Commission Implementing Regulation (EU) 2020/508 of 7 April 2020 imposing a provisional anti-dumping duty on imports of certain hot rolled stainless steel sheets and coils originating in Indonesia, the People’s Republic of China and Taiwan

• (279) As mentioned in recital (7), sampling was used for the determination of possible injury suffered by the Union industry.

• (280) For the injury determination, the Commission distinguished between macroeconomic and microeconomic injury indicators. The Commission evaluated the macroeconomic indicators on the basis of data from the questionnaire reply of Eurofer, which was duly verified, relating to all Union producers. The Commission evaluated the microeconomic indicators on the basis of data contained in the questionnaire replies of the three sampled Union producers, which were duly verified. Both sets of data were found to be representative of the economic situation of the Union industry.

• (281) The macroeconomic indicators are: production, production capacity, capacity utilisation, sales volume, market share, stocks, employment, productivity and magnitude of the dumping margin.

• (282) The microeconomic indicators are: average unit prices, unit cost, labour costs, profitability, cash flow, investments and return on investments.

4.5.2.   Macroeconomic indicators

4.5.2.1.   Production, production capacity and capacity utilisation

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

Table 7

Production, production capacity and capacity utilisation

	2016	2017	2018	IP
Total Union production (tonnes)	4 786 053	4 807 793	4 768 710	4 636 995
Index	100	100	100	97
Production capacity (tonnes)	6 967 785	6 937 585	7 025 230	7 057 282
Index	100	100	101	101
Capacity utilisation	69 %	69 %	68 %	66 %
Index	100	101	99	96
Source: Eurofer.	Source: Eurofer.	Source: Eurofer.	Source: Eurofer.	Source: Eurofer.

• (284) The Union industry’s production volume was stable until 2018 then decreased by 3 % in the investigation period. The reported capacity figures refer to actual capacity, which implies that adjustments considered as standard by the industry – for set-up time, maintenance, bottle necks and other normal stoppages – have been taken into account. On this basis, production capacity remained practically stable, with a marginal increase by 1 % over the period considered.

• (285) As a result of decreased production and slightly increased capacity, capacity utilisation decreased by 4 % over the period considered, and was constantly below 70 %.

4.5.2.2.   Sales volume and market share

• (286) The Union industry’s sales volume and market share on the free market developed over the period considered as follows:

Table 8

Free sales volume and market share

	2016	2017	2018	IP
Union industry free sales volumes (tonnes)	869 660	775 692	735 596	754 334
Index	100	89	85	87
Market share on free Union consumption	71,2 %	63,9 %	61,0 %	61,9 %
Index	100	90	86	87
Source: Eurofer and Eurostat.	Source: Eurofer and Eurostat.	Source: Eurofer and Eurostat.	Source: Eurofer and Eurostat.	Source: Eurofer and Eurostat.

• (287) The Union industry’s sales volume on the free market fell by 13 % over the period concerned.

• (288) The market share of the Union industry also fell significantly, by nearly 10 percentage points, even though consumption in the Union remained stable over the period considered.

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

Table 9

Captive volume and market share (tonnes)

	2016	2017	2018	IP
Captive volume on the Union market	3 627 275	3 741 880	3 703 555	3 607 752
Index	100	103	102	99
Total production of Union industry	4 786 053	4 807 793	4 768 710	4 636 995
Index	100	100	100	97
Share of captive market over total Union production	75,8 %	77,8 %	77,7 %	77,8 %
Index	100	103	102	103
Source: Eurofer.	Source: Eurofer.	Source: Eurofer.	Source: Eurofer.	Source: Eurofer.

• (290) The captive volume of the Union industry (composed of SSHR kept by the Union industry for downstream use) on the Union market remained stable at around 3,6 million tonnes during the period considered.

• (291) The Union industry’s captive market share (expressed as a percentage of total Union production) increased slighlty in 2017 then remained stable at around 78 % over the rest of the period.

• (292) Therefore, in view of the stable trend of the Union captive market over the period considered, the decline in Union industry’s sales was the result of increased pressure exerted by imports from the countries concerned.

4.5.2.3.   Growth

• (293) The above figures in respect of production, sales volume and market share, which all show a decreasing trend over the period considered, demonstrate that the Union industry was not able to grow, either in absolute terms or in relation to consumption.

4.5.2.4.   Employment and productivity

• (294) Employment and productivity over the period considered developed as follows:

Table 10

Employment and productivity

	2016	2017	2018	IP
Number of employees	2 274	2 266	2 303	2 372
Index	100	100	101	104
Productivity (tonnes per staff)	2 104	2 122	2 070	1 955
Index	100	101	98	93
Source: Eurofer.	Source: Eurofer.	Source: Eurofer.	Source: Eurofer.	Source: Eurofer.

• (295) The level of Union industry employment related to the production of SSHR increased marginally by 4 % over the period considered. In view of the slight decrease in production, productivity of the Union industry’s workforce, measured as tonnes per employee produced per year, decreased significantly over the period considered.

4.5.2.5.   Magnitude of the dumping margin

• (296) All dumping margins were significantly above the de minimis level. The impact of the magnitude of the actual margins of dumping on the Union industry was substantial, given the volume and prices of imports from the countries concerned.

4.5.3.   Microeconomic indicators

4.5.3.1.   Prices and factors affecting prices

• (297) The weighted average unit sales prices of the sampled Union producers to unrelated customers in the Union developed over the period considered as follows:

Table 11

Sales prices in the Union

	2016	2017	2018	IP
Average unit sales price on the free market (EUR/tonne)	1 699	2 019	2 072	1 991
Index	100	119	122	117
Unit cost of production (EUR/tonne)	1 581	1 795	1 929	1 894
Index	100	114	122	120
Source: Sampled Union producers.	Source: Sampled Union producers.	Source: Sampled Union producers.	Source: Sampled Union producers.	Source: Sampled Union producers.

• (298) Average unit sales prices increased by 17 % over the period considered, which was not sufficient to keep up with the development of cost of production that increased by 20 % over the same period. To a large extent the cost evolution was driven by important raw material price increases, such as for nickel, molybdenum and chromium. Whereas between 2016 and 2018 the Union industry was able to pass on this cost increase in relative terms to its sales prices, in the investigation period it was not able to fully pass on the cost increase, as the increase in cost was greater than the increase in prices.

4.5.3.2.   Labour costs

• (299) The average labour costs of the sampled Union producers developed over the period considered as follows:

Table 12

Average labour costs per employee

	2016	2017	2018	IP
Average labour costs per employee (EUR)	62 423	61 712	60 037	61 534
Index	100	99	96	99
Source: Sampled Union producers.	Source: Sampled Union producers.	Source: Sampled Union producers.	Source: Sampled Union producers.	Source: Sampled Union producers.

• (300) The average labour costs per employee of the sampled Union producers fell by 4 % until 2018, then increased again in the investigation period, though to a level that is still 1 % below the level in 2016. This shows that Union producers were able to lower labour costs, in spite of the deteriorating market circumstances.

4.5.3.3.   Inventories

• (301) Stock levels of the Union industry developed over the period considered as follows:

Table 13

Inventories

	2016	2017	2018	IP
Closing stocks (tonnes)	147 341	152 089	147 018	118 543
Index	100	103	100	80
Closing stocks as a percentage of production	3,1 %	3,2 %	3,1 %	2,6 %
Index	100	103	100	83
Source: Eurofer.	Source: Eurofer.	Source: Eurofer.	Source: Eurofer.	Source: Eurofer.

• (302) During the period considered the level of closing stocks decreased by 20 %. 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 over the period considered at around 3 % of the production volume.

4.5.3.4.   Profitability, cash flow, investments and return on investments

Table 14

Profitability, cash flow, investments, return on investments

	2016	2017	2018	IP
Profitability of sales in the Union to unrelated customers (% of sales turnover)	7,2 %	10,2 %	5,1 %	3,5 %
Index	100	142	71	49
Cash flow (EUR)	20 214 740	48 032 998	25 074 879	-18 363 974
Index	100	238	124	-91
Investments (EUR)	29 376 840	47 908 280	48 154 124	46 211 563
Index	100	163	164	157
Return on investments	4,8 %	8,5 %	3,1 %	0,2 %
Index	100	179	65	4
Source: Sampled Union producers.	Source: Sampled Union producers.	Source: Sampled Union producers.	Source: Sampled Union producers.	Source: Sampled Union producers.

• (303) The Commission established the profitability of the Union producers by expressing the pre-tax net profit of the sales of the like product to unrelated customers in the Union as a percentage of the turnover of those sales.

• (304) Overall profitability fell from 7,2 % in 2016 to 3,5 % in the investigation period. This drop coincides with the increase of import volumes from the countries concerned at undercutting prices (see recital (276)). Return on investments followed the same downward trend.

• (305) Net cash flow evolved to a large extent in line with profitability and return on investments. It was positive from 2016 to 2018, with the peak in 2017, and turned negative in the investigation period, when profitability was at the lowest point in the period considered.

• (306) The level of yearly investments increased over the period considered by 57 %. However, the increased investment levels did not translate into corresponding capacity increases (see table 7). Subsequently, the investments merely aimed at retaining the existing capacities and making due replacements of necessary production assets.

4.5.4.   Conclusion on injury

• (307) Consumption was stable over the period considered. However, the market share of Union producers decreased from 71,2 % to 61,9 %.

• (308) The financial indicators of the sample of Union producers show that the Union industry’s cost of production increased (+ 20 %) slightly more than its average sales price (+ 17 %), which meant that the Union industry could not fully pass on the cost increase. This resulted in a significant fall in profit over the period considered, from 7,2 % in 2016 to 3,5 % in the investigation period. A similar negative development is noted in relation to the other financial indicators, return on investment and cash flow.

• (309) The Union industry’s sales volume decreased by 13 % and production volume by 3 % over the period considered. The gap is explained by the importance for the Union industry of the captive market, which however did not grow over the period considered. Capacity utilisation was constantly below 70 % and went down by three percentage points over the period considered (66 % in the investigation period).

• (310) 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.

5. CAUSATION

• (311) In accordance with Article 3(6) of the basic Regulation, the Commission examined whether the dumped imports from the countries concerned 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. The Commission ensured that any possible injury caused by factors other than the dumped imports from the countries concerned was not attributed to the dumped imports. inter alia, these factors are: imports from third countries, the export performance of the Union industry, increase in costs of production, decrease in Union demand for SSHR in 2018 and the partial reliance by Union producers on captive production.

5.1.   Effects of the dumped imports

• (312) Prices of imports from all three countries concerned undercut the Union industry’s prices, resulting in undercutting margins of 4,1 % for Taiwan, 9,3 % for the PRC and 10,7 % for Indonesia (9,5 % on average) in the investigation period. The Union industry was therefore unable to account for the increase in cost of production in its Union sales prices, which demonstrates the price pressure exerted by the imports concerned. This situation had a serious impact on Union industry’s profitability, which went down to very low levels in the investigation period.

5.2.   Effects of other factors

5.2.1.   Imports from third countries

• (313) The volume and prices of imports from other third countries developed over the period considered as follows:

Table 15

Country		2016	2017	2018	IP
Republic of Korea	Volume (tonnes)	64 995	32 949	35 535	33 191
Republic of Korea	Index	100	51	55	51
Republic of Korea	Market share	5,3 %	2,7 %	2,9 %	2,7 %
Republic of Korea	Index	100	51	55	51
Republic of Korea	Average price (EUR/tonne)	1 404	1 697	1 695	1 654
Republic of Korea	Index	100	121	121	118
South Africa	Volume (tonnes)	25 803	29 123	25 923	27 494
South Africa	Index	100	113	100	107
South Africa	Market share	2,1 %	2,4 %	2,2 %	2,3 %
South Africa	Index	100	114	102	107
South Africa	Average price (EUR/tonne)	1 436	1 649	1 671	1 728
South Africa	Index	100	115	116	120
Other third countries	Volume (tonnes)	36 926	72 022	63 043	32 989
Other third countries	Index	100	195	171	89
Other third countries	Market share	3,0 %	5,9 %	5,2 %	2,7 %
Other third countries	Index	100	196	173	89
Other third countries	Average price (EUR/tonne)	1 837	1 931	2 084	2 302
Other third countries	Index	100	105	113	125
Total of all third countries except the countries concerned	Volume (tonnes)	127 725	134 093	124 501	93 674
Total of all third countries except the countries concerned	Index	100	105	97	73
Total of all third countries except the countries concerned	Market share	10,5 %	11,1 %	10,3 %	7,7 %
Total of all third countries except the countries concerned	Index	100	106	99	73
Total of all third countries except the countries concerned	Average price (EUR/tonne)	1 536	1 813	1 887	1 904
Total of all third countries except the countries concerned	Index	100	118	123	124
Source: Eurostat.	Source: Eurostat.	Source: Eurostat.	Source: Eurostat.	Source: Eurostat.	Source: Eurostat.

• (314) During the period considered, the market share of imports from third countries declined by 27 % (or by close to 3 percentage points) to 7,7 % in the investigation period. Since during the same period, the countries concerned increased their market share by 66 % (see recital (273) and table 5), the loss of market share by the Union industry is attributed to the steep increase in market share from the countries concerned.

• (315) Imports volume from Korea decreased strongly over the period considered, and their market share almost halved, falling to only 2,7 % during the investigation period Average prices of imports from Korea increased by 18 % over the period considered, slightly less than the total of all third countries except the countries concerned (24 %). Imports from South Africa were stable over the period considered but sold at higher prices than the ones from the countries concerned, and they never reached a market share of more than 2,5 %.

• (316) The Commission therefore provisionally concluded that imports from other countries have not contributed to the injury suffered by the Union industry.

5.2.2.   Export performance of the Union industry

• (317) The volumes and prices of exports of the Union industry developed over the period considered as follows:

Table 16

	2016	2017	2018	IP
Export volume (tonnes)	125 237	151 305	156 620	141 448
Index	100	121	125	113
Average price (EUR/tonne)	1 745	1 909	1 940	1 992
Index	100	109	111	114
Source: Sampled Union producers, Eurofer.	Source: Sampled Union producers, Eurofer.	Source: Sampled Union producers, Eurofer.	Source: Sampled Union producers, Eurofer.	Source: Sampled Union producers, Eurofer.

• (318) The Union industry was able to increase its export volume by 13 % over the period considered. The additional export sales of around 16 000 tonnes in the investigation period, as compared to the beginning of the period considered, pales compared to the loss of 115 000 tonnes of sales in the Union market during the same period. In addition, Union producers could increase their export unit prices by 14 % over the same period. The export sales of the industry could thus only for a very small part compensate the negative developments both in terms of volumes and prices on the Union market. However, on that basis and contrary to the claim by one interested party, the export performance of the Union industry was positive and could not contribute to the injury suffered by the Union industry.

5.2.3.   Other factors

• (319) Cost of production per tonne of SSHR produced increased by 20 % over the period considered (see table 11). This was mainly due to a strong increase in raw material costs, a factor that has impacted on producers worldwide. In particular, the price of nickel, being the second most important input for several Union producers, increased from less than USD 9 000 in early 2016 to over USD 15 000 in mid-2018 and to still more than USD 12 500 in June 2019. The Union industry was initially also able to pass on this cost increase in its sales prices, however that resulted in an important loss of market share and profitability. In the investigation period, this was not possible anymore due to the price pressure exerted by the dumped imports. As a result, profitability decreased dramatically, that is by 51 % over the period considered.

• (320) Several parties claimed that the deterioration affecting the Union industry in the second half of 2018 was in fact due to a decrease in demand; this decrease was, in turn, caused by the imminent imposition of safeguard measures, which resulted in purchases being concentrated in the first half of the year, and to cyclical developments in the global steel market in the second half of the year. Contrary to these claims, the investigation did not reveal any decrease in consumption on the Union market but rather a sharp loss of market share by the Union industry due to a strong increase in imports (see section 4.4.2 and tables 5 and 8). The Commisison was also not able to link the decrease to the safeguard measures. The claim was thus rejected.

• (321) Several parties claimed that the Union industry would not, or to a lesser extent, be interested in selling the product concerned on the free market as it would prioritize captive production. Even though the downstream market is important to the Union industry, it is also selling significant volumes of the product concerned on the free market and has still significant spare capacity to produce and thus sell more. In addition, the Union captive market has not grown over the period considered. For these reasons, the claim was rejected.

• (322) One interested party claimed that overcapacity in the Union was a cause of injury to the Union industry. However, the investigation confirmed that Union industry’s total production capacity remained stable (+ 1 %) during the period considered, contrary to the PRC and Indonesia, which have been building up significant overcapacities in order to export the output resulting from these excess capacities to the Union, thus taking up market shares from the Union producers. Therefore, this claim was rejected.

• (323) One interested party claimed that, since the Union industry (and the steel sector globally) performed exceptionally well in 2017, particularly as regards profits, the decrease in 2018 was in fact a natural consequence. However, the investigation provisionally found a significant deterioration in certain injury indicators from the beginning to the end of the period considered, meaning that the starting point was 2016 and not 2017. Indeed, as compared to 2016, profitability halved and both sales volumes of the Union industry on the Union market and their market share fell by 13 %. Therefore, this claim was rejected.

• (324) Two interested parties claimed that the additional costs borne by the Union producers of the like product in order to meet the strict EU standards in terms of environment makes them less competitive on the Union market. On this claim, the Commission considers that the high environmental standards in the Union cannot be considered as a self-inflicting cause of injury. To the contrary, the high environmental EU standards are taken into account in the calculation of the target price. Therefore, this claim was rejected.

• (325) One interested party claimed that both Union industry prices and the prices of Chinese imports have increased, therefore Chinese imports cannot be a cause of injury. However, the prices of the Chinese imports constantly remained significantly below the average Union industry prices and also undercut the Union prices during the investigation period. In addition, as regards volumes, there was a significant increase in imports from the PRC over the period considered which added to price pressure. Therefore, this claim was rejected.

5.3.   Conclusion on causation

• (326) In light of the above consideration, the Commission provisionally established a causal link between the injury suffered by the Union industry and the dumped imports from the countries concerned.

• (327) 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. All other identified factors, in particular imports from third countries, export performance of the Union industry, increase in costs of production, decrease in demand for SSHR in 2018, the partial reliance by Union producers on captive production, overcapacity in the Union as a result of global overcapacity, the exceptionally favourable market circumstances in 2017, the additional environmental costs borne by Union producers and the increase in import prices from the PRC were provisionally not found to attenuate the causal link, even considering their possible combined effect.

6. LEVEL OF MEASURES

• (328) To determine the level of the measures, the Commission examined whether a duty lower than the margin of dumping would be sufficient to remove the injury caused by dumped imports to the Union industry.

• (329) In the present case, the complainants claimed the existence of raw material distortions within the meaning of Article 7(2a) of the basic Regulation with regard to two of the countries under investigation, namely Indonesia and the PRC. The assessment concerning these countries is included in section 6.2 below.

6.1.   Examination of the margin adequate to remove the injury to the Union industry for Taiwan

• (330) The Commission first established the amount of duty necessary to eliminate the injury suffered by the Union industry in the absence of distortions in the sense of Article 7(2a) of the basic Regulation. In this case, the injury would be eliminated if the Union industry was able to cover its costs of production, including those costs resulting from Multilateral Environmental Agreements, and protocols thereunder, to which the Union is a party, and of ILO Conventions listed in Annex Ia of the basic Regulation, and to obtain a reasonable profit (‘target profit’).

• (331) In accordance with Article 7(2c) of the basic Regulation, for establishing the target profit, the Commission took into account the following factors: the level of profitability before the increase of imports from the country under investigation, the level of profitability needed to cover full costs and investments, research and development (R&D) and innovation, and the level of profitability to be expected under normal conditions of competition. The Union industry claimed that 2017 was a suitable year for establishing a target profit. The Commission considers that 2017 was an exceptionally good year for the industry and that the profit achieved by the sampled Union producers in that year (10,2 %) is thus likely to be tainted if used as a target profit. Moreover, the market share of imports in 2017 was already 29,1 %. By contrast, in 2016 the market share of imports was considerably lower than in 2017 (21,5 %). In the absence of any other information, the Commission decided to provisionally use the average profit achieved over the years 2016 and 2017 as target profit. That profit is 8,7 %.

• (332) In accordance with Article 7(2c) of the basic Regulation, the Commission assessed a claim made by one Union producer on planned investments which were not implemented during the period considered. Based on the documentary evidence received, the Commission provisionally accepted that claim and added the corresponding amount to the non-injurious price of that Union producer.

• (333) In accordance with Article 7(2d) of the basic Regulation, the Commission assessed the future costs resulting from Multilateral Environmental Agreements, and protocols thereunder, to which the Union is a party, that the Union industry will incur during the period of application of the measure pursuant to Article 11(2). Based on the evidence available, the Commission established an additional cost in a range between EUR 1,5 and 6 per tonne, which was added to the non-injurious price.

• (334) On this basis, the Commission calculated a non-injurious price of the like product for the Union industry by adding the above-mentioned profit margin of 8,7 % and the adjustments under Article 7(2c) and 7(2d) to the cost of production of the sampled Union producers during the investigation period.

• (335) The Commission then determined the injury elimination level on the basis of a comparison of the weighted average import price, as established for the verified cooperating exporting producers in the countries concerned on a type-by-type basis, as established for the price undercutting calculations, with the weighted average non-injurious prices of the same product types sold by the sampled Union producers on the Union free market during the investigation period. Any difference resulting from this comparison was expressed as a percentage of the weighted average import CIF value.

• (336) The result of these calculations is shown in the table below.

Country	Company	Dumping margin (%)	Underselling margin (%)
Taiwan	Yieh United Steel Co. and Tang Eng Iron Works Co. Ltd.	6,0	24,1
Taiwan	Walsin Lihwa Co.	7,5	18,3
Taiwan	All other companies	7,5	24,1

6.2.   Examination of the margin adequate to remove the injury to the Union industry for Indonesia and the PRC

6.2.1.   Comparison between dumping margin and underselling margin

• (337) In accordance with Article 7(2) of the basic Regulation, the Commission first examined in relation to Indonesia and the PRC whether the margin of dumping provisionally established would be higher than the margin adequate to remove the injury to the Union industry. To this effect, a comparison between the weighted average import price of the cooperating exporting producers in Indonesia and the PRC with the target price of the Union industry as explained in Section 6.1 above, was made. The result of these calculations is shown in the table below:

Country	Company	Dumping margin (%)	Underselling margin (%)
Indonesia	PT Indonesia Guang Ching Nickel and Stainless Steel Industry PT Indonesia Tsingshan Stainless Steel	19,2	17,0
PRC	Shanxi Taigang Stainless Steel Co., Ltd	108,4	18,9
PRC	Fujian Fuxin Special Steel Co., Ltd	55,6	14,5
PRC	Xiangshui Defeng Metals Co., Ltd	87,9	17,4
PRC	Fujian Dingxin Technology Co., Ltd.	87,9	17,4
PRC	All other companies	108,4	18,9

• (338) Since the underselling margin calculated for the Indonesian and the Chinese exporting producers was lower than the dumping margin, the Commission assessed whether there are distortions on raw materials with regard to the product concerned, pursuant to Article 7(2a) of the basic Regulation.

6.2.2.   Raw material distortions

• (339) The complainant provided sufficient evidence in the complaint that there are raw material distortions within the meaning of Article 7(2a) of the basic Regulation with regard to the product concerned in Indonesia and the PRC. Thus, as announced in the Notice of Initiation, when assessing the appropriate level of measures in relation to Indonesia and the PRC, the Commission examined the alleged distortions and any other distortions in Indonesia and the PRC covered by Article 7(2a) of the basic Regulation.

• (340) The raw materials claimed to be affected by such distortions were nickel (ferronickel, nickel pig iron, nickel ore, scrap nickel), coal, and stainless steel scrap in Indonesia and stainless steel scrap, chromium, coking coal, ferrochromium, ferrosilicon, crude (stainless) steel, and vanadium in the PRC.

• (341) Out of these raw materials, the Commission identified the main raw materials used in the production of the product concerned by each of the sampled exporting producers. The Commission considered as main raw materials those which represent at least 17 % of the cost of production of the product concerned.

(a) Indonesia

• (342) With regard to Indonesia, the investigation confirmed that distortions within the meaning of Article 7(2a) of the basic Regulation existed on raw materials during the investigation period in the form of an export ban ⁹⁰ on nickel ore with a nickel content of 1,7 % and more, an export tax ⁹¹ of 10 % on nickel ore with a nickel content of less than 1,7 %, a licensing requirement ⁹² and a de facto export quota ⁹³ on nickel ore with the latter nickel content, and a de facto licensing requirement ⁹⁴ on ferronickel and nickel pig iron.

• (343) The investigation, further, established that nickel ore represented more than 17 % of the total costs of production of the product under investigation.

• (344) Finally, the investigation concluded that the price paid for nickel ore was significantly lower (by more than 30 %) than the price in the representative international market, in line with Article 7(2a) of the basic Regulation.

• (345) In this respect, the Commission compared the purchase price of the Indonesian exporting producers to the FOB price of nickel ore with a nickel content of 1,8 % in the Philippines ⁹⁵. The Commission considered the price in the Philippines suitable as the Philippines, similarly to Indonesia, belong to the countries with the world’s highest reserves of nickel ore ⁹⁶. Moreover, the nickel content of the nickel ore in this representative international market was very similar to the average nickel content of nickel ore purchased by the Indonesian exporting producers. Finally, the Commission considered that the transport costs between the supplier and the port included in the FOB price reflected the transport costs incurred by the Indonesian exporting producers.

• (346) Therefore, the requisite under Article 7(2a) of the basic Regulation, namely the existence of distortion(s) on a raw material accounting for more than 17 % of the cost of production of the product concerned, was met with regard to Indonesia.

(b) The PRC

• (347) With regard to the PRC, the investigation confirmed that distortions within the meaning of Article 7(2a) of the basic Regulation existed on raw materials during the investigation period in the form of an export tax on stainless steel scrap, ferrosilicon, nickel pig iron and ferrochromium; and a licensing requirement on ferrosilicon, vanadium, ferronickel and ferrochromium. The Commission based this finding on the data available in the OECD database ⁹⁷ and on the relevant legislation applicable in the PRC.

• (348) The investigation further established that, for each of the sampled companies, at least one of the above main raw materials represented more than 17 % of their total cost of production of the product under investigation ⁹⁸.

• (349) The investigation concluded that the price paid by the two sampled Chinese exporting producers in the PRC for these main raw materials was significantly lower than the price in the representative international market used for each respective raw material, for which the same sources were used as for the construction of the normal value in accordance with Article 2 (6a)(a) of the basic Regulation.

• (350) Therefore, the requisite under Article 7(2a) of the basic Regulation, namely the existence of distortion(s) on a raw material accounting for more than 17 % of the cost of production of the product concerned, were met with regard to the PRC.

6.2.3.   Union interest under Article 7(2b) of the basic Regulation

• (351) Having concluded that there are raw material distortions as provided for by Article 7(2a) of the basic Regulation in the case of the PRC and Indonesia, the Commission examined whether it could clearly conclude that it was in the Union interest to determine the amount of provisional duties in accordance with Article 7(2b) of the basic Regulation. The determination of the Union interest was based on an appreciation of all pertinent information to this investigation, including the spare capacities in the exporting countries, competition for raw materials and the effect on supply chains for Union companies in accordance with Article 7(2b) of the basic Regulation. In order to conduct this assessment, the Commission inserted specific questions in the questionnaires to all interested parties. The complainant and the sampled Union producers provided response to those questions.

6.2.3.1.   Spare capacities in the exporting countries

• (352) On the basis of information provided by Eurofer, spare capacity in the PRC was estimated at 26,4 million tonnes in 2019 ⁹⁹, and spare capacity of the total stainless steel sector in Indonesia was estimated at 4 million tonnes in 2019. ¹⁰⁰

• (353) According to the GOI questionnaire however, spare capacity in Indonesia is currently at 2,1 million tonnes. By contrast, the Union free market had a size of 1,2 million tonnes. In relative terms, spare capacities in the exporting countries are therefore of an enormous magnitude.

6.2.3.2.   Competition for raw materials

• (354) As regards competition for raw materials, the GOC provided no meaningful information on the market for the distorted raw materials in the PRC, as set out in recital (347). The complainant stated that by artificially increasing or decreasing the level of raw materials supply, or simply by centrally setting the prices, the GOC can steer the prices upwards or downwards. As set out in Section 6.2.2 above, the Chinese raw materials market was considered to be distorted.

• (355) With regard to Indonesia, the investigation found that Indonesia has one of the biggest nickel ore mining sectors in the world. Therefore, by having export restrictions on nickel ore brings, the GOI brings prices artificially down on the domestic Indonesian market.

• (356) Both countries have export restrictions on nickel containing inputs, which is also the second most important input of the Union producers, as set out in recital (319).

• (357) All these issues create a comparative disadvantage for the Union industry compared to the exporting producers in the countries concerned. The Commission deems that this situation is unlikely to change in the near future. With regard to Indonesia, the situation even worsened recently. Measures allowing for exports of nickel ore with a nickel content below 1,7 % were supposed to last until January 2022. The GOI, however, decided to expedite their termination. All exports of nickel ore were prohibited as of January 2020 ¹⁰¹. There is no evidence that the GOI would reverse its policy in the near future.

6.2.3.3.   Effect on supply chains for Union companies

• (358) In the lack of full cooperation from importers, the Commission provisionally established that the main effect on supply chains will be felt at the level of users. The possible effect on supply chains for Union companies, stipulated under Article 7(2b) of the basic Regulation, was, in view of the important difference between the dumping and injury margins for exporting countries, assessed in the context of the Union interest test pursuant to Article 21 of the basic Regulation.

• (359) As concluded in recital (373) below, that analysis resulted in the determination that, in view of the effect of measures at the level of the dumping margin, it is not in accordance with the Union interest to apply Article 7(2a) of the basic Regulation.

6.2.3.4.   Conclusion

• (360) In view of the analysis set out above, the Commission concluded that, in accordance with Artile 7(2a) of the basic Regulation, it is not in the interest of the Union to set the level of the measures at the level of dumping in view of the disproportionally negative effect this is likely to have on supply chains for Union companies.

7. UNION INTEREST

• (361) 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.

7.1.   Interest of the Union industry

• (362) The Union industry is located in several Member States and it employs directly 2 372 employees in relation to the product under investigation. None of the Union producers opposed the initiation of the investigation. As shown in section 4 above when analysing the injury indicators, the whole Union industry experienced a deterioration of its situation and was negatively affected by the dumped imports.

• (363) It is expected that the imposition of provisional anti-dumping duties will restore fair trading conditions on the Union market, end the price depression and enable 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. The Union industry has suffered material injury caused by imports at dumped prices from the countries concerned. It is recalled that a number of key injury indicators showed a negative trend during the period considered. In particular, market share and sales volume, as well as indicators pertaining to the financial performance of the sampled Union producers, such as profitability and return on investment, were seriously affected. It is therefore important to restore prices to non-dumped or at least non-injurious level in order to allow all producers to operate on the Union market under fair trading conditions. In the absence of measures, a further deterioration of the Union industry’s economic situation is very likely. A bad performance on the SSHR segment would impact the downstream segments of Union producers, and in particular their captive production. Union producers heavily rely on the business model of a combination of free market sales and captive production. A deterioration of the free market segment could likewise put at risk the captive production segment, which represents bigger production volumes and employment figures than the former.

• (364) It is therefore provisionally concluded that the imposition of anti-dumping duties would be in the interest of the Union industry as it would allow it to recover from the effects of injurious dumping found.

7.2.   Interest of unrelated importers

• (365) Two parties made themselves known as unrelated importers and replied to the relevant questionnaire. However, the reply of one of them was not further followed up as the importer turned out to be operating from outside the Union.

• (366) The second party turned out not be a genuine importer but a service centre for various operations. Therefore, there was no cooperation from genuine importers. According to the cooperating service center operator, increasing the price of the products concerned results in higher cost of manufacturing for European users of the products, causing injury to these users. More specifically, the party made a product exclusion request which is addressed under Section 2.3 along with other such claims.

• (367) On that basis, at this stage there is no indication that measures would be against the interest of importers.

7.3.   Interest of users

• (368) Two users cooperated with the investigation.

• (369) One of the users which submitted a questionnaire reply was a producer of stainless steel tubes. With regard to that user, the Commission found that in view of its purchasing and importing volumes, its total profit and its profit derived from output products that involve the product concerned as an input, the imposition of measures would not unduly harm it.

• (370) The second cooperating user is a producer of stainless steel products which competes with the Union industry on several of its key downstream markets. It purchases significant volumes of SSHR from the Union industry as well as from producers outside the Union, including in the countries concerned. That user has raised concerns on the security of supply and purchase prices following any imposition of duties. It is the only large independent user of the product concerned in the Union. Without integrated steel production, it fully depends on coils supplies from other parties to manufacture its downstream products. The party claimed that the Union industry is not interested in selling additional large volumes of SSHR to it, and in particular one product type (black coils), at competitive prices, since the Union producers would prefer to keep them for their own captive use. This claim is rebutted by the fact that the Union industry had spare capacities throughout the period considered that exceeded the total demand of that user at least fourfold. Moreover, as the complainant has submitted, several Union producers are ready to supply black coils as communicated on the producers’ websites. Finally, given the user’s already established supply chains and contacts with third country producers, it is also reasonable to expect that it will be able also to diversify its supply by purchasing more from third countries.

• (371) Provided that all relevant factors (in particular sources, volumes and prices before duties of purchases and turnover achieved on downstream products) would remain unchanged as compared to the investigation period, the Commission established that the overall annual profit of that user would be seriously affected in a negative way if duties were imposed on imports from the PRC and Indonesia pursuant to Article 7(2a) of the basic Regulation.

• (372) If, under the same assumption as in recital (369), duties were imposed on imports from the PRC and Indonesia pursuant to Article 7(2) of the basic Regulation, the overall annual profit would also be affected but to a much lesser extent.

• (373) The above scenarios are based on static assumptions (i.e. all relevant factors remain unchanged except that duties will be imposed and hence to be factored in). In fact, they are worst case scenarios as, as explained below, in case duties are imposed the other underlying factors are likely to change.

• (374) In the first place, sourcing patterns and purchase prices will not remain the same. If prices of imports from in particular the PRC and Indonesia will be made subject to an upwards correction, imports from other sources of supply are likely to resume in larger volumes. In particular, we note that imports from South Korea were at high levels up to and including 2016, when they amounted to 65 000 tonnes. In view of market developments since then, these imports have lost important market shares over the years (see table 15) but it can be expected that after the imposition of measures exporting producers from Korea but also from other producing countries like South Africa will again increasingly focus on the Union market as they will be in a better position to compete, to the benefit of the users. Also, it is expected that due to the relief offered by the measures the Union industry will be in a position to sell more volumes to the users at competitive prices. The Union industry simply cannot afford to lose important market shares in the Union as this investigation testified. As regards the second user mentioned above, owing to its size and importance as a customer of the Union industry, it may have some leverage that is likely to increase in case it buys even larger volumes from the Union industry.

• (375) It is also to be noted that it is foreseen that in July 2021, the currently applicable steel safeguard measures which also concern the product conerned will expire. This means that from July 2021, users will have increased access to alternative sources as the quota restrictions which have been in place since 19 July 2018 will be lifted.

• (376) It is therefore expected that the users as a whole are likely to be affected negatively by the imposition of duties, but that the impact of the duty at the established levels for the PRC and Indonesia pursuant to Article 7(2) of the basic Regulation is not as such as to be disproportionate, as it is expected that the user industry will then be able to adapt to the new situation. Indeed, if the level of duties were to be set pursuant to Article 7(2) of the basic Regulation, all of the cooperating users are expected to remain profitable.

• (377) However, if duties were to be imposed pursuant to Article 7(2a) of the basic Regulation, the Commission established that the possible impact of measures against the PRC and Indonesia at the level of the dumping margin would be disproportionate in view of the possible strong negative effects on supply chains for certain Union companies and in particular on users. Indeed, the Commission found that in such a scenario the user industry, and in particular users which purchased significant volumes from the PRC and/or Indonesia in the investigation period, might be unduly affected and could become as a result loss making.

7.4.   Conclusion on Union interest

• (378) On the basis of the above, and under the condition that duties are to be imposed pursuant to Article 7(2) of the basic Regulation, the Commission provisionally concluded that there were no compelling reasons that it was not in the Union interest to impose measures on imports of certain hot rolled stainless steel sheets and coils originating in the countries concerned at this stage of the investigation.

8. PROVISIONAL ANTI-DUMPING MEASURES

• (379) On the basis of the conclusions reached by the Commission on dumping, injury, causation and Union interest, provisional measures should be imposed imports of flat-rolled products of stainless steel, whether or not in coils (including products cut-to-length and narrow strip), not further worked than hot-rolled originating in Indonesia, the People’s Republic of China and Taiwan, to prevent further injury being caused to the Union industry by the dumped imports.

• (380) Provisional anti-dumping measures should be imposed in accordance with the lesser duty rule in Article 7(2) of the basic Regulation. The Commission compared the injury margins and the dumping margins. The amount of the duties was set at the level of the lower of the dumping and the injury margins.

• (381) 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:

Country	Company	Dumping margin	Injury margin	Provisional anti-dumping duty
Indonesia	PT Indonesia Guang Ching Nickel and Stainless Steel Industry and PT Indonesia Tsingshan Stainless Steel	19,2 %	17,0 %	17,0 %
Indonesia	All other companies	19,2 %	17,0 %	17,0 %
People’s Republic of China	Shanxi Taigang Stainless Steel Co., Ltd.	108,4 %	18,9 %	18,9 %
People’s Republic of China	Fujian Fuxin Special Steel Co., Ltd	55,6 %	14,5 %	14,5 %
People’s Republic of China	Xiangshui Defeng Metals Co., Ltd	87,9 %	17,4 %	17,4 %
People’s Republic of China	Fujian Dingxin Technology Co., Ltd.	87,9 %	17,4 %	17,4 %
People’s Republic of China	All other companies	108,4 %	18,9 %	18,9 %
Taiwan	Yieh United Steel Co. and Tang Eng Iron Works Co. Ltd.	6,0 %	24,1 %	6,0 %
Taiwan	Walsin Lihwa Co.	7,5 %	18,3 %	7,5 %
Taiwan	All other companies	7,5 %	24,1 %	7,5 %

• (382) The individual company anti-dumping duty rates specified in this Regulation were established on the basis of the provisional 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 countries 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.

• (383) A company may request the application of these individual anti-dumping duty rates if it changes subsequently the name of its entity. The request must be addressed to the Commission ¹⁰². 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.

• (384) To minimise the risks of circumvention due to the high difference in duty rates, special measures are needed to ensure the proper application of the individual anti-dumping duties. The companies with individual anti-dumping duties must present a valid commercial invoice to the customs authorities of the Member States. The invoice must conform to the requirements set out in Article 1(3) of this regulation. Imports not accompanied by that invoice should be subject to the anti-dumping duty applicable to ‘all other companies’.

• (385) While presentation of this invoice is necessary for the customs authorities of the Member States to apply the individual rates of anti-dumping duty to imports, it is not the only element to be taken into account by the customs authorities. Indeed, even if presented with an invoice meeting all the requirements set out in Article 1(3) of this Regulation, the customs authorities of Member States should carry out their usual checks and may, like in all other cases, require additional documents (shipping documents, etc.) for the purpose of verifying the accuracy of the particulars contained in the declaration and ensure that the subsequent application of the rate of duty is justified, in compliance with customs law.

• (386) Should the exports by one of the companies benefiting from lower individual duty rates increase significantly in volume, in particular after the imposition of the measures concerned, such an increase in volume could be considered as constituting in itself a change in the pattern of trade due to the imposition of measures within the meaning of Article 13(1) of the basic Regulation. In such circumstances, an anti-circumvention investigation may be initiated, provided the conditions for so doing are met. This investigation may, inter alia, examine the need for the removal of individual duty rate(s) and the consequent imposition of a country-wide duty.

• (387) 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. REGISTRATION

• (388) As mentioned in recital (3), the Commission made imports of certain hot rolled stainless steel sheets and coils subject to registration. Registration took place with a view to possibly collecting duties retroactively under Article 10(4) of the basic Regulation. Registration was thus ongoing during the pre-disclosure phase.

• (389) In view of the findings at provisional stage, the registration of imports should cease/be discontinued.

• (390) No decision on a possible retroactive application of anti-dumping measures has been taken at this stage of the proceeding. Such a decision will be taken at definitive stage.

10. INFORMATION AT PROVISIONAL STAGE

• (391) In accordance with Article 19a of the basic Regulation, the Commission informed interested parties about the planned imposition of provisional duties. This information was also made available to the general public via DG TRADE’s website. Interested parties were given three working days to provide comments on the accuracy of the calculations specifically disclosed to them.

• (392) Two exporting producers in the PRC, two exporting producers in Indonesia and three producers and one independent service centre in Taiwan submitted their comments. The Commission took into account comments that were considered of a clerical nature and in necessary, corrected the margins accordingly.

11. FINAL PROVISIONS

• (393) 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.

• (394) 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

Country	Company	Provisional anti-dumping duty	TARIC additional code
Indonesia	PT Indonesia Guang Ching Nickel and Stainless Steel Industry	17,0 %	C541
Indonesia	PT Indonesia Tsingshan Stainless Steel	17,0 %	C547
Indonesia	All other companies	17,0 %	C999
People’s Republic of China	Shanxi Taigang Stainless Steel Co., Ltd.	18,9 %	C163
People’s Republic of China	Taiyuan Taigang Daming Metal Products	18,9 %	C542
People’s Republic of China	Tisco Guangdong Stainless Steel Service Center Co., Ltd	18,9 %	C543
People’s Republic of China	Tianjin TISCO & TPCO Stainless Steel Co. Ltd.	18,9 %	C025
People’s Republic of China	Fujian Fuxin Special Steel Co., Ltd	14,5 %	C544
People’s Republic of China	Xiangshui Defeng Metals Co., Ltd	17,4 %	C545
People’s Republic of China	Fujian Dingxin Technology Co., Ltd.	17,4 %	C546
People’s Republic of China	All other companies	18,9 %	C999
Taiwan	Yieh United Steel Co.	6,0 %	C032
Taiwan	Tang Eng Iron Works Co. Ltd.	6,0 %	C031
Taiwan	Walsin Lihwa Co.	7,5 %	C548
Taiwan	All other companies	7,5 %	C999

Article 2

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, 7 April 2020.

For the Commission

The President

Ursula VON DER LEYEN

(last viewed 2 March 2020), and www.xinhuanet.com/english/2019-04/23/c_138001574.htm (last viewed 2 March 2020).

https://eurometaux.eu/media/1624/study_-analysis-of-market-distortions-in-china.pdf (last viewed 2 March 2020).

http://www.miit.gov.cn/n1146295/n1652858/n1652930/n3757016/c5353943/content.html (last viewed 2 March 2020).