PUBLIC RECORD 251 300/EPR 284 - archived 17... · PUBLIC RECORD CONTENTS CONTENTS ... BlueScope...

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CONTENTS CONTENTS ................................................................................................................................................................. 2

ABBREVIATIONS ........................................................................................................................................................ 4

1 BACKGROUND AND PURPOSE .......................................................................................................................... 5

1.1 BACKGROUND ................................................................................................................................................. 5 1.2 PREVIOUS INVESTIGATIONS ................................................................................................................................. 5 1.3 INVESTIGATION PROCESS AND TIMEFRAMES ............................................................................................................ 6 1.4 PURPOSE OF THE VISIT ....................................................................................................................................... 7 1.5 MEETING DETAILS ............................................................................................................................................. 7 1.6 VISIT REPORT................................................................................................................................................... 8

2 THE GOODS ...................................................................................................................................................... 9

2.1 DESCRIPTION ................................................................................................................................................... 9 2.2 AUSTRALIAN AND INTERNATIONAL STANDARDS ..................................................................................................... 10 2.3 TARIFF ......................................................................................................................................................... 11 2.4 PREVIOUS INVESTIGATIONS AND CURRENT MEASURES ............................................................................................. 12

3 THE AUSTRALIAN INDUSTRY .......................................................................................................................... 14

3.1 CORPORATE AND ORGANISATIONAL STRUCTURE .................................................................................................... 14 3.2 ACCOUNTING STRUCTURE AND DETAILS OF ACCOUNTING SYSTEMS ............................................................................. 15 3.3 RELATIONSHIP WITH SUPPLIERS AND CUSTOMERS ................................................................................................... 16 3.4 BLUESCOPE’S MANUFACTURING FACILITIES AND PRODUCT RANGE .............................................................................. 17 3.5 PRODUCTION PROCESS .................................................................................................................................... 18 3.6 LIKE GOODS .................................................................................................................................................. 21 3.7 CONCLUSION ................................................................................................................................................. 22

4 AUSTRALIAN MARKET .................................................................................................................................... 23

4.1 MARKET SEGMENTATION ................................................................................................................................. 23 4.2 MARKETING AND DISTRIBUTION......................................................................................................................... 23 4.3 SUBSTITUTABLE PRODUCTS ............................................................................................................................... 25

5 SALES ............................................................................................................................................................. 26

5.1 DOMESTIC SALES LISTING .................................................................................................................................. 26 5.2 ORDERING, INVOICE AND DELIVERY ARRANGEMENTS .............................................................................................. 26 5.3 PRICING ....................................................................................................................................................... 28 5.4 SALES TO RELATED PARTIES ............................................................................................................................... 29 5.5 VERIFICATION OF SALES DATA TO AUDITED FINANCIAL STATEMENTS ............................................................................ 29 5.6 VERIFICATION OF SALES DATA TO SOURCE DOCUMENTS ........................................................................................... 30 5.7 CONCLUSION ................................................................................................................................................. 33

6 COST TO MAKE AND SELL ............................................................................................................................... 34

6.1 GENERAL ...................................................................................................................................................... 34 6.2 APPROACH TO VERIFICATION OF COSTS TO MAKE AND SELL ....................................................................................... 34 6.3 VERIFICATION OF COST OF GOODS DATA TO AUDITED FINANCIAL STATEMENTS .............................................................. 34 6.4 PRODUCTION VOLUMES ................................................................................................................................... 35

7 ECONOMIC CONDITION.................................................................................................................................. 37

7.1 APPLICANT’S INJURY CLAIMS ............................................................................................................................. 37 7.2 COMMENCEMENT OF INJURY AND ANALYSIS PERIOD – INDUSTRY CLAIMS ..................................................................... 37 7.3 VOLUME TRENDS ............................................................................................................................................ 38 7.4 PRICE EFFECTS................................................................................................................................................ 40 7.5 PROFIT AND PROFITABILITY ............................................................................................................................... 41

Hot Rolled Plate Steel Investigation No. 284– Australian Industry Visit Report – BlueScope Steel

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7.6 OTHER ECONOMIC FACTORS .............................................................................................................................. 43 7.7 CONCLUSION ................................................................................................................................................. 46

8 CAUSAL LINK .................................................................................................................................................. 47

8.1 GENERAL ...................................................................................................................................................... 47 8.2 PRICING ....................................................................................................................................................... 47 8.3 FACTORS OTHER THAN DUMPING ....................................................................................................................... 48 8.4 CONCLUSION ................................................................................................................................................. 48

9 UNSUPPRESSED SELLING PRICE - NON-INJURIOUS PRICE ............................................................................... 49

10 APPENDICES AND ATTACHMENTS .................................................................................................................. 50


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ABBREVIATIONS

ACBPS Australian Customs and Border Protection Service the Act Customs Act 1901 the applicant BlueScope Steel Limited AUD Australian dollars BANZ BlueScope Australia and New Zealand BlueScope BlueScope Steel Limited BOS Basic oxygen steelmaking the Commission the Anti-Dumping Commission CIPA Coated & Industrial Products Australia CTMS Cost to make and sell EDI Electronic data interface HRC Hot rolled coil Hyundai Hyundai Iron and Steel Co Ltd IASB International Accounting Standards Board ISSB International Steel Statistics Bureau KAFTA Korea-Australia Free Trade Agreement POSCO POSCO Steel REP 198 Trade Measures Report No. 198 SG&A Selling, general and administrative expenses SGIS Steel group invoicing system


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1 BACKGROUND AND PURPOSE

1.1 Background

On 26 February 2015, BlueScope Steel Limited (BlueScope) lodged an application requesting that the Parliamentary Secretary to the Minister for Industry and Science (the Parliamentary Secretary) publish a dumping duty notice in respect of hot rolled plate steel exported to Australia from Korea, by Hyundai Iron & Steel Co Ltd (Hyundai) and POSCO Steel (POSCO), and Taiwan. BlueScope alleges that the Australian industry has suffered material injury caused by hot rolled plate steel exported to Australia from Korea, by Hyundai and POSCO, and Taiwan at dumped prices. BlueScope alleges that the industry has been injured through:

• loss of sales volume;

• loss of market share;

• price depression;

• price suppression;

• reduced profits;

• reduced profitability;

• reduced capital expenditure;

• reduced return on investment;

• reduced capacity utilisation; and

• reduced employment. After consideration of the application, an investigation was initiated on 27 March 2015, and public notification of the initiation of the investigation was published in The Australian newspaper on 31 March 2015.

Anti-Dumping Notice (ADN) No. 2015/40 refers to the initiation of the investigation and is available at www.adcommission.gov.au.

1.2 Previous investigations

On 25 March 2004, the Minister for Justice and Customs imposed anti-dumping measures on certain hot rolled plate steel exported to Australia from the People’s Republic of China (China), Republic of Indonesia (Indonesia), Japan and Korea with the exclusion of one Korean exporter and two Indonesian exporters. The measures expired on 2 April 2009. On 12 February 2013, the Commission commenced an investigation into the alleged dumping of hot rolled plate steel exported to Australia from China, Indonesia, Japan, Korea and Taiwan, and the alleged subsidisation of the goods exported to Australia from China.


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On 10 September 2013, the Commission terminated its dumping investigation into the goods exported by all exporters from Taiwan, Hyundai and POSCO from Korea and Shandong Iron and Steel, Jinan Company (JIGANG) from China. Termination Report No. 198 (TER 198) sets out the reasons for these terminations. On 19 December 2013, the Minister for Industry imposed dumping measures on certain hot rolled plate steel exported to Australia from China, Indonesia, Japan and Korea with the exclusion of one Chinese exporter and the two Korean exporters the subject of this application; and countervailing measures on certain hot rolled plate steel exported to Australia from China.

1.3 Investigation process and timeframes

The verification team advised BlueScope of the investigation process and timeframes as follows:

• the investigation period is 1 January 2014 to 31 December 2014;

• the injury analysis period is from 1 January 2010 for the purpose of analysing the condition of the Australian industry;

• a Preliminary Affirmative Determination (PAD) will not be made by the Commission until it becomes satisfied that there appears to be sufficient grounds, or that it appears there will be sufficient grounds subsequent to the importation into Australia of such goods, for the publication of a dumping duty notice. This is distinguished from the ‘reasonable grounds’ threshold for the initiation of an investigation;

• the Statement of Essential Facts (SEF) for the investigation is currently due to be placed on the public record by 19 July 2015; or such later date1 as the Parliamentary Secretary allows under section 269ZHI of the Customs Act 1901 (the Act);2

• the SEF will set out the material findings of fact on which the Commissioner intends to base his recommendations to the Parliamentary Secretary, and will invite interested parties to respond, within 20 days, to the issues raised therein;

• following receipt and consideration of submissions made in response to the SEF, the Commissioner will provide his final report and recommendations to the Parliamentary Secretary; and

• the final report is due to the Parliamentary Secretary no later than 2 September 2015, unless an extension is approved by the Parliamentary Secretary.3

1 The Parliamentary Secretary has subsequently allowed an extension of time to place the SEF on the public record to 12 October 2015. 2 All references in this report to sections of legislation, unless otherwise specified, are to the Customs Act 1901. 3 The extension of time to place the SEF on the public record to 12 October 2015 allowed by the Parliamentary Secretary has consequently extended the due date for the Final Report to 26 November 2015.


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1.4 Purpose of the visit

BlueScope has been visited by the Commission to undertake verification on a number of occasions in the past four years (including in March 2013 for hot rolled plate steel – see section 2.4 of this report). Parts of the information provided for these previous visits are relevant in the context of this investigation. In addition to confirming the currency of this information, the purpose of the visit was to:

• obtain general information about the Australian market for plate steel;

• gain a greater understanding of BlueScope’s manufacturing, marketing, sales and distribution processes;

• verify information provided in the application;

• gather information relevant to assessing whether the allegedly dumped imports had caused material injury to the Australian industry; and

• give BlueScope the opportunity to provide any further comments or raise any further issues it believes relevant to the investigation.

Various applications have been lodged by BlueScope and each is assessed on a case-by-case basis. The Commission remains committed to ensuring that it can be confident in the completeness, relevance and accuracy of the data and information submitted by BlueScope for each investigation.

1.5 Meeting details

Company BlueScope Steel Limited Five Islands Road Port Kembla NSW 2505

Date of visit 18 May 2015 – 20 May 2015

The following representatives were present at various stages of the visit:

BlueScope Mr Alan Gibbs, Development Manager - International Trade Affairs Mr Chad Uphill, Senior Finance Analyst – International Trade Affairs Mr Miles Mihajlovic, Finance Analyst – International Trade Affairs Mr Daniel Castle, Pricing Manager Mr Graham Unicomb, Pricing Leader – Distribution Mr Luke Sparks, National Sales Manager – Distribution Mr Todd Bryers, Sales Operations Manager Mr Esa Mannisto, Manager – Costing


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John O’Connor & Associates Pty Ltd

Mr John O’Connor, Consultant

The verification team

Ms Kerry Taylor Director, Operations 4 Mr Jukka Mäntynen Assistant Director, Operations 4 Ms Angela Zahos Senior Investigator, Operations 4

1.6 Visit report

The verification team indicated to BlueScope that:

• it would prepare a report of the verification visit (this report) and provide it to BlueScope for review of its factual accuracy and to identify those parts of the report that the company may consider confidential; and

• in consultation with BlueScope, it would prepare a non-confidential version of the report for the public record.


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• producers are able to manufacture pattern plate in much larger sizes than coil plate;

• grade 250 MPa and grade 350 MPa of plate steel are the most common grades that are sold around the world; and

• there are often extra charges incurred for widths above a standard range, but these may be waived by exporters for large orders.

BlueScope explained that to meet special testing requirements for certain standards of plate steel, alloys must be added to the steel to alter its chemical properties. BlueScope explained that different standards were applicable for structural grades of plate steel, pressure vessel and boiler grade steel.

2.2 Australian and international standards

2.2.1 Product standards

There are a number of relevant international standards for plate steel products that define specific grade designations, including the recommended or guaranteed properties of each of these product grades. These relevant standards are noted in the tables below:

Australian and International Standards: Structural Grades

Australia and NZ

AS/NZS 3678

International

ASTM

Japan

JIS

China

Grade

Grade

Grade

Grade

250

A36

G3101-SS400

GB/T 700-Q275

250L15 250L20 250Y20 250L40 250Y40

300

300L15 300L20 300Y20 300L40 300Y40

350 A572-345(50) G3101-SS490 GB/T 1591-Q345

350L15 350L20 350Y20 350L40 350Y40

400 A572-415(60) GB/T 1591-Q390

400L15 400L20 400Y20 400L40 400Y40


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Australia and NZ

AS/NZS 3678

International

ASTM

Japan

JIS

China

Grade

Grade

Grade

Grade

450 A572-450(65) GB/T 1591-Q420

450L15 450L20 450Y20 450L40 45040

Table 1: Plate steel – Australian and international standards – Structural grades

Australian and International Standards – Pressure Vessel and Boiler Grades

AS 1548

ASTM

Grade

Grade PT 430 A516 – 415 (60) PT 460 A516 – 450 (65) PT 490 A516 – 485 (70) PT 490 A516 – 485 (70)

PT 490 N A516 – 485 (70) N Table 2: Plate steel – Australian and international standards – Pressure vessel and boiler grades

2.3 Tariff

2.3.1 Tariff classifications

The application states that the goods are typically classified to the following subheadings in Schedule 3 of the Customs Tariff Act 1995:

• 7208.40.00 statistical code 39;

• 7208.51.00 statistical code 40;

• 7208.52.00 statistical code 41; and

• 7225.40.00 statistical codes 22 and 24.

The goods imported from Korea and Taiwan classified to 7208.40.00, 7208.51.00 and 7208.52.00 are free of duty. The goods classified under 7225.40.00 attract a 5 per cent rate of duty for Taiwan. Under the Korea-Australia Free Trade Agreement (KAFTA), the duty rate applicable to imports from Korea reduced to zero from 13 December 2014. 2.3.2 Tariff concession orders

There are currently no tariff concession orders (TCOs) applicable to the goods the subject of the investigation.


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2.4 Previous investigations and current measures

On 25 March 2004, the Minister for Justice and Customs published a dumping duty notice under subsection 269TG(2) of the Customs Act 19014, imposing anti-dumping measures on certain plate steel exported to Australia from the People’s Republic of China (China), the Republic of Indonesia (Indonesia), Japan and Korea with the exclusion of one Korean exporter and two Indonesian exporters. The measures took effect on 2 April 2004. Following a review by the Trade Measures Review Officer (TMRO), the Minister requested the Chief Executive Officer of Customs (CEO) to reinvestigate the findings in original report No. 76. Following the reinvestigation, on 7 December 2004, the Minister for Justice and Customs accepted the CEO’s recommendations in report No. 87 to affirm the publication of dumping duty notices. Public notice was made on 24 December 2004. The measures expired on 2 April 2009. On 12 February 2013, the Commission commenced an investigation into the alleged dumping of hot rolled plate steel exported to Australia from China, Indonesia, Japan, Korea and Taiwan, and the alleged subsidisation of the goods exported to Australia from China. On 10 September 2013, the Commission terminated its dumping investigation into the goods exported by all exporters from Taiwan, Hyundai and POSCO from Korea and Shandong Iron and Steel and Jinan Company (JIGANG) from China. Termination Report No. 198 (TER 198) sets out the reasons for these terminations. The Commissioner was satisfied that the goods exported during the investigation period by:

• all exporters from Taiwan; and

• Hyundai and POSCO from Korea; were not dumped. These goods form the subject of the current application. On 19 December 2013, the Minister for Industry published:

• a dumping duty notice under subsections 269TG(1) and 269TG(2) imposing dumping measures on certain hot rolled plate steel exported to Australia from China, Indonesia, Japan and Korea with the exclusion of one Chinese exporter and the two Korean exporters the subject of this application; and

• a countervailing duty notice under section 269TJ(2) imposing countervailing measures on certain hot rolled plate steel exported to Australia from China.

The measures apply to certain hot rolled plate steel exported to Australia after 19 July 2013. The Commission’s Report to the Minister No. 198 (REP 198) details the findings of the investigation. The goods subject to anti-dumping measures as a result of REP 198 are slightly different to the goods the subject of this application, as follows:

4 All references in this report to sections of legislation, unless otherwise specified, are to the Customs Act 1901.


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• this application includes flat rolled products of ‘other alloy’ steel; and

• this application excludes Q&T greenfeed.


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3 THE AUSTRALIAN INDUSTRY

3.1 Corporate and organisational structure

BlueScope is a publicly listed company on the Australian stock exchange, limited by shares. BlueScope has a large number of subsidiaries and joint ventures both in Australia and internationally. Details of these subsidiaries and joint ventures have been provided by BlueScope to the Commission in Attachments A2.6.1, A2.6.2, A2.6.3 and A2.6.4 to its application. BlueScope has six internal corporate groups with distinct functions that operate in Australia and internationally.

Figure 1 – External Reporting Structure

BlueScope’s Australian and New Zealand (BANZ) operations are managed as a single unit and include all affiliated companies. The goods the subject of the investigation are incorporated under the Coated and Industrial Products Australia (CIPA) group. The CIPA group is the largest supplier and only manufacturer of hot rolled plate steel, hot rolled coil, metal coated and painted steel in Australia (including the goods the subject of this investigation). It has an Australian finished product capacity of around 2.6 million tonnes per annum and supplies a domestic market of around million tonnes per annum. The Building Components and Distribution Australia group includes over sites in Australia. It includes BlueScope Distribution and supplies the building and construction, automotive, white goods and general manufacturing industries. The New Zealand and Pacific Steel Products group includes the only fully integrated flat steel producer in New Zealand, and the only producer of long steel products in New Zealand. The Building Products Asean, North America & India group includes metallic coating, painting and steel building product operations in Thailand, Indonesia, Vietnam, Malaysia, India and North America, primarily servicing the residential and non-residential building and construction industries across Asia, and the non-residential construction industry in North America. The group operates in ASEAN and North America in partnership with Nippon Steel and Sumitomo Metal Corporation (NSSMC) and in India with Tata Steel. The Global Building Solutions group includes engineering and manufacturing businesses in Asia and North America. The Hot Rolled Products North America group includes various BlueScope joint venture steel producing operations in the USA.


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3.3.2 Customers

BlueScope sells hot rolled plate steel on both the domestic and export markets. The verification team notes that domestic sales of hot rolled plate steel comprised around 93 per cent of total hot rolled plate steel sales (based on net revenue) in 2014.

BlueScope sells its hot rolled plate steel to related and unrelated parties in the Australian domestic market. BlueScope confirmed that prices to related companies are negotiated in the same way as prices to unrelated customers. This is discussed further in Section 5.4 of this report.

3.4 BlueScope’s manufacturing facilities and product range

3.4.1 Product information

BlueScope manufactures flat rolled products of ‘non-alloy’ steel and ‘other alloy’ steel of widths greater than 600mm, not further worked than hot rolled, not in coils, whether or not with ‘patterns in relief’. BlueScope advised that the goods are generically called ‘hot rolled plate steel’, ‘plate steel’ or ‘coil plate steel’.

Trade or further generic names often used to describe these goods include:

• XLERPLATE steel;

• XLERPLATE LITE steel;

• TRU-SPEC steel;

• plate;

• pattern plate;

• coil plate;

• checker plate; and

• floor plate.

BlueScope indicated that it has produced plate products since 1962. Hot rolled plate steel products made by BlueScope are required to meet AS/NZS 3678 for structural plate steel, and AS/NZS 1548 for pressure vessel plate grades.

BlueScope indicated that it produces a wide variety of 250 MPa and 350 MPa structural and pressure vessel plate steel grades with differing chemical and physical properties. The 250 MPa and 350 MPa grades of plate steel represent the majority of production and sales of plate steels manufactured by BlueScope. 250 MPa grades of hot rolled plate steel with a thickness up to 150mm or 350 MPa grades of hot rolled plate steel with a thickness up to 100mm produced by BlueScope are the ‘like’ of the 250 MPa and 350 MPa imported grades.


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The coal is converted to coke in coking ovens; this process removes impurities and volatile matter. The coke is then screened into solid lump form which has more strength than coal and is able to support the total weight of material above it within the blast furnace. The sinter, coke and fluxes are fed into the top of the blast furnace by conveyor in predetermined proportions and sequences. Air, which is heated to about 1,200 degrees celsius, is blown into the blast furnace through nozzles (referred to as ‘tuyeres’) that are spaced around the lower section of the blast furnace. The air causes the coke to burn, producing carbon monoxide which creates the required chemical reaction. The iron ore is reduced to molten iron and slag. About every two hours, the molten iron and slag is drained from the blast furnace. The slag contains impurities and is removed by skimming. The molten iron then runs into torpedo ladles that transport the molten iron to the steelmaking area by rail.

3.5.2 The steel making process

Steel is produced by converting the iron to steel in the basic oxygen steelmaking (BOS) process. The BOS process creates liquid steel from molten iron, scrap steel, fluxes and alloying materials. The first step is charging the BOS vessel. The BOS vessel is one-fifth filled with steel scrap to which molten iron and fluxes are added until the vessel is full (around 280 tonnes per batch). A lance that blows 99 per cent pure oxygen into the steel and iron is lowered into the vessel and causes the temperature to rise to around 1,700 degrees celsius. This melts the scrap, lowers the carbon content of the molten iron and helps remove unwanted elements. Near the end of the blowing cycle (around 20 minutes) a temperature reading and samples are taken. The samples are tested and an analysis of the steel is done to ensure the desired chemistry is achieved. Molten steel from the BOS vessel is poured into a ladle where the steel is further refined by adding alloying materials, giving it the special properties that may be required by the customer. Finally, slag is removed by skimming.

3.5.3 The casting process

Casting is the process that transforms liquid steel into a solid slab for rolling. This is done by continuous casting machines that mould the liquid steel into solidified blocks of steel called slabs (approximately 230 mm thick). The liquid steel is continuously poured from the ladle into a mould at the same rate as continuous steel cast slabs are extracted. This continuous cast slab is cut to desired lengths and the slabs are then partially cooled. This process is only stopped when the mould needs to be changed so that slabs of different dimensions can be produced or when steel with a different chemistry is made. 3.5.4 The hot rolled plate steel product manufacturing process

XLERPLATE® (pattern plate) XLERPLATE® is produced at the Port Kembla Plate Mill. Slab is heated in a furnace to around 1200 degrees celsius. It is then reduced in thickness from 230mm to the required thickness by passing through a series of rollers, and then passing through a hot leveller to achieve the required flatness.


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In the first stage of the plate rolling process, the slab undergoes a series of passes through a reversing mill. During this stage of rolling, the required plate width is obtained. Once the correct width is obtained and the slab has been rolled to a predetermined intermediate thickness, the slab is then sent to a second reversing mill to complete the rolling process. The slab is converted into pattern plate by going through a series of passes through rollers in the second reversing mill. The rolling parameters are controlled and monitored in the production of XLERPLATE® steel to ensure the specified properties of the plate are obtained. Following rolling, the plate passes through a hot leveller to ensure it meets the required flatness standards. After cooling, the ‘pattern’, or ‘rolled length’, is sent to the processing area where it is cut to the required size. Cutting of test pieces and inspection of the plate is carried out at this stage as specified. XLERPLATE® can be produced with a thickness ranging from 5mm to 150mm, up to 3,300mm wide and 22 metres long. XLERPLATE LITE® (coil plate) XLERPLATE LITE® is produced at the Port Kembla Hot Strip Mill. Slab is heated in the Hot Strip Mill’s furnace to reduce the risk of surface damage and maintain an even temperature. Scale (surface iron oxide) from the furnace is removed by high pressure water sprays. The slab is heated in a furnace to around 1,200 degrees celsius then reduced in thickness from 230mm to the required thickness by passing through a series of rollers at great pressure. After the slab is heated, it passes through rollers in the reverse roughing mill multiple times until it is reduced from a 230mm thick slab to a strip that is around 25mm thick and is lengthened considerably. The width is controlled by vertical edge rollers. The strip then travels to a coil box where it is rolled up to form a coil. This ensures the temperature is evenly distributed throughout its entire length. The strip then passes through six sets of rollers that gradually reduce the thickness from 25mm to as low as 1.5mm. The thickness is monitored by x-ray gauges as the strip leaves the last stand and this equipment adjusts the mill settings during rolling if necessary. After the strip leaves the last finishing stand, it is cooled using water sprays en route to the coilers. The final step of the rolling process is the coiling of the strip to become hot rolled coil. The coiling temperature impacts the mechanical properties of the steel. Hot rolled coil is taken to a secondary processing facility where it is sheared to length and levelled flat to make XLERPLATE LITE® steel. The product can be produced with a thickness ranging from 1.5mm- 12.7mm, up to 1500mm wide and 12 metres long. Only products with a thickness equal to or greater than 4.75mm fall within the goods under investigation. TRU-SPEC™ (coil plate) The production of TRU-SPEC® follows the same process as for XLERPLATE® LITE. For TRU-SPEC®, after un-coiling the strip, the strip is stretch-levelled flat and sheared to length at a secondary processing facility. The TRU-SPEC™ size range is the same as XLERPLATE LITE®.


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3.5.5 Capacity, employment and annual turnover

The total combined capacity of BlueScope for producing plate steel is approximately tonnes per annum. The total combined nameplate capacity is 450,000 tonnes.

BlueScope’s Confidential Appendix A7 indicates that turnover for hot rolled plate steel was around million in 2014; or per cent of BlueScope’s revenue as recorded for its Coated and Industrial Products Australia (CIPA) division. During the visit, BlueScope stated that the number of employees in December 2014 in relation to its steelworks was This number includes people associated with the plate rolling mills. BlueScope’s hot rolled plate steel capacity and employment is further discussed in Section 7.6 of this report.

3.6 Like goods

Subsection 269T(1) defines like goods as: goods that are identical in all respects to the goods under consideration or that, although not alike in all respects to the goods under consideration, have characteristics closely resembling those of the goods under consideration.

BlueScope claims that its locally produced flat rolled products are like goods to the imported flat rolled products of ‘non alloy’ steel and ‘other alloy’ steel. BlueScope considers that both goods possess the same essential characteristics based on:

• physical likeness – the primary physical characteristics of imported and locally produced goods are similar (both are manufactured to achieve mechanical properties designated by Australian and international standards);

• commercial likeness – the imported and locally produced goods are commercially alike, directly competitive and are sold to common customers;

• functional likeness – the imported and locally produced goods are functionally alike as they have the same end-uses; and

• production likeness – BlueScope points to the Commission’s previous determination (REP 198) that BlueScope and exporters of hot rolled plate steel manufacture hot rolled plate steel in a similar manner.

Based on information available, as well as discussions and verification with BlueScope, the verification team considers:

• the primary physical characteristics of the goods and locally produced goods are similar;

• the goods and locally produced goods are commercially alike as they are sold to common users, and directly compete in the same market;

• the goods and locally produced goods are functionally alike as they have a similar range of end-uses; and

• the goods and locally produced goods are manufactured in a similar manner.


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The verification team is satisfied that the Australian industry produces like goods to the goods the subject of the application (including those goods that comprise other alloy steel), as defined in subsection 269(T)(1). The issue of like goods will continue to be assessed throughout the investigation.

3.7 Conclusion

The verification team is satisfied that:

• the hot rolled plate steel produced by BlueScope is like to the imported goods;5

• the like goods were wholly, or partly, manufactured in Australia by BlueScope;6

• at least one substantial process of manufacture of hot rolled plate steel is carried out in Australia;7 and

• BlueScope is an Australian industry producing like goods in Australia.

5 Subsection 269T(1). 6 Subsection 269T(2). 7 Subsection 269T(3).


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4 AUSTRALIAN MARKET

4.1 Market segmentation

BlueScope stated that the Australian market for plate steel products is dominated by three large segments. These are:

• mining, oil and gas (construction of new plant and the maintenance of that plant) including bulk commodities materials handling;

• infrastructure including ports, wharves, bridges, water storage; and

• transport and equipment manufacture including marine, road transport, earth moving, and general manufacture.

BlueScope claimed that locally produced and imported goods are used interchangeably across a variety of applications in the Australian market.

4.2 Marketing and distribution

4.2.1 Marketing

BlueScope is the only Australian manufacturer of hot rolled plate steel. BlueScope sells hot rolled plate steel under the brand names XLERPLATE®; XLERPLATE LITE®; and TRU-SPEC™. 4.2.2 Distribution

BlueScope sells over per cent of its hot rolled plate steel via a network of distribution companies.8 These distribution companies may offer plate processing which includes the cutting, drilling, shaping of steel for customers who will incorporate these ‘components’ into a finished article. Distributors hold stock, provide credit terms and can combine deliveries with other steel products such as pipe and tube and structural ‘I’ beams and ‘H’ columns. BlueScope sells around per cent directly to larger end-users that are often referred to as ‘converters’. These larger end-users will mostly procure hot rolled plate steel directly for large projects or they are manufacturers that make proprietary products such as underground mining equipment. The ‘converters’ are generally large fabricators that will fabricate structures or items to a design. In addition to this, there are fabricators and maintenance companies that purchase steel from distributors for regular repairs and maintenance to buildings or machinery. Around per cent of BlueScope’s hot rolled plate steel is sold to customers who are also independent importers. BlueScope is a wholesale manufacturer that sells to both related and unrelated parties in the Australian market. Related entities that BlueScope supplies include:

8 The steel distribution companies referred to by BlueScope are members of the Australian Steel Institute (ASI). BlueScope’s subsidiaries, [confidential], are members of ASI.


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[Commercial-in-confidence related party customers]

•

• BlueScope competes with importers of the hot rolled plate steel compete in all states and territories in Australia. At the visit, BlueScope provided a diagram of the Australian distribution market supply chain, depicting the known channels to end users. This diagram is provided below: [Confidential supply chain details]

Figure 3 – Australian distribution market, supply chain diagram

Further discussion of BlueScope’s distribution arrangements is included in Section 5.2 of this report.

4.2.3 Demand

BlueScope advised that the key sources of demand in the Australian market for the goods include:

• infrastructure - fixed asset investment or maintenance of existing infrastructure. This can be driven by need for assets to support investment in mining, oil and gas, population growth, expansion of trade (port facilities);

• transport, equipment and general manufacturing - fixed asset investment and repairs in road and rail haulage, agricultural equipment, earth moving equipment including wear surfaces. Demand for earth moving equipment can come from general construction, mining and infrastructure investment; and

• mining, oil and gas plant construction and operation plus the movement and storage of bulk commodities.


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However, there has been a significant downturn in the mining industry and thus demand since the previous investigation (REP198) into hot rolled plate steel. BlueScope stated that there are a variety of factors that influence demand variability for plate steel products within the Australian market, including:

• availability of capital for infrastructure spending – government and private;

• general macro-economic factors such as bank interest rates which directly impact on investment decisions by home buyers, investors and developers;

• global and domestic economic conditions (GDP, unemployment, inflation, interest rates);

• demand for Australian minerals and gas;

• trend to off-shore fabrication of large mining, oil and gas project modules to low labour cost countries;

• major government spending on infrastructure such as roads and ports; and

• incentives to develop renewable energy sources such as wind power generation.

4.3 Substitutable products

BlueScope stated that generally hot rolled plate steel is not substitutable to any significant degree. Aluminium in some instances is substitutable, but due to a quite different cost by weight, generally these two products do not compete.


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5 SALES

5.1 Domestic sales listing

BlueScope’s prices vary according to products which are defined by grade, thickness, width and length. BlueScope provides additional services with respect to its plate steel, including edge trimming, property testing and ultrasonic testing. Prior to the visit, BlueScope provided the verification team a line-by-line sales listing of its Australian sales of hot rolled plate steel over the 12 months from 1 January 2014 to 31 December 2014. The listing includes all sales to BlueScope’s related and unrelated companies and provides details of sales to the level of trade, model, thickness, width, length, edge trim, property testing and ultrasonic testing. BlueScope divided sales into three thickness ranges: [confidential thickness ranges]

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BlueScope divided sales into two width ranges: [Confidential width ranges]

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BlueScope divided sales into three length ranges: [confidential length ranges]

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BlueScope considered that width, thickness, length, grade, and property testing were the main price determinates for plate steel. The verification team has verified the data within these sales listings, as discussed in Sections 5.5 and 5.6 of this report.

5.2 Ordering, invoice and delivery arrangements

The verification team found that ordering, invoice and delivery arrangements are consistent with the practices of BlueScope found in previous investigations. BlueScope has explained that generally its hot rolled plate steel is made to order. A small volume of product, however, may be produced over the amount that has been ordered but is quickly sold and not held as inventory.


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5.3 Pricing

5.3.1 General

BlueScope stated that its pricing is based on import parity pricing (IPP) and that, as such, the price of imports is a key determinant of its selling price and directly causes price injury resulting in lost revenue and profits. BlueScope indicated that it considers itself to be a price taker in the Australian hot rolled plate steel market. BlueScope indicated that IPP has become the reference point for domestic pricing and that pattern plate and coil plate have been priced on an IPP basis for the past years. Import parity pricing takes into consideration the market price of the goods using contemporary price information for equivalent imported products. BlueScope uses prices gathered from the import market (including from the countries the subject of the application) to determine the selling price of its goods, with a view to sell at prices considered competitive with imports. As such, hot rolled plate steel may be said to have a market based price, as opposed to a cost based price. The IPP process is described more fully in Section 8.2.1 of this report. BlueScope stated that factors in addition to import prices are taken into consideration when determining price, for example manufacturing costs and margins. However, BlueScope claims that in order to maintain market share and sales volume, it relies heavily on IPP to determine its prices. Despite the existence of a pricing schedule, BlueScope advised that the final net price is negotiated with customers by the BlueScope sales team. Further, the price paid by customers is typically lower than the list price due to the discount and rebate structures in place (see Section 5.3.2). BlueScope’s sales team will take this into account in negotiations. 5.3.2 Discounts and rebates

Discounts BlueScope offers an ‘early payment’ discount, which is applicable when particular customers pay by the invoice due date. This discount is generally between and

per cent . Approximately [proportion] of BlueScope’s customers received discounts in 2014. The total of discounts provided to BlueScope’s customers generally correlated with the respective value of sales to those customers. Rebates In addition to discounts, BlueScope also offers a range of rebates to its customers

. Approximately [proportion] of BlueScope’s customers received rebates in 2014. The total of rebates provided to BlueScope’s customers generally correlated with the respective value of sales to those customers. During the verification, BlueScope provided the verification team with a copy of its Rebate Summary Schedule. This forms Confidential Attachment B to this report and is revisited at Section 5.6.3 of this report.


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BlueScope provided the following specific supporting documentation:

• sales invoices;

• credit adjustment notes;

• despatch advices;

• remittance advices and bank statements; and

• SGIS screen shots to verify ledger entries for payment. The source documents for all eight transactions form Confidential Attachment C to this report. The verification team reconciled the documentation for each selected sale to the corresponding information in Confidential Appendix 4.

5.6.1 Sales invoices

By reviewing the invoices provided for all eight transactions, the verification team was able to reconcile the following product and transaction details contained in Confidential Appendix 4:

• customer name;

• invoice number;

• invoice and sales date;

• payment due date and (where applicable) the ‘early payment’ discount percentage;

• delivery terms;

• supplier order number;

• product name and grade;

• thickness and width;

• quantity (in tonnes); and

• gross invoice amount (ex GST). It was observed from the invoices provided by BlueScope that multiple sales listings from Confidential Appendix A4 may have been included in a single invoice. The net invoice amount for sales listings in Confidential Appendix A4 could not always be directly reconciled to the sales invoice, but was verified by confirming the accuracy of the gross invoice amount and associated discounts and rebates. It was further observed by the verification team that the net invoice value in Confidential Appendix A4 was formula based. As such, this figure has been verified by confirming the accuracy of the net invoice and quantity values. The verification team also observed that the payment terms listed in Confidential Appendix 4 (for example, payment may be due on the [confidential payment]) were not specifically stated in the sales invoices, or in other source documentation provided by BlueScope, nor were the packing and transport and handling costs listed. On verifying the sales data and invoices, the verification team is satisfied that no additional charges were incurred for transport and packaging. In relation


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to the payment terms, the verification team was able to confirm the terms identified in Confidential Appendix 4 by comparing the invoice and payment due date on the relevant invoice with the term identified in Confidential Appendix 4. Hot rolled plate steel is sold on a Free into Store basis and accordingly the packing, transport and handling costs are not specifically listed on the sales invoice. BlueScope has not provided any additional documentation that supports these costs. However, the verification team notes that documentation to support freight costs was provided at previous verification visits, and that no issues were identified. It is considered reasonable to accept the transport and handling costs in the current instance.

5.6.2 Early payment discounts

As noted in Section 5.6.1 above, the verification team was able to identify whether a ‘pay on time’ discount applied to a particular sales listing, and if so the relevant percentage, from the sales invoices provided by BlueScope. In addition to this, BlueScope provided the verification team with credit adjustment notes for the four transactions selected for full verification. These adjustment notes break the total invoice ‘pay on time’ discount down by product ordered (i.e. by sales listing). As such, the discount amount in Confidential Appendix A4 can be reconciled directly to the credit adjustment note. The total credit adjustment can also be reconciled back to the relevant invoice (as the invoice notes the net amount due should that invoice be paid by the due date).

5.6.3 Rebates

BlueScope provided screen shots from COGNOS evidencing rebate amounts for particular sales listings. The verification team was able to confirm the following information in each screen shot to link the rebate amounts to the relevant sales listing:

• customer name;

• supplier order number;

• invoice date and number;

• quantity; and

• gross invoice amount (for that sales listing). As discussed in Section 5.3.2, calculations in COGNOS are based on [confidential rebate calculation process] and customer identification. The screen shots provided by BlueScope from COGNOS demonstrate the value of each applicable rebate, as well as the total rebate amount, but not the detail of the [confidential rebate calculation process]. Nevertheless, the verification team was able to verify that the total rebate amounts in the COGNOS screen shots reconciled to the amounts in Confidential Appendix 4. The verification team has also noted that in Confidential Appendix 4 [confidential rebate formula], the rebate percentages are based on a formula using

. This figure is considered to be indicative of the proportion of rebates applicable.


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5.6.4 Proof of payment

BlueScope provided remittance advice and associated bank statements to evidence proof of payment from certain customers. Each remittance advice contained a number of transactions, and BlueScope identified the relevant sales listing by its invoice number. These numbers reconciled to the amounts in Confidential Appendix 4. The verification team was then able to reconcile the total remittance amount in the advice to the bank statements BlueScope provided. BlueScope also provided SGIS screen shots, evidencing ledger entries between related entities for ‘payment’. The verification team was able to confirm that the SGIS screen shots were relevant to the selected sales listings by the:

• company name;

• invoice date and number;

• payment due date;

• gross invoice amount due (for the entire invoice amount, not the sales listing); and

• total discounts (for the entire invoice, not the sales listing; per related credit adjustment note).

The verification team observed that the ‘banked’ date in the ledger entry matched the date payment in all cases. It also observed that the amount paid in the ledger entry was equal to the gross invoice amount minus the total discounts for that invoice. Where ‘rebates’ were applicable, BlueScope advised that this is accounted for in a separate ledger entry, which credits the rebate amount back to the related entity. The verification team is satisfied that the data in Confidential Appendix 4 accurately reflects the amounts in the ledger entries.

5.7 Conclusion

The verification team has verified the sales information provided by BlueScope in the Confidential Appendix A4 for hot rolled plate steel and is satisfied that the data is complete, relevant and accurate, and therefore suitable for the purposes of injury analysis.


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6 COST TO MAKE AND SELL

6.1 General

In Confidential Appendix A6.1 to its application, BlueScope provided cost to make and sell (CTMS) data for domestic sales of hot rolled plate steel. The information provided in this appendix included production and sales volumes, manufacturing costs, selling, general and administrative (SG&A) expenses (including distribution costs) for the period 2008 to 2014.

6.2 Approach to verification of costs to make and sell

As discussed in Section 1.3, the verification team conducted this verification in a truncated manner. In relation to BlueScope’s CTMS data for hot rolled plate steel, the verification team considered that it was appropriate to verify data upwards to the audited financial statements. The verification team was prepared to maintain its usual practice of conducting verification downwards to source documents at the visit. Given the nature and extent of verification visits to BlueScope in recent years, as well as the outcomes of upwards verification that indicated that there were no high risks associated with accepting those findings, the verification team was satisfied that it was not necessary to conduct verification downwards to source documents. The verification team has focused on data for the investigation period, in particular the quarter ending March 2014.

6.3 Verification of cost of goods data to audited financial statements

To assess the CTMS data submitted by BlueScope for completeness and relevance, the verification team sought to trace the CTMS data submitted by BlueScope in Confidential Appendix A6.1 up through management reports to audited financial statements. BlueScope advised that the cost of goods sold (as recorded for the [name] business unit) can be reconciled to the trial balance report. BlueScope explained that the auditors examine and sign off the trial balance report as a routine and essential part of the audit process. Having accepted that the sales data for hot rolled plate steel was satisfactorily traced through to the audited financial statements (Section 5.5 refers), the verification team sought to link the cost of goods sold data contained in Confidential Appendix 6.1 to the trial balance report. BlueScope demonstrated that the cost of goods sold data contained in Confidential Appendix A6.1 could be linked to the trial balance report by presenting and explaining the details of its COGNOS to trial balance reconciliation report for the quarter ending March 2014. The verification team was satisfied with this explanation and demonstration and thereby satisfied with the accuracy of cost of goods sold data contained in Confidential Appendix A6.1 prepared from COGNOS data and that they reconcile with the audited trial balance report.


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6.3.1 Conclusion

Based on the above, the verification team is satisfied that the cost of goods sold data for hot rolled plate steel, as shown in BlueScope’s Confidential Appendix A6.1, is a reasonably complete and relevant account of the cost of goods sold data in the investigation period.

6.4 Production volumes

BlueScope stated that its reported production was equal to its total sales of hot rolled plate steel. BlueScope explained that it considered sales to be an appropriate measure of production as goods were made to order and all goods produced have been sold. Sales volumes are captured from an order tracking inventory system. Sales by the Port Kembla steel works included numerous products to both export and domestic customers. The verification team verified that sales of hot rolled plate steel to domestic customers in the COGNOS database matched production reported in Confidential Appendix A6.1. BlueScope explained that hot rolled plate steel produced on the plate mill (pattern plate) is sold on theoretical weight based on the product’s dimensions. Because the weight of the product coming out of the plate mill re-heat furnace cannot be easily measured, the slab going into the plate mill re-heat furnace is weighed and a ratio is applied to this weight to estimate the weight of the end product. The ratio is designed to account for steel losses due to scale and end trimming. Cost data is also calculated on theoretical tonnes. Plate made from HRC (coil plate) is measured after production. The coils are weighed and the total weight of the coil is divided by the number of plates that are cut from each coil. The cost data and sales data of coil plate are calculated on theoretical tonnes. However, BlueScope stated that the theoretical figures are very close to the actual figures. The verification team has not found any evidence to contradict this statement. 6.4.1 Labour and manufacturing overheads

BlueScope explained that the Management Accounting System (MAS) contains full manufacturing costs (overheads, raw materials and labour) for hot rolled plate steel. The MAS contains information on the different process costs and additional material costs (such as alloys) for each individual plate steel product manufactured by BlueScope. For example, each plate product has different grade, width, thickness and alloy content properties which contribute to the cost of manufacture.

6.4.2 Verification of Sales, General and Administrative expenses

It is noted that BlueScope used SG&A expenses from COGNOS, adjusted for differences from SAP. The verification team notes that this is the same approach found in previous investigations. The verification team consistently found that that the data related to hot rolled plate steel could be satisfactorily traced through to the audited trial balance report. This was also the case with SG&A expenses included in Confidential Appendix A6.1 to the trial balance report.


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As such, the verification team has accepted the SG&A expenses presented by BlueScope.

6.4.3 Conclusion

Having regard to the above and to information gathered during previous verification visits to BlueScope, the verification team considers that the costs recorded in BlueScope’s systems, and reflected in Confidential Appendix A6.1, accurately reflect the incurred costs of materials and production overheads. The verification team has verified the cost information provided by BlueScope and is satisfied that the data is reasonably complete, relevant and accurate, and that it is suitable for the purposes of injury analysis.


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7 ECONOMIC CONDITION

7.1 Applicant’s injury claims

BlueScope alleges the Australian industry has suffered material injury caused by hot rolled plate steel exported to Australia from Korea by POSCO and Hyundai and from Taiwan at dumped prices. It claims the industry has been injured through:

• loss of sales volume;

• loss of market share;

• price depression;

• price suppression;

• reduced profits;

• reduced profitability;




• reduced employment. BlueScope provided data with its application in support of the above allegations, which was subject to verification testing (see Sections 5 and 6 of this report).

7.2 Commencement of injury and analysis period – industry claims

BlueScope claimed that injury commenced following the publication of the Commission’s Preliminary Affirmative Determination No. 198 (PAD 198) in July 2013. As a result of PAD 198, securities on exports of hot rolled plate steel from China, Indonesia, Japan and Korea (other than exports by Hyundai and POSCO) were imposed. These securities were converted to duty following the publication of a dumping duty notice and a countervailing duty notice in December 2013 (see Section 2.4 of this report). BlueScope submitted that following the imposition of provisional measures in July 2013 on exports of plate steel from China, Indonesia, Japan and Korea (other than for exports by Hyundai and POSCO), the exporters in Korea and Taiwan that were not the subject of measures dramatically increased export volumes to Australia at prices that undercut the Australian industry’s selling prices. BlueScope claimed that the impact of exports from Korea and Taiwan at injurious prices diminished the Australian industry’s recovery from material injury that occurred in 2012 and into 2013, thereby preventing material and extended improvements in profit and profitability. In addition to the Australian market (see Section 4 of this report), the verification team examined the economic condition of the Australian industry from 1 January 2010 for the purposes of its injury analysis.


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7.3 Volume trends

BlueScope claimed that the Australian industry suffered material injury in relation to loss of sales volume or market share. 7.3.1 Sales volume

From the information provided by BlueScope and verified by the verification team, in volume terms, BlueScope’s sales increased from tonnes in 2010 to

tonnes in 2011. Since that time, sales have fallen and in 2014 were per cent below the 2011 level. The following graph shows BlueScope’s total sales volume for hot rolled plate steel in the Australian market since 2010. [confidential BlueScope plate sales]

Figure 5: BlueScope’s total sales volumes

In its application BlueScope claims that it was able to recover somewhat from the injurious dumping found in investigation 198 after the imposition of measures in December 2013, but this recovery has not been able to be sustained due to the increasing volume of allegedly dumped goods from Taiwan, Hyundai and POSCO. The Commission will continue to examine sales volumes during the course of the investigation. 7.3.2 Market Share

At the time of application, BlueScope used import data sourced from the International Steel Statistics Bureau (ISSB)9 and the Australian Bureau of Statistics (ABS), as well as its own sales data, to estimate the size of the Australian market for hot rolled plate steel between 2010 and 2014. BlueScope completed Confidential Attachment A1 and A2 using this data and its own sales data to estimate the size of the Australian market.

9 The ISSB is a European agency that specialises in collecting, analysing and publishing import and export trade data. The company is involved in the publication of reports covering UK, European and global trade in steel and raw materials.


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During the visit, BlueScope indicated that in 2014 the total Australian market for hot plate steel is around tonnes, of which BlueScope makes up tonnes (a similar volume to that which BlueScope achieved in 2010) – which equals approximately

per cent. BlueScope noted that in the last investigation, BlueScope’s sales represented per cent of the market for hot rolled plate steel. BlueScope acknowledged that per cent is an [market share change]. However, it also indicated that in 2014 the volume of sales of hot rolled plate steel from Korea has also increased. Following the visit, BlueScope provided a breakdown of Australian market shares for each month in 2014 by volume. This data indicates that BlueScope’s market share by volume has [market share position] over 2014 and forms Attachment A to this report. The verification team has analysed data provided by BlueScope, as well as data from the ACBPS import data base. This data indicates that:

• the Australian industry’s market share increased by percentage points between 2010 and 2013;

• in 2014, the Australian industry’s market share fell by percentage points to a level [market share change] its 2010 market share;

• the market share held by imports currently subject to measures fell from per cent in 2010 to per cent in 2014;

• the market share held by allegedly dumped imports increased from per cent in 2010 to per cent in 2014; and

• the market share held by allegedly dumped imports increased by percentage points in 2014.

The following graph depicts the market shares (measured by reference to volume in tonnes) for sales of hot rolled plate steel on the Australian market by BlueScope and by importers, based on the data in BlueScope’s application. BlueScope’s estimates of import volumes are considered reasonable based on a cross-check with data from the ACBPS import database. [Confidential market share details]

Figure 6 – Market shares for hot rolled plate steel


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The verification team acknowledges that the above market shares do not provide an entirely accurate depiction of the market share for the two Korean exporters – Hyundai and POSCO – that are the subject of this application. Obtaining accurate data in relation to volumes from these two exporters from the ACBPS import data is problematic because the verification team is aware from its previous investigation that the exporters conduct some of their exports through traders that appear in the import database as the supplier. These traders may also purchase from manufacturers that are not the subject of this application. Notwithstanding this limitation, the verification team is satisfied that the import database confirms that a significant portion of the export volume from Korea is attributable to Hyundai and POSCO. In particular, for 2013 and 2014 the export volume is made up almost entirely of exports attributable to these exporters. The Commission will continue to examine market share during the course of the investigation.

7.4 Price effects

In its application, BlueScope claimed that the Australian industry suffered material injury in the form of price suppression. BlueScope alleges that the price suppression experienced by the Australian industry has been due to dumped exports undercutting the Australian industry’s selling prices. Price depression occurs when a company, for some reason, lowers its prices. Price suppression occurs when price increases, which otherwise would have occurred, have been prevented. An indicator of price suppression may be the margin between revenues and costs. Unit revenue fell from 2010 to 2013. In 2014 it recovered slightly but was below the 2010 level. In the same period, unit cost to make and sell has increased slightly. The verification team has found that BlueScope’s prices:

• have fallen since 2010 and had not recovered by 2014; and

• have fallen in relation to the cost to make and sell since 2010 and had not recovered by 2014.


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Figure 4: BlueScope’s average unit CTMS vs. average unit sales revenue

The Commission will continue to examine price effects during the course of the investigation.

7.5 Profit and profitability

In its application, BlueScope claimed that, following the imposition of provisional measures in July 2013 on exports of plate steel from China, Indonesia, Japan and Korea (other than for exports by Hyundai and POSCO), the exporters in Korea and Taiwan not the subject of measures dramatically increased export volumes to Australia at prices that undercut the Australian industry’s selling prices. BlueScope claimed that the impact of exports from Korea and Taiwan at injurious prices diminished the Australian industry’s recovery from material injury that occurred in 2012 and into 2013, thereby preventing material and extended improvements in profit and profitability. BlueScope claims that as a consequence of price suppression in 2012-13 and 2013-14, the Australian industry’s profit and profitability declined and in 2013-14 remained below the profit and profitability achieved in 2011-12. BlueScope claimed that dumped imports from Korea and Taiwan have undercut the Australian industry’s selling prices, resulting in price suppression and therefore reduced profit and profitability. Unit profit declined from 2010 to early 2013. It recovered slightly thereafter but remained at a loss and significantly below the 2010 level.


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Figure 5: BlueScope’s weighted average unit net gain or loss

Total profitability (profit measured as a percentage of revenue) fell from 2010 to early 2013. It recovered slightly thereafter but remained significantly below the 2010 level.

Figure 6: BlueScope’s total profitability (total gain or loss / total sales revenue)

BlueScope’s net gain fell from 2010 to early 2013. It recovered slightly thereafter but remained significantly below the 2010 level.


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Figure 7: BlueScope’s total net gain or loss

The Commission will continue to examine profit and profitability during the course of the investigation.

7.6 Other economic factors

In its application, BlueScope claimed that it has experienced injury in respect of the following other factors:




• reduced employment levels. To support its claims regarding other economic injury factors, in its application BlueScope provided Confidential Appendix A7 for Hot Rolled Plate Steel for the period 2010 to 2014. The Commission has reviewed the data contained in Confidential Appendix A7 and found that the information submitted appears to support BlueScope’s claims for all but one of these factors.

7.6.1 Capital expenditure

BlueScope’s capital investment for the production of hot rolled plate steel has decreased significantly from 2010 to 2014.


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Figure 8: BlueScope’s capital investment for production of like goods

7.6.2 Return on Investment

BlueScope’s return on investment related to like goods decreased significantly from 2010 to 2014.

Figure 9: BlueScope’s return on investment for like goods

7.6.3 Capacity Utilisation

BlueScope’s capacity utilisation related to like goods increased from 2010 to 2014. However, at the visit it was observed that BlueScope’s rolling mill was operating well


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below capacity. BlueScope indicated that the rolling mill was only operating three to five days per week.

Figure 10: BlueScope’s capacity utilisation

7.6.4 Employment Numbers

BlueScope’s employment levels related to like goods fell from 2010 to 2014.

Figure 11: BlueScope’s employment levels related to like goods


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7.7 Conclusion

Based on an analysis of the information contained in the application and obtained and verified during the verification visit, the verification team considers that the Australian industry may have experienced injury since 2010 in the form of:

• sales volume effects

• price effects;

• profit effects; and

• other economic factors. The verification team also notes that BlueScope has experienced a degree of recovery in the investigation period. The Commission will continue to examine BlueScope’s injury claims during the course of the investigation.


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8 CAUSAL LINK

8.1 General

In its application, BlueScope alleged that the Commission’s decision to terminate investigation198 with respect to exports from Korea (Hyundai and POSCO) and exports from Taiwan resulted in those exports to Australia increasing in volume. BlueScope has claimed that its market surveys of hot rolled plate steel selling prices in Korea and Taiwan in 2014 and other available information confirm that exports to Australia from the identified exporters in both countries have been at dumped prices. BlueScope has claimed that in 2013-14 exports of hot rolled plate steel from Korea and Taiwan had risen to levels that are above negligible and had undercut the Australian industry’s selling prices, resulting in price suppression and reduced profit and profitability. BlueScope claims that following the imposition of provisional anti-dumping measures on exports from China, Indonesia, Japan and Korea (other than Hyundai and POSCO) in July 2013, and followed by the imposition of final measures in December 2013, BlueScope’s ability to recover from the material injury it had suffered has been limited by increased exports from Taiwan, Hyundai and POSCO at dumped prices. The verification team has found that BlueScope has experienced a degree of recovery in 2014. BlueScope provided nine case studies in its application as evidence of its need to reduce prices to compete with import offers from Taiwan, Hyundai and POSCO. In its application, BlueScope claims that in some cases it lost volume because it was unable to reduce its price to a level acceptable to particular customers and that price undercutting is particularly evident in the second half of 2014.

8.2 Pricing

8.2.1 Import Parity Pricing

As discussed in Section 5.3.1 of this report, BlueScope indicated that its pricing is based on IPP and, as such, the price of imports is a key determinant of its selling price and directly causes price injury resulting in lost revenue and profits. BlueScope indicated that it considers itself to be a price taker in the plate steel market. BlueScope indicated that its sales staff obtain information on market prices of imported hot rolled plate steel and feeds this information into its customer relationship management system. BlueScope explained that the price of imported hot rolled plate steel was generally released into the market three months before the date by which the purchased goods would arrive in Australia. BlueScope has provided several examples of import offers that were made available to importers during the investigation period. BlueScope stated that factors in addition to import prices are taken into account when determining its prices. These other factors include BlueScope’s manufacturing costs and margins. BlueScope further indicated that maintaining its market share and sales volume is the key determinant of price setting.


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8.2.2 Evidence of price undercutting

In its application, BlueScope provided case examples of price undercutting. This included evidence of market offers for imported plate steel from exporters in each of the nominated countries. BlueScope indicated that it had obtained information on offers in both written and verbal form. All of these offers were subsequently documented, and, corroborative documentation has been provided to the Commission for those offers obtained in written form. Such information included email correspondence between BlueScope and its customers, correspondence between an offshore mill and customers and correspondence between BlueScope employees. It also included offer schedules and internal price reviews undertaken by BlueScope to determine its price offers. These documents were provided in Confidential Appendix A-9.2.1 (summary) and A-9.2.2 (supporting documentation). Further assessment of price undercutting will be conducted during the course of the investigation.

8.3 Factors other than dumping

During the visit, BlueScope was asked whether it considered that other factors may have contributed to the injury suffered. BlueScope acknowledged that the market for hot rolled plate steel contracted in 2013 and showed only slight recovery in 2014. BlueScope further stated that the market has not recovered to the position it held prior to the global financial crisis and that building activity remains suppressed. BlueScope stated that in a contracting market it would be expected that all participants would be impacted to the same degree. BlueScope referred to the increasing market share of imports from Taiwan and Hyundai and POSCO, and has claimed that this is evidence of dumping being the primary cause of the injury experienced by BlueScope. BlueScope also stated that the previous strength of the Australian dollar had some impact on the attractiveness of import offers. BlueScope indicated that the depreciation of the Australian dollar during 2013 and 2014 did not result in a market shift away from imported hot rolled plate steel as would have been expected.

8.4 Conclusion

The information provided by BlueScope indicates that since 2010 BlueScope appears to have suffered injury, but that BlueScope has experienced a degree of recovery in the investigation period. The Commission will continue to examine BlueScope’s injury claims and whether these are linked to dumping during the course of the investigation.


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9 UNSUPPRESSED SELLING PRICE - NON-INJURIOUS PRICE

The verification team invited BlueScope to make any comments on the calculation of an unsuppressed selling price and a non-injurious price. BlueScope advised that it may provide a submission on the unsuppressed selling price and a non-injurious price at a later date.


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PUBLIC RECORD 251 300/EPR 284 - archived 17... · PUBLIC RECORD CONTENTS CONTENTS ... BlueScope...

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