period (recital (40)). It has already been established (recital (57)) that the market
      share of South Africa decreased owing to production problems, and that Norway
     increased its market share, but with however the highest CIF Eurostat price.
     These arguments have to be rejected.
5.   Impact on the competitive environment
(85) With respect to the competitive situation on the Community market, the Commission
     considered whether the existing measures and their continuation might affect effective
     competition. First, it should be recalled that after five years of anti-dumping
     measures silicon metal of Chinese origin was still available on the Community market.
     Other exporters had increased their presence in that market. Consequently, the
     Commission came to the conclusion that it does not appear to be realistic to foresee
     acute supply shortages in the silicon metal market, nor any negative effect on
     effective competition.
6.   Conclusion on Community interest
(86) On the basis of the above facts and considerations, in particular, and having examined
     the arguments submitted by the Community industry, Community downstream
     industry and importers of the product concerned, it is considered that, on balance, it
     is in the overall Community interest that the anti-dumping measures on silicon metal
     originating in China should not be allowed to expire.
                           I. ANTI-DUMPING MEASURES
1.   Injury elimination level
(87) During the investigation period, it was established that the return on sales of the
     product concerned was negative because the selling prices charged by the Community
     industry were below the verified cost of production.
(88) In order to obtain a non-injurious reference level for export prices, the Commission
     established first the Community industry's actual cost of production. With respect to
     a reasonable level of profit, one Community producer claimed that a minimum pre-tax
     profit of 7.5%» on sales was required for it to remain competitive. The Commission
     used a rate of 6.5% on turnover, a rate which is considered to be sufficient given the
     mature nature of the product, requiring only modest investment in research and
     development or in production equipment.
(89) The price, determined by adding 6.5% profit to the average cost of production of the
     Community industry, was duly adjusted to take account of differences in the level of
     trade between the imports and the sales of the Community industry.
                                            19
 ---pagebreak--- (90)  On this basis, the injury margin was determined by taking into account the CIF
      Chinese prices (Eurostat data) and amounted to 49% of the CIF price of the imports
      in question. According to the present injury margin, which is lower than the actual
      dumping margin, the actual measures would have to be ECU 376.5/tonne, instead of
      ECU 396/tonne which is the level of the measures in force.
2.    Definitive duties
(91)  Considering the conclusions on dumping, injury, causality, likelihood of continuation
      of dumping and injury and Community interest outlined above, the Commission
      considers it necessary to continue to impose anti-dumping measures which
      should restore effective and fair competitive conditions on the Community
      silicon-metal market.
(92)  Referring to Article 8 of the Basic Regulation, the Chinese traders proposed an
      undertaking or the imposition of a variable duty. The lack of cooperation, as
      demonstrated by the inadequacy of the Chinese replies to the questionnaires, indicates
      that efficient monitoring of undertakings would be jeopardized. Furthermore, the
      previous behaviour of the Chinese traders does not make the imposition of a variable
      duty appropriate.
(93)  On the basis of the above, and taking into account the fact that those measures have
      been in force since 1992 at the current level, it is considered more appropriate that
      the anti-dumping measures on imports of silicon metal originating in China should
      take the form of an ad-valorem anti-dumping duty, the rate of which should be set
      at 49%.
(94)  The Council confirms the above conclusions,
HAS ADOPTED THIS REGULATION:
                                        Article 1
1.    A definitive anti-dumping duty is hereby imposed on imports of silicon metal
      originating in the People's Republic of China, falling within CN code 2804 69 00.
2.    The rate of the definitive anti-dumping duty applicable to the net, free-at-
      Community-frontier price, before duty, shall be 49%.
3.    Unless otherwise specified, the provisions in force concerning customs duties
      shall apply.
                                            20
 ---pagebreak---                                              Article 2
This Regulation shall enter into force on the day following that of its publication in the
OfficialJournal of the European Communities.
This Regulation shall be binding in its entirety and directly applicable in all Member States.
Done at Brussels,                                               For the Council
                                                                The President
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 ---pagebreak---  ---pagebreak---                                                                   ISSN 0254-1475
                                                           COM(97) 616 final
                                              DOCUMENTS
EN                                                             02 11 10 08
                                    Catalogue number : CB-CO-97-635-EN-C
                                                             ISBN 92-78-27761-4
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