LP 2021 ER: Carbon and alloy steel line pipe
Statement of Reasons—expiry review determination

Products excluded from the CITT's finding

[17] As discussed above, the Canadian International Trade Tribunal (CITT) excluded from its finding unfinished seamless carbon or alloy steel line pipe in the form of mother tubes having outside diameters of 184, 197, 210, 235, 260, 286, 328, 350, 368, 377, 394, 402, 419, 426, 450, 475, 480, 500, 521, 530, 560, 585 or 610 mm, in wall thicknesses from 9 mm to 110 mm and in lengths ranging from 7.72 m to 15.24 m, not stenciled as meeting any line pipe product specification, but imported for use in the production, and not solely for finishing, of seamless line pipe made to any one or several of API 5L, CSAZ245.1, ISO 3183, ASTM A333, ASTM A335, ASTM A106, ASTM A53 or their equivalents.

Additional product information^{Footnote 9}

[18] Pipe that is being sold for oil and gas transmission purposes or process piping purposes is line pipe. The subject goods are used by the oil and gas industry in pipelines for the gathering and distribution of oil and gas or as process pipe used in steam generation facilities for steam assisted gravity drainage, petrochemical plants, upgraders, gas transmission facilities, and fabrication of modules.

[19] The Canadian market for oil and gas line pipe is governed by two main design codes depending on whether the line pipe is for pipelines or for process piping. Each code specifies the standards and grades of pipe that are acceptable for use. Together, the complainants manufacture or have the capability to manufacture line pipe under both design codes, in all grades. Pipelines must conform or be equivalent to CSA Z662 (oil and gas pipeline systems), and process piping must conform or be equivalent to ASME B31.1. These systems standards cover multiple pipe standards and can cover multiple grades of pipe. Examples of pipe standards include:

• CSA Z245.1
• API 5L
• ISO 3183
• ASTM A333
• ASTM A53-B and
• ASTM A106

[20] Pipe manufactured to a particular standard may be compatible with the requirements of another standard. This means that a particular pipe may be certified as complying with multiple standards (if all the requirements of each standard/grade are met for that particular pipe). For example, CSA Z245.1 Grade 448 pipe is considered to be equivalent to API 5L Grade X65. The API 5L X grade numbers define the minimum yield strength required of the grade in kilopounds per square inch. Process piping is generally supplied with multiple stencils including API 5L, CSA Z245.1 and ASTM A106.

[21] Equivalent grades of pipe specified under each design code represent products that are equivalent regardless of manufacturing process. As a result, any grade of pipe is considered to be substitutable by a similar grade of pipe designed with a different standard. It is common practice to certify multiple grades of pipe on a mill test report. It is also common practice to substitute grades other than that initially requested by a customer with an equivalent grade. Mill test reports are provided to show that the properties of the supplied pipe meet the requirements of the actual grade supplied.

[22] Line pipe is normally marked or stenciled in paint on the external surface with the API, ASME, or equivalent specifications to which it has been manufactured and tested. The subject goods cover all line pipe meeting or supplied to meet the above specifications, regardless of whether the pipe has been multiple stenciled to indicate that it meets or is supplied to meet additional end use specifications. Line pipe that is manufactured and tested to meet higher API specifications (or equivalent CSA and ISO specifications) is automatically in conformity with lower specifications and may therefore have multiple stencils identifying additional end uses, such as American Society for Testing and Materials (ASTM), and equivalent specifications for end use as standard pipe (for low-pressure conveyance of steam, water, natural gas, air and other liquids in plumbing and heating applications), piling pipe, and other such end uses. Seamless line pipe conforming to API 5L may also be marked as conforming to pressure pipe applications under ASME B31.3. Additionally and for the same reasons, line pipe that is single-stencilled as API 5L may be used in lower specifications absent stencilling identifying that lower specification. All line pipe that is marked as meeting or that is supplied to meet API 5L (or equivalent specifications) for use as oil and gas pipelines or as ASME B31.3 for use as pressure pipe are covered in this investigation as subject goods regardless of whether the pipe is marked as meeting any other end-uses or is supplied to meet any other end-uses.

[23] The subject goods may be manufactured by the seamless or welded process. The typical end finish is a beveled end to allow for welding in the field, although line pipe may also be supplied as plain end (square cut), threaded, and threaded and coupled.

[24] According to the complainants and the producers that support the complaint, since November 12, 2012, the date of the CITT Finding in Inquiry No. NQ-2012-002, steel piling pipe originating in or exported from China (steel piling pipe), the subject goods have been increasingly used in the Canadian market as piling pipe to form deep foundations where soil and ground conditions are not suitable or strong enough to support the structure load, particularly in drilling platforms and other energy installations in Western Canada.

Canadian production

[38] The Canadian producers’ combined domestic sales from domestic production decreased in value and volume in each year of the POR. This decrease is most notable between 2019 and 2020, where the Canadian producers sales from domestic production decreased significantly, and by comparatively more^{Footnote 22} than the decrease experienced in the total apparent Canadian market.

Imports

[39] Total imports followed a similar pattern, with an overall decrease between 2018 and 2020 in terms of value and volume. Total imports lost market share in 2019 followed by an increase in 2020. While subject imports increased overall during the POR, the total volume remained low representing less than 1% of total imports during the POR.

[40] Since the dumping period of investigation (POI) of the original investigation (July 2014 to June 2015), subject imports have decreased significantly. During the original investigation, imports of line pipe from China represented 56.8% of total imports.^{Footnote 23} In contrast, subject imports represented only 0.2% of total line pipe imports and an even smaller proportion of the total apparent Canadian market, during the POR, thereby demonstrating that the sources of imports for line pipe have shifted since the original investigation. This is also supported by the CBSA’s initiation of a second dumping investigation with respect to line pipe originating in or exported from the Republic of Korea in 2017.^{Footnote 24}

[41] Similar to the general trends of the total apparent market, imports from other countries decreased in each year during the POR. However, in terms of market share, imports from other countries have fluctuated, decreasing in 2019 followed by gains in 2020 bringing the market share back up near to 2018 levels.

Administrative record

[48] The information considered by the CBSA for purposes of this expiry review investigation is contained in the administrative record. The administrative record includes the information on the CBSA’s exhibit listing, which is comprised of the CITT’s administrative record relating to the initiation of the expiry review, the CBSA’s exhibits and information submitted by interested parties, including information which the interested parties feel is relevant to the decision as to whether dumping and subsidizing are likely to continue or resume, if the CITT’s finding is allowed to expire. This information may consist of expert analysts’ reports, excerpts from trade magazines and newspapers, orders and findings issued by authorities of Canada or of a country other than Canada, documents from international trade organizations such as the World Trade Organization and responses to the ERQs submitted by the Canadian producers, exporters and importers.

[49] For purposes of an expiry review investigation, the CBSA sets a date after which no new information submitted by interested parties will be placed on the administrative record or considered as part of the CBSA’s investigation. This is referred to as the “closing of the record date.” This allows participants time to prepare their case briefs and reply submissions based on the information that is on the administrative record as of the closing of the record date. For this investigation, the administrative record closed on April 27, 2021.

Parties contending that continued or resumed dumping is likely

[50] The Canadian producers made representations as part of their submissions to the CITT in LE-2020-004, in their ERQ responses, and/or in their case briefs supporting their position that the dumping of line pipe from China is likely to continue or resume should the CITT’s finding expire.

[51] The main arguments made by the Canadian producers can be summarized as follows:

• Chinese Line Pipe Cannot Compete at Non-Dumped Prices in Canada
• Chinese Producers of Line Pipe are Export Focused
• Overcapacity in the Chinese Steel Pipe Industry and Slowing Demand
• Chinese Line Pipe is Priced Below Global Market Prices
• Changes in the Global and Domestic Markets Make Dumping More Likely
• Trade Measures Imposed in Canada and in Other Jurisdictions
• Circumvention Efforts of Chinese Exporters Towards Similar Energy Tubular Products
• Ability of Chinese Producers of Energy Tubular Products to Shift Production Capacity

Parties contending that continued or resumed dumping is unlikely

[77] None of the parties contended that continued or resumed dumping of subject goods from China is unlikely should the CITT’s finding expire.

Imports of Chinese line pipe during the POR

[81] The volume of subject imports decreased drastically between the Dumping POI of the original investigation (i.e. prior to the finding) and the POR of this expiry review investigation. Proportionally, subject imports represented 56.8% of imports during the Dumping POI,^{Footnote 95} while line pipe originating in or exported from China was reduced to only 0.2% of imports during the POR.^{Footnote 96} This significant reduction in the volume of subject good imported is indicative of the effect of the SIMA line pipe measures and the inability or unwillingness for most exporters to maintain sales at normal values. Furthermore, the assessment of SIMA duties on subject goods during the POR also serves as evidence that line pipe from China was dumped and/or subsidized during this period.^{Footnote 97}

Export orientation of Chinese line pipe producers

[82] Information on the record confirms that line pipe producers in China continue to be export-orientated and interested in the Canadian market, as evidenced by policies and plans in China, export volumes and marketing and sales strategies.

Policies and plans in China

[83] Various initiatives of the GOC emphasize the government’s focus on exports generally, and with respect to steel in particular. For example, in its 13th five year plan (2016-2020), the GOC identified the steel industry specifically as an industry of focus for which China will encourage more equipment, technology, standard and services to go global.^{Footnote 98} The 13th five year plan also aims to upgrade foreign trade by promoting “… a transformation in foreign trade toward better quality exports that command higher prices,” while also consolidating and improving traditional export strengths. The GOC states that it will promote diversification in export markets, increasing the proportion of emerging markets while also maintaining the share of traditional markets.^{Footnote 99}

[84] The 2015 draft revision to the Steel Industry Adjustment Policy also emphasizes the vital role of the iron and steel industry, stating various goals for 2025 including international competitiveness.^{Footnote 100} The policy also seeks to improve the quality and performance of widely available common products, and increase the development and application of certain key steel varieties. Article 28 of the draft identifies steel for energy fields among the steel product types oriented for development. Strong steel enterprises are also encouraged to participate in cross-border mergers and acquisitions to optimize resource allocation and improve competitiveness.

[85] In response to the spread of the COVID-19 pandemic and the impact on national economies, China’s Ministry of Finance announced in March 2020 that tax rebates on over 1000 export goods would be raised.^{Footnote 101} In the case of exports of alloy steel and steel pipes, including oil and gas steel pipe, this resulted in a tax rebate increase to 13%.^{Footnote 102} Despite rumours of a rollback on export tax rebates, no such confirmation has been made by the Chinese central government as recent as April 2021.^{Footnote 103} With larger rebates applicable on exports of line pipe, it is more likely that exporters of subject goods will be able to lower their export prices to improve their international competitiveness. The initiatives, plans and policies of the GOC, discussed above, encourage export behaviour and underline the importance of steel, including line pipe, to the Chinese economy.

Export volumes

[86] China has maintained a trade surplus for the better part of the last decade, with exports increasing consistently between 2009 and 2015.^{Footnote 104} While exports of steel from China have trended down since 2016, China remained the world’s largest steel exporter during the POR,^{Footnote 105} exporting 62 million MT of steel in 2019 alone.^{Footnote 106} Baosteel, a known producer of line pipe in China, reported exports of steel products totalling 3.621 million tons in 2019.^{Footnote 107} Notably the volume of China’s 2019 steel exports was almost double that of Japan, the world’s second largest exporter. China was also the largest exporter of semi-finished and finished steel products during this period, with pipe and tube products representing 12.6% of total exports.^{Footnote 108} Information available on the administrative record suggests China’s steel exports are expected to rise in 2021.^{Footnote 109}

[87] The recent sunset review conducted by the USITC relating to circular welded carbon quality steel line pipe from China also found that China continues to export substantial quantities of line pipe “…and will continue to have that capability in the reasonably foreseeable future.”^{Footnote 110} In fact, information on the administrative record indicates that exports of line pipe from China remained above three million MT in almost every year between 2016 and 2019 and above 2 million MT in 2020.^{Footnote 111}

[88] While exports of subject goods to Canada have decreased dramatically since the original period of investigation, China remains one of the top five trading partners from which Canada imports pipe and tube products for the period beginning January 2018 and ending September 2020.^{Footnote 112} In light of the volume of line pipe exported from China during the POR, it is evident that Chinese line pipe has the potential to overwhelm the Canadian market.

Marketing and sales strategies of line pipe producers in China

[89] The marketing and sales strategies of producers of line pipe in China demonstrate a continued focus on export markets. In fact, excerpts taken from the websites of known line pipe producers in China emphasize global marketing strategies and the producers’ capacities to fulfill export sales.^{Footnote 113} For example, Tianjin Pipe International Economic & Trading Corporation lists products specifically available for export (including line pipe), the value of its exports, and indicates that it has been named one of the top 50 exporters in Tianjin.^{Footnote 114} Likewise, Baosteel’s 2019 annual report boasts the export of goods to more than 70 countries and regions.^{Footnote 115} With respect to 2020 business objectives, plans and priorities, Baosteel states that the overseas market will be “…vigorously expanded to achieve export targets of key products.” Another producer of steel products, Shandong Molong Petroleum Machinery Company Limited, also discusses the export of products for the energy equipment industry among the company’s principal businesses.^{Footnote 116} Further evidence of the export orientation of Chinese line pipe producers is found in the imposition of anti-dumping measures concerning line pipe originating in or exported from China.^{Footnote 117} This is discussed in further detail below.

[90] Further to the marketing strategies discussed above, information on the record suggests that producers of line pipe in China have maintained interest in the Canadian market. Evidence of this was provided in the form of offers/price quotes received by Tenaris Canada from Chinese exporters.^{Footnote 118} In addition, excerpts from distributor websites confirm that several companies which participated in the CITT’s original line pipe injury inquiry, continue in operation and continue to source goods from abroad.^{Footnote 119} The existence of networks connecting producers in China to distributors and/or potential customers in Canada increases the likelihood that line pipe producers would sell line pipe to Canada if the current finding expired.

[91] The evidence on the administrative record demonstrates that producers of line pipe in China remain focused on export markets. In light of factors discussed above, the CBSA finds that producers in China are likely to rely, or to continue to rely, on export markets.

Steel overcapacity in China

Production and capacity

[92] As noted in the CBSA’s recent OCTG expiry review investigation, steel production is capital-intensive in nature, incurring high fixed costs. As such, in order to maintain high capacity utilization rates (to recover fixed expenses) producers may look to export markets to help maintain utilization rates when demand in the home market cannot absorb production.^{Footnote 120} The CBSA continues to find there to be a risk that producers in the steel industry will sell excess production in foreign markets at depressed prices rather than reduce their production, in situations where there is overcapacity.

[93] According to the Organisation for Economic Co-operation and Development (OECD), global crude steelmaking capacity increased to over 2,453 million MT in 2020.^{Footnote 121} While global steel making capacity decreased from 2015 to 2018, information available suggests that capacity increases in 2020 would mark the second consecutive year of increases, taking into consideration new capacity additions and closures.^{Footnote 122} The OECD states that the gap between global production and capacity narrowed between 2016 and 2019 due to strong increases in production and modest decreases in steelmaking capacity. The OECD expects the gap could widen significantly from 565.9 million MT in 2019 to 703.8 million MT in 2020.^{Footnote 123}

[94] Overcapacity in the Chinese steel industry has been a well-recognized problem over a number of years, including throughout the POR. Like global steelmaking capacity, steelmaking capacity in China increased in 2019 following a period of decreasing capacity.^{Footnote 124} Specifically, steelmaking capacity in China increased 2.1% in 2019, while global capacity increased approximately 1.5%. Furthermore, evidence available suggests that China’s steelmaking capacity will continue to increase, as the net crude steel capacity expansion is estimated to be 37.65 million MT per year from 2019 to 2023.^{Footnote 125} Line pipe production capacity in China, in particular, has previously been estimated to exceed 65 million MT.^{Footnote 126}

[95] In addition to having the largest steelmaking capacity, evidence on the record indicates that China is also the world’s largest steel producing country, representing 53.1% of total global production in 2019.^{Footnote 127} Further, 6 of the 10 largest steel producing companies globally are headquartered in China. For example, China’s Baowu Group, a producer of line pipe and other steel products, is China’s largest steel producer and the second largest global steel producer.^{Footnote 128} A list of China’s top 10 steel producers identifies several companies that produce steel pipe.^{Footnote 129} Although China is already the largest steel producer, crude production data reported by the World Steel Association (WSA) for 2010 to 2019 demonstrates that China’s steel production continued to increase.^{Footnote 130} Steel production data reported by the United States International Trade Administration, also confirmed consistent production increases between 2015 and 2019, despite some inconsistencies with the data reported by the WSA.^{Footnote 131}

[96] While most countries reduced steel production in 2020 in light of the effects of the COVID-19 pandemic, information available indicates that China’s steel production continued to increase reaching nearly 1.053 billion MT.^{Footnote 132} In fact, in May 2020 China hit a new record by producing more than 90 million MT of steel in a single month.^{Footnote 133}

[97] Included on the administrative record is information concerning certain plans, policies and actions of the GOC which have the stated aim of reducing production and/or capacity of steel. For example, in its 13th five year plan (2016-2020), China admits that it must “move more quickly to address overcapacity in industries such as steel….”^{Footnote 134} In fact, China has stated that it reduced its installed steelmaking capacity by 150 million MT between 2016 and 2018, as part of this plan.^{Footnote 135}

[98] The OECD also published a list of plant level closures for 2019, in which six of ten companies were located in China.^{Footnote 136} In addition, the OECD discusses targets announced by the Hebei provincial government, China’s largest steel producing province, to reduce steel making capacity by an additional 14 million MT per year in 2019 and 2020.^{Footnote 137} Mandatory production cuts were also reportedly introduced in Tangshen as well as rules to renovate or stop using old blast furnaces, enforceable by penalties.^{Footnote 138} Evidence available also points to a draft plan of the Ministry of Industry and Information Technology which reportedly aims to tighten steel capacity though a capacity swap programme in certain regions.^{Footnote 139} In January 2021, the GOC further reiterated its plans to reduce annual steel production, as part of its efforts to cut carbon dioxide emissions.^{Footnote 140}

[99] Despite China’s repeated commitments to address steel overcapacity, scepticism remains surrounding China’s willingness and ability to meaningfully address steel capacity issues. For example, several sources expressed concern that China’s capacity swap initiative will have the impact of increasing overall capacity, as outdated equipment is replaced with more efficient technology.^{Footnote 141} In addition, information on the record confirms that China disengaged from the Global Forum on Steel Excess Capacity (GFSEC) in 2019.^{Footnote 142}

[100] Further, a report published by the GFSEC cites discrepancies between the 150 million MT reduction in steelmaking capacity as claimed by the GOC and a 100 million MT reduction calculated using capacity data provided by China’s National Bureau of Statistics to the GFSEC, for this period.^{Footnote 143} According to this report, OECD capacity data points to an even smaller reduction of 87 million MT for the period of 2016 to 2018, followed by increases in capacity in 2019, as was discussed previously above. In fact, even if the capacity reduction claimed by the GOC is accepted as accurate, China’s Iron and Steel Association recognized in 2019 that the Chinese steel industry continues to face excess capacity, stating that the 150 million MT which were cut was “far from achieving its tasks”.^{Footnote 144}

[101] The existence of illegal induction furnaces in China has also been widely recognized. According to an article posted by Reuters in September 2019, China’s Ministry of Industry and Information Technology admitted that China was continuing to face challenges containing illegal capacity such as new illegal mills not approved by the government, mills that reopened without approval and/or mills which were moved instead of being shut down.^{Footnote 145} In reporting China’s steelmaking capacity, the OECD notes that the data does not include illegal IF capacity, for which data was not available.^{Footnote 146} Other sources of information available on the administrative record discuss specific instances of companies ignoring demands to cut production.^{Footnote 147} Perhaps most notably, and as discussed above, China’s production and capacity have actually increased during the POR despite the GOC’s stated reduction efforts.

[102] Further to the discussion above, information on the administrative record suggests that steel production and capacity are likely to continue to increase following the POR. For example, an article published by S&P Global Platts references the approval of eight steel capacity replacement projects.^{Footnote 148}

Demand

[103] While the effects of the pandemic have contributed to a slowdown in global demand for steel, information on the administrative record suggests that China’s economic performance and infrastructure stimulus has lead to increases in steel demand during the POR.^{Footnote 149} Notably, in October 2020, the WSA forecasted that China would be one of the few markets to experience growth in demand for finished steel in 2020.^{Footnote 150}

[104] Despite these gains in demand, it is evident that China’s steel production has a history of exceeding consumption:

[105] In addition, softening oil demand in China suggests that China’s demand for energy tubulars such as line pipe may not be immune to the downturns experienced in the global market.^{Footnote 152} Persistent production in addition to reduced global demand, has lead to record levels of steel inventory in China in 2020.^{Footnote 153}

[106] In the opinion of the CBSA, the combination of the factors described above will likely result in further overproduction and continued overcapacity. As supply continues to exceed demand, the CBSA is of the opinion that this is likely to put pressure on prices and will further encourage producers of line pipe in China to pursue export markets.

Market conditions

Global market conditions

[107] According to the OECD, global growth prospects have collapsed as a result of government containment measures implemented to help limit and/or slow the spread of the COVID-19 pandemic.^{Footnote 154} In fact, world GDP growth went from 3.4% in 2018 to -4.5% in 2020.^{Footnote 155} Notably, China was the only market reported in the OECD’s market development report to have real GDP growth in 2020, although it too slowed substantially at 1.8%. While the OECD projects GDP growth to partially recover in 2021 at 5%, it notes that consumers and businesses remain cautious and that recovery is fragile. The OECD indicates that the resilience of the steel sector towards COVID-19 is likely to be affected by the challenging conditions already faced by the steel industry prior to the pandemic.^{Footnote 156} Further, the OECD cites other risks including trade and cross-border investment restrictions, financial vulnerabilities from slow economic growth and corporate indebtedness.^{Footnote 157}

[108] Information available on the administrative record demonstrates that West Texas Intermediate (WTI) prices (a benchmark in oil prices) improved between 2016 and 2018 but, like GDP growth, faced setbacks in 2020.^{Footnote 158} Looking at the POR specifically, WTI oil prices decreased from 65 USD/barrel in 2018 to 39 USD/barrel in 2020. Based on information available for the first three months of 2021, WTI oil prices have shown signs of growth, averaging 58 USD/barrel. While WTI oil prices of 58 USD/barrel are improved from 2020, the forecasted 2021 oil prices remain below prices seen in 2014.^{Footnote 159} According to the US Energy Information Administration, WTI prices are expected to remain around 55 USD/barrel in 2021 and 2022.^{Footnote 160}

[109] As discussed by the Canadian producers, trends in oil and gas prices have been recognized to have an impact on drilling activity, thereby impacting demand for products like OCTG and line pipe. Tenaris Canada notes, for example, that drilling activity is stimulated when WTI oil prices hold above 50 USD/barrel.^{Footnote 161} Drilling activity, measured by average number of drilling rigs actively looking for or developing oil or natural gas, declined over the POR.^{Footnote 162} Likewise, in light of the collapse in oil prices and the declines in drilling activity during the POR, demand for line pipe has also faced challenges during the POR and particularly in 2020. For example, Evraz referenced a Preston Pipe report, claiming that 2020 demand for small diameter line pipe in the United States was the lowest it had been since 2009.^{Footnote 163}

[110] With respect to steel products generally, based on data from the WSA, global demand for finished steel products increased each year from 2010 to 2019, except for 2015.^{Footnote 164} For example, in 2019, the second year of the POR, global steel demand reportedly increased 3.5%, reaching a high of 1,766.7 million MT.^{Footnote 165} Steel demand in 2020 however is projected to be weak, falling 2.4% according to the WSA’s October 2020 short range outlook, as it too was effected by the COVID-19 pandemic.^{Footnote 166} Steel demand forecasts for 2021 have shown improvements^{Footnote 167}, however several sources cite concerns over prolonged weak demand.^{Footnote 168}

Market conditions in China

[111] Following a period of decreasing HRC prices beginning in May 2018^{Footnote 169}, information available on the administrative record demonstrates that prices of HRC have increased in certain markets from August 2020 to March 2021.^{Footnote 170}

[112] With respect to the pricing of line pipe, Canadian producers have supplied estimated export prices of line pipe from China. Using data collected from IHS Markit Data, Evraz reports average export prices of line pipe for sales to all countries.^{Footnote 171} This data demonstrates a modest downward trend in average pricing from 1,151 USD/tonne in 2018 to 1,020 UDS/tonne in 2020.^{Footnote 172} Likewise, Tenaris Canada reports export pricing of line pipe from China based on information gathered from Fastmarkets MBR.^{Footnote 173}

[113] For the purposes of the 2016 final determination,^{Footnote 174} the CBSA was of the opinion that the conditions described in paragraph 20(1)(a) of SIMA apply in the steel pipe sector in China, which includes line pipe. Section 20 of SIMA may be applied to determine the normal value of goods where certain conditions prevail in the domestic market of the exporting country. In the case of a prescribed country, under paragraph 20(1)(a) of SIMA, it is applied where, in the opinion of the CBSA, domestic prices are substantially determined by the government of that country and there is sufficient reason to believe that they are not substantially the same as they would be if they were determined in a competitive market. Where section 20 is applicable, normal values for the goods are not determined based on domestic prices or costs in that country.

[114] When section 20 conditions are found to exist, the CBSA usually determines normal values using the selling price, or the total cost and profit, of like goods sold by producers in a surrogate country designated by the CBSA pursuant to paragraph 20(1)(c) of SIMA. Alternately, normal values may be determined under paragraph 20(1)(d) of SIMA, using re-sales in Canada of like goods imported from a third country. During the investigation, sufficient surrogate country data respecting domestic prices and costs relating to the like goods was not provided to the CBSA. Furthermore, importers did not provide sufficient re-sale information to enable the CBSA to determine normal values in accordance with paragraph 20(1)(d) of SIMA.

[115] As a result, throughout the enforcement period, the normal values for the exporters that provided a complete and reliable response to the questionnaires have been determined using an alternate methodology under a Ministerial Specification, pursuant to section 29 of SIMA. Specifically, the CBSA determined normal values based on information provided in the publication Pipe Logix for the period of July 2014 to June 2015. Pipe Logix is a trade publication based in the USA which tracks OCTG and line pipe prices. As the Pipe Logix data represents the price of goods from distributors to end users, the prices were adjusted to account for a distributor margin.^{Footnote 175}

[116] Evidence on the administrative record does not indicate any significant change in the GOC’s level of involvement in the steel pipe sector in China such that it would change the CBSA’s opinion issued at the time of the Final Determinations concerning the conditions of Section 20 in the steel pipe sector in China.

[117] As such, for purposes of evaluating the likelihood of resumed and/or continued dumping, the CBSA finds it relevant to compare the export selling prices of line pipe from China during the POR to other line pipe pricing information available on the administrative record. In this respect, information from Pipe Logix relating to average line pipe prices was provided. For the purposes of the final determination of dumping, the CBSA relied on information from this publication in determining normal values pursuant to section 29 of SIMA. As such, the CBSA has found, and continues to find, that this publication is a reasonably reliable source of information. A comparison of export selling prices from China to average Pipe Logix line pipe pricing, as provided by Evraz, demonstrates that export pricing was below adjusted Pipe Logix pricing in all years of the POR.

[118] Considering the above pricing analysis in concert with the existing substantial overcapacity and export orientation of Chinese line pipe producers, the CBSA finds that it is likely that exporters of subject goods will continue or resume selling line pipe to Canada at dumped prices in the absence of the CITT’s finding.

Conditions in the Canadian market

[119] Despite the challenges faced in the global line pipe market, discussed above, Canada remains an attractive market to line pipe producers in other countries, as evidence by the presence of imports from countries other than China during the POR.

[120] Nevertheless, following markets for oil and gas, demand for line pipe in Canada was also negatively impacted during the POR.^{Footnote 177} As discussed above, WTI oil prices decreased over the course of the POR. Likewise, Western Canada Select (WCS) prices (i.e. the benchmark oil price for Western Canada drilling activities) were also under pressure during the POR.^{Footnote 178} As noted by the CITT in RR-2019-005, “…Canadian oil prices remained additionally challenged, due to Canadian oil and gas being landlocked and the delivery of Western Canadian oil and gas to market being constrained by transportation bottlenecks.”^{Footnote 179} With the Russia-OPEC oil price war and the outbreak of the pandemic, WCS oil prices were particularly effected in 2020, where they declined from 36.82 USD/bbl in January to 3.50 USD/bbl in April. ^{Footnote 180}Despite some recovery in WCS prices towards the end of 2020, evidence on the record suggests oil prices are expected to remain around $40/bbl in 2021, far below 2014 levels.^{Footnote 181}

[121] As discussed above, drilling activity tracks oil and gas price trends. In response to falling WCS prices, the Government of Alberta imposed oil production cuts during the POR thereby slowing oil production and drilling activity.^{Footnote 182} According to Baker Hughes, the average annual Canadian rig count decreased in each year of the POR. Specifically, Canada’s average annual rig count was 191 in 2018, 135 in 2019 and 90 in 2020.^{Footnote 183}

[122] Despite the collapse in oil prices and the negative impacts to the Canadian oil and gas industry, Canada remains an attractive market for line pipe. According to 2019 data, Canada is among the 4th largest producers of crude oil and natural gas globally.^{Footnote 184} With respect to drilling activity, information on the administrative record indicates that Canadian drilling activity began improving following the low in June 2020, while worldwide oil and natural gas rig counts continued decreasing for several more months.^{Footnote 185} Furthermore, information on the record suggests continued improvement in 2021. For example, PSAC forecasts a modest increase in rigs released in 2021.^{Footnote 186} Likewise, Tenaris Canada also noted that drilling activity in 2021 has been stronger than 2020 and is expected to continue.^{Footnote 187} Further aiding the favourable oil and gas industry outlook, are forecasted increases in capital expenditures in Canada.^{Footnote 188}

[123] As demand for line pipe in Canada tracks the oil and gas market (i.e. drilling activity), Canadian producers have forecasted some recovery in the Canadian line pipe market. Specifically, Canadian producers suggest that the line pipe market is expected to begin its recovery in 2021 and continue into 2022.^{Footnote 189}

[124] Average line pipe pricing in Canada, according to the CBSA’s estimate of imports, suggests an overall average increase in import pricing over the POR.^{Footnote 190} In addition, in response to the CBSA’s ERQ, Evraz referenced a Pipe Logix report suggesting that line pipe prices in North America have started to increase in the beginning of 2021 due to recovery in oil prices and the increase in raw material costs, but states that they remain below 2018 prices.^{Footnote 191} Further, it was submitted that the presence of low priced imports from other countries has made it impossible to recover the increase in input prices (i.e. HRC).^{Footnote 192}

[125] Although the Canadian market for line pipe faced difficult conditions during the POR, forecasts with respect to line pipe demand and pricing suggest potential recovery in the industry thereby supporting the attractiveness of the Canadian market. In light of the appeal of the Canadian market, the substantial excess capacity in global and domestic markets and the fact that producers generally compete on the basis of price, there is an ongoing risk that line pipe would be sold to Canadian customers at dumped prices.

Trade measures in canada and other jurisdictions

[126] China has a history of dumping steel pipe products into the Canadian market. This is evidenced by the number of anti-dumping findings in place with respect to steel pipe products originating in or exported from China. In addition to subject line pipe, the CBSA has anti-dumping measures in force on large diameter line pipe, OCTG, sucker rods, carbon steel welded pipe, seamless casing, steel piling pipe, and pup joints.^{Footnote 193}

[127] In addition to the Canadian measures, several jurisdictions have imposed anti-dumping and other trade measures on Chinese steel pipe and tubular products, including line pipe. A list of these anti-dumping measures is provided in Table 6 below.

[128] Certain measures referenced in the table above have recently undergone review by the respective investigating authority. For example, in 2019 the US DOC conducted a sunset review with respect to circular welded carbon quality steel line pipe, finding that the revocation of the orders on welded line pipe from China would likely lead to the continuation or recurrence of dumping, countervailable subsidies and material injury to the industry in the United States.^{Footnote 195} Similarly, in 2020, the European Commission initiated an expiry review with regard to imports of certain welded tubes and pipes of iron or non-alloy steel originating in three countries, including China. On April 16, 2021, the European Commission published the results of the expiry review in the Official Journal of the European Union, noting that there was a likelihood of recurrence of dumping if the measures would not be extended.^{Footnote 196}

[129] In addition to the measures in force concerning Chinese line pipe, information on the record indicates that there are 18 additional anti-dumping measures against related products, which can be produced on the same or similar equipment.^{Footnote 197} The numerous measures currently in place in Canada and other jurisdictions demonstrate the Chinese exporters’ propensity to dump line pipe and other related steel tubular products. Furthermore, the CBSA’s numerous investigations into the alleged dumping and/or subsidizing of steel products originating in or exported from China is evidence of the attractiveness of the Canadian market for such goods.

[130] Other trade measures, such as tariffs and safeguards have also been imposed on Chinese steel products by jurisdictions outside of Canada during the POR. For example, the United States imposed tariffs on imports of several goods, including Chinese line pipe, under Section 232 of the Trade Expansion Act of 1962.^{Footnote 198} In 2019, the European Commission imposed definitive safeguard measures on a number of steel products which were subsequently reviewed and maintained in June 2020.^{Footnote 199} The evidence available suggests that this includes line pipe from China.

[131] The presence of these trade measures further limits the markets that Chinese line pipe can access, thereby increasing the risk of diversion of subject goods to Canada. While the anti-dumping and countervailing measures currently in place in Canada with respect to the subject goods have significantly limited imports of Chinese line pipe during the POR, the removal of these measures is likely to result in an increase of shipments to Canada at dumped prices.

Ability of Chinese producers of energy tubular products to shift production capacity

[132] The CBSA has previously found that line pipe can be made on the same production equipment as OCTG and other tubular products such as standard pipe and piling pipe.^{Footnote 200} Likewise, evidence on the record suggests that a number of companies in China hold active licenses/certifications to produce both API-5L line pipe and API 5CT OCTG.^{Footnote 201} Further, given the similarities in production, it is reasonable to assume that manufacturers with certification only to produce API-5CT would not experience significant challenges obtaining API 5L certification.

[133] In addition to having the ability to shift production from other tubular goods, such as OCTG, to line pipe, it is reasonable to expect that some production would be converted to line pipe production if the line pipe finding expired. On July 3, 2020, the CBSA determined that the expiry of the order in respect of certain OCTG from china was likely to result in the continuation or resumption of dumping and subsidizing of the goods exported to Canada.^{Footnote 202} The CITT subsequently continued its order. Notably, OCTG is also subject to trade measures in the United States and Russia.^{Footnote 203} As markets for Chinese OCTG have been limited by such trade measures, there is an increased risk of conversion of production from OCTG, in particular, to products not subject to anti-dumping measures.

Parties contending that continued or resumed subsidizing is likely

[135] The Canadian producers, having made certain representations as part of their submissions to the CITT in LE-2020-004, in their ERQ responses, and/or in their case briefs, argued that the subsidizing of line pipe from China is likely to continue or resume should the CITT’s finding expire.

[136] The main argument made by the Canadian producers can be summarized as follows:

• Imports of Chinese Line Pipe Cannot Compete at Unsubsidized Prices
• Chinese Producers of Line Pipe Remain Heavily Subsidized
• Trade Measures in Canada and in Other Jurisdictions

Parties contending that continued or resumed subsidizing is unlikely

[144] None of the parties contended that continued or resumed subsidizing of subject goods from China is unlikely should the CITT’s finding expire.

Trade measures in canada and in other jurisdictions

[149] In the original line pipe subsidy investigation, the CBSA investigated 177 subsidy programs. Information concerning these programs is available in the CBSA’s Statement of Reasons for the original investigation concerning line pipe.^{Footnote 220}

[150] As noted in the CBSA’s Final Determinations Statement of Reasons, the GOC did not provide a response to the CBSA’s subsidy RFI which limited the CBSA’s ability to determine the amount of subsidy in the prescribed manner, pursuant to subsection 30.4(1) of SIMA, as the required information relating to financial contribution, benefit and specificity was not provided. It also limited the CBSA’s ability to determine whether producers, or other suppliers of goods and services are public bodies.

[151] Due to this lack of information, subsidy amounts for all exporters were determined under a ministerial specification, pursuant to subsection 30.4(2) of SIMA.

[152] For each of the eight exporters/exporter groups that provided sufficient information in response to the subsidy RFI, an individual amount of subsidy was determined under ministerial specification, based on the information provided in response to the RFI and obtained during the on-site verification or desk audit. Amounts of subsidy determined for exporters that provided sufficient information during the original investigation ranged from 12.10 RMB/MT to 289.93 RMB/MT. The all others rate, for exporters that have not been issued specific amounts of subject, is equal to 989.97 RMB/MT.

[153] It was found that 100% of the goods exported from China were subsidized during the original investigation. Since the CITT’s finding, the CBSA has not conducted any re-investigations to update amounts of subsidy for line pipe from China.

[154] In addition to the line pipe finding, the CBSA currently has seven other countervailing measures in place against steel tubular products originating in or exported from China: OCTG, Seamless Casing, Pup Joints, Sucker rods, Large Line Pipe, Carbon Steel Welded Pipe and Piling Pipe.^{Footnote 221} Detailed descriptions and explanations of the programs are contained in the CBSA’s Statement of Reasons issued at the final determination of each investigation.

[155] Furthermore, in recent years the CBSA has conducted expiry reviews with respect to seamless casing, carbon steel welded pipe and OCTG, determining that that the expiry of each finding/order was likely to result in the continuation or resumption of subsidizing of the goods originating in or exported from China.^{Footnote 222}

[156] Information on the administrative record also indicates that the US and Australia have countervailing measures in force against steel tubular products from China. Products listed as subject to the US countervailing measures include: OCTG, Circular Welded Austenitic Stainless Pressure Pipe, Circular Welded Carbon Quality Steel Line Pipe, Circular Welded Carbon Quality Steel Pipe, Light-Walled Rectangular Pipe and Tube, and Certain Seamless Carbon and Alloy Steel Standard, Line, and Pressure Pipe, and Large Diameter Welded pipe. The goods subject to Australia’s countervailing measures are hollow structural sections.^{Footnote 223} With respect to the US countervailing measures on line pipe, it is worth noting that the US DOC recently concluded its second sunset review in which it determined that the revocation of the orders on welded line pipe from China would likely lead to continuation or recurrence of dumping and countervailable subsidies.^{Footnote 224}

[157] The existence of these countervailing measures in place in Canada and in other jurisdictions concerning line pipe and/or similar steel tubular products from China serves as evidence that Chinese exporters of steel tubular products have received countervailable benefits from the GOC. It is the CBSA’s opinion that the GOC will likely continue to subsidize its domestic line pipe producers in the future.

Continued availability of subsidy programs

[158] Information on the administrative record indicates that government subsidies continue to be available to steel producers, including line pipe producers, in China. For example, and as previously discussed, the GOC announced in March 2020 an increase to the export tax rebate rate on certain goods, including steel pipe.^{Footnote 225} Further, in November 2020, it was revealed that the Chinese Ministry of Commerce and the Ministry of Ecology and Environment are studying new export tax rebate policies to promote steel exports.^{Footnote 226}

[159] Also noteworthy are the annual reports of two steel producers in China, which confirm that government support was received during the POR. For example, the 2020 annual report of Shandong Molong Petroleum Machinery Company Limited lists government grants in excess of RMB 14 million each year from 2018 to 2020. In fact over the course of the POR the total amount of government grant is reportedly greater than RMB 60 million and is described as being “mainly due to the company’s corporate support subsidies.”^{Footnote 227} Reports published by Baosteel, a line pipe producer that participated in the CBSA’s original investigation, describes receipt of government subsidies and grants throughout the POR.^{Footnote 228} The CBSA also notes that the assessment of SIMA duties on line pipe originating in or exported from China and imported into Canada during the POR^{Footnote 229} is further evidence of the continued dumping and/or subsidization of subject goods.

[160] Evidence available also suggests the introduction of additional government support in response to the COVID-19 pandemic, including through tax measures, employment related measures, economic stimulus, etc.^{Footnote 230}

[161] In addition, other jurisdictions continue to express concern over subsidization of the steel industry in China. For example, the United States and the European Union reiterated concerns surrounding China’s non-notification of possible subsidy programs for steel producers in a 2019 meeting of the WTO’s Committee on Subsidies and Countervailing Measures.^{Footnote 231} Members of the GFSEC, a forum open to members of the G20 and members of the OECD, also recently cited concerns over market-distorting government subsidies and other support measures in China, in its 2020 Ministerial Report.^{Footnote 232} Members of the GFSEC contend that there is lending by Chinese state owned banks to indebted steel companies, equity infusions to non-financially viable steelmaking companies, grants and awards, preferential tax programs, and the preferential provision of steelmaking materials, among other government measures.^{Footnote 233}

[162] On the basis of the above, it is the CBSA’s position that the GOC places a great deal of importance on its steel industry, including line pipe, and that there are strong indications that the GOC will likely continue to subsidize its domestic producers of line pipe in the future.