Commission Implementing Regulation (EU) 2016/1778 of 6 October 2016 imposing a provisional anti-dumping duty on imports of certain hot-rolled flat products of iron, non-alloy or other alloy steel originating in the People's Republic of China

• (i) on the one hand, the significant price differential is likely to cause (further) a shift towards these dumped imports, because users will be more likely to buy increasing quantities of goods that are sold at low prices;

• (ii) on the other hand, the existence of such low prices in the market is likely to be used by buyers as a negotiating tool to depress the prices offered by the Union producers and other sources, thereby causing further a depressive effect in terms of both diminishing volumes and lower prices. While these effects can be questioned in situations where the price differentials are not substantial, in the case at stake, and considering the price undercutting found, the resulting damage to the Union industry is expected to be serious.

5.2.4.   Level of inventories

• (147) The Commission considered that this factor is not of any particular significance for the analysis because normally stocks are kept by traders (stockists) and not so much by producers. Furthermore, Union producers are mainly producing on order, enabling them to keep their inventory levels as low as possible. Nevertheless, it analysed this factor which is expressly mentioned in Article 3(9), second subparagraph, of the basic Regulation (see recital (120) above).

• (148) Falling levels of stock were noted both in the PRC and on the Union market ²⁶ at the end of the investigation period. This might be explained in the framework of the price decreases in 2015 and in 2016, as follows: if a producer or trader expects that prices would rise, it should be building up stocks rapidly expecting to make proportionally more profits when prices rise.

• (149) The Commission was unable to find comprehensive post-investigation period data on stocks despite requests and own researches. It found it nevertheless likely that inventory levels of the product concerned remains rather low in the Union during early 2016: For instance, in Germany, ‘according to the German Association of Steel Distribution (BDS), at the end of last year flat steel inventories dropped to the lowest level since December 2003. The latest data showed some improvement, but with flat steel stocks at 1,4 million tonnes in February, they remained 7 % lower year-on-year ²⁷’.

• (150) In the PRC, steel inventories in the warehouses of 40 major Chinese cities reportedly decreased to 8,86 tonnes late June 2016 from 9,47 tonnes late May 2016, which compares to 12,86 tonnes late June 2015. During the month of May 2016, the steel inventories of 80 major Chinese mills amounted to 14,17 tonnes, comparing to 16,71 tonnes late May 2015 ²⁸.

• (151) In conclusion, steel inventories are decreasing both during the end of the investigation period and in the post-investigation period. Although this factor is not decisive in the analysis, it might indicate a potential further decrease in prices reinforcing the threat of injury.

5.2.5.   Other elements: Profitability and order intakes in the Union by the Union industry

• (152) The Union industry needs sustainable profits. Therefore, this injury indicator is very important. Order intakes are confirmed commitments from customers and show the evolution of the Union industry's sales in the coming months. The Commission was able to collect and analyse data on profit and order intakes for the investigation and post investigation period.

• (153) As set out in recital (113), the Union producers slightly started to recover during 2014 and the first two quarters of 2015 in terms of profitability. As set out in recital (116), during the second half of 2015, the Union profitability became loss making and losses reached the unsustainable level of – 10 % in the 4th quarter of the investigation period.

• (154) For the post investigation period, profitability figures for the whole Union industry were not yet available. Profitability figures were collected for the complainants though, which represent about 90 % of the total production of the Union industry, as mentioned under recital (62). These data will be updated after the publication of this Regulation and where possible, also other factors will be analysed. At this stage of the investigation, the data for profitability and order intakes were the best available data.

• (155) As was shown in the table in recital (145), Chinese export prices further decreased during the first half of 2016 and were below the cost of production of the Union producers. This shows an aggressive Chinese price setting on the Union market, which cannot be sustained in the future by the Union producers. This is confirmed by the table below which provides information on the profitability of the complainants. The investigation established a further deterioration of the profitability for the complainants.

Table 17

Evolution of profitability and order intakes of the Complainants

Description	2012	2013	2014	2015	April 2015- March 2016
Profitability	– 1,31 %	– 4,86 %	– 1,28 %	– 3 to – 5 %	– 5 % to – 7 %
Order intakes	16 763 734	16 631 630	16 677 099	15 529 155	15 636 444
Source: Eurofer	Source: Eurofer	Source: Eurofer	Source: Eurofer	Source: Eurofer	Source: Eurofer

5.2.6.   Foreseeability and imminence of the change in circumstances

• (156) Article 3(9) of the basic Regulation provides that ‘… the change in circumstances which would create a situation in which the dumping would cause injury must have been clearly foreseen and must be imminent.’

• (157) All the above-mentioned factors have been analysed and verified with respect to the investigation period. In particular, the profitability of the sampled Union producers reached the unsustainable level of — 10 % in the 4th quarter of 2015 when Chinese price pressure was felt most. Furthermore, the post-investigation period data revealed that this negative trend, which started in the second half of 2015, was not invalidated during the first half of 2016. If this trend continues, the fragile situation of the Union industry will be turned into a material injury shortly. Based on the data for the investigation period, the Commission thus concluded that there was a clearly foreseeable and imminent change in circumstances at the end of the investigation period, which will create a situation in which the dumping will cause injury.

5.3.   Conclusion on threat of injury

• (158) While the Union industry was recovering during 2014 and the first two quarters of 2015, almost all injury indicators started to fall dramatically during the second half of 2015. The investigation revealed that this negative trend, which started in the second half of 2015, was not invalidated during the first half of 2016. The Union industry's forecast concerning future profitability and future sales is negative and could be confirmed (see table 17 under recital (155)). Decreasing sales and lower/negative margins are most likely to lead to heavy losses, lost orders and reduced jobs. As a result, all factors assessed in the framework of Article 3(9) of the basic Regulation, in particular the significant rate of increase of dumped imports in 2015 (continued in 2016) at further decreasing prices, the huge excess capacity in the PRC, and the negative developments in profitability of the Union industry point to the same direction.

• (159) In the view of this analysis, at this stage the Commission concluded that there was a threat of a clearly foreseeable and imminent injury to the Union industry at the end of the investigation period.

6. CAUSATION

• (160) In accordance with Article 3(6) of the basic Regulation, the Commission examined whether the threat of material injury to the Union industry was caused by the existing dumped imports from the country concerned. In accordance with Article 3(7) of the basic Regulation, the Commission also examined whether other known factors could at the same time have threatened to injure the Union industry. The Commission ensured that any possible threat of injury caused by factors other than the dumped imports from the PRC was not attributed to the dumped imports. These factors are: the economic crisis and decrease in steel demand, the cost of raw materials causing the decrease of the sales prices, imports from other third countries, the export sales performance of the Union producers, and the allegation that one Union producer on its own is injuring the Union industry.

6.1.   Effects of the dumped imports

• (161) Sales prices of the Chinese exporting producers decreased on average from 600 EUR/tonne in 2012 to 404 EUR/tonne during the investigation period (– 33 %). By continuously lowering their unit sales price during the period considered, and as set out in recital (76), the Chinese exporting producers were able to significantly increase their market share from 2012 (0,79 %) to the investigation period (4,32 %). In particular, during the investigation period, compared to the previous years, there was a substantial increase of Chinese imports.

• (162) While the drop in steel demand and the aftermath of the Eurozone debt crisis affected negatively the performance of the Union industry in 2012 and 2013, the Union industry was able to recover slightly in 2014. However, in particular from the second half of 2015 onwards, the continuous increase in imports from the country concerned at undercutting prices had a clear negative impact on the performance of the Union industry. Indeed, while the Union industry was cutting in 2015 its costs by productivity gains, including some labour reductions 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. As a result, while the Union industry's profitability showed slight improvement by reducing losses in 2014 and the first half of 2015, the trend reversed completely from the second half of 2015 onwards: the volume of Chinese imports increased further and the Chinese prices decreased even more while the Union industry prices and profitability went further down.

• (163) In view of the coincidence in time between, on the one hand, the ever-increasing level of dumped imports at continuously decreasing prices and, on the other hand, the Union industry's loss of market share and price depression resulting in further losses, in particular from the second half of 2015 onwards, the Commission concluded that the dumped imports had a negative impact on the situation of the Union industry.

• (164) Moreover, the progressive slowing down of the Chinese economy and the very significant overcapacity of the Chinese steel industry has pushed Chinese steel producers to direct their excess production towards export markets and the Union market is an attractive export destination. Indeed, some other traditionally important export markets imposed measures against Chinese steel products, including hot-rolled flat steel products.

• (165) With the growing imposition of trade defence measures across the globe, it is likely that the Union market has become one of the most attractive destinations for Chinese dumped imports of the product concerned, to the detriment of Union industry. This conclusion is corroborated by:

• — the Eurostat import statistics which show that the level of Chinese imports continues to be significant after the end of the investigation period;

• — the weakened Chinese internal steel demand.

6.2.   Effects of other factors

6.2.1.   The economic crisis

• (166) The drop in steel demand in mainly 2012 and the aftermath of the Eurozone debt crisis affected negatively the performance of the Union steel industry in 2012 and 2013. As mentioned in recital (106), the Commission recognises the negative effect. It is also observed however that the Union industry started recovering during 2014 and 2015.

• (167) Therefore, on the one hand, even if the Union industry was impacted by the Eurozone debt crisis, namely during the years 2012-2013, the market was recovering slightly from their effects with a relatively stable, even increasing Union market demand from 2013 onwards. As a result, whereas between 2014 and 2015 the Union industry could have benefited more from the recovery of the market, it was prevented from doing so by a steep increase in imports from the PRC. Low-priced Chinese imports gradually increased and captured market shares to the detriment of the Union industry. The continuous pressure of imports started to be fully felt from the second half of 2015.

• (168) The Commission thus concluded at this stage that the Eurozone debt crisis had had a negative impact during mainly the years 2012 and 2013 of the period considered and before the investigation period. However, it did not contribute to the threat of injury found at the end of 2015.

6.2.2.   Decrease in cost of the main raw materials (iron ore, coking coal and scrap) of the product concerned/like product

• (169) An interested party argued that the prices of the product concerned and the like product would follow a sole worldwide price trend and basically reflect the decreasing prices of iron ore. Accordingly, it was not the Chinese exports, but a worldwide trend, which exerted the price pressure and caused the ensuing threat of injury.

• (170) The Commission analysed the developments in raw material prices for HRF for the period considered.

• (171) First, in established steel markets, such as the Union market, domestic producers compete with many import sources as shown in table 18 under recital (177) below, leading to a growing price pressure and, consequently, to price erosions.

• (172) Second, even if the PRC is the most steel consuming country in the world, it has a significant excess capacity. Chinese producers are thus incentivised to export their surplus of production at low prices to their most attractive markets, including the Union market. Hence, the trend of raw materials prices is not the only factor which has an impact on world-wide prices.

• (173) Third, it is acknowledged though that prices for the main raw materials (iron ore, coking coal and scrap) to produce HRF fell significantly between 2012 and 2015 as follows:

• — the price for iron ore decreased from about 141 USD per MT to 56 USD per MT, or a decrease of 60 %;

• — the price for demolition scrap fell from about 327 EUR per MT to 159 EUR per MT, or a decrease of 51 %;

• — the price for coking coal lowered from about 252 USD per MT to 121 USD per MT (– 52 %).

• (174) However, when analysing the cost of production of the biggest sampled Union producer, it turns out that the impact of these falling raw materials prices is much lower than the mentioned price evolution. The evolution is about averages and does not reflect the costs for the Union producers which also depend on quality, quantity and contracted relationships. For example, the input from the three above mentioned raw materials accounted for about 60 % of the total cost of production of one big producer in 2012, but was still at 50 % of its total cost of production in 2015. This shows that there is no direct correlation between the fall in raw material prices and a decrease of cost of production for HRF.

• (175) Furthermore, the cost of production within the Union industry decreased altogether by 25 % over the period considered (see recital (104)), which was the result of not only a lower cost for the raw materials but also due to efficiency gains achieved by Union producers. In addition, the average import prices decreased by a higher percentage, i.e. by 33 % over the same period (see recitals (78) and (79)).

• (176) Under fair market conditions, the Union industry could have maintained its sales price levels so as to reap the benefits of a reduction in costs and reach profitability again. However, Union producers had to follow the trend of prices on the Union market and prices fell down. During the investigation period Union producers were even forced to sell at prices below costs, even though they had already managed to reduce significantly their costs of production.

6.2.3.   Imports from third countries

• (177) The volume of imports and market share (in volume of total imports) from third countries developed over the period considered as follows:

Table 18

Volumes, unit prices and market shares from third countries

	2012	2013	2014	IP
BRAZIL	BRAZIL	BRAZIL	BRAZIL	BRAZIL
Volume of imports from Brazil	69 457	41 895	108 973	580 525
Index (2012 = 100)	100	60	157	836
Unit import prices from Brazil	515	461	433	386
Index (2012 = 100)	100	89	84	75
Market share	0,22 %	0,13 %	0,33 %	1,65 %
Share in total Union import volume	1,68 %	0,87 %	2,08 %	7,42 %
IRAN	IRAN	IRAN	IRAN	IRAN
Volume of imports from Iran	96 505	125 202	527 161	1 015 088
Index (2012 = 100)	100	130	546	1 052
Unit import prices from Iran	499	454	415	369
Index (2012 = 100)	100	91	83	74
Market share	0,31 %	0,39 %	1,59 %	2,89 %
Share in total Union import volume	2,34 %	2,60 %	10,08 %	12,97 %
RUSSIA	RUSSIA	RUSSIA	RUSSIA	RUSSIA
Volume of imports from Russia	1 341 666	1 334 322	1 376 412	1 714 880
Index (2012 = 100)	100	99	103	128
Unit import prices from Russia	500	448	431	387
Index (2012 = 100)	100	90	86	77
Market share	4,27 %	4,13 %	4,15 %	4,88 %
Share in total Union import volume	32,47 %	27,66 %	26,32 %	21,90 %
SERBIA	SERBIA	SERBIA	SERBIA	SERBIA
Volume of imports from Serbia	156 894	155 055	211 835	427 558
Index (2012 = 100)	100	99	135	273
Unit import prices from Serbia	523	468	442	400
Index (2012 = 100)	100	89	84	77
Market share	0,50 %	0,48 %	0,64 %	1,22 %
Share in total Union import volume	3,8 %	3,21 %	4,05 %	5,46 %
UKRAINE	UKRAINE	UKRAINE	UKRAINE	UKRAINE
Volume of imports from Ukraine	906 872	905 397	939 545	1 084 477
Index (2012 = 100)	100	100	104	120
Unit import prices from Ukraine	478	429	415	370
Index (2012 = 100)	100	90	87	78
Market share	2,89 %	2,81 %	2,84 %	3,08 %
Share in total Union import volume	21,95 %	18,77 %	17,97 %	13,85 %
Source: Eurostat	Source: Eurostat	Source: Eurostat	Source: Eurostat	Source: Eurostat

• (178) As set out in the table in recital (76), imports from the PRC grew with 516 % during the period considered. Although the growth rate during the period considered was even higher for Brazil (+ 736 %) and Iran (+ 952 %), their levels of imports (580 525 tonnes from Brazil, and 1 015 088 tonnes from Iran respectively) were much lower than the imports from the PRC in absolute figures (1 519 304 tonnes from the PRC) during the investigation period.

• (179) Furthermore, comparing absolute export figures, it is observed that the country concerned was the second largest exporter to the Union market during the investigation period, after Russia. Russian imports ²⁹ may have contributed to the threat of injury, but did not break the causal link because of the following considerations.

• (180) First, the growth rate of the PRC during the period considered (+ 516 %) is much higher than the one of Russia (+ 28 %).

• (181) Second, the PRC closed the gap with Russia that exported only slightly more, i.e. 773 686 tonnes (source: Eurostat) during the first half of 2016 compared to a volume of 773 275 tonnes (source: Eurostat) from the PRC in the same period.

• (182) Third, the excess capacity of Russia is not as significant as the excess capacity existing in PRC as shown in the table below-:

Table 19

Actual production of the like product by third countries (in thousands of tonnes)

Country	Crude steel capacity estimated for the year 2014	Crude steel production in 2013	Crude steel production in 2014	HRF actual production in 2013	HRF actual production in 2014
Russia	89 000	69 008	71 461	26 140	26 996
PRC	1 140 000	822 000	822 698	311 564	317 387
Source for capacity data: OECD() Source for production data: World Steel Association, Steel Statistical Yearbook 2015()	Source for capacity data: OECD() Source for production data: World Steel Association, Steel Statistical Yearbook 2015()	Source for capacity data: OECD() Source for production data: World Steel Association, Steel Statistical Yearbook 2015()	Source for capacity data: OECD() Source for production data: World Steel Association, Steel Statistical Yearbook 2015()	Source for capacity data: OECD() Source for production data: World Steel Association, Steel Statistical Yearbook 2015()	Source for capacity data: OECD() Source for production data: World Steel Association, Steel Statistical Yearbook 2015()

• (183) Even if the figures above on capacity are exclusively on crude steel, and even under the very unlikely assumption that all crude steel in Russia would be used for producing the like product, the excess capacity of Russia is even in that unlikely scenario far below the excess capacity of China.

• (184) Furthermore, the Commission then assessed the prices and market shares of the third country imports. It noted that imports of the like product from some other countries such as Iran, Russia and Ukraine, were made at prices even lower than that of imports from the country concerned. However, when analysing the trends and import volumes, it is clear that the level of imports from Iran were much lower than the level of imports from the PRC in the investigation period, and that imports from Russia and Ukraine indeed increased in volumes during the period considered, but at a much slower pace than the imports from the PRC. Also, contrary to the PRC, imports from Russia and Ukraine lost a significant share in the total Union import volumes during the period considered.

• (185) Finally, the Commission compared the actual production by third countries with the production of the country concerned showing that China outnumbers all other countries both in production of the like product and in capacity of crude steel.

Table 20

Actual production of the like product by third countries (in thousands of tonnes)

Country	Crude steel capacity estimated for the year 2014 (1)	Crude steel production in 2013	Crude steel production in 2014 (2)	Theoretical excess capacity in 2014 (1)	HRF actual production in 2013	HRF actual production in 2014
Russia	89 000	69 008	71 461	17 539	26 140	26 996
PRC	1 140 000	822 000	822 698	317 302	311 564	317 387
Ukraine	42 500	32 771	27 170	15 330	8 929	7 867
Iran	27 000	15 422	16 331	10 669	8 250	8 276
Brazil	48 000	34 163	33 897	14 103	15 014	14 229
Source for capacity data: OECD() Source for production data: World Steel Association, Steel Statistical Yearbook 2015()	Source for capacity data: OECD() Source for production data: World Steel Association, Steel Statistical Yearbook 2015()	Source for capacity data: OECD() Source for production data: World Steel Association, Steel Statistical Yearbook 2015()	Source for capacity data: OECD() Source for production data: World Steel Association, Steel Statistical Yearbook 2015()	Source for capacity data: OECD() Source for production data: World Steel Association, Steel Statistical Yearbook 2015()	Source for capacity data: OECD() Source for production data: World Steel Association, Steel Statistical Yearbook 2015()	Source for capacity data: OECD() Source for production data: World Steel Association, Steel Statistical Yearbook 2015()

• (186) The above production figures for the like product show that the country concerned outnumbers by far all other large exporting countries. Furthermore, the above capacity figures for crude steel also indicate that only the PRC has such a massive excess capacity.

• (187) Accordingly, the Commission found that the PRC posed a threat of an imminent injury to the Union industry. As mentioned before, this threat of injury has even become more realistic, due to the combined effect that the Chinese demand for steel is slowing down and that some other Chinese export markets are gradually becoming more difficult to access. As a result, a part of the Chinese volumes is likely to be continued to be directed in the near future to the Union.

• (188) However, it is also likely that imports from Brazil, Iran, Russia, Serbia and Ukraine have contributed to the threat of material injury. Nevertheless, the underlying production, the import trends and the precise import volumes in absolute figures are not of such a scale that they would break the causal link between ever increasing and ever more heavily dumped imports from the PRC and the threat of injury to the Union industry.

6.2.4.   Export sales performance of the Union industry

• (189) The volume of exports of the sampled Union producers developed over the period considered as follows:

Table 21

Export volumes to unrelated customers by the sampled Union producers

	2012	2013	2014	IP
Export volume to unrelated customers	2 344 463	2 379 035	2 777 446	2 409 721
Index (2012 = 100)	100	101	118	103
Average price (EUR/tonne)	516	463	459	391
Index (2011 = 100)	100	90	89	76
Source: Questionnaire reply of sampled Union producers	Source: Questionnaire reply of sampled Union producers	Source: Questionnaire reply of sampled Union producers	Source: Questionnaire reply of sampled Union producers	Source: Questionnaire reply of sampled Union producers

• (190) The volume of exports to unrelated customers increased by 3 % during the investigation period. As far as prices are concerned, they dropped significantly by – 24 % over the period considered.

• (191) Export sales accounted for not more than 4 % of the total Union production and for 22 % of total sales to unrelated customers during the investigation period. Also, the decrease in export prices followed percentage-wise the same trend as the sales prices of the Union producers on the Union market. Therefore, at this stage the Commission concluded that the export sales performance of the Union producers contributed to the weak situation of the industry. However, this factor did not break the causal link between the dumped imports and the threat of material injury to the Union industry either.

6.2.5.   Specific situation of one Italian Union producer

• (192) One interested party claimed that one Italian producer was potentially causing injury to the Union industry. It alleged that this Italian producer is benefiting from illegal State aid to the detriment of the other Union producers on the Union market, possibly ‘to an extent to break the causal link…’ It also claimed that the actual production of the Italian producer decreased significantly during the period considered.

• (193) First, the definition and analysis of the Union industry is based on the entire Union industry, including the Italian producer. Despite the fact that this Italian producer effectively reduced significantly its production level during the period considered, the overall production levels of the Union industry (see recital (87)) increased by 2 %. As a consequence, on balance, all other Union producers increased their production during the period considered.

• (194) Second, the allegation that the Italian producer is benefiting from illegal State aid is still under investigation by the Commission until 2017. The opening of an investigation does not prejudge the outcome of the proceedings. As a result, no conclusions can be drawn yet concerning this allegation. Nevertheless, the Commission noted that the sales prices from this Italian producer were found to be lower than the Union average sales price during the investigation period. If the Italian producer had a meaningful impact on sales prices in the Union, one would have expected that average Union prices would have gone up after the reduction of its production. However, this was not the case.

• (195) Third, the fact that certain Union producers perform better on the Union market than others may be the result of a variety of factors but does not affect the provisional conclusion that the Union industry as a whole is suffering from dumped imports.

• (196) The Commission therefore concluded at this stage that the specific situation of one Italian producer did not contribute to the weak situation of the Union industry.

6.3.   Conclusion on causation

• (197) A causal link was provisionally established between the Chinese dumped imports and the threat of material injury of the Union industry. There is a clear coincidence in time between the sharp increase of, in particular, the level of the dumped imports at continuous decreasing sales prices from the PRC, and the drop of the Union's performance, in particular from the second half of 2015 onwards. The Union industry had no other choice but to follow the price level set by the dumped imports in order to avoid a further shrinking of its market share. This resulted in a loss-making situation which is likely to further deteriorate.

• (198) 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, causing the threat of material injury for the Union industry as a whole at the end of the investigation period. The situation of the Italian producer did not contribute to the weak situation of the Union industry. The other identified factors such as the economic crisis, the cost of the raw materials, imports from third countries, and the export sales performance of the Union producers were not found to break the causal link between the threat of material injury and the Chinese dumped imports. On the basis of the above, the Commission concluded at this stage that the dumped imports from the PRC in the investigation period were causing a threat of material injury to the Union industry within the meaning of Article 3(6) of the basic Regulation. Known other factors other than the dumped imports from the PRC which at the same time had an impact on the situation of the Union industry were not found to break the causal link.

7. UNION INTEREST

• (199) 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. It gave special consideration to the need to eliminate the trade-distorting effects of injurious dumping and to restore effective competition. 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.

7.1.   Interest of the Union industry

• (200) The Union industry is located in several Member States (UK, France, Germany, Czech Republic, Slovak Republic, Italy, Luxembourg, Belgium, Poland, the Netherlands, Austria, Finland, Sweden, Portugal, Hungary and Spain), and employs directly ca. 18 000 employees in relation to hot-rolled flat steel products.

• (201) Seventeen 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 showed some signs of injury during the period considered. In particular, injury indicators related to the financial performance of the sampled Union producers, such as profitability, were seriously affected. They experienced a deterioration of its situation, in particular from the second half of 2015 onwards, and were negatively affected by the dumped imports, causing the threat of injury which became imminent at the end of the investigation period.

• (202) It is expected 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. It is therefore important that prices be restored to a non-dumped or a non-injurious level in order to allow all various producers to operate on the Union market under fair trade circumstances. In the absence of measures, it is very likely that the threat of injury will materialise and that there will be a further deterioration of the Union industry's economic situation. A negative performance on the hot-rolled flat steel products segment would impact the downstream and upstream segments of many Union producers as capacity utilization on these segments is closely linked to the production of the product investigated.

• (203) The Commission therefore concluded at this stage that the imposition of anti-dumping duties would be in the interest of the Union industry.

7.2.   Interest of importers

• (204) As mentioned in recitals (11) to (13), no unrelated importer completed a questionnaire reply or provided the Commission with elements showing to what extent importers would be harmed by the imposition of measures. Therefore and also taking into account that, in addition to the PRC, many other countries export to the Union, the Commission provisionally concluded that it is likely that the imposition of measures may not be in the interest of importers.

7.3.   Interest of users

• (205) The hot-rolled flat steel products 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, pressure vessels and energy pipelines.

• (206) Only one user from Italy (Marcegaglia Carbon Spa) with imports from the country concerned and producing inter alia tubes, pipes and downstream steel products provided a questionnaire reply. The product concerned/like product is a cost item for this user.

• (207) This Italian user alleged that the imposition of measures on imports from the country concerned would lead to a situation whereby it would no longer have access to reliable supplies of the product concerned on the Union market, in particular of high quality coils used for re-rolling. It alleged that 88 % of the total Union production is accounted for by only 16 companies belonging to eight large groups, whereby the largest part of the production (about 70 %) is used in the captive market. As a consequence, allegedly, the Union producers as a result of their still relatively high market share can exercise a strong pressure both on the market of the product concerned as on the downstream market.

• (208) First, the Commission noted that the objective of anti-dumping duties is not to close off the Union market from any imports, but to restore fair trade by removing the effect of injurious dumping. Imports from the PRC are therefore not expected to come to an end, but to continue, albeit at non-dumped prices.

• (209) Second, the Commission found that the user is not exclusively dependent on Chinese imports, but also purchased the product concerned during the investigation period from Union producers as well as from other producers in third countries other than the country concerned.

• (210) Third, even if the prices of the Chinese product concerned were to increase by around 30 %, this would only have a 3 % impact of the cost of production of this Italian user. Such an impact is considered minor.

• (211) Fourth, because imports from the country concerned and from other countries are expected to continue after the imposition of anti-dumping duties, and since as such alternative sources of supply still exist, the claim that the imposition of anti-dumping duties would result in the Union industry being able to exercise strong price pressure is unfounded. The Union industry consists of 23 producers which provide users with a wide range of supply already within the Union, in addition to the option of imports from the other third countries which produce and export the like product. Therefore, at this stage the Commission rejected the claim that the imposition of measures would lead to a shortage of supply of the product concerned/like product.

• (212) With regard to any potential negative effects on the competition on the Union market, it is true that the EU competition rules impose more stringent standards of behaviour on a company that has a significant market share. However, it is ultimately up to the competent competition authorities to determine whether there is a dominant position and whether it is abused.

• (213) In view of the above, it is concluded at this stage that the imposition of measures would be against the interest of users but would not have any disproportionate negative effect on them. In particular the wide range of supply which is available on the market, and that the investigation revealed that the impact of the measures on the cost of the user that came forward was less significant than alleged were taken into consideration.

7.4.   Conclusion on Union interest

• (214) The Commission concluded at this stage that the imposition of measures would contribute to the recovery of the Union industry in terms of profitability. The imposition of measures would allow the Union producers to make the necessary investments and R&D to better equip their hot-rolled flat steel production equipment and boost their competitiveness.

• (215) The Union industry underwent already significant restructuring in the (recent) past. If no measures were imposed, the threat of imminent injury at the end of the investigation period is likely to materialise. Some Union hot-rolled flat steel producers might have to close down/reduce their hot-rolled flat steel products activities, dismiss employees and leave many Union users with limited sources of supply.

• (216) As regards the interest of unrelated importers and users, the Commission concluded at this stage that the imposition of measures at the proposed level would have only a limited impact. More specifically, the prices, their profitability and the employment in the user's industry would not be disproportionately affected. Hence, the imposition of measures at the proposed level only has a limited impact on the prices of the supply chain and the performance of users. The level of measures will lead to a level playing field but still allow for imports from the country concerned, at fair prices.

• (217) Weighing and balancing the strong interests of an important Union industry to be protected against unfair practices, on the one hand, and the limited likely effects of measures on unrelated importers and users, which continue to benefit from a wide array of supply in the Union, the Commission concluded at this stage that there were no compelling reasons that it was not in the Union interest to impose measures on imports of the product concerned originating in the country concerned.

8. PROVISIONAL ANTI-DUMPING MEASURES

• (218) On the basis of the conclusions reached by the Commission on dumping, threat of injury, causation and Union interest, provisional measures should be imposed to prevent that the imminent threat of material injury which is caused to the Union industry by the dumped imports would materialise.

8.1.   Injury elimination level (Injury margin)

• (219) To determine the level of the measures, the Commission first established the amount of duty necessary to eliminate the threat of material injury. According to the case-law, the target price is the price which the Union industry could reasonably count on under normal conditions of competition, in the absence of the dumped imports. In the Commission decision practice, the target price is normally calculated by establishing the costs of production of the like product and adding the profit margin which the Union industry could reasonably count on under normal conditions of competition, in the absence of the dumped imports.

• (220) As regards the determination of a target profit, the Commission first analysed the proposal of the complainant, which pointed to 12,9 %, taken from a previous Commission decision on the same product ³⁴. However, this finding dates back to the year 2000, and the data from over 15 years ago cannot be regarded as representative anymore given the technological and financial changes the Union industry faced since then.

• (221) The Commission then turned to the profitability data of the year 2008, which it had regarded as the most representative year for a downstream product, namely cold-rolled steel products ³⁵ The product concerned of the current investigation is similar in many respects to certain cold-rolled flat steel products (cold-rolled products) for the following reasons:

• (a) For both products (iron ore and coking coal) certain alloys are major parts of their cost of production and they go through similar processes (furnace, hot strip mill).

• (b) As set out in recital (26), the product concerned is the primary material for the production of various value-added downstream steel products, starting with cold-rolled products.

On this basis, the Commission found a profit margin of 14,4 %.

• (222) However, various elements in that case relating to injurious dumping from China and Russia are not present in the current case, where the Commission found a threat of injury from Chinese exports, which involves a prospective analysis. In particular, in that case, imports at low prices from the countries under investigation had taken place throughout the four-year period prior to the investigation period.

• (223) The Commission then tried to establish a target profit by simulating how the recovery of the Union industry from the recession caused by the economic and financial crisis in 2009 might have developed if it had not been interrupted by the high volumes of price-depressing Chinese imports. For this exercise, it relied on more recent data and a prospective analysis presented to the OECD's Steel Committee in December 2013. In a study entitled ‘Laying the foundations for a financially sound industry’ an expert opinion looked at the profitability of the global steel industry in recent years and fixed a long-term sustainability profit threshold. In particular, this study argued in favour of 17 % global average EBITDA margin (earnings before interest, taxes, depreciation and amortisation) ³⁶. The report also points to an average of 7 % investment costs and an average debt cost of 3 %. The Commission deducted these two posts, and arrived at level of 7 % for earnings before taxes (EBT). Absent any other reliable data, it equated these figures made for the steel industry as a whole to the product concerned, as HRF makes up a big proportion of the crude steel production.

• (224) In conclusion, the Commission established provisionally at this stage that a target profit of 7 % can be used to calculate the threat of injury margin for the Union HRF industry, but will further investigate whether more precise data are available for the product concerned.

8.2.   Provisional measures

• (225) Provisional anti-dumping measures should be imposed on imports of the product concerned originating in the country concerned, 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.

• (226) 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:

Company	Dumping margin	Injury margin	Provisional anti-dumping duty
Bengang Steel Plates Co., Ltd.	96,5 %	17,1 %	17,1 %
Hebei Iron & Steel Group	95,0 %	13,2 %	13,2 %
Jiangsu Shagang Group	106,9 %	22,6 %	22,6 %
Other cooperating companies	100,1 %	18,0 %	18,0 %
All other companies	106,9 %	22,6 %	22,6 %

• (227) 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. These duty rates are exclusively applicable to imports of the product concerned originating in the country concerned 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 ³⁷. The request must contain all the relevant information, including: modification in the company's activities linked to production; domestic and export sales associated with, for example, the name change or the change in the production and sales entities. The Commission will update the list of companies with individual anti-dumping duties, if justified.

• (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.

9. FINAL PROVISIONS

• (230) 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.

• (231) The findings concerning the imposition of provisional duties are provisional and may be amended at the definitive stage of the investigation.

HAS ADOPTED THIS REGULATION:

Article 1

The product concerned does not include:

• — products of stainless steel and grain-oriented silicon electrical steel,

• — products of tool steel and high-speed steel,

• — products, not in coils, without patterns in relief, of a thickness exceeding 10 mm and of a width of 600 mm or more, and

• — products, not in coils, without patterns in relief, of a thickness of 4,75 mm or more but not exceeding 10 mm and of a width of 2 050 mm or more.

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 (TARIC code 7225191090), 7225 30 90, ex 7225 40 60 (TARIC code 7225406090), 7225 40 90, ex 7226 19 10 (TARIC code 7226191090), 7226 91 91 and 7226 91 99 and originating in the People's Republic of China.

Country	Company	Provisional duty rate	TARIC Additional Code
PRC	Bengang Steel Plates Co., Ltd.	17,1 %	C157
PRC	Handan Iron & Steel Group Han-Bao Co., Ltd.	13,2 %	C158
PRC	Hebei Iron & Steel Co., Ltd. Tangshan Branch	13,2 %	C159
PRC	Hebei Iron & Steel Co., Ltd. Chengde Branch	13,2 %	C160
PRC	Zhangjiagang Hongchang Plate Co., Ltd.	22,6 %	C161
PRC	Zhangjiagang GTA Plate Co., Ltd.	22,6 %	C162
PRC	Other cooperating companies listed in Annex I	18,0 %	See annex
PRC	All other companies	22,6 %	C999

Article 2

• (a) Request disclosure of the essential facts and considerations on the basis of which this Regulation was adopted;

• (b) Submit their written comments to the Commission; and

• (c) Request a hearing with the Commission and/or the Hearing Officer in trade proceedings.

Article 3

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

Article 1 shall apply for a period of six months.

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

Done at Brussels, 6 October 2016.

For the Commission

The President

Jean-Claude JUNCKER

’

ANNEX

Country	Name	TARIC additional code
PRC	Angang Steel Company Limited	C150
PRC	Inner Mongolia Baotou Steel Union Co., Ltd.	C151
PRC	Jiangyin Xingcheng Special Steel Works Co., Ltd.	C147
PRC	Shanxi Taigang Stainless Steel Co., Ltd.	C163
PRC	Shougang Jingtang United Iron & Steel Co., Ltd	C164
PRC	Maanshan Iron & Steel Co., Ltd	C165
PRC	Rizhao Steel Wire Co., Ltd.	C166
PRC	Rizhao Baohua New Material Co., Ltd.	C167
PRC	Tangshan Yanshan Iron and Steel Co., Ltd.	C168
PRC	Wuhan Iron & Steel Co., Ltd.	C156