Expiry review RR‑2023‑009 Carbon Steel Welded Pipe

Order and reasons issued Tuesday, December 24, 2024

 

TABLE OF CONTENTS

ORDER i

STATEMENT OF REASONS 1

INTRODUCTION 1

PROCEDURAL BACKGROUND 1

PRODUCT 2

Product definition 2

Product information 3

LEGAL FRAMEWORK 3

LIKE GOODS AND CLASSES OF GOODS 4

DOMESTIC INDUSTRY 5

CROSS-CUMULATION 5

LIKELIHOOD OF INJURY ANALYSIS 6

Changes in market conditions 7

Likely price effect of dumped and subsidized goods if the order is rescinded 11

Likely import volume of dumped and subsidized goods 15

Likely impact of the subject goods on the domestic industry 16

CONCLUSION 20

 

IN THE MATTER OF an expiry review, pursuant to subsection 76.03(1) of the Special Import Measures Act, of the order made by the Canadian International Trade Tribunal on March 28, 2019, in expiry review RR‑2018‑001, continuing, without amendment, its order made on August 19, 2013, in expiry review RR‑2012‑003, continuing, without amendment, its finding made on August 20, 2008, in inquiry NQ-2008-001, concerning:

CARBON STEEL WELDED PIPE ORIGINATING IN OR EXPORTED FROM THE PEOPLE’S REPUBLIC OF CHINA

ORDER

The Canadian International Trade Tribunal, pursuant to subsection 76.03(1) of the Special Import Measures Act (SIMA), has conducted an expiry review of its order made on March 28, 2019, in expiry review RR‑2018‑001, continuing, without amendment, its order made on August 19, 2013, in expiry review RR‑2012‑003, continuing, without amendment, its finding made on August 20, 2008, in inquiry NQ‑2008‑001, concerning the dumping and subsidizing of carbon steel welded pipe, commonly identified as standard pipe, in the nominal size range of 1/2 inch up to and including 6 inches (12.7 mm to 168.3 mm in outside diameter) inclusive, in various forms and finishes, usually supplied to meet ASTM A53, ASTM A135, ASTM A252, ASTM A589, ASTM A795, ASTM F1083 or Commercial Quality, or AWWA C200-97 or equivalent specifications, including water well casing, piling pipe, sprinkler pipe and fencing pipe, but excluding oil and gas line pipe made to API specifications exclusively and excluding (1) carbon steel welded pipe in the nominal pipe size of 1 inch, meeting the requirements of specification ASTM A53, Grade B, Schedule 10, with a black or galvanized finish, and with plain ends, for use in fire protection applications, (2) carbon steel welded pipe in nominal pipe sizes of 1/2 inch to 2 inches inclusive, produced using the electric resistance welding process and meeting the requirements of specification ASTM A53, Grade A, for use in the production of carbon steel pipe nipples, and (3) carbon steel welded pipe in nominal pipe sizes of 1/2 inch to 6 inches inclusive, dual-stencilled to meet the requirements of both specification ASTM A252, Grades 1 to 3, and specification API 5L, with bevelled ends and in random lengths, for use as foundation piles, originating in or exported from the People’s Republic of China.

Pursuant to paragraph 76.03(12)(b) of SIMA, the Tribunal continues its order in respect of the aforementioned goods.

The statement of reasons will be posted on the Tribunal’s website at a later date.

Place of Hearing:	Ottawa, Ontario
Date of Hearing:	October 15, 2024 (file hearing)
Tribunal Panel:	Bree Jamieson-Holloway, Presiding Member Serge Fréchette, Member Frédéric Seppey, Member
Tribunal Secretariat Staff:	Carina De Pellegrin, Lead Counsel Charlotte Saintonge, Counsel Shawn Jeffrey, Lead Analyst Rhonda Heintzman, Analyst Ozanay Bozkaya, Data Services Advisor Esther Song-Ledlow, Senior Registry Officer

PARTICIPANTS:

Domestic Producers	Counsel/Representatives
Nova Steel Inc./Nova Tube Inc.	Paul Conlin Benjamin P. Bedard Linden Dales Anne-Marie Oatway M. Drew Tyler Manon Carpentier Shannon McSheffrey Nasrudin Mumin Ming Fei (Angel) Li Kahina (Nina) Haroune Corum Bok Holtz Selena Zabian Wilfredo Tovar Jack Walsh Robin M. Kelly
Atlas Tube Canada ULC	Darrel Pearson Sabrina A. Bandali Kai Ling (Kathleen) Wang Ethan Gordon Carlota Claveron-Wilkins Quinn James Scarlett
DFI Corporation	Dalton Albrecht Jonathan Ip
United Steelworkers/Syndicat des Métallos	Craig Logie Mark Rowlinson Jacob Millar Peter Werhun

Please address all communications to:

The Registry
Telephone: 613-993-3595
Email: citt-tcce@tribunal.gc.ca

 

STATEMENT OF REASONS

INTRODUCTION

[1] The Canadian International Trade Tribunal, pursuant to subsection 76.03(1) of the Special Import Measures Act[1] (SIMA), has conducted an expiry review of the order made on March 28, 2019, in expiry review RR-2018-001, concerning the dumping and subsidizing of carbon steel welded pipe (CSWP) originating in or exported from the People’s Republic of China (China) (the subject goods).

[2] Under SIMA, a finding of injury or threat of injury, and the associated protection in the form of anti-dumping or countervailing duties, expires five years from the date of the finding or, if one or more orders continuing the finding have been made, the date of the last order made under paragraph 76.03(12)(b), unless the Tribunal initiates an expiry review before that date. The order in expiry review RR-2018-001 was therefore due to expire on March 27, 2024.

[3] The Tribunal’s mandate in this expiry review is to determine whether the expiry of the order is likely to result in injury to the domestic industry and then, accordingly, to make an order either continuing or rescinding the order with or without amendment.

PROCEDURAL BACKGROUND

[4] The Tribunal issued its notice of expiry review on February 19, 2024. This notice triggered the initiation of an investigation by the Canada Border Services Agency (CBSA) on February 20, 2024, to determine whether the expiry of the Tribunal’s order was likely to result in the continuation or resumption of dumping and subsidizing of the subject goods.

[5] On July 18, 2024, the CBSA determined, pursuant to paragraph 76.03(7)(a) of SIMA, that the expiry of the order was likely to result in the continuation or resumption of dumping and subsidizing of the subject goods.[2]

[6] Following the CBSA’s determination, the Tribunal began its expiry review on July 19, 2024, pursuant to subsection 76.03(10) of SIMA, to determine whether the expiry of the order was likely to result in injury to the domestic industry.

[7] The period of review (POR) for the Tribunal’s expiry review covers three full calendar years, from January 1, 2021, to December 31, 2023, as well as the period of January 1 to March 31, 2024.

[8] During the review, the Tribunal asked domestic producers and importers of CSWP, foreign producers of the subject goods, and trade unions that represent workers in the domestic industry to respond to questionnaires. The Tribunal received responses as follows:[3]

· five responses from domestic producers of CSWP, namely, Atlas Tube Canada (Atlas), DFI Corporation (DFI), Evraz Inc. NA Canada (Evraz), Nova Tube (Nova), and Welded Tube of Canada Corporation (Welded Tube);[4]

· thirteen responses from importers of CSWP;

· one response from a union representing workers employed in the domestic industry, the United Steelworkers/Syndicat des Métallos (USW);

· no responses from foreign producers of the subject goods.

[9] Using the questionnaire responses and other information on the record, staff of the Secretariat to the Tribunal prepared public and protected versions of the investigation report and placed them on the record on September 9, 2024.[5]

[10] There were four parties to this proceeding: Atlas, Nova, DFI and the USW. These parties all provided submissions in support of the order being continued. The Tribunal did not receive any submissions in opposition to a continuation of the order.

[11] On October 15, 2024, in Ottawa, Ontario, pursuant to rule 25.1 of the Canadian International Trade Tribunal Rules,[6] the Tribunal held a file hearing based on the documentary evidence filed in this matter.

PRODUCT

Product definition

[12] The subject goods are defined as follows:[7]

Carbon steel welded pipe, commonly identified as standard pipe, in the nominal size range of ½ inch up to and including 6 inches (12.7 mm to 168.3 mm in outside diameter) inclusive, in various forms and finishes, usually supplied to meet ASTM A53, ASTM A135, ASTM A252, ASTM A589, ASTM A795, ASTM F1083 or Commercial Quality, or AWWA C200‑97 or equivalent specifications, including water well casing, piling pipe, sprinkler pipe and fencing pipe, but excluding oil and gas line pipe made to API specifications exclusively and excluding (1) carbon steel welded pipe in the nominal pipe size of 1 inch, meeting the requirements of specification ASTM A 53, Grade B, Schedule 10, with a black or galvanized finish, and with plain ends, for use in fire protection applications, (2) carbon steel welded pipe in nominal pipe sizes of ½ inch to 2 inches inclusive, produced using the electric resistance welding process and meeting the requirements of specification ASTM A53, Grade A, for use in the production of carbon steel pipe nipples, and (3) carbon steel welded pipe in nominal pipe sizes of ½ inch to 6 inches inclusive, dual-stencilled to meet the requirements of both specification ASTM A252, Grades 1 to 3, and specification API 5L, with bevelled ends and in random lengths, for use as foundation piles, originating in or exported from the People’s Republic of China.

Product information

[13] The CBSA provided the following additional product information:[8]

CSWP, also commonly referred to as standard pipe, covers a wide range of pipe products generally used in plumbing and heating applications for the low-pressure conveyance of water, steam, natural gas, air, and other liquids and gases. CSWP, or standard pipe, may also be used in air conditioning systems, in sprinkler systems for fire protection, as structural support for fencing, as piling, as well as for a variety of other mechanical and light load‑bearing applications.

The size of CSWP is generally specified by two values: a nominal pipe size (NPS) and a schedule. The NPS relates roughly to the inside diameter of the pipe while the schedule relates to the wall thickness. For a given NPS, the wall thickness will increase as the schedule number increases. For example, CSWP with an NPS of 1 inch (NPS 1) and made to ASTM A53, Schedule 40 requirements will have an outside diameter of 1.315 inches and a wall thickness of 0.133 inch while the same pipe meeting the requirements of ASTM A53, Schedule 80 will have an outside diameter of 1.315 inches and a wall thickness of 0.179 inch.

Although CSWP is generally produced to industry standards such as ASTM A53, ASTM A135, ASTM A252, ASTM A589, ASTM A795, ASTM F1083, Commercial Quality and AWWA C200-97, it may also be produced to foreign standards such as BS1387 or to proprietary specifications as is often the case with fencing pipe. While standard pipe may be manufactured to any of the standards mentioned above, the ASTM A53 specification is the most common as it is considered to be the highest quality and is suitable for welding, coiling, bending and flanging.

Standard pipe may be sold with a lacquer finish, or a black finish as it is sometimes referred to in the industry. It may also be sold in a galvanized finish which means it has been treated with zinc. Both types of finish are intended to inhibit rust although the galvanizing process will deliver a superior result. Galvanized pipe will sell at a premium to black standard pipe because of this, and the fact that zinc costs much more than lacquer.

LEGAL FRAMEWORK

[14] The Tribunal is required, pursuant to subsection 76.03(10) of SIMA, to determine whether the expiry of the order in respect of the subject goods is likely to result in injury or retardation for the domestic industry.[9] Pursuant to subsection 76.03(12), if the Tribunal determines that the expiry of the order is unlikely to result in injury, it is required to rescind it. However, if it determines that the expiry of the order is likely to result in injury, the Tribunal is required to continue it, with or without amendment.

[15] Before proceeding with its analysis of the likelihood of injury, the Tribunal must first determine what constitutes “like goods”. Once that determination has been made, the Tribunal must determine what constitutes the “domestic industry”.

[16] The Tribunal must also determine whether it will make an assessment of the cumulative effect of the dumping and subsidizing of the subject goods (i.e., whether it will cross-cumulate the effect).

LIKE GOODS AND CLASSES OF GOODS

[17] In order for the Tribunal to determine whether the resumed or continued dumping and subsidizing of the subject goods is likely to cause material injury to the domestic producers of like goods, it must determine which domestically produced goods, if any, constitute like goods in relation to the subject goods. The Tribunal must also assess whether there is, within the subject goods and the like goods, more than one class of goods.[10]

[18] Subsection 2(1) of SIMA defines “like goods”, in relation to any other goods, as follows:

(a) goods that are identical in all respects to the other goods, or

(b) in the absence of any goods described in paragraph (a), goods the uses and other characteristics of which closely resemble those of the other goods.

[19] In deciding the issue of like goods when goods are not identical in all respects to the other goods, the Tribunal typically considers a number of factors, including the physical characteristics of the goods, such as composition and appearance, and their market characteristics, such as substitutability, pricing, distribution channels, end uses and whether the goods fulfill the same customer needs.[11] The same factors are also considered in deciding whether there is more than one class of goods.[12]

[20] The CSWP described in the product definition has been the subject of several previous inquiries and expiry reviews before the Tribunal, in other proceedings involving CSWP, and in the original inquiry and expiry reviews of the current proceeding. The Tribunal has consistently found that domestically produced CSWP is like goods to the subject goods and that there is a single class of goods.[13] Having received no arguments or evidence to the contrary, the Tribunal sees no reason to depart from its previous conclusions with respect to like goods and classes of goods.

DOMESTIC INDUSTRY

[21] Subsection 2(1) of SIMA defines “domestic industry” as follows:

… the domestic producers as a whole of the like goods or those domestic producers whose collective production of the like goods constitutes a major proportion of the total domestic production of the like goods except that, where a domestic producer is related to an exporter or importer of dumped or subsidized goods, or is an importer of such goods, domestic industry may be interpreted as meaning the rest of those domestic producers.

[22] The Tribunal must therefore determine whether there is a likelihood of injury to the domestic producers as a whole or those domestic producers whose production represents a major proportion of the total production of like goods.[14]

[23] During the POR, there were five domestic producers of like goods in the Canadian market: Atlas, DFI, Nova, Welded Tube and Evraz.[15] As the foregoing companies account for all known domestic production of like goods, the Tribunal finds that they constitute the domestic industry for the purpose of this expiry review.

CROSS-CUMULATION

[24] The Tribunal must also determine whether it will make an assessment of the cumulative effect of the dumping and subsidizing of the subject goods.

[25] There are no legislative provisions that directly address the issue of cross-cumulation of the effects of both dumping and subsidizing. However, as noted in previous cases, the effects of dumping and subsidizing of the same goods from a particular country are manifested in a single set of injurious price effects and it is not possible to isolate the effects caused by the dumping from the effects caused by the subsidizing. In reality, when the dumped and subsidized goods originate from a single country, the effects are so closely intertwined as to render it impossible to allocate discrete portions of injury to the dumping and the subsidizing.[16]

[26] Given that this expiry review is in respect of dumped and subsidized goods from China only, the likely effects of the resumption of dumping and subsidizing of the subject goods will likewise be manifested in a single set of prices. Therefore, the Tribunal will make a cumulative assessment of the likely impact of the continued or resumed dumping and subsidizing of the subject goods on the domestic industry.

LIKELIHOOD OF INJURY ANALYSIS

[27] An expiry review is forward-looking.[17] It follows that evidence from the period during which an order or a finding was being enforced is relevant insofar as it bears upon the prospective analysis of whether the expiry of the order or finding is likely to result in injury.[18]

[28] There is no presumption of injury in an expiry review; findings must be based on positive evidence, in compliance with domestic law and consistent with the requirements of the World Trade Organization.[19] In the context of an expiry review, positive evidence can include evidence based on past facts that tend to support forward-looking conclusions.[20]

[29] In making its assessment of the likelihood of injury, the Tribunal has consistently taken the view that the focus should be on circumstances that can reasonably be expected to exist in the near to medium term, which is generally considered to be within 12 to 24 months from the date on which the finding or order would be rescinded.[21] In the previous CSWP I RR expiry review, based on arguments made by the parties, the Tribunal found it appropriate to consider a shorter period of 12 to 18 months because of the volatility in the Canadian and global CSWP markets.[22]

[30] However, in the current expiry review, the Tribunal sees no reason to depart from the usual approach and has received no submissions to the contrary. The Tribunal finds it appropriate to focus its analysis on the next 12 to 24 months.

[31] Subsection 37.2(2) of the Special Import Measures Regulations[23] (Regulations) lists factors that the Tribunal may consider in addressing the likelihood of injury in cases where the Canada Border Services Agency has determined that there is a likelihood of continued or resumed dumping. The factors that the Tribunal considers relevant in this expiry review are discussed in detail below.

Changes in market conditions

[32] In order to assess the likely volumes and prices of the subject goods and their impact on the domestic industry if the order were rescinded, the Tribunal will first consider changes in international and domestic market conditions.[24]

[33] The parties generally submitted that relatively weak economic growth in Canada and globally, combined with market conditions in China (including significant excess production capacity, export-oriented producers, trade remedies against CSWP from China in other jurisdictions and interest in the Canadian market), make it likely that resumed dumping and subsidizing of the subject goods is likely to result in injury to the domestic industry if the order were rescinded.

[34] The Tribunal reviewed the uncontroverted arguments and evidence submitted by the parties, finding the following observations to be particularly relevant and credible.

International market conditions

[35] The World Bank describes the global economy as “stabilizing”, with global growth expected to increase slightly more than anticipated in 2024 due to “mainly the continued solid expansion of the U.S. economy”.[25] However, global outlook remains “subdued” with global markets (advanced and emerging economies) set to grow at an overall slower pace over the next 24 months than in the last decade. Global gross domestic product (GDP) is expected to keep growing. It is anticipated to grow by 2.6% in 2024.[26] Additionally, there are indications that goods’ inflation will continue to decrease globally, especially in advanced economies.[27] Interest rates have been declining globally, including in the U.S.[28]

[36] There is an enormous, and growing, excess capacity of steel globally, with limited global steel demand growth. Global steelmaking capacity increased by 16.3 million metric tonnes (MT) to 2.442 billion MT in 2022 and was expected to increase by 57.1 million MT to 2.499 billion MT in 2023, while the gap between global steelmaking capacity and production increasing from 556 million MT in 2022 to 611 million MT in 2023, and further capacity growth expected.[29] This will create instability and increase trade actions, making certain countries more export dependent.[30]

[37] With respect more specifically to CSWP, global prices for hot-rolled coil (HRC), the main raw material input for CSWP,[31] significantly increased in 2021 before declining in 2022, in 2023 and in the first seven months of 2024, driving uncertainty and suggesting decreasing prices in the global CSWP market.[32]

[38] The Tribunal takes note of Nova’s submissions that declining prices, volatile international market conditions and global excess capacity for steel will make producers of subject goods eager to access any available markets with attractive market conditions, including Canada.

[39] The evidence therefore demonstrates, consistent with findings recently made by the Tribunal in other cases involving steel products, that global steelmaking capacity and production are increasing faster than demand.[33] The Tribunal finds no reason to depart from its previous conclusions and finds that the global steel market is weak, with overall capacity continuing to increase.

Chinese market conditions

[40] The International Monetary Fund reports that China’s GDP grew by 3% in 2022 and by 5.2% in 2023 and expects a 5% growth in 2024.[34] Although China is expected to experience continued growth, this growth is projected to slow due to lower domestic prices, a weakening real estate market, a decline in labour supply and a reduction in investments.[35]

[41] Steel markets have been slowing across Asia.[36] In China, steel demand is expected to remain stable at approximately 2023 levels. Infrastructure investments are expected to offset the decline in real estate investments. In 2025, a 1% decrease in demand for steel is forecasted.[37]

[42] China’s total welded pipe capacity (which includes subject goods and non-subject goods) is estimated at 118 million MT in 2024. Excess capacity has been increasing throughout the POR, with a reported excess capacity of 52.8 million MT in 2021 and of 53.3 million MT in 2022. The excess capacity of steel welded pipe is expected to increase to 54.1 million MT in 2023 and 56 million MT in 2024.[38] In addition, new welded pipe projects in China are expected to create new production capacity of over 5.7 million MT by 2024.[39] With respect to CSWP specifically, China’s total capacity is estimated at over 7.7 million MT in 2024.[40]

[43] Chinese demand for welded pipes has fluctuated during the POR. It decreased by 4.8% in 2021, increased by 6.3% in 2022 and is estimated to have decreased by 2.4% in 2023 and to increase by 0.9% in 2024.[41]

[44] Prices for Chinese welded pipe also fluctuated during the POR, with the average yearly price increasing by 18% in 2021, then by 1% in 2022, before decreasing by 15% in 2023 and by 16% as of August 2024.[42] Prices for HRC followed similar trends during that period.[43] Nova argued that, because the difference between welded pipe prices and HRC is very small, Chinese producers are likely selling CSWP below production costs.[44]

[45] Chinese exports of CSWP have been growing throughout the POR (by 7% both in 2021 and 2022 and by 16% in 2023).[45] Nova submitted that this is attributable to China’s excess capacity, low prices and weak domestic demand. However, several countries have anti-dumping and other trade restrictive measures on CSWP, or similar products using the same equipment, from China.[46]

[46] Nova submitted that China has established in Canada a large distribution channel for large diameter CSWP. Imports of Chinese large diameter CSWP have more than doubled from 2023 to the first half of 2024 alone. Accordingly, due to the already established large diameter Chinese CSWP market in Canada, there is a high likelihood that, given their significant overcapacity, Chinese producers could easily adjust their production to include all sizes of CSWP, including those which are covered by the subject goods.[47]

[47] On balance, the Tribunal concludes that the preponderance of evidence supports the conclusion that Chinese producers of CSWP have significant overcapacity and remain highly export focused.

Domestic market conditions

[48] The evidence on the record shows that the Canadian economy will continue to grow, with the Bank of Canada predicting in its July 2024 report a growth of the final domestic demand 2.3% in 2025 and 2.8% in 2026.[48] Canada’s construction sector is expected to have shrunk by 1.7% in 2023 and by 3.1% in 2024,[49] but is expected to maintain an average annual growth of 2.2% between 2025 and 2027,[50] which Nova submitted will support stable demand for steel in the next 12 to 24 months. The high funding costs currently hindering construction are expected to become less binding in the medium to long term as interest rates decline, and growth in renovation spending is expected to pick up over the near future due to easing financial conditions and rising income growth.[51] The Bank of Canada also reports that business investment growth is expected to average 4¼% over 2025–2026.[52] The Tribunal finds that this can contribute to the growth of the Canadian CSWP market over the next two years.

[49] Atlas submitted that the Canadian solar energy sector grew by 25.9% in 2022[53] and, accordingly, that recent growth and prospects for future growth in demand for helical piles (used for the installation of solar modules) make Canada an attractive market for foreign producers and exports of CSWP.

[50] DFI referred to its questionnaire response in submitting that ongoing changes in the Canadian oil and gas industry, including market volatility, and regulatory uncertainty have hampered new exploration and drilling activity (and related demand for CSWP) despite the recent commodity price recovery.[54]

[51] Additionally, as of October 22, 2024, Canada is applying a 25% surtax on imports of steel products from China under section 53 of the Customs Tariff, which CSWP will be subject to given that the list of the Harmonized System (HS) code headers includes all HS codes used in this expiry review. Canada has also announced a tariff remission process for Canadian businesses importing certain Chinese goods, “[t]o ensure that Canadian industry has sufficient time to adjust supply chains, remission will provide relief from the payment of surtaxes, or the refund of surtaxes already paid, under specific and exceptional circumstances”.[55] The Tribunal has taken this into account as a measure in effect that will likely impact the Canadian market, as it relates to volume and pricing. According to Nova, the surtax would provide significantly less protection from injury than the Tribunal’s order, given the much lower rate[56] and potentially shorter duration. Nova submitted that Chinese CSWP was offered during the POR at prices that would still undercut Canadian prices even if the Chinese price were 25% higher.[57] The USW argued that there is currently too much inherent uncertainty for the Tribunal to make reliable predictions about its impact on the domestic market. The Tribunal agrees that the application and actual duration of the surtax remain uncertain at this stage.

[52] Overall, the Tribunal finds that the Canadian market is likely to remain attractive to exporters of the subject goods. Indeed, Canada’s construction sector is expected to grow over the next few years. As discussed in the following sections, the Canadian CSWP market is also characterized by relatively high prices and a sustained, though quite minor, penetration by the subject goods.

Likely price effect of dumped and subsidized goods if the order is rescinded

[53] In light of the evidence on the record, the Tribunal is of the view that, in this case, the expiry of the order will likely trigger price effects before any increase in the volume of imports materializes itself. In the Tribunal’s opinion, this is explained by the fact that CSWP is a commodity product, a view supported by the domestic industry. Given that the Canadian market is extremely price sensitive and since market intelligence disseminates quickly, the lowest price prevails.^[58] Should the finding be rescinded, Chinese exporters would begin sending offers which would reflect the pricing that they can afford to offer and would ensure that they can regain market share lost while they were not in the market. These low prices would then likely attract an increase in demand and be followed by significant import volumes.

[54] The Tribunal must consider whether, if the order is rescinded, the dumping and subsidizing of goods is likely to significantly undercut the prices of like goods, depress those prices, or suppress them by preventing increases in those prices that would likely have otherwise occurred.^[59] In this regard, the Tribunal distinguishes the price effect of the dumped and subsidized goods from any price effects that would likely result from other factors affecting prices.

Prices during the POR

[55] The investigation report shows declining average market prices over the POR, with the exception of 2023. The average market unit value decreased 2% between 2021 and 2022 and then increased 7% between 2022 and 2023; it then decreased 12% for the interim period, in line with the evolution of the world prices for HRC.[60] The domestic industry unit value increased 17% between 2021 and 2022, but then decreased 13% between 2022 and 2023 and continued to decrease 13% during the interim periods.^[61]

[56] Chinese CSWP imports had the highest prices throughout the POR albeit with minimal volume. The lowest-priced imports over the POR can be attributed to other countries with measures in place for CSWP.^[62]

[57] However, the Tribunal considers that, in the absence of anti-dumping duties, Chinese exporters will likely offer their products at low prices in Canada because of the attractiveness of the Canadian market and the export orientation of the Chinese steel industry.

Attractiveness of the Canadian market

[58] Nova submitted that Canada is an attractive destination for steel imports. According to Nova, Canada is particularly attractive to CSWP exporters as a market for their excess production because of the higher prices in Canada relative to other world markets.^[63] Figures published by the CRU Flat Products Statistical Review support this.^[64] Moreover, Atlas submitted that the recent growth and prospects for future growth in the demand for helical piles make Canada an even more attractive market for foreign producers and exporters of CSWP.^[65]

[59] Parties have submitted that there are higher prices in the Canadian market compared to the Chinese market and a slow but steady improvement across several key sectors downstream of welded steel pipe, suggesting a market environment that remains attractive to imports. The Canadian economy, while still somewhat sluggish, has reached or surpassed 2021 and 2022 levels across several indicators of relevance to welded steel pipe.^[66] The growth, albeit slow, of the Canadian market in these key areas suggests that there are continuing opportunities for welded steel pipe applications. Questionnaires submitted by several importers also generally support this point.^[67]

China has excess capacity, and its producers are export oriented

[60] Evidence on the record confirms that China’s steel industry is export oriented. The Tribunal notes that the systemic excess steel capacity in China is significant and growing.^[68] Moreover, despite the absence of major new capacity additions over the next three years,^[69] China continues to invest abroad and offer financial incentives that promote “the capacity of higher value-added steel products”.^[70] Should Chinese firms import into the Chinese market from their new, foreign sources of production, there may be even more Chinese excess capacity domestically.^[71]

[61] DFI submitted that the “excess capacity in China could supply the Canadian market many times over” and that Chinese exporters could redirect equipment used for the production of other steel products to the production of CSWP very easily.^[72]

[62] China continues to export to several developed countries and regions, with its largest export destinations being the Philippines, Australia, Thailand and Singapore.^[73]

[63] With trade measures in place in jurisdictions other than Canada, including but not limited to, the United States, Mexico, Thailand and the European Union, evidence on the record indicates that there is an increased risk of exports being diverted to Canada.^[74] Despite measures in place in Canada, Chinese producers have continued to export the subject goods to Canada in minimal amounts.

[64] The Tribunal is of the view, based on the evidence on the record, that the aforementioned imbalance between continued excess capacity and stagnant domestic demand would likely result in continued exports on the part of Chinese producers attempting to make up for an unfavourable domestic situation.

Price undercutting

[65] The Tribunal considers that, should the order be rescinded, subject imports would resume at a price likely to significantly undercut domestic products. In order to regain market share, subject goods will likely be offered at a price that would be at least competitive with those of the current price leaders, if not lower than those prices.

[66] The Tribunal is of the view that the record does not include clear pricing indicators for the subject goods without the duties in place. To estimate the ability of subject goods manufacturers to offer products at such prices, the Tribunal has constructed a price at which subject goods could reasonably be sold. For its estimation, the Tribunal started with the main raw material input for CSWP, HRC,^[75] in China. Turkish CSWP producer Borusan Mannesmann Boru similarly stated that HRC “makes up 85% of the total cost of production of CSWP”.^[76]

[67] The Tribunal then applied an estimated markup on the HRC Chinese price as described in the three scenarios below. This resulted in an “ex-work Chinese” price, to which the Tribunal then added an estimated ocean freight cost to a Canadian west coast port.[77] The resulting prices could then be compared to selling prices in Canada, namely CIF Vancouver selling prices.

[68] The Tribunal prepared three scenarios which differ only in the markup used to estimate the ex-work Chinese price.

[69] In the first scenario, the markup applied for a given year represents the actual differences between Nova’s selling price and Nova direct material cost in that year.[78] The “markup” in this scenario differed from one year to another.

[70] In the second scenario, the markup applied in all years is the highest markup observed during the POR. The Tribunal’s rationale for using such a scenario is that it needs to be “prudent” in estimating actual markups applied by subject goods manufacturers in China. The Tribunal recognizes that it is unlikely that manufacturers in China would apply such a markup rate. However, if price undercutting is occurring even at this markup, it means that the likelihood of sales occurring at prices undercutting Canadian like goods is high.

[71] In the third scenario, the markup applied in all years is an average of the markup calculated for Nova over the period 2021–2023. The Tribunal excluded interim 2024 from the calculation because it was an outlier, which was validated by Mr. Cannon, Nova’s CFO, in his testimony.^[79]

[72] As a result of the above analysis, the Tribunal considers that it is most reasonable to rely on the estimation calculated using the third scenario, as it applies a uniform markup based on a three-year average of Nova steel’s markup, excluding the year (2024) where the markup was exceptionally low. Under this scenario, the Tribunal finds that price undercutting of domestic products by subject imports would have ranged between about 5% and 49% over the period of 2021 to 2023. Under the same scenario, subject imports would have been able to undercut the price of products sold by the “price leader” over each year of the POR, with the exception of 2021.[80]

[73] In addition to looking at the pricing scenarios above, the Tribunal also recognizes the existence of the newly applicable 25% surtax of steel goods from China, as detailed above. In this respect, the Tribunal is of the opinion that the surtax will likely have minimal impact on the CSWP market on its own, with a likelihood that significant undercutting would still exist. Moreover, Nova noted that Chinese CSWP was offered during the POR at prices that would still undercut Canadian prices even if the Chinese price were 25% higher.^[81] In light of its analysis described above, the Tribunal reaches the same conclusion.

[74] Hence, the Tribunal finds that, if the finding were rescinded, the subject goods from China would likely significantly undercut the like goods.

Price depression

[75] If the order were rescinded, and as described above, China would begin making low-priced offers which would eventually contribute to pushing prevailing Canadian like goods and other prices down.

[76] Indeed, Nova submitted that actual offshore imports, or even offshore import offers made to its customers, cause it to reduce its price or lose sales. This consequently resulted in reduced revenue. Even if a customer does not end up purchasing low-priced offshore material, Nova may be injured by the offshore offers themselves, as it must lower its prices in order to remain competitive in negotiations influenced by those offers.^[82]

[77] The domestic industry is already facing increased import competition from low-priced competition from non-subject countries. If the order were rescinded and SIMA duties removed, this competition would only intensify, pushing prices down further.^[83]

[78] The Tribunal finds that price depression is likely to occur in light of the significant price undercutting expected by subject imports should the order be rescinded.

Price suppression

[79] There is insufficient positive evidence on the record to allow a conclusion of price suppression, as such the Tribunal cannot conclude that the rescission of the order would likely result in significant price suppression.

Likely import volume of dumped and subsidized goods

[80] Paragraph 37.2(2)(a) of the Regulations directs the Tribunal to consider the likely volume of the dumped or subsidized goods if the order is rescinded and, in particular, whether there is likely to be a significant increase in the volume of imports of the dumped or subsidized goods, either in absolute terms or relative to the production or consumption of like goods.

[81] The Tribunal’s assessment of the likely volumes of dumped and subsidized imports encompasses the likely performance of the foreign industry, the potential for the foreign producers to produce goods in facilities that are currently used to produce other goods, evidence of the imposition of anti-dumping and/or countervailing measures in other jurisdictions, and whether measures adopted by other jurisdictions are likely to cause a diversion of the subject goods to Canada.[84]

[82] Should the order be rescinded, the Tribunal expects (and there is substantial evidence on the record to indicate) that there will be a significant increase in the volume of dumped or subsidized goods from China. This would be the logical result of the structural factors described above (i.e., Chinese excess capacity, export orientation of Chinese exporters and attractiveness of the Canadian market) and, in particular, Chinese manufacturers’ ability to offer low prices.

Likely performance of the foreign industry

[83] The Tribunal previously noted that the Chinese industry was characterized by significant and growing excess steel capacity.

[84] Welded pipe in the Chinese context appears to be used chiefly for real estate construction purposes, with other uses in infrastructure, machinery and electrical applications. While the real estate market in China has experienced several shocks that have contributed to stagnant demand for welded pipe, it is worth noting that infrastructure investments have increased across the board, “which will help hedge against the downturn in real estate investment”.[85] In fact, a very minor increase in demand of 0.9% is estimated for 2024.

[85] Overall, while Chinese excess welded steel pipe capacity increased by approximately 3.5% between 2023 and 2024, Chinese demand for welded steel pipe increased by 0.9% in the same period. The Chinese market is thus affected by both excess capacity and simultaneous weak demand.

Potential for product shifting

[86] The Tribunal noted prior that parties have demonstrated that Chinese production of other steel goods could be redirected to the production of the subject goods.

Potential for diversion

[87] As indicated earlier, Chinese exports faced a variety of trade measures in other jurisdictions including the United States, Mexico, Thailand and the European Union. As CSWP pricing appears to be the main driver of volumes in this instance, and the Canadian market is particularly attractive due to higher prices relative to many other markets,[86] the Tribunal considers it reasonable to conclude that it is likely that the attractiveness of the Canadian market may serve to divert goods towards Canada if the order is rescinded.

Conclusion on likely volumes

[88] Overall, considering the evidence on record and the strong link between pricing and volumes for CSWP, the Tribunal finds that it is likely a significant increase in the volume of dumped or subsidized goods from China would occur in the absence of the order.

Likely impact of the subject goods on the domestic industry

[89] The Tribunal will now assess the likely impact of the above volumes and prices on the domestic industry if the finding were rescinded[87] taking into account the domestic industry’s recent performance. In this analysis, the Tribunal distinguishes the likely impact of the dumped and subsidized goods from the likely impact of any other factors affecting or likely to affect the domestic industry.[88]

Recent performance of the industry

[90] The results of the domestic industry presented a mixed picture in some respects, but, overall, the recent performance of the domestic industry demonstrates weak to declining performance in several key parameters throughout the POR. While the domestic industry returned to profitability following the COVID-19 period, it remains vulnerable and highly sensitive with respect to pricing changes and input costs.^[89]

[91] The Canadian market for CSWP increased by 5% in 2022, decreased by 25% in 2023 and then increased by 7% during the interim period of 2024.[90] Sales from domestic production increased by 21% in 2022, decreased by 13% in 2023 and decreased by 2% during the interim period of 2024.[91]

[92] During the POR, the market share of the domestic industry increased 3 percentage points in 2022, increased 3 percentage points in 2023 and then decreased 3 percentage points for the interim period. The portion of the Canadian market share held by subject imports is very limited.[92]

[93] However, the domestic industry performed worse financially over the POR, with a constant decrease in aggregated gross margins year-over-year.^[93] This is largely due to significant cost of goods sold (COGS) increases that outpaced the evolution of net sales revenues.^[94]

[94] The domestic industry’s gross margin decreased significantly between 2021 and 2023 and also decreased significantly between the interim periods.[95]

[95] The COGS on a $/tonne basis increased significantly between 2021 and 2022 and then decreased between 2022 and 2023 and between the interim periods.[96]

[96] The parties all presented credible evidence of the industry’s poor financial performance over the POR. The Tribunal is persuaded that the evidence demonstrates that the financial performance of the domestic industry is weak, with declining income and deteriorating financial results. This is sufficient to show that the domestic industry is very vulnerable to resumed injury if the finding expires.

Likely impact on the domestic industry if the order is rescinded

[97] The Tribunal must ultimately assess whether the likely volume and price effects of the subject goods are likely, in and of themselves, to result in material injury to the domestic industry. This assessment is considered in the context of the domestic industry’s recent performance[97] and, where relevant, takes into account the impact from other factors unrelated to the dumping of the subject goods.

[98] For the reasons outlined above, the Tribunal has found that the prices of the subject goods will likely significantly undercut and depress those of the like goods in the absence of the finding. Further, the Tribunal has determined that the expiry of the finding would likely result in significantly increased volumes of subject CSWP to Canada in the near to medium term.

[99] Nova submitted that the international market conditions described above will make it likely that China will export large volumes of CSWP to Canada at low prices. Moreover, both Nova and the USW submitted that current and projected economic conditions in China and its CSWP industry, with its significant steel production and CSWP capacity, combined with trade remedies against CSWP from China in other jurisdictions, will significantly enhance the likelihood of resumed dumping in Canada if the order were rescinded.

[100] DFI submitted that the recent return to profitability of the domestic industry as a whole is tenuous and could easily change. The Tribunal accepts that DFI’s lower sales volumes and related financial results from 2024 support this position.[98] DFI states that its overall competitiveness and market share would be significantly impacted by the recission of the finding against subject goods from China. In particular, DFI’s evidence indicates that, if the finding were rescinded, its domestic production of CSWP like goods would no longer be financially viable, and it would be forced to cease production activities in the CSWP like goods pipe size ranges. The continued viability of DFI’s emerging solar farm industry segment would be at risk, and other negative impacts to DFI’s operations and planned capital investments would likely also result.[99]

[101] Nova also appears to remain vulnerable to resumed injury if the finding were rescinded.[100] The evidence of Lawrence Cannon is that if the finding against China were rescinded, prices are likely to fall further and lead to significant future losses for Nova, in the context of a domestic market that remains highly sensitive to changes in market pricing and input cost.[101] Without the finding in place, Nova estimated at least a $100/MT drop in Canadian market pricing, but more likely a much more significant price drop of over $300/MT and upwards of $500/MT given anticipated market conditions in 2025 and 2026. Nova also argued that its recent performance demonstrates that it is already in a vulnerable financial situation and, if price levels dropped, it would expect to see a significant adverse impact on its domestic sales of CSWP.[102] In addition, Nova witness Scott Jones indicated that Nova’s continued investments in its Canadian pipe production are contingent on Nova’s financial performance and market outlook for the industry, including fairly traded imports, and that without the continuation of the finding against subject goods from China, the future viability of these facilities in Canada will be called in question.[103] Reduced production caused by competition from subject goods would also cause Nova to consider its ongoing employment requirements, as discussed below.[104]

[102] Atlas also submitted that, if the finding were rescinded, importations of subject goods would increase in volume, with detrimental impacts on the domestic industry, including Atlas’s prospects for participating in the growth of the Canadian solar energy sector.[105] Atlas relied on import statistics showing that the average unit price in 2023 of both non-subject imports and subject imports is far below Atlas’s selling price[106] and states that it will be injured because if the finding is rescinded, Chinese producers will lower their prices to below market levels in order to win market share and compete in the Canadian market.

[103] The Tribunal concludes that these concerns presented by the parties are sufficiently supported by the evidence. The Tribunal finds that these financial and market-related concerns of the domestic industry will only be exacerbated should the finding be rescinded, and domestic producers lose sales to the subject goods. The Tribunal is satisfied that if the order were rescinded, the domestic industry would be left vulnerable to China dumping and subsidizing its CSWP imports into Canada, at volumes and pricing with which the domestic industry could not compete.

Likely impact on workers

[104] In terms of the impact on workers as a factor in the assessment of injury, DFI indicated that, if the finding were rescinded, this would result in the reduction of employees associated with its pipe mill operations due to less production volume, including production employees, and potentially also a loss of some indirect employees.[107]

[105] The Tribunal received one response to the union questionnaire from the USW. The USW only operates at the production facilities of Nova Tube. The USW stated that workers face, or will face, negative impacts on bargaining concessions, layoffs and hours worked, hiring practices, wages, quality of employment, employment benefits, workplace conditions and employee well-being. Guio Jacinto, a researcher and staff representative of the USW, argues that, if the order were rescinded, the Union would be in a weaker position to bargain for wage increases and higher employer pension contributions. Since steel making is a fixed-cost industry, Nova has limited options to economize in the face of lost revenue. Guio Jacinto concludes that any added commercial pressure (i.e., from lost sales) due to dumped and subsidized subject goods will be passed through, in one form or another, to the workers in their next collective agreement.[108]

[106] With respect to submissions on the negative impact on workers, in particular, the Tribunal is of the view that in any assessment of injury pursuant to subsection 76.03(10) of SIMA, the Tribunal must take into account any impacts on workers employed in the domestic industry. Subparagraph 37.2(2)(e)(iii) and paragraph 37.2(2)(g) of the Regulations provide guidance to that effect. Accordingly, the Tribunal must take into account the impact on workers as a factor in its assessment of whether there is a likelihood of injury to the domestic industry.

[107] The Tribunal, having reviewed especially the submissions made by the USW, is of the view that a rescinding of the order would result in layoffs. Employment is very vulnerable to the market situation, as evidenced by the layoffs of skilled employees at Nova on July 29, 2024, due to a lack of work.^[109] The Tribunal also finds that the expertise of the workforce will likely be reduced. Skilled workers, once laid off, are difficult to rehire, as revealed by the fact that over 10% of the employees laid off by Nova in July 2024 were no longer interested or available when called back to work in September.^[110] Further, the Tribunal agrees that conditions of employment are likely to be negatively impacted when the current collective agreement expires in 2025. Even with the continuation of the order, union representatives expect difficult negotiations.^[111]

Factors other than the subject goods

[108] The Tribunal has not identified other significant factors that, in and of themselves, would be likely to negatively affect the domestic industry over the next 18 to 24 months, nor that would negate the likely injury that would result from the resumed dumping of the subject imports.

Continuation of dumping will materially injure the domestic industry

[109] Although the domestic industry is likely to face continued competition from imports even if the finding were continued, the Tribunal finds that the situation for domestic producers would be materially worse if the finding were rescinded. The return of significant volumes of dumped and subsidized subject goods would exert downward pressure on the prices of domestically produced like goods, and these adverse effects would, in themselves, likely make the domestic industry materially worse off compared to if the finding were continued. These impacts will likely come from reduced net income and gross margins because sales of like goods would be made at depressed prices to maintain sales volumes and market share. If the industry seeks to maintain higher prices, then the negative impacts will be in the form of lost sales and market share. Either way, given the current financial situation of the domestic industry as a whole, its ability to withstand any future squeeze on its profit margins appears to be quite limited. These lost sales, limited gross margins and reduced market share will have a negative impact on the domestic industry’s profitability, its employment, its productivity and its ability to continue planned investments to sustain future growth.

[110] Accordingly, for the above reasons, the Tribunal finds that the resumption of dumping and subsidizing of the subject goods will likely result, in and of itself, in material injury to the domestic industry.

CONCLUSION

[111] On the basis of the foregoing analysis, and pursuant to paragraph 76.03(12)(b) of SIMA, the Tribunal continues its finding in respect of CSWP from China.