Continuation or Recurrence of Material Injury
Import Volume
44. Pacific Steel submits that there is likely to be a recurrence of dumped imports because:
- Thailand currently exports the subject goods with substantial dumping margins to its three major export destinations (as shown in the previous section of this report);
- Manufacturing capacity in Thailand for reinforcing steel bar is significant and exceeds Thai domestic demand;
- There is ease of access to the New Zealand market;
- Exporters have historically exported dumped reinforcing steel bar to New Zealand; and
- Exporters will likely increase dumping activities as they seek export sales at marginal cost.
Production Capacity
45. Pacific Steel considers that the major steel manufacturer in Thailand, Tata Steel Thailand Public company Limited (TSTH), formerly Millennium Steel Public Company Limited (MS), has excess production capacity over domestic demand to send its surplus product to other export markets, such as New Zealand.
46. TSTH operates through three subsidiary companies; NTS Steel Group (NTS), The Siam Iron and Steel (2001) Co (SISCO) and The Siam Construction Steel Co (SCSC). SCSC was an interested party in the original investigation in 2003. According to TSTH's acquisition document of MS dated December13 the three companies have the annual capacity to produce 900,000 tonnes of reinforcing steel bar and coil.
47. Pacific Steel has provided data sourced from the Thailand Steel Institute14 that shows if the Thai steel industry was operating at full capacity through 2007 and up to August 2008 then the September 2008 production figure would mean the industry utilised only 53 percent of its production capacity in that month. Pacific Steel claims that this capacity utilisation rate "indicates that Thailand now has a very strong, structural, incentive to vigorously seek export markets". Pacific Steel contends that the looming decline in steel demand will "stimulate steel makers to seek any export market opportunity in order to keep their high fixed cost plants running efficiently". Pacific Steel has provided a sample of comments from the daily Steel Business Briefing that it considers supports its contention that the "deep recession is likely to increase dumping activities as the steel makers seek to produce marginally costed products for sale".
Market Access
48. Pacific Steel refers to previous exports to New Zealand and to the Ministry's findings in its previous investigation reports regarding reinforcing steel bar and coil from Thailand where it was concluded that there were well developed distribution channels in New Zealand for the imported product. Pacific Steel is of the opinion that these channels still remain active.
49. Pacific Steel has noted that BRP Steel of Thailand holds a current certification with the Australian Certification Authority which {deleted due to confidentiality} Australian/New Zealand Standard (AS/NZS4671) for selling reinforcing steel bar and coil to New Zealand. {deleted due to confidentiality} two other Thai companies have applied for certification for reinforcing steel {deleted due to confidentiality}.
Exports from Thailand
50. Pacific Steel has estimated that, should anti-dumping duties be removed, 5,58415 tonnes of reinforcing steel bar and coil from Thailand will be imported into New Zealand at dumped prices and such a volume would likely lead to the continuation or recurrence of injury. In estimating the import volume Pacific Steel considered the export volume from Thailand in 2007 and the volume of imports prior to the original dumping investigation in 2003 and believes it is most probable that the volume of imports would return to the position prior to the imposition of anti-dumping duties. Pacific Steel argues that the figure of 5,584 is at the low end of a possible volume of imports taking into consideration that Thailand exported in 2007 134,589 tonnes of steel products.
51. In considering whether this estimation is reasonable and likely to be injurious to the New Zealand industry, the assessment team has looked at the findings of the original investigation in 2003. In the investigation the Ministry assessed the volume of imports from 1999 to 2003. Over the five year period New Zealand imported on average 4,799 tonnes of dumped product of Thai origin which was found to be injurious to the New Zealand industry. In 2003 4,496 tonnes of reinforcing steel bar and coil had been imported at dumped prices from Thailand which equated to xxxx percent of the industry sales in that year. If this percentage is applied to Pacific Steel's financial performance of 2008 the volume of injurious imports, all other things being equal, would be in the vicinity of xxxx tonnes. The assessment team considers that the estimation of import volume is reasonable and on the basis of the findings in 2003 there is evidence for purposes of initiation of a review that it could cause a continuation or recurrence of injury.
Price Effects
52. Based on the FOB value of exports of 2007 to all destinations of THB18,222 per tonne, Pacific Steel has estimated a likely Free-Into-Store (FIS) price of imported reinforcing steel bar and coil from Thailand. Pacific Steel has converted the FOB price to NZD using the exchange rate of NZD1:THB20.924 (as at October 2008) and added costs incurred for overseas freight, overseas insurance, tariff duty of 5 percent and local costs in New Zealand. The adjustments are evidenced by Pacific Steel's email summaries it has received from an independent freight forwarding company. The FIS value has been estimated as NZDxxxx per tonne.
53. The assessment team has considered the evidence and checked Pacific Steel's workings in its estimation of an FIS value. The assessment team considers the source of information on adjustments as reliable but has re-calculated the figures. The recalculation has established an ex-wharf cost of NZDxxxx per tonne, a lower FIS cost of NZDxxxx per tonne and an ex-store price of NZDxxxx per tonne. These figures differ from the figure provided by Pacific Steel because the base price is lower, due to no conversion being necessary from short tons to metric tonnes, the exchange rate is an average for 2007 (as the base price relates to 2007), the cost of delivery has not been included when calculating an ex-wharf cost per tonne and Pacific Steel's estimation of an importer's margin has been added to calculate an importer's ex-store price per tonne.
Price Undercutting
Level of Trade
54. Pacific Steel submits that the level of trade at which its goods first compete with the imported reinforcing steel bar and coil is at the ex-wharf level. The appropriate level of trade was extensively discussed in the original investigation and it was decided for purposes of that investigation that some importers competed at the ex-wharf level while others competed at the ex-store level, as not all of the importers were able to purchase domestically manufactured product under Pacific Steel's customer criteria. Any review investigation will need to consider any changes and any new evidence since the conclusion of the investigation.
Extent of Price Undercutting
55. Pacific Steel has provided an extract of its historical financial performance information on domestic sales of reinforcing steel bar and coil for the financial years 2007, 2008 and the four months to October 2008. The average selling price over this period was NZDxxxx, NZDxxxx and NZDxxxx per tonne respectively. Pacific Steel has chosen to demonstrate the likely extent of price undercutting by comparing the estimated FIS value against its 4 months to October 2008 average selling price. This comparison shows a likely price undercutting of NZDxxxx per tonne or xxxx percent. Pacific Steel notes that its average price {deleted due to confidentiality} likely price undercutting of NZDxxxx per tonne or xxxx percent.
56. For this exercise the assessment team considers that a comparison of prices should be based on the same period of data. The FIS value is based on 2007 data therefore it would be equitable to establish, to the extent possible, an ex-factory price for Pacific Steel for 2007. Pacific Steel's financial year ends 30 June therefore the 2007 figures include the first half year of 2007 and the 2008 figures include the last half year of 2007. An average of Pacific Steel's prices for 2007 and 2008 is NZDxxxx per tonne which is NZDxxxx less than Pacific Steel's {deleted due to confidentiality} estimated price of NZDxxxx per tonne. The assessment team has re-calculated the extent of price undercutting and established likely price undercutting at the ex-wharf cost and ex-store price. The price undercutting is NZD xxxx per tonne (xxxx percent) or NZD xxxx per tonne (xxxx percent) respectively of Pacific Steel's ex-factory price per tonne. The use of an FIS price for the Thai steel is conservative, given the level of trade in the original investigation was at either the ex-wharf or ex-store levels.
Price Depression and Suppression
57. The financial information provided by Pacific Steel indicates that the average price per tonne has increased by xxxx percent from 2007 to 2008 and xxxx percent from 2008 to period ended October 2008.
58. Pacific Steel considers that if the anti-dumping duties were removed and imports of dumped product from Thailand recommenced, to maintain its sales volume it would be forced to reduce its prices to meet the prices of the imported dumped product. Alternatively if it chose to maintain its prices it foresees that the volume of sales would reduce and Pacific Steel's prices would be suppressed.
59. Pacific Steel's historical financial information shows a reduction in the volume of sales from 2007 to 2008 and an increase in the cost of sales (total costs) as a proportion of sales revenue, mainly through an increase in the cost of production on a per unit basis. One would expect an increase in the cost of production on a per unit basis if the sales volume decreases, due to the allocation of fixed costs in the production of reinforcing steel bar and coil. This change cannot be attributed to goods of Thai origin as there have been no imports since 2006. Any review would need to consider additional historical financial information as well as forecast financial information for the two scenarios of retention of the anti-dumping duties and removal of the anti-dumping duties.
Economic Effects
Output and Sales
60. Pacific Steel forecasts that, based on maintaining an average sales price of NZDxxxx per tonne and a loss of sales volume of xxxx percent or xxxx tonnes per annum (i.e. {deleted due to confidentiality} dumped imports), its sales revenue would reduce by NZDxxxx per annum. If its sales volume reduced by the {deleted due to confidentiality} estimation of dumped imports of 5,584 tonnes, its sales revenue would reduce by NZDxxxx per annum.
61. Pacific Steel's {deleted due to confidentiality} maintains its market share therefore should the anti-dumping duties be removed it would be forced to reduce the price of its goods to meet the likely importer's ex-store price of NZDxxxx but such a pricing strategy would result in a substantial revenue reduction of NZDxxxx per annum.
62. Based on Pacific Steel's estimated sales revenue per unit of NZDxxxx and the assessment team's recalculation of an estimated importer's ex-store price of NZDxxxx per unit, as discussed in paragraph 52, it is forecast that there is a potential loss of revenue of NZDxxxx if Pacific Steel were to reduce its prices to an equivalent importer's ex-store price to maintain its market share.
Profits
63. Pacific Steel has explained that if the anti-dumping duties were to be removed it would either maintain its prices and lose sales volume or reduce its price to maintain its market share. Both actions would reduce sales revenue by either xxxx, xxxx or xxxx but Pacific Steel has not quantified its effect upon its profit margin other than to say that the "impact of profits will closely mirror the sales effect as the price effect is so significant. Pacific Steel will have limited ability to reduce costs".
Other Economic Effects
64. Pacific Steel maintains the loss of volume, sales revenue and profits from the recurrence of dumped imports would also have significant adverse effects upon its return on investments, utilisation of production capacity, cash flow, inventories and employment and growth, however Pacific Steel has not quantified these effects.
Causal Link
65. Pacific Steel has noted that the original investigation established a causal link between dumped imports and material injury to the New Zealand industry. It is not aware of any changes to commercial activities and practices since that time and notes that New Zealand importers and Thai exporters remain active. Pacific Steel considers that, in the absence of anti-dumping duties, in order to meet dumped Thai prices and retain market share it would be forced to reduce its selling price to meet that of an importer's equivalent price leading to loss of earnings.
Conclusion on Injury
66. Pacific Steel has provided reasonable evidence of the likely import price into New Zealand of reinforcing steel bar and coil from Thailand in the absence of anti-dumping duty. The information has shown that the estimated import price for the Thai reinforcing steel bar would undercut Pacific Steel's likely average selling price leading to lower prices and price suppression. Pacific Steel has made reasonable assumptions that the level of price undercutting and suppression of prices would have an adverse effect on its profits, return on investments, utilisation of capacity, cash flow, inventories, employment and growth. The assessment team considers this information constitutes positive evidence of a likely recurrence of material injury should anti-dumping duties be removed and justifies the initiation of a review.
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