(1)

On 13 February 2016, the European Commission (‘the Commission’) initiated an anti-dumping investigation into imports into the European Union (‘the Union’) of flat products of non-alloy or alloy steel (excluding stainless steel, silicon-electrical steel, tool steel and high-speed steel), hot-rolled, not clad, plated or coated, not in coils, of a thickness exceeding 10 mm and of a width of 600 mm or more or of a thickness of 4,75 mm or more but not exceeding 10 mm and of a width of 2 050 mm or more (‘heavy plate’) originating in the People's Republic of China (‘the PRC’) on the basis of Article 5 of Council Regulation (EC) No 1225/2009 (2) (‘the basic Regulation’).

(2)

The Commission published a Notice of Initiation in the Official Journal of the European Union (3) (‘the Notice of Initiation’).

(3)

The Commission initiated the investigation following a complaint lodged on 4 January 2016 by the European Steel Association (‘Eurofer’ or ‘the complainant’) on behalf of producers representing more than 25 % of the total Union production of heavy plate.

(4)

The complaint contained evidence of dumping and of resulting material injury that was sufficient to justify the initiation of the investigation.

(5)

Following a request by the complainant supported by the required evidence, the Commission published on 10 August 2016 Implementing Regulation (EU) 2016/1357 (4) making imports of heavy plate originating in the PRC subject to registration as of 11 August 2016 (‘the registration Regulation’).

(6)

In the Notice of Initiation, the Commission invited interested parties to come forward in order to participate in the investigation. In addition, the Commission specifically informed the complainant, other known Union producers, the known exporting producers, the authorities of the PRC, known importers, suppliers and users, traders and associations known to be concerned about the initiation and invited them to participate.

(7)

Interested parties were given the opportunity to make their views known in writing on the initiation of the investigation and to request a hearing with the Commission and/or the Hearing Officer in trade proceedings.

(8)

The Commission also informed producers in Australia, Brazil, Canada, India, Japan, the Republic of Korea, Malaysia, Mexico, Russia, the Former Yugoslav Republic of Macedonia, Ukraine and the United States of America about the initiation and invited them to participate.

(9)

In the Notice of Initiation, the Commission informed interested parties that it envisaged the use of the United States of America as the third market economy country (‘analogue country’) within the meaning of Article 2(7)(a) of the basic Regulation.

(10)

Interested parties had an opportunity to comment on the appropriateness of the choice of the analogue country and to request a hearing with the Commission and/or the Hearing Officer in trade proceedings.

(11)

In the Notice of Initiation, the Commission stated that it might sample exporting producers, Union producers and unrelated importers in the Union in accordance with Article 17 of the basic Regulation.

(12)

In the Notice of Initiation, the Commission stated that it had provisionally selected a sample of Union producers. The Commission had selected the sample on the basis of the highest representative sales volumes of the like product in the investigation period whilst ensuring a geographical spread.

(13)

This provisional sample consisted of three Union producers located in three different Member States and accounted for over 26 % of the total sales of heavy plate by the Union producers responding to the standing exercise. The Commission invited interested parties to comment on the provisional sample.

(14)

The Complainant and the sampled company itself submitted that it was not appropriate that Metinvest Trametal Spa (‘Trametal’) be included in the sample as this company is not an integrated mill but rather a re-roller of purchased slab from a related company in Ukraine and therefore allegedly not representative of the Union industry.

(15)

The Union industry consists of both integrated mills and re-rollers, and both types of Union producers are among the complainants. However, the vast majority of the heavy plates produced by the Union industry are produced by integrated mills.

(16)

The Commission established in addition that Trametal obtains slabs, the main input material typically accounting for around 70 % of total costs, from their related company in Ukraine. Therefore, in particular indicators relating to costs and profitability are directly impacted by this relationship as well as the performance and the particular situation of the related Ukrainian company supplying the slabs.

(17)

The Commission notes however that the situation of both types of the Union producers — integrated mills and re-rollers is fully reflected in the macroeconomic indicators described in recitals (105) to (124) below.

(18)

For the reasons listed in recitals (14) to (16) above the Commission however provisionally considers that the particular situation of Trametal is not representative for the Union industry and that the microeconomic indicators described in recitals (125) to (138) below should not be affected by it.

(19)

The Commission found this comment to be warranted and, after having considered the preliminary injury information at hand, it replaced Trametal in the sample by Ilsenburger Grobblech GmbH, the second biggest Union producer when ranked according to Union sales volume in the investigation period as defined in recital (28) below.

(20)

On 7 March 2016 the Commission made available to interested parties a note explaining the reasons for changing the sample and listing the companies included in the revised sample. No interested parties commented on the final sample.

(21)

The Commission requested unrelated importers to provide the information specified in the Notice of Initiation in order to decide whether sampling was necessary and, if so, to select a sample.

(22)

Six importers provided the requested information and agreed to be included in the sample. Three of them were sampled.

(23)

To decide whether sampling was necessary and, if so, to select a sample, the Commission asked all exporting producers in the PRC to provide the information specified in the Notice of Initiation. In addition, the Commission asked the Mission of the People's Republic of China to the European Union to identify and/or contact exporting producers that could be interested in participating in the investigation.

(24)

Fourteen exporting producers in the PRC provided the requested information and agreed to be included in the sample. In accordance with Article 17(1) of the basic Regulation, the Commission selected a sample of three companies on the basis of the largest representative volume of exports to the Union which could reasonably be investigated within the time available. In accordance with Article 17(2) of the basic Regulation, all known exporting producers concerned, and the authorities of the PRC, were consulted on the selection of the sample. No comments were received and the sample was therefore confirmed.

(25)

Seven exporting producers in the PRC indicated that they wished to request individual examination under Article 17(3) of the basic Regulation. However, none of them replied to the questionnaire and, thus, no requests for individual examinations were received.

(26)

The Commission sent questionnaires to all parties known to be concerned and to all other companies that made themselves known within the deadlines set out in the Notice of Initiation. Questionnaire replies were received from three Union producers, six unrelated importers, ten users, a group of steel service centres, the three sampled exporting producers in the PRC, and two producers in different analogue countries.

(27)

The Commission sought and verified all the information deemed necessary for a provisional determination of dumping, resulting injury and Union interest. Verification visits under Article 16 of the basic Regulation were carried out at the premises of the following parties:

(28)

The investigation of dumping and injury covered the period from 1 January 2015 to 31 December 2015 (‘the investigation period’ or ‘IP’).

(29)

The examination of trends relevant for the assessment of injury covered the period from 1 January 2012 to the end of the investigation period (‘the period considered’).

(30)

The product concerned is flat products of non-alloy or alloy steel (excluding stainless steel, silicon-electrical steel, tool steel and high-speed steel), hot-rolled, not clad, plated or coated, not in coils, of a thickness exceeding 10 mm and of a width of 600 mm or more or of a thickness of 4,75 mm or more but not exceeding 10 mm and of a width of 2 050 mm or more currently falling within CN codes ex 7208 51 20, ex 7208 51 91, ex 7208 51 98, ex 7208 52 91, ex 7208 90 20, ex 7208 90 80, 7225 40 40, ex 7225 40 60 and ex 7225 99 00 (‘heavy plate’) and originating in the PRC.

(31)

Heavy plate is used in the manufacture of construction, mining and logging equipment; pressure vessels; oil and gas pipelines; shipbuilding and bridges and buildings.

(32)

The investigation showed that the following products have the same basic physical characteristics as well as the same basic uses:

(33)

The Commission therefore has provisionally decided that these products are like products within the meaning of Article 1(4) of the basic Regulation.

(34)

One interested party argued that the product scope is defined too widely. In particular, it argues that the product scope should be limited to so-called ‘commodity heavy plates’, while so-called ‘special heavy plates’ should be excluded from the product definition. In supporting its claim, it mainly relies on two arguments.

(35)

Firstly, it argues that the information provided in the complaint mainly relates to ‘commodity heavy plates’, which account for the majority of exports from the PRC. Secondly, it argues that the product scope is wider than the definition of the like product in Article 1(4) of the basic Regulation.

(36)

The Commission notes in this respect that at the complaint stage only sufficient evidence concerning dumping, injury and a causal link has to be provided. It is therefore not required to provide information about the complete product range at that stage. Limiting the analysis to the most commonly sold grades exported does not mean that the product definition has to be limited to those product types.

(37)

Secondly, Article 1(4) of the basic Regulation provides that the like product has to be identical or closely resembling to the product under consideration. This, however, does not refer to the definition of the product under consideration as such. The various types of the product under consideration merely have to share the same basic characteristics, which is the case as described in recital (32) above.

(38)

The parameters which allegedly differentiate ‘special heavy plates’ from commodity heavy plates are the chemical composition, the mechanical/technological composition, the delivery condition, the thickness and the certification and inspection for shipbuilding purposes.

(39)

Except of the thickness, none of these parameters concern the basic properties of the product. The party argues that all products with a thickness > 50,8 mm should be excluded from the product scope. In support of the thickness limit, the only argument brought forward by the party is that the complaint did allegedly merely targets heavy plates with a thickness < 50,8 mm, since the prima facie evidence provided in one Annex of the complaint concerning the dumping calculation is limited to such products.

(40)

It is however clear that product definition in the complaint also covers products with a thickness > 50,8 mm, as the product definition does not contain an upper limit for the thickness. As stated above, the mere reason that the prima facie evidence on dumping only covers the most commonly exported product types does not mean that the product definition is limited to those types.

(41)

The Commission therefore provisionally concludes to leave the product definition unchanged.

(42)

As set out in Article 2(7)(b) of the basic Regulation, if an exporting producer in the PRC complies with the criteria in Article 2(7)(c) and is therefore granted MET, the Commission then determines normal value for that company in accordance with Articles 2(1) to (6).

(43)

The Commission sent a MET claim form to all the sampled exporting producers in order that they could claim that they should be granted MET. None of them returned the claim form and therefore none of the companies could be granted MET.

(44)

Normal value was therefore determined on the basis of the price or constructed value in a market economy third country as set out in Article 2(7)(a) of the basic Regulation. For this purpose, an analogue country had to be selected.

(45)

In the Notice of Initiation, the Commission indicated that it envisaged the use of the United States of America as analogue country and invited interested parties to comment. No comments were received.

(46)

Questionnaires were sent to all known producers of heavy plate in the countries named in recital (8) above and two replies were received: one from a producer in Australia and one from a producer in the United States of America.

(47)

The reply from the producer in the United States of America showed evidence of production and sales on the US domestic market.

(48)

In its questionnaire reply the US producer informed the Commission that the normal US customs duty on imports of heavy plate is zero. Anti-dumping duties are in force on imports from the PRC, and both anti-dumping and anti-subsidy duties on imports from India, Indonesia and the Republic of Korea.

(49)

There are 7 US producers on the domestic US market, and imports from the Republic of Korea, Germany, France and Canada with a market share of 20 %.

(50)

The reply from the Australian producer contained evidence of production and sales on the Australian domestic market, and that it is the only producer in Australia. However, the imports into Australia have a market share of 35 %. Anti-dumping duties are in force on imports from the PRC, Indonesia, Japan, the Republic of Korea and Taiwan, but these duties are low and for some companies zero.

(51)

The Australian domestic market can be considered more competitive because imports take a larger market share and duties on imports are lower.

(52)

The Commission thus concluded at this stage that Australia was an appropriate analogue country under Article 2(7)(a) of the basic Regulation.

(53)

The information received from the cooperating producer in the analogue country was used as a basis for the determination of the normal value for the exporting producers not granted MET, under Article 2(7)(a) of the basic Regulation.

(54)

The Commission first examined whether the total volume of domestic sales of the cooperating producer in the analogue country was representative, in accordance with Article 2(2) of the basic Regulation.

(55)

The domestic sales are representative if the analogue country producer's total domestic sales volume of the like product to independent customers on the domestic market represented at least 5 % of total export sales volume of the product concerned to the Union of each sampled exporting producer in the PRC during the investigation period.

(56)

On this basis, the total sales of the cooperating producer of the like product on the domestic market of the analogue country were representative.

(57)

The Commission subsequently identified the product types sold domestically that were identical or comparable with the product types sold for export to the Union by the sampled exporting producers.

(58)

The Commission then examined whether the domestic sales by the analogue country producer on its domestic market for each product type that was identical or comparable with a product type sold for export to the Union by each sampled exporting producer in the PRC were representative, in accordance with Article 2(2) of the basic Regulation.

(59)

The domestic sales of a product type are representative if the total volume of domestic sales of that product type to independent customers during the investigation period represents at least 5 % of the total volume of export sales by each sampled exporting producer in the PRC of the identical or comparable product type to the Union.

(60)

The Commission found that some product types were representative on this basis, but others were not, either due to low quantities or because the exported product type was not sold domestically by the analogue country producer.

(61)

The Commission next defined the proportion of profitable sales to independent customers on the domestic market for each product type during the investigation period in order to decide whether to use actual domestic sales for the calculation of the normal value, in accordance with Article 2(4) of the basic Regulation.

(62)

The normal value is based on the actual domestic price per product type, irrespective of whether those sales are profitable or not, if:

(63)

In this case, the normal value is the weighted average of the prices of all domestic sales of that product type during the investigation period.

(64)

The normal value is the actual domestic price per product type of only the profitable domestic sales of the product types during the investigation period, if:

(65)

When a product type was not sold in representative quantities or not sold at all or all sales were at a loss on the domestic market by the analogue country producer, the Commission constructed the normal value in accordance with Article 2(3) and (6) of the basic Regulation.

(66)

For every product type not sold in representative quantities on the domestic market, normal value was constructed by adding the average selling, general and administrative (‘SG&A’) expenses and profit of transactions made in the ordinary course of trade on the domestic market for each of those types to their average cost of production.

(67)

For product types not sold at all or where all sales were at a loss on the domestic market, normal value was constructed by adding the average selling, general and administrative (‘SG&A’) expenses and profit in the ordinary course of trade of the like product on the domestic market to the average cost of production of each type.

(68)

In case where a product type was not sold at all in the domestic market of the analogue country, the cost of production was established on the basis of the cost of the closest cheaper type.

(69)

The export price was checked for each sampled exporting producer during the verification visit. When the export to the Union was made to the first unrelated customer directly or via a related trading company, the export price was the price actually paid or payable for the product concerned when sold for export to the Union, in accordance with Article 2(8) of the basic Regulation.

(70)

One of the sampled exporting producers exported heavy plate via a related importer in the Union. The export price for those sales was constructed in line with Article 2(9) of the basic Regulation.

(71)

The Commission compared the normal value from the analogue country producer and the export price of the sampled exporting producers on an ex-works basis.

(72)

Where justified by the need to ensure a fair comparison, the Commission adjusted the normal value and/or the export price for differences affecting prices and price comparability, in accordance with Article 2(10) of the basic Regulation. Adjustments were made for transport related costs, handling, loading and ancillary charges, indirect taxes, commissions, credit costs and bank charges.

(73)

For those sampled exporting producers which sold to the Union via related trading companies with functions similar to those of an agent working on a commission basis, an adjustment was made under Article 2(10)(i) of the basic Regulation.

(74)

For the sampled cooperating exporting producers, the Commission compared the weighted average normal value of each type of the like product with the weighted average export price of the corresponding type of the product concerned, in accordance with Article 2(11) and (12) of the basic Regulation.

(75)

On this basis, the provisional weighted average dumping margins expressed as a percentage of the CIF (cost insurance and freight) Union frontier price, duty unpaid, are as follows:

Table 1

Dumping margins sample

(76)

For the cooperating exporting producers which were not sampled, the Commission calculated the weighted average dumping margin of the sampled exporting producers, in accordance with Article 9(6) of the basic Regulation.

(77)

On this basis, the provisional dumping margin of the cooperating exporting producers outside the sample is 125,5 %.

(78)

For all other exporting producers in the PRC, the Commission established the dumping margin on the basis of the facts available, in accordance with Article 18 of the basic Regulation.

(79)

The Commission first determined the level of cooperation from exporting producers in the PRC. The level of cooperation is based on the volume of the exports to the Union of the cooperating exporting producers as a percentage of the total export volume — as reported in Eurostat import statistics — from the PRC to the Union.

(80)

The level of cooperation in this case is high because the exports of the cooperating exporting producers constituted around 87 % of the total exports to the Union during the investigation period. On this basis, the Commission decided to base the dumping margin for all other companies at the level of the sampled company with the highest dumping margin.

(81)

The provisional dumping margins, expressed as a percentage of the CIF Union frontier price, duty unpaid, are as follows:

Table 2

Dumping margins all

(82)

The like product was manufactured by 30 producers in the Union during the investigation period. They constitute the ‘Union industry’ within the meaning of Article 4(1) of the basic Regulation.

(83)

26 of them cooperated with the sampling exercise. These cooperating Union producers represent around 94 % of the total Union industry production and the total Union industry sales of the like product in the investigation period.

(84)

The total Union production of the like product during the investigation period is around 10,3 million tonnes. The Commission established the figure on the basis of all available information concerning the Union industry such as the complaint, verified questionnaire replies by sampled Union producers and verified submission by Eurofer.

(85)

As indicated in recital (1) above, three Union producers were selected in the sample representing around 28,5 % of the total sales of the Union industry and the total Union production volume of the like product during the investigation period.

(86)

The Commission established the Union consumption on the basis of Eurostat import statistics and verified sales data from the Union industry.

(87)

Union consumption of the heavy plate developed as follows:

Table 3

Union consumption (MT)

(88)

Union consumption increased by 5 % over the period considered. A year-by-year analysis shows an initial drop of 6 % between 2012 and 2013 and a subsequent recovery in 2014 and the investigation period of 11 percentage points or over 1 million tonnes.

(89)

The captive use by Union producers is insignificant as it accounts for less than 0,5 % of Union consumption over the period considered. The injury indicators are therefore assessed for the whole Union market, including quantities captively used by the Union producers.

(90)

The Commission established the volume of imports of on the basis of the Eurostat database. The market share of the imports was then established by comparing import volumes with the Union consumption as shown in table 3 of recital (87) above.

(91)

Imports of heavy plates into the Union developed as follows:

Table 4

Import volume (MT) and market share

(92)

The import volume from the PRC to the Union increased by 231 % over the period considered. After a 16 % decrease between 2012 and 2013 the imports from the PRC picked up substantially in 2014 by 85 percentage points and increased even further in the investigation period by another 162 percentage points.

(93)

The initial decrease in exports from the PRC between 2012 and 2013 was driven by the decreasing consumption on the Union market as shown in table 3 of recital (87) above. After 2013 the Union market experienced a dynamic surge, growing by over 1 million tonnes between 2013 and the investigation period. This growth was almost exclusively absorbed by the imports from the PRC, which increased also by over 1 million tonnes during this period.

(94)

In parallel, the share of the Union market held by imports from the PRC more than tripled from 4,6 % in 2012 to 14,4 % in the investigation period.

(95)

The Commission established the prices of imports on the basis of Eurostat data. The weighted average price of imports of heavy plates into the Union from the PRC developed as follows:

Table 5

Import price (EUR/tonne)

(96)

The average import prices from the PRC decreased by 29 % over the period considered. There was a constant decrease from 647 EUR/tonne in 2012 to 460 EUR/tonne in the investigation period.

(97)

The Commission determined the price undercutting during the investigation period by comparing:

(98)

The price comparison was made on a type-by-type basis for transactions at the same level of trade, duly adjusted where necessary, and after deduction of rebates and discounts. The result of the comparison was expressed as a percentage of the three sampled Union producers' turnover during the investigation period.

(99)

On the basis of the above, the dumped imports from the PRC were found to undercut the Union industry prices on average by 29 %.

(100)

In accordance with Article 3(5) of the basic Regulation, the examination of the impact of the dumped imports on the Union industry included an evaluation of all economic indicators having a bearing on the state of the Union industry during the period considered.

(101)

For the injury determination, the Commission distinguished between macroeconomic and microeconomic injury indicators.

(102)

The Commission evaluated the macroeconomic indicators (production, production capacity, capacity utilisation, sales volume, market share, employment, labour costs, growth, productivity, and magnitude of the dumping margins and recovery from past dumping) at the level of the whole Union industry. The assessment was based on the information provided by the complainant, Union producers and available official statistics (Eurostat). The macroeconomic data related to all Union producers.

(103)

The Commission evaluated the microeconomic indicators (average unit sale prices, unit cost, inventories, profitability, cash flow, investments, return on investments, and ability to raise capital) on the basis of data contained in the questionnaire replies from the sampled Union producers, duly verified, and available official statistics (Eurostat). The data related to the sampled Union producers.

(104)

The Commission notes that one of the sampled Union producers suspended the production of heavy plates in December 2015. This suspension has no impact on any injury indicator as it took place at the very end of the investigation period and therefore both sets of data were found to be representative of the economic situation of the Union industry.

(105)

The total Union production, production capacity and capacity utilisation developed over the period considered as follows:

Table 6

Production, production capacity and capacity utilisation

(106)

The production volume of the Union industry decreased by 12 % over the period considered. After a 12 % decrease between 2012 and 2013 the production volume increased slightly in 2014 by 5 percentage points to drop again in 2015 by 5 percentage points back to the level of 2013.

(107)

The initial decrease in production volume between 2012 and 2013 was driven by the decreasing consumption on the Union market as reported in Table 3 of recital (87) above. The Union industry was however not able to benefit from the subsequent growth in consumption between 2013 and the investigation period. While the consumption increased by 11 % or over 1 million tonnes, the production by the Union industry only temporarily slightly increased in 2014, falling back to the low level of 2013 in the investigation period.

(108)

The reported production capacity figures of the Union industry refer to technical capacity, which implies that adjustments, considered as standards by the industry, for set-up time, maintenance, bottle necks and other normal stoppages have been taken into consideration.

(109)

On this basis, the production capacity moderately decreased by 2 % over the period considered in a market growing by 6 % during the same period.

(110)

Since the decrease in production quantity exceeds the decrease in production capacity the capacity utilisation of the Union industry decreased by 10 % over the period considered.

(111)

The Union industry's sales volume and market share developed over the period considered as follows:

Table 7

Sales volume and market share

(112)

The Union industry's sales volume decreased by 7 % during the period considered. After a 7 % decrease between 2012 and 2013 and an even further decrease in 2014 by 2 percentage points the sales volume increased slightly by 2 percentage points in the investigation period.

(113)

Similar to the development of the production quantity, the initial decrease in sales quantity between 2012 and 2013 was driven by the decreasing consumption on the Union market explained in recital (87) above. The Union industry was however not able to benefit from the subsequent growth in consumption between 2013 and the investigation period. While the Union consumption increased by more than 1million tonnes, the sales quantity by the Union industry remained at the low level of 2013.

(114)

Due to the sales quantity decreasing by 7 % in a market growing by 5 %, the Union industry's market share decreased by 12 % over the period considered.

(115)

Employment and productivity of the Union industry developed over the period considered as follows:

Table 8

Employment and productivity

(116)

The Union industry reduced the level of employment by 17 % over the period considered. This decrease had two main reasons:

(117)

The Commission notes that the consumption in the Union market increased by 5 % during the period considered. In the absence of the increasing volumes of dumped imports from the PRC Union industry would therefore have been able to maintain employment since the efficiency gains would have been absorbed by the increased demand.

(118)

The average labour costs of the Union industry developed over the period considered as follows:

Table 9

Average labour costs per FTE (Full-time equivalent)

(119)

Due to substantial reductions in manpower as reported in recital (115) above the average labour cost per employee increased by 13 % over the period considered. In fact, while a certain part of the increased labour cost relates to mandatory wage increases under collective bargaining agreements it is predominantly caused by the costs of reducing workforce and working hours. Such costs include redundancy payments and the higher cost incurred in situations of part-time work due to decreasing production caused by steadily increasing quantities of dumped imports.

(120)

The Union consumption initially decreased from 2012 to 2013 by 6 % or almost 600 000 tonnes. This initial decrease had a negative impact on the situation of the Union industry's sales and production quantities.

(121)

Between 2013 and the investigation period, the situation was different. The Union consumption experienced a dynamic growth of 11 percentage points or more than 1 million tonnes. The Union industry could not however benefit from this dynamic growth. Indeed, the production and sales quantities remained at the very low levels of 2013. The growth of Union market was entirely absorbed by increasing quantities of low-priced dumped imports from the PRC, which equally increased by more than 1 million tonnes between 2013 and the investigation period, as presented in recital (91) above.

(122)

The dumping margins of all exporting producers from the PRC exceeded 100 %. The impact of the magnitude of these very high margins of dumping on the Union industry was serious, given the volume and prices of imports from the PRC.

(123)

In 2000, the Council imposed a definitive anti-dumping duty on imports of certain hot-rolled flat products of non-alloy steel originating in the People's Republic of China, India and Romania. These measures covered a very similar product scope to that of the present investigation. These measures expired on 11 August 2005.

(124)

As indicated in recital (221) below the Union industry achieved a profitability exceeding the target profit. The Commission therefore provisionally concludes that the Union industry recovered from the past dumping.

(125)

The weighted average unit sales prices to unrelated customers in the Union and the unit cost of production of the sampled Union producers developed over the period considered as follows:

Table 10

Sales prices in the Union

(126)

The average sales prices of the sampled Union producers have continuously decreased by 25 %, while the average unit cost of production continuously decreased by 19 % over the period considered. Sales prices have been decreasing faster and on average have constantly been lower than the unit cost of production.

(127)

In order to limit the loss in market share the Union producers had to follow the downward price spiral and reduce their sales price significantly. This price decrease significantly exceeds the decrease in their cost of production, which mainly resulted from the decrease in raw material prices over the period considered and the productivity gains achieved through workforce reductions as shown in recital (115) above.

(128)

The stock levels of the sampled Union producers developed over the period considered as follows:

Table 11

Inventories

(129)

The level of closing stocks of the three sampled Union producers continuously increased by 26 % over the period considered. At the same time, their level of closing stocks as a percentage of production also continuously increased by 35 %.

(130)

The main reason for the increase in inventories was that although the Union industry tried to prevent the decrease in production volumes, the sales volumes decreased even faster since the Union industry could not benefit at all from the market growth due to the increasing volumes of low-priced dumped imports.

(131)

The Commission established the profitability of the sampled Union producers by expressing the pre-tax net loss of the sales of the like product to unrelated customers in the Union as a percentage of the turnover of those sales.

(132)

Profitability, cash flow, investments and return on investments of the sampled Union producers developed over the period considered as follows:

Table 12

Profitability, cash flow, investments and return on investments

(133)

Profitability decreased by 758 % over the period considered. After yielding 1,6 % profit in 2012 the sampled Union producers were loss making in all the following years.

(134)

While the heavy loss of 12,2 % in 2013 is influenced by the particularly low demand in that year, the considerable price and volume pressure exerted on the Union industry by the increasing imports from the PRC over 2014 and the investigation period prevented the Union industry from benefiting from the dynamic growth of the Union consumption by 11 percentage points. As indicated in the recital (93) above this growth was almost completely absorbed by the dumped imports from the PRC.

(135)

The net cash flow is the ability of the Union producers to self-finance their activities. The cash flow decreased by 226 % over the period considered. After the 310 % decrease between 2012 and 2013, which was influenced by the particularly low demand in that year, it improved and became slightly positive in 2014. Nevertheless the negative trend continued in the investigation period, where it again became strongly negative.

(136)

The return on investments is the profit in percentage of the net book value of investments. The return on investment decreased by 282 % over the period considered. After the dramatic decrease of 397 % between 2012 and 2013 which was influenced by the particularly low demand in that year, it increased somewhat improved in 2014 and the investigation period while still remaining negative.

(137)

Consequently the Union industry reduced the level of its investments by 31 % over the period considered. After increasing investments between 2012 and 2013 by 7 % the Union industry was forced to reduce them in 2014 by 26 percentage points and in the investigation period by further 12 percentage points. As shown in table 6 of recital (105) above, these investments were not used to increase production capacity.

(138)

The ability to raise capital has been affected by the losses incurred during the period considered and has ultimately resulted in the shut-down of the operations of one of the sampled Union producers.

(139)

The period considered is characterized by two distinct periods: 2012 to 2013 and 2014 till the end of investigation period.

(140)

Initially, between 2012 and 2013 the Union consumption significantly decreased by 6 %. This decreasing consumption had a negative effect on many injury indicators, such as sales volume and prices, production, capacity and capacity utilisation, employment, productivity, profitability, cash flow and return on investments.

(141)

Subsequently, in 2014 and the investigation period the consumption experienced a dynamic growth of 11 percentage points or more than 1 million tonnes. However, the Union industry could not benefit from this growth, which was entirely absorbed by increasing volumes of dumped imports from the PRC.

(142)

Indeed, in this context of increased Union consumption, Union industry did not manage to increase the sales volumes or production volumes, while capacity utilisation even slightly decreased in a growing market.

(143)

The attempts to maintain production levels resulted in an increase of inventories of 24 percentage points. The Union industry also lost 9,3 percentage points market share to imports from the PRC which gained 10,3 percentage points market share at the same time. Unit sales prices dropped by 9 percentage points and cost of production decreased by 13 percentage points.

(144)

This led to a slight improvement of the financial indicators such as profitability, cash flow and return on investment, which however remained largely negative throughout this period. Employment decreased by 9 percentage points, while Union industry managed to increase productivity by 11 percentage points. Furthermore, Union industry had to reduce investments by 38 percentage points in the light of the continuously negative profitability and return on investment.

(145)

Overall, the Union industry as a whole reduced its production and took actual actions to improve efficiency by reducing labour force, production capacity and managed to significantly reduce their costs of manufacturing.

(146)

Despite these actions by the Union industry during the period considered to improve its overall performance, its economic and financial situation deteriorated significantly as losses started to accumulate from 2013 onwards.

(147)

On the basis of the above, the Commission concluded at this stage that the Union industry suffered material injury within the meaning of Article 3(5) of the basic Regulation.

(148)

In accordance with Article 3(6) of the basic Regulation, the Commission examined whether the dumped imports from the PRC caused material injury to the Union industry. In accordance with Article 3(7) of the basic Regulation, the Commission also examined whether other known factors could at the same time have injured the Union industry.

(149)

The Commission ensured that any possible injury caused by factors other than the dumped imports from the PRC was not attributed to the dumped imports. These factors are: fierce competition caused by demand problems on the Union market, low capacity utilisation of the Union industry, imports from other third countries, export sales performance of the Union producers and competition between vertically integrated producers and re-rollers.

(150)

Sales prices of the exporting producers from the PRC decreased by 25 %, from 647 EUR/tonne in 2012 to 460 EUR/tonne in the investigation period. By continuously lowering their unit sales price during the period considered, the producers from the PRC were able to significantly increase their market share from 4,6 % in 2012 to 14,4 % in the investigation period.

(151)

While the drop in demand negatively affected the performance of the Union industry between 2012 and 2013, the subsequent almost continuous increase in imports from the PRC at highly undercutting prices has had a clear negative impact on the performance of the Union industry.

(152)

Indeed, while the Union industry was cutting its costs by reducing employment and benefitting from the decrease in raw material prices, dumped imports kept on increasing and forced the Union industry to decrease its Union sales prices even more to limit its loss of market share, albeit to the detriment of profitability.

(153)

Furthermore, while the Union industry's profitability showed slight improvement by reducing losses in 2014, the volume of imports increased further and prices decreased even more in the investigation period bringing the Union industry prices and profitability further down.

(154)

Moreover, the progressive slowing down of the economy and very significant overcapacity of the steel industry in the PRC has pushed their steel producers to redirect their excess production towards export markets (6) and the Union market is an attractive export destination.

(155)

Indeed, a large number of other traditionally important export markets imposed or are considering imposing measures against steel products from the PRC, including heavy plates (7), because prices are artificially driven down by unfair imports leading to unhealthy competition.

(156)

With the growing imposition of trade defence measures across the globe, the Union market has become one of the most attractive destinations for dumped imports from the PRC, to the detriment of the Union industry.

(157)

This conclusion is corroborated by the most recent Eurostat import statistics which show that imports from the PRC have increased even more since the end of the investigation period. Import volumes for the period March to May 2016 increased by approximately 15 % when compared to the import volumes during the investigation period, while average prices of these imports continued to decrease by around 30 %.

(158)

One interested party argued that the injury of the Union industry is not caused by imports from the PRC, but by demand problems on the Union market. It argued that while the demand in the Union recovered in 2014 and the investigation period, in 2012 it was 32 % below the peak level in 2007, and in 2014 it was 17 % below the allegedly ‘normal’ year 2004.

(159)

This weakness in demand has allegedly resulted in fierce competition with regard to the limited quantities needed on the market, which has put a high pressure on the Union sales prices.

(160)

However, this fierce competition caused by the alleged demand problems did not negatively affect the ability of the exporters from the PRC to sell ever increasing quantities of dumped heavy plates on the Union market, increasing their market share from 4,6 % to 14,4 %, causing an almost exactly corresponding loss of market share of the Union industry and exerting a significant price pressure on the Union industry leading to its negative profitability.

(161)

While the demand problems initially had a significant negative impact on the performance of the Union industry in 2013, it is the dumped imports from the PRC which are the main cause for the fierce competition on the Union market, in particular in 2014 and the investigation period.

(162)

Indeed, in 2014 and the investigation period the Union industry could have benefited from the recovery of the market. It was prevented from doing so by a substantial increase in imports from the PRC, which more than tripled during these two years, and captured significant market share to the detriment of the Union industry.

(163)

The Commission therefore concludes that the demand problems on the Union market are not the root cause of the Union industry's injury and do not break the causal link between the dumped imports and the injury of the Union industry.

(164)

One interested party argued that the injury of the Union industry is also caused by low capacity utilisation, caused by significant overcapacities of Union producers. They argue that already in 2012, when imports from the PRC were at a relatively low level, the capacity utilisation was already very low, and that the Union industry has not reduced their capacities accordingly.

(165)

However, the demand in the Union significantly increased subsequently, in particular in 2014 and the investigation period where it exceeded the 2012 demand by 6 %. In the absence of strongly increasing quantities of dumped imports from the PRC, this increasing demand would have led to an increasing capacity utilisation of the Union industry, even more so since they decreased their production capacity by 2 % in a growing market.

(166)

The Commission therefore concludes that the low capacity utilisation, in particular in 2014 and the investigation period, are mainly caused by strongly increasing quantities of dumped imports from the PRC.

(167)

The Commission established the volume of imports on the basis of the Eurostat database. Apart from the PRC, the imports came mainly from Ukraine and Russia. The market share of the imports was established by comparing import volumes with the Union consumption as reported in table 3 of recital (87) above.

(168)

The imports into the Union from other third countries developed over the period considered as follows:

Table 13

Imports from third countries (MT) and market shares

(169)

The market share of imports from other third countries remained relatively stable over the period considered while that of imports from the PRC increased by 214 %.

(170)

Furthermore, the market share of Ukraine and Russia increased only slightly over the period considered. For Ukraine the market share rose from 4,7 % to 6,2 % and for Russia from 1,7 % to 2,4 % and this merely to the detriment of other importing countries than the PRC.

(171)

In the context of Union consumption increasing by 5 % and market share of the Union industry decreasing by 10 percentage points over the period considered this means that the imports from the PRC gained market share only from the Union industry.

(172)

In result, the imports from the PRC account for around 54 % of all imports into the Union in the investigation period, whereas imports from Ukraine are at around 23 % and Russia accounts for 9 %.

(173)

The average import price from other third countries decreased much slower than import prices from the PRC. They decreased by 19 % while the import prices from the PRC decreased by 29 %.

(174)

Even though the import prices from Ukraine and Russia are on average still just below the import prices from the PRC they decreased at a much slower rate than the import prices from the PRC over the period considered. Also, these prices are not necessarily directly comparable, since the average price is affected by a different product mix.

(175)

Furthermore the import volumes from Ukraine and Russia in particular or from all other third countries in general have not increased as substantially as those from the PRC. While the volume of imports from the PRC increased by almost 1 million tonnes over the period considered, the import volume from Ukraine increased by around 160 000 tonnes, that from Russia by around 75 000 tonnes and that from all other third countries (including Russia and Ukraine) by around 90 000 tonnes.

(176)

On the basis of above and given the much smaller import volumes from Ukraine and Russia as compared to those from the PRC there is no indication that imports from these two countries were causing injury to the Union industry.

(177)

Imports from all other third countries (including Russia and Ukraine) are — on average — higher priced than imports from the PRC and only had an insignificant market share gain of 1 percentage point.

(178)

The Commission therefore concludes that imports of heavy plates from third countries are not the root cause of the Union industry's injury and do not break the causal link between the dumped imports from the PRC and the injury of the Union industry.

(179)

The volume and average export prices of exports of the Union industry developed over the period considered as follows:

Table 14

Export performance

(180)

The volume of exports to unrelated customers outside the Union decreased by 18 % over the period considered. After decreasing by 28 % between 2012 and 2013 they increased in 2014 by 25 percentage points, dropping again in the investigation period by 15 percentage points.

(181)

As far as prices are concerned, they dropped significantly by 24 % over the period considered, in line with the price decrease on the Union market (– 25 %).

(182)

Overall, the export performance of the Union industry largely mirrors its performance on the Union market. The Union market, however, is significantly more important for the Union industry than the export markets. Throughout the period considered, sales on the Union market are around 4 times higher than export sales.

(183)

The Commission therefore considers that due to the limited significance of these export sales, the export performance of the Union industry cannot break the causal link between the dumped imports from the PRC and the injury suffered by the Union industry.

(184)

One interested party argued that the profit margin of the vertically integrated Union producers is eroded by the lower prices charged by re-rollers in the Union, which allegedly charge prices 6 % - 9 % below the prices charged by vertically integrated producers.

(185)

A re-roller is a company who does not produce their own input material, namely steel slabs. All sampled Union producers produce their own steel slabs and are therefore vertically integrated producers.

(186)

The Commission notes in this respect that the prices of dumped imports from the PRC undercut the Union industry prices on average by 29 % during the investigation period, as stated in recital (99) above. On this basis, prices of dumped imports from the PRC would still be at least 20 % lower than prices of re-rollers in the Union.

(187)

The same party also argued that the quantity produced by re-rollers in the Union is decreasing, since many of them depend on supplies of steel slabs from Ukraine. This supply from Ukraine has however decreased due to supply shortages during the period considered, and that this decrease in supply has not been compensated by production of the other Union producers despite their low capacity utilisation.

(188)

In this respect, the party provided no evidence that the Union producers were not interested or not willing to supply these additional quantities. It is therefore clear that especially these price sensitive customers moved away from products produced by the Union industry to even lower priced dumped imports from the PRC.

(189)

The Commission therefore concludes that the decreasing profitability of vertically integrated Union producers can only be affected to a very limited extent by decreasing quantities of moderately priced heavy plates produced by re-rollers in the Union. It also concludes that their decreasing profitability is overwhelmingly due to very significantly lower-priced dumped imports from the PRC, which also significantly increased in quantity.

(190)

A causal link was provisionally established between the injury suffered by the Union producers and the dumped imports from the PRC.

(191)

The Commission distinguished and separated the effects of all known factors on the situation of the Union industry from the injurious effects of the dumped imports.

(192)

The other identified factors such as the fierce competition caused by demand problems, low capacity utilisation, the imports from third countries, the export sales performance of the Union producers, competition between vertically integrated producers and re-rollers were provisionally not found to break the causal link, even considering their possible combined effect.

(193)

The temporary decrease in consumption in 2013 may have somewhat contributed to the injury in that year, but in the absence of continuously increasing volumes of dumped imports at ever decreasing prices, the Union industry would certainly have been able to benefit from the market growth in the subsequent years. In particular, sales volumes would have recovered, sales prices would not have dropped to such low levels, and better profitability would have been achieved.

(194)

On the basis of the above, the Commission concluded at this stage that the material injury to the Union industry was caused by the dumped imports from the PRC and that the other factors, considered individually or collectively, did not break the causal link.

(195)

In accordance with Article 21 of the basic Regulation, the Commission examined whether it could clearly conclude that it was not in the Union interest to adopt measures in this case, despite the determination of injurious dumping. The determination of the Union interest was based on an appreciation of all the various interests involved, including those of the Union industry, importers and users.

(196)

The Union industry is located in 14 Member States (Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Italy, Poland, Romania, Slovenia, Spain, Sweden, the UK) and employed directly around 20 000 employees in relation to heavy plates during the period considered.

(197)

26 Union producers cooperated during the investigation. None of the known producers opposed the initiation of the investigation. As shown above when analysing the injury indicators, the whole Union industry experienced a deterioration of its situation and was negatively affected by the dumped imports.

(198)

The Commission expects that the imposition of provisional anti-dumping duties will restore fair trade conditions on the Union market, putting an end to the price depression and enabling the Union industry to recover. This would result in an improvement of the Union industry's profitability towards levels considered necessary for this capital intensive industry.

(199)

The Union industry has suffered material injury caused by the dumped imports from the PRC. The Commission recalls that most of the injury indicators showed a negative trend during the period considered. In particular, injury indicators related to the financial performance of the sampled Union producers, such as profitability and return on investment, were seriously affected.

(200)

It is therefore important that prices be restored to a non-dumped or at least a non-injurious level in order to allow all producers to operate under conditions of fair trade on the Union market. In the absence of measures, a further deterioration of the Union industry's economic situation appears very likely.

(201)

The Commission therefore provisionally concludes that the imposition of anti-dumping duties would be in the interest of the Union industry. Any imposition of anti-dumping measures would allow the Union industry to recover from the effects of injurious dumping found.

(202)

As indicated in recital (22) above, six importers cooperate in the investigation, and three of them were sampled. One of the sampled importers is in favour of measures while the two other sampled importers oppose the imposition of measures. The remaining three non-sampled importers did not express an opinion.

(203)

The investigation showed that an increase in prices due to the imposition of measures would not have a direct impact on these unrelated importers. Heavy plate accounts for 20 % or less of their business.

(204)

In addition, most importers trade goods from numerous sources, including the Union industry. There is no indication that importers would not be able to continue serving their customers if measures were imposed.

(205)

In view of the above the Commission provisionally concludes that the imposition of measures will not have significant negative effects on the interest of the Union importers.

(206)

The main end-user industries for heavy plates are construction, mining and logging equipment; pressure vessels; oil and gas pipelines; shipbuilding and bridges and buildings.

(207)

Seven users and three traders/steel service centres submitted a users' questionnaire reply. However, four of the replies were highly deficient, and only two of them were against the imposition of measures. The Commission however cannot treat these submissions as representative for the following reasons:

(208)

The Commission further notes that duties should contribute to continuous security of supply on the Union market. Without duties, some of the Union producers might have to close down or reduce their production activities and leave many Union users with more limited sources of supply.

(209)

Indeed, one of the sampled producers suspended production of heavy plates at the end of the investigation period, as indicated in recital (104) above.

(210)

Moreover the level of measures will lead to a level playing field for all producers in the Union and third countries, which may allow this Union producer to resume production of heavy plates.

(211)

In view of the above, the Commission provisionally concludes that the imposition of measures would not have any disproportionate negative impact on users.

(212)

In view of the above, the Commission provisionally concludes that the imposition of measures would contribute to the recovery of the Union industry and allow for increased investments to better equip heavy plates' producers in the Union for the future and boost their competitiveness.

(213)

The Union industry underwent already significant restructuring in the (recent) past. If there are no duties, further Union heavy plates' producers might have to close down or reduce their heavy plates' activities, dismiss hundreds of employees and leave many Union users with limited sources of supply.

(214)

The impact of measures on the few other parties in the Union that came forward cannot be deemed substantial. Nothing on file shows that the potential impact on other stakeholders than those who came forward can outweigh the positive effect of measures on the Union industry. End-users and consumers are expected to benefit from a fair competitive market, including a local source of supply fully able to service their needs and requests. Price will continue to be a major determinant, but on a fair basis.

(215)

On balance, the Commission concludes at this stage of the investigation that there are no compelling reasons that it is not in the Union interest to impose provisional measures on imports of heavy plates originating in the PRC.

(216)

On the basis of the conclusions reached by the Commission on dumping, injury, causation and Union interest, provisional measures should be imposed to prevent further injury being caused to the Union industry by the dumped imports.

(217)

To determine the level of the measures, the Commission first established the amount of duty necessary to eliminate the injury suffered by the Union industry.

(218)

The injury would be eliminated if the Union industry was able to cover its costs of production and to obtain a profit before tax on sales of the like product in the Union market that could be reasonably achieved under normal conditions of competition by an industry of this type in the sector, namely in the absence of dumped imports.

(219)

To establish this profit that could be reasonable achieved under normal conditions of competition, the Commission requested the sampled Union producers to provide profitability data with regard to the like product when sold on the Union market for the years 2006 to the investigation period. This information was provided and duly verified.

(220)

The profitability of the Union industry was negative between 2013 and the investigation period. While the profit in 2012 was slightly positive at 1,6 %, there was already a significant presence of dumped imports from the PRC, and this profit margin was far below the profit margin achieved in the previous years.

(221)

The preceding year 2011 however showed a profit margin of 7,9 %, which is higher than the profit margins in 2009 and 2010, namely years in which the financial crisis was the most fierce, but lower than the profit margins in 2006 to 2008, namely before the financial crisis. In addition, it is the most recent available reasonable data in which imports from the PRC to the Union were not yet made at significant quantities. The Commission therefore considers that this profit margin is one that could be reasonably achieved under normal conditions of competition.

(222)

The Commission then determined the injury elimination level on the basis of a comparison of the weighted average import price of the cooperating sampled exporting producers in the PRC, duly adjusted for importation costs and customs duties, as established for the price undercutting calculations, with the weighted average non-injurious price of the like product sold by the sampled Union producers on the Union market during the investigation period. Any difference resulting from this comparison was expressed as a percentage of the weighted average import CIF value.

(223)

The injury elimination level for ‘other cooperating companies’ and for ‘all other companies’ is defined in the same manner as the dumping margin for these companies (see recitals (76)-(80) above).

(224)

Provisional anti-dumping measures should be imposed on imports of the product concerned originating in the PRC, in accordance with the lesser duty rule provided for in Article 7(2) of the basic Regulation. The Commission compared the injury margins and the dumping margins. The amount of the duties should be set at the level of the lower of the dumping and the injury margins.

(225)

On the basis of the above, the provisional anti-dumping duty rates, expressed on the CIF Union border price, customs duty unpaid, should be as follows:

(226)

The individual company anti-dumping duty rates specified in this Regulation were established on the basis of the findings of this investigation. Therefore, they reflected the situation found during this investigation with respect to these companies.

(227)

These duty rates are exclusively applicable to imports of the product concerned originating in the PRC and produced by the named legal entities. Imports of product concerned produced by any other company not specifically mentioned in the operative part of this Regulation, including entities related to those specifically mentioned, should be subject to the duty rate applicable to ‘all other companies’. They should not be subject to any of the individual anti-dumping duty rates.

(228)

A company may request the application of these individual anti-dumping duty rates if it changes the name of its entity or sets up a new production or sales entity. The request must be addressed to the Commission (8). The request must contain all the relevant information enabling to demonstrate that the change does not affect the right of the company to benefit from the duty rate which applies to it. If the change of name of the company does not affect its right to benefit from the duty rate which applies to it, a notice informing about the change of name will be published in the Official Journal of the European Union.

(229)

To ensure a proper enforcement of the anti-dumping duties, the anti-dumping duty for all other companies should apply not only to the non-cooperating exporting producers in this investigation, but to the producers which did not have exports to the Union during the investigation period.

(230)

As mentioned in recital (5) above, the Commission made imports of the product concerned originating in the PRC subject to registration by Commission Implementing Regulation (EU) 2016/1357.

(231)

This was in view of the possible retroactive application of the anti-dumping measures under Article 10(4) of the basic Regulation. The registration of imports should cease. No decision on a possible retro-active application of anti-dumping measures can be taken at this stage of the proceeding.

(232)

In the interests of sound administration, the Commission will invite the interested parties to submit written comments and/or to request a hearing with the Commission and/or the Hearing Officer in trade proceedings within a fixed deadline.

(233)

The findings concerning the imposition of provisional duties are provisional and may be amended at the definitive stage of the investigation,

(1)

On 4 January 2016, the European Steel Association (‘Eurofer’ or ‘the complainant’) lodged a complaint on behalf of producers representing more than 90 % of the total Union production of certain hot-rolled flat products of iron, non-alloy or other alloy steel. The complaint contained evidence of dumping and a resulting threat of material injury that was sufficient to justify the initiation of the investigation.

(2)

Following this complaint, on 13 February 2016, the European Commission (‘the Commission’) initiated an anti-dumping investigation with regard to imports into the Union of certain hot-rolled flat products of iron, non-alloy or other alloy steel originating in the People's Republic of China (‘the PRC’ or ‘the country concerned’) on the basis of Article 5 of Council Regulation (EU) 2009/1225 (2) (‘the basic Regulation’). It published a Notice of Initiation in the Official Journal of the European Union (3) (‘the Notice of Initiation’).

(3)

Subsequently, the Commission also initiated the following two investigations:

(4)

On 5 April 2016, the complainant submitted a request for registration of imports from the PRC of the product concerned. On 2 June 2016, the complainant updated the request by providing more recent financial data, but on 11 August 2016, withdrew it.

(5)

In the Notice of Initiation, the Commission invited interested parties to come forward in order to participate in the investigation. It specifically informed the complainant, other known Union producers, the known exporting producers, the Chinese authorities, known importers, suppliers and users, traders and associations known to be concerned about the initiation and invited them to participate.

(6)

Interested parties were given the opportunity to make their views known in writing and to request a hearing with the Commission and/or the Hearing Officer in trade proceedings. All interested parties who so requested and showed that there were particular reasons why they should be heard were granted a hearing.

(7)

In the Notice of Initiation, the Commission stated that it might sample the interested parties in accordance with Article 17 of the basic Regulation.

(8)

In the Notice of Initiation, the Commission stated that it would select a sample of Union producers in view of their large number. The Commission subsequently selected a sample on the basis of the highest representative production and sales volumes whilst ensuring a geographical spread. It informed these provisionally selected companies and the complainant. The Commission invited interested parties to comment on the provisional sample.

(9)

One provisionally selected Union producer informed the Commission that it would not be able to cooperate. In addition, both the Italian Iron and Steel association (Federacciai) and Eurofer commented that Southern Europe was not represented in the provisional sample. To ensure a better geographical spread, the Commission replaced the Union producer which decided not to cooperate with a Union producer from Southern Europe.

(10)

As a result, the final sample consisted of five Union producers located in five different Member States. It accounts for over 45 % of Union production.

(11)

The Commission asked unrelated importers to provide the information specified in the Notice of Initiation in order to decide whether sampling was necessary and, if so, to select a sample.

(12)

Four importers provided the requested information. Therefore, no sampling was necessary and importer questionnaires were sent to all of them.

(13)

However, even though the Commission contacted them in an effort to gather relevant information, no unrelated importer provided a complete questionnaire reply for the purposes of this investigation.

(14)

In order to decide whether sampling was necessary and, if so, to select a sample for the PRC, the Commission asked exporting producers in the PRC to provide the information specified in the Notice of Initiation. In addition, the Commission asked the Mission of the People's Republic of China to the European Union to identify and/or contact exporting producers that could be interested in participating in the investigation.

(15)

Thirteen groups of exporting producers in the PRC provided the requested information and agreed to be included in the sample. The Commission proposed a sample of three groups of companies on the basis of the largest representative volume of exports to the Union, which could reasonably be investigated within the time available. It invited all known exporting producers concerned and the authorities of the PRC to comment on the proposed sample.

(16)

One exporting producer, Jiangsu Tiangong Tools Company Limited (‘Tiangong Tools’), claimed that it should be included in the sample because, unlike the selected exporting producers, it produces tool steel and high-speed steel. It argued that, if its product is considered as product concerned, the sample should be more representative and include it.

(17)

This request was rejected. Tiangong Tools only exported small quantities of a particular product type into the Union. Therefore, the inclusion of this exporting producer in the sample would not have made the sample more representative. The Commission analysed the issue of representativity further within the context of the production scope.

(18)

Accordingly, the Commission decided to retain the proposed sample of three groups of exporting producers. The sampled exporting producers account for 57 % of total Union imports of the product concerned from the PRC and 58 % of the total Union imports of the product concerned from Chinese cooperating exporting producers.

(19)

Only one exporting producer, Tiangong Tools, requested an individual examination under Article 17(3) of the basic Regulation and submitted a questionnaire response for that purpose. The Commission accepted preliminary this request and verified the information provided on-spot.

(20)

However, the investigation demonstrated that this company only produces and exports to the Union tool steel and high-speed steel. Given that, as explained in recitals (29) to (35) below, the Commission provisionally decided to exclude tool steel and high-speed steel from the scope of this investigation, no provisional dumping margin has been established for Tiangong Tools. Nevertheless, should the Commission change its decision regarding product scope at the definitive stage, the individual examination request of this exporting producer would be reconsidered.

(21)

The Commission sent questionnaires to all parties known to be concerned and to all other companies that made themselves known within the deadlines set out in the Notice of Initiation. Questionnaire replies were received from Eurofer, five Union producers and their related steel service centres, one user, three groups of exporting producers in the PRC, and one producer in an analogue country.

(22)

The Commission sought and verified all the information deemed necessary for a provisional determination of dumping, a resulting threat of injury and Union interest. Verification visits pursuant to Article 16 of the basic Regulation were carried out at the premises of the following companies/association:

(23)

The investigation of dumping and injury covered the period from 1 January 2015 to 31 December 2015 (‘the investigation period’). The examination of trends relevant for the assessment of injury covered the period from 1 January 2012 to the end of the investigation period (‘the period considered’).

(24)

The product concerned is certain flat-rolled products of iron, non-alloy steel or other alloy steel, whether or not in coils (including ‘cut-to-length’ and ‘narrow strip’ products), not further worked than hot-rolled, not clad, plated or coated.

The product concerned does not include:

The product concerned is currently falling within CN codes 7208 10 00, 7208 25 00, 7208 26 00, 7208 27 00, 7208 36 00, 7208 37 00, 7208 38 00, 7208 39 00, 7208 40 00, 7208 52 10, 7208 52 99, 7208 53 10, 7208 53 90, 7208 54 00, 7211 13 00, 7211 14 00, 7211 19 00, ex 7225 19 10, 7225 30 90, ex 7225 40 60, 7225 40 90, ex 7226 19 10, 7226 91 91 and 7226 91 99 and originating in the PRC.

(25)

Hot-rolled flat steel products are produced through hot rolling; this is a metal forming process in which hot metal is passed through one or more pairs of hot rolls to reduce the thickness and to make the thickness uniform, whereby the temperature of the metal is above its recrystallization temperature. They can be delivered in various forms: in coils (oiled or not oiled, pickled or not pickled), in cut lengths (sheet) or narrow strips.

(26)

There are two main uses of the hot-rolled flat steel products. First, they are the primary material for the production of various value added downstream steel products, starting with cold-rolled (7) flat and coated steel products. Second, they are used as an industrial input purchased by end users for a variety of applications, including in construction (production of steel tubes), shipbuilding, gas containers, cars, pressure vessels and energy pipelines.

(27)

The investigation showed that the following products have the same basic physical characteristics as well as the same basic uses:

(28)

The Commission decided at this stage that these products are like products within the meaning of Article 1(4) of the basic Regulation.

(29)

First, one exporting producer (Jiangsu Tiangong Tools Company Limited) and one importer related to another Chinese exporting producer (Duferco S.A.) requested that certain types of hot-rolled flat steel products, known in the industry as tool steel and high-speed steel, should be excluded from the product scope. They claimed that tool steel and high-speed steel have significantly different properties, prices, different specifications and uses.

(30)

On 21 April 2016, a hearing with this Chinese exporting producer was held in the presence of the Hearing Officer in trade proceedings. Furthermore, on 22 June 2016, a hearing with the importer was held about its product exclusion request.

(31)

The Complainant was of the opinion that these claims were not well founded and that there is a risk of circumvention in case these claims would be accepted by the Commission.

(32)

The Commission found that there are indeed major physical and chemical differences between other types of the product concerned than tool steel and high-speed steel on the one hand, and tool steel and high-speed steel on the other hand. There are several chemical elements (8) inherently present in tool steel and high-speed steel, which are not found in the product concerned.

(33)

Furthermore, there are differences in the production process, different uses and significant price differences between tool steel and high-speed steel on the one hand and other types of the product concerned. For instance, tool steel and high-speed steel, unlike other types of the product concerned, are used for working, machining, extruding, cutting, stamping and perforating other materials, which is not the conventional use of the other types of the product concerned. Furthermore, the production of tool steel follows another production process, whereby the specific properties are achieved during all stages of the production process. This difference in production process makes the production process for tool steel and high-speed steel more cost-intensive, which also explains to an extent the difference in sales price with other types of the product concerned.

(34)

Imports of tool steel and high-speed steel account volume-wise for about 1,25 % of total Chinese imports during the year 2015. Tool steel and high-speed steel are also put under different, specific CN codes.

(35)

Therefore, the Commission provisionally excluded tool steel and high-speed steel, while alerting the national customs authorities about possible risks of circumvention.

(36)

Second, on 5 August 2016, one Italian user, Marcegaglia Carbon Steel Spa, claimed that the following types of the product concerned should be excluded from the product scope: Interstitial-Free (IF) steel types, dual-phase steel types, high carbon steel types, and non-grain oriented steel types. The rationale for the product exclusion request for these types was mainly as follows:

(37)

The same user also requested that the product types which are used for cold-rolling should be excluded on the basis of their further use downstream.

(38)

Concerning the product exclusion request for Interstitial-Free (IF) steel types, dual-phase steel types, high carbon steel types, and non-grain oriented steel types of the product concerned, the Commission found that it had not been demonstrated that these products have different properties and uses. Also, the final detailed request for the product exclusion request came in at a very late stage. Therefore, at this stage the Commission rejected this request, but will further investigate this claim.

(39)

Concerning the product types which are used for re-rolling, this is one of the main uses of the product concerned, as mentioned under recital (26) above. A different use alone is not a reason for exclusion. Also, excluding these product types would lead to the exclusion of a majority of all imported types of the product concerned, on top of a complex, if not impossible administrative monitoring to distinguish the product concerned between those which are used for re-rolling and those which are not. Therefore, at this stage the Commission rejected this request as well.

(40)

Pursuant to Article 2(7)(b) of the basic Regulation the Commission determines normal value in accordance with Article 2(1) to (6) of the basic Regulation for exporting producers in the PRC which comply with the criteria in Article 2(7)(c) of the basic Regulation and can be granted market economy treatment. However, none of the cooperating exporting producers applied for such treatment.

(41)

Therefore, under Article 2(7)(a) of the basic Regulation normal value had to be determined on the basis of the prices or constructed normal value in an appropriate third market economy — country (the ‘analogue country’).

(42)

In the Notice of Initiation, the Commission proposed using a third market economy country (‘analogue country’) within the meaning of Article 2(7)(a) of the basic Regulation. The Commission sent questionnaires to all known producers in the 11 market economy countries mentioned in the Notice of Initiation (9) and to eight other countries where there were indications of production and sales of the like product, namely Argentina, Australia, Egypt, Iran, Japan, South Africa, the Republic of Korea and Taiwan. In total, 62 producers in 19 potential analogue countries were contacted. However, only one company in the USA (ArcelorMittal USA) expressed its willingness to cooperate — and submitted a questionnaire reply.

(43)

The USA is considered a suitable analogue market, as it is an open market, with ten domestic producers of the like product and imports from other countries account for up to over 10 % of total consumption. Therefore, and given that only one producer from USA expressed its willingness to cooperate, USA was provisionally selected as an appropriate analogue country.

(44)

Interested parties were invited to comment on this selection. As no comments were received, the USA was selected as analogue country.

(45)

In accordance with Article 2(2) of the basic Regulation, the Commission first examined whether the sales of the like product in the USA to independent customers were representative. The sales of the cooperating producer of the like product were found to be sold in representative quantities on the domestic market compared to the product concerned exported to the Union by the Chinese exporting producers included in the sample.

(46)

The Commission subsequently examined whether those sales could be considered as made in the ordinary course of trade pursuant to Article 2(4) of the basic Regulation. This was done by establishing the proportion of profitable sales to independent customers. The sales transactions were considered profitable where the unit price was equal or above the cost of production. The cost of production of the American producer during the investigation period was therefore determined.

(47)

For those product types where more than 80 % by volume of sales on the domestic market of the type in question were above cost and the weighted average sales price of that type was equal to or above the unit cost of production, normal value, by product type, was calculated as the weighted average of the actual domestic prices of the actual domestic prices of all sales of the type in question, irrespectively of whether those sales were profitable or not.

(48)

Where the volume of profitable sales of a product type represented 80 % or less of the total sales volume of that type, or where the weighted average price of that type was below the unit cost of production, normal value was based on the actual domestic price, which was calculated as a weighted average price of only the profitable domestic sales of that type made during the investigation period.

(49)

As regards the product types — that were not profitable, normal value was constructed pursuant to Article 2(3) of the basic Regulation using the cost of manufacturing of the American producer plus SG&A and profit for product types of the American producer that are profitable.

(50)

Some product types produced in the analogue country could not be matched with the product types exported from the PRC to the Union because they are not sold by the American producer. Therefore, the normal value for the non-matching product types had to be constructed pursuant to Article 2(3) of the basic Regulation on the basis of the analogue country's producer's manufacturing costs. The Commission took those costs of the closest resembling product, and adjusted them for the cost of the modification work (slitting or cutting) needed in order to ensure a fair comparison. The Commission then added a reasonable amount for SG&A (7 %-13 %) based on actual data pertaining to production and sales, as provided for in Article 2(6) of the basic Regulation. It finally added a reasonable amount of profit (10 %-15 %) by using the average profit margin of sales of the profitable products.

(51)

The sampled exporting producers exported to the Union both directly to independent customers and through related companies.

(52)

For direct sales, the export prices were based on the prices actually paid or payable for the product concerned, in accordance with Article 2(8) of the basic Regulation.

(53)

For the transactions where the exporting producers export the product concerned to the Union through related companies acting as an importer, the export price was established on the basis of the price at which the imported product was first resold to independent customers in the Union in accordance with Article 2(9) of the basic Regulation. In this case, adjustments to the price were made for all costs incurred between importation and resale.

(54)

The normal value and export price were compared on an ex-works basis. The dumping margins were established by comparing the individual ex-works prices of the sampled exporting producers to the domestic sales prices of the analogue country producer or to the constructed normal value as appropriate.

(55)

For the purpose of ensuring a fair comparison between the normal value and the export price, due allowance in the form of adjustments was made for differences affecting prices and price comparability in accordance with Article 2(10) of the basic Regulation.

(56)

On this basis, adjustments, where appropriate, were made for transport, insurance, handling, loading and ancillary costs (4 %), bank charges (0,02 %), credit costs (0,05 %), commissions (0,6 %) and indirect taxation (4 %).

(57)

For the sampled exporting producers, the weighted average normal value of each type of the like product in the USA was compared with the weighted average export price of the corresponding product type, as provided for in Article 2(11) and (12) of the basic Regulation.

(58)

The dumping margin for the cooperating exporting producers not included in the sample was established in accordance with the provisions of Article 9(6) of the basic Regulation. This margin was calculated as a weighted average on the basis of the margins established for the sampled exporting producers.

(59)

With regard to all other exporting producers in the PRC, the Commission determined the level of cooperation in the PRC. It was measured by assessing the proportion of the volume of exports of the cooperating producers to the Union out of the total export volume from the country concerned to the Union.

(60)

The level of cooperation is high. On this basis, the residual dumping margin applicable to all other exporting producers in the PRC was provisionally set at a level corresponding to the highest dumping margin found for the cooperating exporting producers in the sample.

(61)

The provisional dumping margins, expressed as a percentage of the CIF Union frontier price, duty unpaid, are as follows:

Table 1

Dumping margins, the PRC

(62)

Within the Union, 17 companies provided production and sales data in the standing exercise and indicated that they produced the like product during the investigation period. Based on the available information from the complaint, these 17 companies are representing around 90 % of the production of the like product in the Union.

(63)

Apart from these 17 companies, there were five other companies producing the like product during the investigation period.

(64)

The total Union production during the investigation period was established at around 74,7 million tonnes. The Commission established the figure on the basis of all the available information concerning the Union industry, such as information from the complainant and from all known producers in the Union. As indicated in recital (10), five Union producers were selected in the sample representing 45 % of the total Union production of the like product. This is a representative sample.

(65)

The Union producers accounting for the total Union production constitute the Union industry within the meaning of Article 4(1) of the basic Regulation and are referred to as the ‘Union industry’.

(66)

The business model of the Union producers and their degree of vertical integration varies. Nevertheless, the Union industry can overall be characterised as an industry with a high degree of vertical integration, as further explained in recital (68) below.

(67)

As mentioned in recital (24) above, the product concerned falls within a number of CN codes including certain ex codes. In order not to underestimate Union consumption, and in view of the apparent marginal impact of such codes on total consumption, import volumes of CN ex codes have been fully accounted for the purpose of calculating Union consumption.

(68)

As the Union industry is mostly vertically integrated and the product concerned is regarded as a primary material for the production of various value added downstream products, starting with cold-rolled products, captive and free market consumptions were analysed separately.

(69)

The distinction between captive and free market is relevant for the injury analysis because products destined for captive use are not exposed to direct competition from imports, and transfer prices are set within the groups according to various price policies. By contrast, production destined for the free market is in direct competition with imports of the product concerned, and prices are free market prices.

(70)

To provide a picture of the Union industry that is as complete as possible, the Commission obtained data for the entire activity of the like product and determined whether the production was destined for captive use or for the free market. The Commission found that around 60 % of the total Union producers' production was destined for captive use.

(71)

The Commission established the Union captive consumption on the basis of the captive use and captive sales on the Union market of all known producers in the Union. On this basis, the Union captive consumption developed as follows:

Table 2

Captive consumption on the Union market (tonnes)

(72)

During the period considered the Union captive consumption on the Union market increased by around 4 %. This increase is mainly due to a growth of the captive markets, including manufacturing parts such as for the automotive industry.

(73)

The Commission established the Union free market consumption on the basis of (a) the sales on the Union market of all known producers in the Union and (b) the imports into the Union from all third countries as reported by Eurostat, thereby also considering the data submitted by the cooperating exporting producers in the country concerned. On this basis, the Union free market consumption developed as follows:

Table 3

Free market consumption (tonnes)

(74)

During the period considered, the Union free market consumption increased by around 12 %. The increase is mainly due to the economic recovery of the downstream industry.

(75)

The Commission established the volume of imports on the basis of the Eurostat database. The market share of the imports was established by comparing import volumes with the Union free market consumption as reported in table (73) above.

(76)

Imports into the Union from the PRC developed as follows:

Table 4

Import volume (tonnes) and market share

(77)

The above table shows that in absolute figures the imports from the country concerned increased significantly during the period considered. In parallel, the total market share of the Chinese imports into the Union increased more than five times during the period considered.

(78)

The Commission established the prices of imports on the basis of Eurostat data. The weighted average price of imports into the Union from the country concerned developed as follows:

Table 5

Import prices (EUR/tonne)

(79)

The average prices of the imports decreased from 600 EUR/tonne in 2012 to 404 EUR/tonne during the investigation period. During the period considered, the decrease of the average unit price of the dumped imports was around 33 %.

(80)

The Commission assessed the price undercutting during the investigation period by comparing:

(81)

The price comparison was made on a type-by-type basis for transactions at the same level of trade, duly adjusted where necessary, and after deduction of rebates and discounts. The result of the comparison was expressed as a percentage of the Union producers' turnover during the investigation period. The main adjustments related to delivery costs (varying between 2,7 % and 6,3 % per sampled Union producer) and discounts (varying between 0,1 % and 19,5 %). As no unrelated importer came forward in this case, a post-importation of 7 euro per tonne was added, which was the adjustment taken in the investigation regarding certain cold-rolled flat steel products (10). This was assessed to be the most appropriate way due to the fact that the product concerned of the current investigation is similar in many respects to certain cold-rolled flat steel products, as explained in recital (221).

(82)

On the basis of the above, the dumped Chinese imports were found to undercut the Union industry prices in a range between 2,7 % and 5,6 %.

(83)

In accordance with Article 3(5) of the basic Regulation, the examination of the impact of the dumped imports on the Union industry included an evaluation of all economic indicators having a bearing on the state of the Union industry during the period considered.

(84)

The macroeconomic indicators (production, production capacity, capacity utilisation, sales volume, stock, growth, market share, employment, productivity and magnitude of dumping margins) were assessed at the level of the whole Union industry. The assessment was based on the information provided by the complainant, cross-checked with data provided by Union producers and available official statistics (Eurostat).

(85)

The analysis of microeconomic indicators (sale prices, profitability, cash flow, investments, return on investments, ability to raise capital, wages and cost of production) was carried out at the level of the sampled Union producers. The assessment was based on their information, duly verified.

(86)

To provide a picture of the Union industry that is as complete as possible, the Commission obtained data for the entire production of the product concerned and determined whether the production was destined for captive use or for the free market. For some injury indicators relating to the Union industry, the Commission analysed separately data related to the free and the captive market and made a comparative analysis. These factors are: sales, market share, unit prices, unit cost, profitability, and cash flow. However, other economic indicators could meaningfully be examined only by referring to the whole activity, including the captive use of the Union industry because they depend on the whole activity, whether the production is captive or sold on the free market. These factors are: production, capacity, capacity utilisation, investments, return on investments, employment, productivity, stocks and labour costs. For these factors, analysis of the whole Union industry is warranted in order to establish a complete injury picture of the Union industry, as the data in question cannot be separated out between captive sales and free sales.

(87)

The total Union production, production capacity and capacity utilisation developed over the period considered as follows:

Table 6

Production, production capacity and capacity utilisation

(88)

During the period considered, the Union industry's production volume increased by 2 %, despite the fact that one Italian Union producer reduced considerably its production during the same period (– 3 million tonnes).

(89)

The reported capacity figures refer to technical capacity, which implies that adjustments, considered as standards by the industry, for set-up time, maintenance, bottle necks and other normal stoppages have been taken into consideration. The production capacity decreased during the period considered due to the stoppage of production in Belgium and Italy.

(90)

The increase in capacity utilisation rate resulted from a slight increase in the production volume mainly driven by the increase in captive consumption (+ 4 %) and free consumption (+ 12 %) and this despite the significant reduction of production volume by mainly one Italian Union producer.

(91)

The Union industry's sales volume and market share in the free market developed over the period considered as follows:

Table 7

Sales volume and market share (free market)

(92)

The Union industry sales volume on the Union market remained relatively stable during the period considered, i.e. between 27 and 28 million tonnes.

(93)

During the period considered, the Union industry's market share in terms of Union consumption went down with more than 9 percentage points, i.e. from 86,8 % to 77,7 %. The decrease of Union industry's market share exceeded significantly the slight increase in its sale on the Union free market.

(94)

As far as the captive market on the Union market is concerned, the captive volume and market share developed over the period considered as follows:

Table 8

Captive volume on the Union market and market share

(95)

The Union industry captive volume (composed of captive use and captive sales on the Union market) on the Union market increased by 4 % during the period considered, from about 40,7 million tonnes in 2011 to 42,2 million tonnes during the investigation period.

(96)

The Union industry's captive market share (expressed as a percentage of total production) remained stable over the period considered, ranging between 55,7 % and 56,7 %.

(97)

The employment was calculated by taking only the employees directly working for the like product in the different steel mills of the Union producers. This method provided accurate data which are relatively easy to determine.

(98)

Employment and productivity developed over the period considered as follows:

Table 9

Employment and productivity

(99)

The level of the Union industry employment decreased during the period considered in order to reduce production costs and gain efficiency in view of the increasing competition from Chinese and other imports on the market. This resulted in a reduction of workforce by 5 % during the period considered, without taking into consideration any indirect employment. As a consequence and in view of the slightly increasing production volume (+ 2 %) over the period considered, the productivity of the Union industry's workforce, measured as output per person employed per year, increased much more (+ 7 %) than the increase in actual production. This shows that the Union industry was willing to adapt to the changing market conditions in order to remain competitive.

(100)

Stock levels of the Union producers developed over the period considered as follows:

Table 10

Inventories

(101)

During the period considered the level of closing stocks decreased slightly. Most types of the like product are produced by the Union industry based on specific orders of the users. Therefore, stocks are not considered to be an important injury indicator for this industry. This is also confirmed by analysing the evolution of the closing stocks as a percentage of production. As can be seen above, this indicator remained relatively stable at ca. 3,5 % to 4 % of the production volume.

(102)

All dumping margins were significantly above the de minimis level. The impact of the magnitude of the actual high margins of dumping on the Union industry was not negligible, given the volume and prices of imports from the country concerned.

(103)

The Union consumption (free market) increased by around 12 % during the period considered, while the sales volume of the Union industry on the Union market remained stable. The Union industry thus lost market share, contrary to the market share of the imports from the country concerned which increased significantly during the period considered.

(104)

The weighted average unit sales prices of the Union producers on the free market in the Union developed over the period considered as follows:

Table 11

Sales prices on the free market in the Union

(105)

The table above shows the evolution of the unit sales price on the Union free market as compared to the corresponding cost of production. Sales prices have on average been lower than the unit cost of production, with the exception of 2014 where the market started picking up and where the market share of Chinese imports was lower than in the investigation period.

(106)

In 2012 and 2013, the aftermath of the Eurozone debt crisis, on top of a declining steel demand in 2012, affected negatively the performance of the Union industry. In 2014, and also in the first half of 2015, the Union industry started recovering, due to increased efforts to remain competitive, in particular by increasing the productivity of the Union industry's workforce, as set out in recital (99), which resulted in productivity gains and in improved capacity utilisation.

(107)

Despite these efforts, the cost of production remained generally higher than the decreasing sales prices, and in order to limit the loss in market share, the Union producers followed the downward price spiral and reduced their sales price significantly, in particular during 2015. As the product concerned is a commodity, Union producers had to follow the decreasing price spiral.

(108)

Among the sampled producers, certain hot-rolled flat products of iron, non-alloy or other alloy steel for captive consumption were transferred or delivered at transfer prices for further downstream processing using different pricing policies (cost, cost plus, market price). Therefore, no meaningful conclusion can be drawn from captive use price evolution.

(109)

The average labour costs of the Union producers developed over the period considered as follows:

Table 12

Average labour costs per employee

(110)

During the period considered, the average wage per employee went up by 4 %.

(111)

Profitability, cash flow, investments and return on investments of the Union producers developed over the period considered as follows:

Table 13

Profitability, cash flow, investments and return on investment

(112)

The Commission established the profitability of the Union producers by expressing the pre-tax net loss of the sales of the like product on the free market in the Union as a percentage of the turnover of those sales.

(113)

Profitability developed negatively over the period considered: losses were incurred during all the three years, with the exception of 2014. While the losses in the years 2012 and 2013 are partly linked to the aftermath of the Eurozone debt crisis (on top of a declining steel demand in 2012), the Union producers could partly recover during 2014 and the first half of 2015.

(114)

The net cash flow is the ability of the Union producers to self-finance their activities. The trend in net cash flow varies a lot during the period considered, but remained overall largely positive, mainly due to non-cash expenses such as depreciation.

(115)

As return on investment remained negative overall during all years, with exception of 2014, the Union industry reduced the level of its investments by 13 % between 2012 and 2015. The ability to raise capital has been affected by the losses incurred during the period considered as can be seen from the decrease in investments.

(116)

Finally, the table below contains a breakdown of 2015 per quarter as the Complainant alleged in its complaint that there was a significant deterioration in the second half of 2015. The data in the table indeed confirm a significant deterioration, in the second half of 2015, of the profitability and of the net sales value due to further depressing sales prices on the free Union market.

Table 14

Profitability per quarter of the sampled Union producers

(117)

On the one hand, the Union industry as a whole could slightly increase its production volumes (despite the significant reduction of production by mainly one major Italian producer) and improve its capacity utilisation rate due to the increase in captive and free consumption. It also took concrete actions to improve efficiency by keeping a tight grip on costs of manufacturing (mainly raw materials) and by increasing the production per employee. As a result, the cost of production decreased by 25 %. Furthermore, its cash flow remained positive over the whole period considered. The sampled Union producers could still make investments of around 250 — 330 million euro a year during the period considered.

(118)

On the other hand, despite the Union industry's efforts during the period considered to improve its overall performance, other injury indicators show a deterioration of the situation on the free market: With exception of 2014 and the beginning of 2015, where the Union industry started to slightly recover, losses were incurred throughout the whole period considered, which reached unsustainable levels in the second half of 2015. Indeed, despite the fact that the sales volumes remained relatively stable on the Union free market, the Union industry lost market share and had to reduce investments in the light of the negative return on investment.

(119)

In the light of the foregoing, it is concluded at this stage that the above data show that the Union industry was in a weak situation at the end of the investigation period but not to the extent that the Union industry has suffered material injury during the period considered within the meaning of Article 3(5) of the basic Regulation.

(120)

In the analysis of a threat of material injury to the Union industry, in accordance with Article 3(9), second subparagraph, of the basic Regulation, consideration is given below to such factors as:

(121)

As the wording ‘such as’ in Article 3(9), second subparagraph, indicates, next to these four factors other factors may be analysed as well for the determination of a threat of injury. In particular, the Commission further analysed factors like profitability and order intakes, for which it had investigation period and post-investigation period data available.

(122)

With respect to the period considered, the Commission reviewed again the data collected for 2012-2015, as an understanding of the present situation of the Union industry is necessary in order to be able to determine whether there is a threat of injury to the Union industry (11). It then conducted a prospective analysis for all factors. In addition, it was able to collect data on dumped imports, Chinese capacity and import prices for the period January — June 2016 in order to confirm or invalidate the forecasts, as required by the Court (12). For profitability and order intakes though, comprehensive data were not available for the period January- June 2016 and only partial data up to the end of March 2016. For the level of inventories, no comprehensive data could be found up to the end of June 2016, in particular for the Union industry. Nevertheless, these data will be updated after the publication of this Regulation and where possible, also other factors will be analysed. At this stage, the data for profitability, order intakes and the level of inventories were the best available data.

(123)

Finally, Article 3(9) first subparagraph, second sentence, of the basic Regulation requires that the change in circumstances must have been clearly foreseen and must be imminent.

(124)

Imports from the country concerned significantly increased from 246 720 to 1 519 304 tonnes between 2012 and the investigation period, as shown in the table at recital (76) above. These imports have consistently taken place at continuously lowering prices. The substantial increase of the market share held by these Chinese dumped imports (+ 550 %) confirms that the development of these imports was not only the consequence of an increase in demand (+ 12 %). The Chinese exporting producers have been penetrating a new market and gaining market shares with low-priced imports at the expense of other economic actors, including the Union producers. The volume of Chinese imports further increased (by 8,5 %) in the first half of 2016 (773 275 tonnes) (source: Eurostat), compared to the first half of 2015 (712 390 tonnes). The available data show that not only the Chinese dumped imports have shown a substantial increase during the period considered, but also that this trend was not stopped or reversed during the post-investigation period.

(125)

Concerning Chinese crude steel capacity, the available information indicates that the Chinese steel capacity has been increasing rapidly for a long time. Whereas the PRC accounted for 25,6 % of the total world crude steel production in 2004 (13), it almost doubled its actual production and accounted for 50,3 % in 2015. In this respect, the Steel Communication from the Commission states the following: ‘…the spare production capacity in certain third countries, notably in China, has increased dramatically. The overcapacity in China alone has been estimated at around 350 million tonnes, almost the double of the Union's annual production. (14)’

(126)

In this respect, the OECD estimated the total Chinese steelmaking capacity to be 1 140 million tonnes (15) in 2014, whereas the actual Chinese production was calculated to be 822,8 million tonnes (16). As a result, the available Chinese excess capacity is certainly more than 300 million tonnes.

(127)

Such steel overcapacity is also not in line with the demand for the like product in the PRC or in other countries. In fact there is a slowing demand growth in global markets and the capacity/demand gap has been widening, according to a recent OECD study (17).

(128)

The fact that the country concerned has a massive steel overcapacity is not challenged by the Chinese authorities: First, the Chinese State Council issued on 1 February 2016 an ‘Opinion for the steel industry to resolve excess capacity’ which lays down the overall Chinese approach for tackling more resolutely the overcapacity in the Chinese steel industry. Measures would inter alia be a reduction of the crude steel capacity by 100-150 million tonnes over five years and the strict prohibition of new production capacity. Second, the China Iron & Steel Association (CISA) also mentioned in its submission that ‘in the last few years the Chinese government and the Chinese steel association have taken effective measures…Since 2011 China has actively eliminated obsolete capacities and reinforced energy saving measures. (18)’

(129)

However, inconsistencies are recently reported between the above-mentioned Chinese announcement of capacity cuts in the post-investigation period and the actual situation, as follows:

(130)

Finally, the Commission analysed the pledges and commitments of the Chinese authorities as mentioned in recital (128). Despite these announcements early 2016, they did not yet materialise.

(131)

As a result, it is considered that the issue of overcapacity in the steel sector in the PRC is widely-known and it is also acknowledged by the Chinese authorities.

(132)

The like product is assessed to be a large portion of the total crude steel production for the following reason: whereas the total Chinese crude steel production was 822 000 million tonnes and 822 698 million tonnes, the total Chinese production of hot-rolled flat products was 311 564 million tonnes (or about 37,9 % of overall crude steel production) and 317 387 million tonnes (or about 38,6 % of overall crude steel production) in respectively the years 2013 and 2014 (22). Therefore, the above data on crude steel provide a good indication as well on the overcapacity of the like product in the PRC.

(133)

Second, reference is made to the table in recital (185) where the actual production of the like product of the PRC is compared to the actual production of other countries for the years 2014 and 2013. This table shows for instance that the 2014 actual production of the like product in the PRC (317,4 million tonnes) is about 5 times the total aggregate production of Russia, Ukraine, Iran and Brazil combined (57,4 million tonnes). This is an indication of the enormous production capacity of the like product in the PRC.

(134)

Third, the investigation confirmed that during the investigation period, the sampled Chinese exporting producers run on average, at a capacity utilisation rate of 65 %. This amounts to more than 14 million metric tonnes of freely disposable capacity of the product concerned amongst only three companies. This is another indicator of the spare capacity of the like product. Assuming similar ratios from other Chinese hot-rolled flat steel products (HRF) producers, a high total HRF spare capacity in China can be deducted.

(135)

Furthermore, the Union market is an open market with a lot of imports from several countries, as shown in the table in recital (177). As shown in table 4 under recital (76), the Chinese exporting producers have been exporting to the Union market from mainly 2012 onwards and gaining rapidly market shares with low-priced imports at the expense of other economic actors, including the Union producers. This proves that penetration has proven relatively easy and very successful during the period considered for the Chinese exporting producers and is as such an indication of the attractiveness of the Union market for Chinese and other exporting producers.

(136)

In line with Article 3(9), 2nd subparagraph, lit (b) of the basic Regulation, the Commission analysed the availability of other export markets for the Chinese exporting producers to absorb any additional exports.

(137)

Some (major) exporting markets are increasingly difficult to access for the Chinese exporting producers because of trade defence measures (countries such as the USA, Malaysia, India, and Mexico) and/or investigations (countries such as Thailand) or increased customs duties (South Africa).

(138)

Statistical export data — for 2015 and for the first six months of 2016 — for a sample (23) of CN codes concerning the like product — show though a status quo in Chinese export volumes to the rest of the world.

(139)

First, the country concerned exported about the same volumes during the first 6 months of 2016, if these figures were annualised and compared to 2015. Nevertheless, the average unit sales price was lower during the first 6 months of 2016 compared to 2015. Second, the loss of market share in some countries (such as Indonesia and Vietnam) during the first 6 months of 2016 compared to 2015 is compensated by a gain of market share in other countries (such as Bangladesh and the Democratic People's Republic of Korea). The Commission hence concluded that it is unlikely that third countries would absorb on their own the huge amount of freely disposable Chinese capacity. Even if there is currently a status quo in Chinese exports to other third countries, the attractive Union market, as mentioned under recital (135) is likely to continue to be among the primary targets of Chinese dumped exports.

(140)

There is no sufficient absorption capacity in the PRC either. The domestic demand in the PRC for steel is slowing down: According to the World Steel Association, China's steel demand was first expected to decrease by – 3,5 % in 2015 and – 2,0 % in 2016, following its demand peak in 2013. (24). However, these figures were afterwards adjusted by the same organisation as follows: ‘the decline in steel demand in China is expected to be – 4,0 % in 2016 followed by – 3,0 % in 2017. This suggests a demand of 626,1 Mt steel (15 % down from 2013) for 2017, a contraction to 41,9 % of world steel use from 47,9 % in 2009 and 44,8 % in 2015’ (25).

(141)

In conclusion, it is likely that significant volumes of the existing massive excess capacity on steel, including the like product, will continue to be directed to the Union market. The present overcapacities and the insufficient absorption capacity of third states or the PRC itself indicate the likelihood of substantially increased Chinese exports to the Union where penetration has proven relatively easy and very successful during the period considered.

(142)

During the period considered, as set out in recital (78), average import prices from the country concerned decreased by 33 %, from 600 euro/tonne in 2012 to 404 euro/tonne in 2015.