Statement of reasons—expiry review determination: Carbon and alloy steel line pipe 2 (LP2 2022 ER)

Decision

Ottawa, April 14, 2023

On March 30, 2023, pursuant to paragraph 76.03(7)(a) of the Special Import Measures Act, the Canada Border Services Agency determined that the expiry of the finding made by the Canadian International Trade Tribunal on January 4, 2018, in Inquiry No. NQ-2017-002 is likely to result in the continuation or resumption of dumping of certain carbon and alloy steel line pipe originating in or exported from South Korea.

Executive summary

[1] On October 31, 2022, the Canadian International Trade Tribunal (CITT), pursuant to subsection 76.03(1)(a) of the Special Import Measures Act (SIMA), initiated an expiry review of its finding made on January 4, 2018, in Inquiry No. NQ-2017-002, concerning the dumping of certain carbon and alloy steel line pipe (line pipe) originating in or exported from South Korea.

[2] As a result of the CITT’s notice of expiry review, on November 1, 2022, the Canada Border Services Agency (CBSA) initiated an expiry review investigation to determine, pursuant to paragraph 76.03(7)(a) of SIMA, whether the expiry of the finding is likely to result in the continuation or resumption of dumping of the subject goods.

[3] The CBSA received three responses to its Canadian Producer Expiry Review Questionnaire (ERQ). Namely, the CBSA received ERQ responses from Tenaris Canada^{Footnote 1}, Bri-Steel Manufacturing (Bri-Steel)^{Footnote 2} and Evraz Inc. NA Canada (Evraz)^{Footnote 3}. The submissions made by the Canadian producers included information supporting their position that continued or resumed dumping of line pipe from South Korea is likely if the CITT’s finding is rescinded.

[4] The CBSA received three responses to the Importer ERQ. Namely, the CBSA received ERQ responses from Marmen Inc. (Marmen)^{Footnote 4}, CCTF Corporation (CCTF)^{Footnote 5} and Global Alloy Pipe & Supply (Bri-Steel Distribution)^{Footnote 6}. The CBSA did not receive any responses to the Exporter ERQ. The CBSA also did not receive a response to the Foreign Government ERQ from the Government of South Korea.

[5] In addition to responding to the ERQ, Evraz^{Footnote 7} and Tenaris Canada^{Footnote 8} submitted supplementary information prior to the closing of the record. The CBSA also received case briefs filed on behalf of Evraz^{Footnote 9} and Tenaris Canada^{Footnote 10}. The case briefs submitted include arguments supporting the position that continued or resumed dumping of line pipe from South Korea is likely if the CITT’s finding is rescinded.

[6] Analysis of information on the administrative record indicates a likelihood of continued or resumed dumping into Canada of line pipe originating in or exported from South Korea should the CITT’s finding be rescinded. This analysis relied upon the following factors:

• Imports of Korean line pipe during the POR
• Export orientation of Korean line pipe producers
• Market conditions
• Global steel production and excess capacity in Korea
• Trade measures in Canada and in other jurisdictions
• Ability of Korean producers of energy tubular products to shift production capacity

[7] For the forgoing reasons, the CBSA, having considered the relevant information on the record, determined on March 30, 2023, pursuant to paragraph 76.03(7)(a) of SIMA that the expiry of the finding in respect of certain line pipe originating in or exported from South Korea is likely to result in the continuation or resumption of dumping of the goods into Canada.

Background

[8] On June 8, 2017, pursuant to subsection 31(1) of SIMA, the CBSA initiated an investigation respecting the dumping of line pipe from South Korea. The investigation followed a properly documented complaint received from EVRAZ Inc. NA Canada of Regina, Saskatchewan, and Canadian National Steel Corporation of Camrose, Alberta (collectively “Evraz”) and Tenaris Global Services (Canada) Inc. of Calgary, Alberta, Algoma Tubes Inc. of Sault Ste. Marie, Ontario, and Prudential Steel Inc. of Calgary, Alberta, (collectively “Tenaris Canada”) (“the complainants”).

[9] On December 5, 2017, pursuant to subsection 41(1)(b) of SIMA, the CBSA made a final determination^{Footnote 11} of dumping respecting subject line pipe originating in or exported from South Korea.

[10] On January 4, 2018, pursuant to subsection 43(1) of SIMA^{Footnote 12}, the CITT found that the dumping of subject line pipe originating in or exported from South Korea has caused injury to the Canadian domestic industry.

[11] On October 31, 2022, pursuant to subsection 76.03(1) of SIMA, the CITT initiated an expiry review of its finding.

[12] On November 1, 2022, the CBSA commenced an expiry review investigation to determine whether the expiry of the finding is likely to result in continued or resumed dumping of the goods from South Korea.

[13] On March 30, 2023, pursuant to subsection 76.03 (7)(a) of SIMA, the CBSA made a determination that the expiry of the finding is likely to result in continued or resumed dumping of the goods from South Korea.

Product definition

[14] The goods subject to this expiry review investigation are defined as:

Carbon and alloy steel line pipe originating in or exported from the Republic of Korea, welded or seamless, having a nominal outside diameter from 2.375 inches (60.3 mm) up to and including 24 inches (610 mm) (with all dimensions being plus or minus allowable tolerances contained in the applicable standards), including line pipe meeting or supplied to meet any one or several of API 5L, CSA Z245.1, ISO 3183, ASTM A333, ASTM A106, ASTM A53-B or their equivalents, in all grades, whether or not meeting specifications for other end uses (e.g. single-, dual-, or multiple-certified, for use in oil and gas or other applications), and regardless of end finish (plain ends, beveled ends, threaded ends, or threaded and coupled ends), surface finish (coated or uncoated), wall thickness, or length, excluding galvanized line pipe and excluding stainless steel line pipe (containing 10.5 percent or more by weight of chromium), and excluding goods covered by the Canadian International Trade Tribunal’s Finding in Inquiry No. NQ-2012-003.

[15] For greater certainty, the product definition includes:

• unfinished line pipe (including pipe that may or may not already be tested, inspected, and/or certified to line pipe specifications) originating in the Republic of Korea and imported for use in the production or finishing of line pipe meeting final specifications, including outside diameter, grade, wall-thickness, length, end finish, or surface finish and
• non-prime and secondary pipes ("limited service products")

Classification of imports

[23] Prior to January 1, 2022, the subject goods were usually classified under the following tariff classification numbers:

1. 7304.19.00.31
2. 7304.19.00.32
3. 7304.19.00.33
4. 7304.19.00.34
5. 7304.19.00.39
6. 7304.19.00.41
7. 7304.19.00.42
8. 7304.19.00.43
9. 7304.19.00.44
10. 7304.19.00.49
11. 7305.11.00.31
12. 7305.11.00.32
13. 7305.11.00.33
14. 7305.11.00.34
15. 7305.11.00.39
16. 7305.12.00.31
17. 7305.12.00.32
18. 7305.12.00.33
19. 7305.12.00.34
20. 7305.12.00.39
21. 7305.12.00.41
22. 7305.12.00.42
23. 7305.12.00.43
24. 7305.12.00.44
25. 7305.12.00.49
26. 7305.19.00.12
27. 7305.19.00.13
28. 7305.19.00.14
29. 7305.19.00.15
30. 7306.19.00.10
31. 7306.19.00.90

[24] Beginning January 1, 2022, under the revised customs tariff schedule, subject goods are normally classified under the following tariff classification numbers:

1. 7304.19.00.13
2. 7304.19.00.14
3. 7304.19.00.15
4. 7304.19.00.16
5. 7304.19.00.19
6. 7304.19.00.23
7. 7304.19.00.24
8. 7304.19.00.25
9. 7304.19.00.26
10. 7304.19.00.29
11. 7304.19.00.61
12. 7304.19.00.62
13. 7304.19.00.63
14. 7304.19.00.64
15. 7304.19.00.69
16. 7304.19.00.71
17. 7304.19.00.72
18. 7304.19.00.73
19. 7304.19.00.74
20. 7304.19.00.79
21. 7305.11.00.31
22. 7305.11.00.32
23. 7305.11.00.33
24. 7305.11.00.34
25. 7305.11.00.39
26. 7305.12.00.31
27. 7305.12.00.32
28. 7305.12.00.33
29. 7305.12.00.34
30. 7305.12.00.39
31. 7305.12.00.41
32. 7305.12.00.42
33. 7305.12.00.43
34. 7305.12.00.44
35. 7305.12.00.49
36. 7305.19.00.31
37. 7305.19.00.32
38. 7305.19.00.33
39. 7305.19.00.34
40. 7305.19.00.39
41. 7306.19.00.10
42. 7306.19.00.90

[25] This listing of tariff classification numbers is for convenience of reference only. The tariff classification number provided may include goods that are not subject goods and subject goods may be imported into Canada under tariff classification numbers other than those provided. Refer to the product definition for authoritative details regarding the subject goods.

Period of review

[26] The period of review (POR) for the CBSA’s expiry review investigation is from January 1, 2019 to September 30, 2022.

Canadian industry

[27] Information on the administrative record of this expiry review investigation indicates that the composition of the Canadian Industry has not changed since the original inquiry and that the Canadian industry for certain line pipe is comprised of the following producers:^{Footnote 14}

• Bri-Steel
• Evraz and
• Tenaris Canada

[28] As such, based on the information on the record, the CBSA has based its estimates of domestic production on the combined production of the above-named producers, each of whom provided a response to the CBSA’s ERQ sent to the domestic producers of line pipe.^{Footnote 15}

Bri-Steel Manufacturing

[29] Integris International Inc. dba Bri-Steel Manufacturing (Bri-Steel) was established in 2011 and is a domestic producer of pipe with outside diameters ranging from 16 inches to 36 inches.^{Footnote 16} Bri-Steel produces pipe using Thermal Pipe Expansion (TPE), whereby mother tube is used as an input in the production of line pipe.^{Footnote 17}

[30] During the POR Bri-Steel produced line pipe at one production facility located in Edmonton, Alberta.^{Footnote 18}

Evraz Inc. NA Canada

[31] Evraz Inc. NA Canada (Evraz) was incorporated in 1956 under the name of Prairie Pipe Manufacturing Co. Ltd. The company commenced operations in 1957 with the completion of construction of an ERW pipe mill in Regina. In 1959, the assets of Interprovincial Steel Corp. Ltd. (“IPSCO”) were acquired and production of hot rolled steel flat products began in 1960. Manufacturing capabilities were subsequently expanded through a series of acquisitions and plant constructions.

[32] In July 2007, a wholly owned subsidiary of SSAB Svenkst Stahl of Sweden acquired all the outstanding shares and subsidiaries of IPSCO. As a result of a subsequent structural reorganization, IPSCO covered only Canadian operations, but excluding coil processing in Scarborough, Ontario. In June 2008, Evraz Group S.A. acquired all of IPSCO’s shares and subsidiaries from SSAB. The outcome of this purchase resulted in the transfer of IPSCO’s Canadian steel mill and tubular operations to Evraz. In October 2008, IPSCO Inc. became by name “Evraz Inc. NA Canada”, which covered by January 2009 all Canadian steel tubular and flat product production.

[33] Following the corporate restructuring on September 30, 2014, Evraz became an indirect, wholly-owned subsidiary of EVRAZ Group SA, which transferred 51% ownership to its wholly-owned subsidiary EVRAZ North America Ltd. (the UK corporate entity) and retaining the remaining 49% of ownership. In January 2020, Canadian National Steel Corporation, an entity formerly affiliated with Evraz Inc. NA Canada and which housed Camrose assets, also became a division of Evraz Inc. NA Canada.^{Footnote 19}

[34] Evraz can produce Electric resistance welded (“ERW”) line pipe, seamless line pipe, and large diameter line pipe using the different submerged arc welding processes (“SAW”, “LSAW”, etc.).^{Footnote 20}

[35] During the POR Evraz produced line pipe at three production facilities located in Red Deer, Alberta, Camrose, Alberta and Regina, Saskatchewan.^{Footnote 21}

Tenaris Canada

[36] For purposes of the expiry review investigation, Tenaris Canada collectively refers to three separate legal entities, owned by Tenaris SA^{Footnote 22}, that are operated as a coordinated Canadian organization. The three companies are:

• Algoma Tubes Inc. (Sault Ste. Marie, Ontario)—producer of seamless line pipe and oil country tubular goods (OCTG)
• Prudential Steel ULC (Calgary, Alberta)—producer of ERW line pipe and OCTG and
• Tenaris Global Services (Canada) Inc. (Calgary, Alberta)—strip distributor and importer of record for Tenaris seamless products produced outside Canada

[37] Tenaris Canada is part of a network of associated companies involved in the production of line pipe in Canada and other countries. Tenaris Canada does not import line pipe from South Korea, but does from non-subject countries.^{Footnote 23}

[38] Tenaris has played a role in the Canadian line pipe market since the 1980s, when it acted as a spot importer of Tenaris-produced foreign line pipe to Canada. The role of the company has since evolved and today Tenaris Canada produces seamless and ERW line pipe in Canada. Together the Tenaris companies in Canada employ about 850 people, including those at two manufacturing facilities (pipe manufacturing in Sault Ste. Marie, ON and connections and accessories manufacturing in Nisku, AB), a commercial headquarters located in downtown Calgary, and service facilities (Bienfait SK, Red Deer AB, Sherwood Park AB, and Grande Prairie AB).^{Footnote 24}

Canadian market

[39] The imports of certain line pipe during the POR are presented in Table 1 and Table 2 below. The CBSA cannot release specific quantitative data respecting the value and volume of Canadian production of line pipe sold for domestic consumption as it would lead to the disclosure of confidential information.

[40] Total imports and the Canadian market were volatile during the POR as a number of macroeconomic issues disrupted the Canadian line pipe market.

[41] Oil and gas markets collapsed in early 2020 due to the onset of the COVID-19 pandemic and a breakup in dialogue between the Organization of the Petroleum Exporting Countries (OPEC) and Russia over oil-production cuts during the pandemic.^{Footnote 27} Global oil and gas prices began to recover beginning in mid-2020. By the end of 2020, drilling activity in Canada recovered considerably. The recovery to oil and gas markets continued throughout 2021 and early 2022. This strong recovery in oil prices allowed for increased drilling activity and heightened demand for line pipe in 2022, especially in the North American markets. CBSA research and information on the record indicates that the North American line pipe market had a better recovery than other global markets, making the Canadian market especially important for line pipe exporters. Information on the record from Tenaris Canada suggests that the Canadian market for line pipe at the end of the POR is still less than the market size in 2018. Analysis of the current line pipe market and forecasts are discussed further in the consideration and analysis section of the report.

Enforcement data

[46] As shown in Table 3 below, the total amount of anti-dumping duty collected on imports of subject goods from South Korea during the POR was collectively $6,851,258. As a percentage of the total value for duty, the anti-dumping duty assessed during the POR was 8.7%. Of note, this number is potentially understated. Based on the analysis of information collected during the 2022 re-investigation, the CBSA determined that certain exporters did not notify the CBSA in a timely manner of changes to certain conditions as required and failed to adjust their selling prices accordingly.

Parties to the proceedings

[47] On November 1, 2022, a notice concerning the CBSA’s initiation of the expiry review investigation was sent to Canadian producers and potential importers and exporters of line pipe. All of these parties were also sent an ERQ.

[48] The ERQ requested information relevant to the consideration of the expiry review factors, as listed in subsection 37.2(1) of the Special Import Measures Regulations (SIMR).

[49] Three Canadian producers, Bri-Steel^{Footnote 33}, Evraz^{Footnote 34} and Tenaris Canada^{Footnote 35} participated in the expiry review investigation and provided ERQ responses. Additionally, representations were filed on behalf of Evraz and Tenaris Canada^{Footnote 36} prior to the closing of the record.

[50] The CBSA received three responses to the Importer ERQ. Namely, the CBSA received ERQ responses from Marmen Inc. (Marmen)^{Footnote 37}, CCTF Corporation (CCTF)^{Footnote 38} and Global Alloy Pipe & Supply (Bri-Steel Distribution)^{Footnote 39}. The CBSA did not receive any responses to the Exporter ERQ.

[51] Case briefs were received from counsel on behalf of Tenaris Canada and Evraz.^{Footnote 40} No reply submissions were filed in response to the two case briefs received by Canadian producers.

Information considered by the CBSA

Position of the parties

Consideration and analysis

[85] In making a determination under paragraph 76.03(7)(a) of SIMA whether the expiry of the finding is likely to result in the continuation or resumption of dumping of the goods, the CBSA may consider factors identified in subsection 37.2(1) of the SIMR, as well as any other factors relevant in the circumstances.

Likelihood of continued or resumed dumping

[86] Guided by the aforementioned factors and having considered the information on the administrative record, the following list represents a summary of the factors analyzed by the CBSA in conducting this expiry review investigation with respect to dumping:

• Imports of Korean line pipe during the POR
• Export orientation of Korean line pipe producers
• Market conditions
• Global steel production and excess capacity in Korea
• Trade measures in Canada and in other jurisdictions
• Ability of Korean producers of energy tubular products to shift production capacity

[87] As mentioned earlier in this report, the CBSA received ERQ responses from three Canadian producers. Two of the responding Canadian producers, Evraz and Tenaris Canada, also submitted supplementary information prior to the closing of the record. The CBSA received ERQ responses from three importers and did not receive responses from exporters or producers of subject goods. The CBSA relied on the ERQ responses, articles, reports and CBSA research, and the representations and case briefs on the administrative record in its analysis of whether continued or resumed dumping is likely.

Imports of Korean line pipe during the POR

[88] Subject goods continued to be imported during the expiry review POR, especially during periods when costs and prices increased. According to CBSA enforcement stats, subject imports represented 39% of imports during the POI of the original investigation,^{Footnote 69} while line pipe originating in or exported from Korea represented 13.8% of imports during the POR.^{Footnote 70} This reduction in the volume of subject good imported can be partially explained as the effect of the imposition of SIMA duties and the inability or unwillingness for most exporters to maintain sales at normal values that reflect current market conditions.

[89] It’s important to note that while subject imports decreased relative to the period before the imposition of SIMA duties, the subject goods still represented a considerable share of the total apparent market even with anti-dumping duties in place. Subject goods were exported to Canada in greater quantities when normal values did not reflect market conditions.

[90] The assessment of SIMA duties on subject goods during the POR also serves as clear evidence that line pipe from Korea was dumped during this period. According to the CBSA’s enforcement stats, SIMA duties were collected each year of the POR, totalling over $6.8 million.

[91] Patterns of increased subject goods entering Canada during periods of outdated normal values and the significant amount of SIMA duties collected during the POR support the Canadian producers’ stance that resumed and/or continued dumping is likely if the finding were to be rescinded

Export orientation of Korean line pipe producers

Policies and plans in Korea

[92] Information on the record confirms that line pipe producers in Korea continue to be export oriented as indicated by government policies and plans.

[93] The Government of Korea initiated a KRW 23.9 billion R&D project in 2021 in conjunction with Hyundai Steel, SeAH and Husteel, in order to develop new markets. One of the objectives is to develop oil/gas line pipe with outside diameter of 16 inches or more for use in extreme conditions, including in low temperature conditions in Canada.^{Footnote 71} The objective of the joint project between government and private sector is to develop a manufacturing process for extremely low temperature, corrosion resistant structural steel pipe, and assist in securing the first mover’s advantage in the markets for extreme environment line pipe/pipe of oil wells.^{Footnote 72}

[94] South Korean President Yoon Suk-yeol said that the government would aid companies with the promotion of exports to key regions like Southeast Asia to counter slowing economic growth. “We have to overcome the kind of complex global crisis as one facing us now through the promotion of exports”.^{Footnote 73}

[95] Information on the record indicates that Hyundai Steel is pre-emptively developing its steel pipe business capabilities and expanding its export portfolio as the energy market becomes more unstable due to the war in Ukraine and indications of a global recession. According to data from the Korea Iron and Steel Association, steel pipe exports from January to October 2022 were up 15.4% from the same period a year before.^{Footnote 74}

Export volumes

[96] In 2022, South Korea was the third largest exporter of steel products in the world. While many countries experienced large decreases in steel exports in 2022, Korean steel exports remained stable at 26,264,500 MT, according to OECD steel market developments Q4 2022 report. Information on the record indicates that the Korean line pipe market is export oriented. The steel pipe industry in Korea has had annual production capacity ranging between approximately 9 million to 11 million tonnes. During that time, the annual estimated Korean market for steel pipe has never exceeded 4.3 million tonnes.^{Footnote 75}

[97] Information on the record also shows that the domestic market for pipe and tube products is limited because of the lack of oil and gas reserves in Korea. This suggests that Korean producers of pipe and tube products are export oriented.

[98] By the end of the POR, South Korean exports rose sharply by the first quarter of 2022 from a hike in international oil prices and an increase in demand for liquefied natural gas (LNG). According to the Korea Iron & Steel Association, domestic steelmakers exported 445,009 tons of steel pipe products, up 30.5% from a year prior. Korea’s steel pipe shipments to the U.S. jumped 50.5% to 276,973 tonnes alone.^{Footnote 76}

Marketing and sales strategies of line pipe producers in Korea

[99] The marketing and sales strategies of producers of line pipe in Korea demonstrate a continued focus on export markets. In fact, excerpts taken from the websites of known line pipe producers in Korea emphasize global marketing strategies and the producers’ capacities to fulfill export sales. Histeel Co., Ltd. (Histeel) is a line pipe producer located in Korea. Histeel’s Q3 2022 report says that the U.S. market is the most important market for steel pipe companies and that they have established an overseas sales subsidiary for steel products to target the North American market. Histeel Pipe & Tube Inc. plans on carrying out marketing campaigns for the North American markets.^{Footnote 77} Histeel’s marketing activities are very similar to other more established Korean pipe producers.

[100] In summary, information on the record indicates that Korean pipe and tube producers are export oriented supported by government policies & plans in Korea, export volumes representing a significant portion of line pipe sales, and the marketing and sales strategies of line pipe producers in Korea. In light of factors discussed above, the CBSA finds that producers in Korea are likely to continue to rely on export markets.

Market conditions

Global market conditions

[101] CBSA analysis of current market conditions suggests that the global line pipe market faces a number of macroeconomic challenges moving forward. The general outlook for the global economy has turned pessimistic in 2023. Strict COVID-19 restrictions in China, the conflict in Ukraine, multi-decade high inflation and interest rate increases have all lead to softened forecasts for the global economy and specifically price forecasts for oil and gas.

[102] According to the OECD, world GDP growth is expected to decelerate from 3.1% in 2022 to 2.2% in 2023. The global economy is experiencing persisting supply bottlenecks, rising input costs and the continued effects of the pandemic weighed down on the pace of global recovery. Rising inflation is creating uncertainty in consumer confidence and consumer spending is expected to decrease, especially in the most vulnerable households.^{Footnote 78} Lower disposable income negatively impacts the housing construction and automotive sector, both significant steel-consuming sectors.

[103] According to the OECD, global steel demand will be stagnant in 2023. Previously anticipated demand growth forecasts have turned pessimistic and the outlook for global steel markets have deteriorated sharply. The OECD lists the following factors that are negatively impacting the outlook for steel markets:^{Footnote 79}

• Global economic slowdown and reduced consumer confidence
• High energy prices
• Accelerating inflation
• Russian war vs. Ukraine and supply chain disruptions
• A sharp downturn in the Chinese economy

[104] Information available on the administrative record demonstrates that West Texas Intermediate (WTI) prices (a benchmark in oil prices) faced setbacks in 2020. Looking at the POR specifically, WTI oil prices increased from 45.41 USD/barrel to 61.06 USD/barrel in 2019, hit historic lows in April 2020, but rebounded to 48.52 USD/barrel by the end of 2020, increased to 75.21 USD/barrel in 2021, and had a strong 2022 hitting 123.70 USD/barrel at its peak and returning to 79.49 USD/barrel by the end of the POR.

[105] 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 pipe and tube products. In light of the collapse in oil prices and the declines in drilling activity during the POR, demand for line pipe also faced challenges during the POR, particularly during 2020. This is evident in Table 2: Import of line pipe during the POR, where line pipe imports were at their lowest in 2020.^{Footnote 80} Stronger oil prices in 2022 improved demand temporarily, but due to macroeconomic factors discussed earlier, 2023 forecasts for oil prices and by proxy line pipe have dampened.

[106] To summarize, CBSA analysis of global economic conditions suggest that the global line pipe market will face significant challenges that increase the likelihood of continued/resumed dumping. Slowing GDP growth, decreased consumer confidence and rising interest rates are expected to negatively affect the housing construction and automotive sectors, which are both significant steel consuming sectors. Weakening forecasts of the oil and gas industry, such as reduced drilling activity and capital investment, are forward indicators that suggest a weakening line pipe market. CBSA analysis of global economic conditions suggest that Korean line pipe producers facing these challenges will be pressured to win contracts in order to keep market share, and as shown during the POR, continue to dump subject goods into export markets.

Hot-rolled coil costs

[107] Tenaris Canada stated in their submissions that hot rolled coil costs have continued to rise and that the volume of subject goods being dumped increases when this occurs. Tenaris Canada argue that while HRC prices have declined since peaking in March 2022, prices in September 2022 remain 15% higher than HRC prices in 2016-2017, the time period of the original investigation.

[108] The CBSA considered all information on the record in analyzing HRC prices and their impact on Korean producers and the Canadian market. HRC prices peaked in June 2021 and have been decreasing sharply since then, erasing most of their 2021 gains. CBSA analysis shows that iron ore and scrap prices followed similar decreases but coking coal prices have remained high. With prices of steel products falling more than the prices of the raw materials necessary to make them, steel company margins are being squeezed and stand at historic lows in 2022.^{Footnote 81} Confidential information on the record outlines HRC prices between January 2021 and November 2022 and supports the argument of HRC prices peaked in June 2021 and declined significantly from that peak, especially by the end of 2022.

[109] Another factor that is affecting steel prices is that steel consumption is expected to remain stagnant in 2023. Rising interest rates, tightening monetary policy, high inflation, weak consumer spending and higher energy prices are expected to impact steel demand significantly and are putting downward pressure on steel prices moving forward.^{Footnote 82}

[110] CBSA analysis of hot-rolled coil prices and their input costs show that while prices peaked during the POR and have decreased since, the prices of raw material are still higher than the period of the original investigation. Furthermore, coking coal prices have remained high and are putting upward pressure on hot rolled coil producers which puts upward pressure on Korean line pipe producers.

Line pipe pricing

[111] The CBSA continued its analysis of market conditions by looking at line pipe prices in comparison to the changes to HRC prices. Unsurprisingly, line pipe prices followed a similar pattern as HRC prices but slightly lagged the raw material fluctuation discussed above.

[112] Despite similar patterns in the price of hot-rolled coil and line pipe, CBSA analysis showed that line pipe prices did not increase as much as HRC prices. For example, in Korea the price of HRC had risen by KRW 600,000 per tonne in 2021 but line pipe prices increased by just KRW 400,000 per tonne in the same period.^{Footnote 83} Line pipe producers purchased more expensive HRC but were unable to increase prices of line pipe to fully account for the increase in raw material costs.

[113] Tenaris Canada argues that current low prices in unprotected markets predict future dumping of subject goods into Canada. Tenaris Canada compared the prices of line pipe sold to Canada with the prices of like goods sold to Vietnam and Japan, two countries without anti-dumping duties in place. If Canadian anti-dumping protection is removed, Korean exports would likely be priced at these lower prices to gain sales volumes and customers. Although there are a number of reasons that can account for the premium on line pipe sales to Canada versus Vietnam and Japan, up to 68% and 16% differences in 2022 prices respectively represent a significant difference that can be partially attributed to Korean producers willingness to sell like goods to export markets at lower prices when there is no anti-dumping protection in place.

[114] The Canadian market faced a number of challenges but made a relatively strong recovery towards the end of the POR compared to other global markets. As explain above, forecasts for the global economy, HRC prices and line pipe prices have all weakened. Korean exporters of line pipe will be challenged by these weakened forecasts and are experiencing upward pressure on HRC prices that have not been accompanied by comparable increases in line pipe prices. In order for Korean exporters to avoid losing market share and sales volume, they generally need to compete on the basis of price. The significant difference of line pipe sales to Canada compared to Vietnam and Japan reflect Korean producers willingness to sell like goods to export markets at lower prices in weakening economic conditions. Weak market conditions, specifically global economic challenges, uncertainty in raw material costs, and fierce competition prohibiting line pipe prices to fully reflect raw material cost increases, support the likelihood of continued or resumed dumping. With increased financial risk due to rising interest rates, substantial excess capacity of Korean producers (discussed in detail below), and the appeal of the Canadian line pipe market, the CBSA concludes that it is reasonably likely that Korean exporters would be more likely to dump goods into the Canadian line pipe market amid worsening market conditions.

Global steel production and excess capacity in Korea

Production and capacity

[115] 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 84} 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.

[116] According to the OECD, global crude steelmaking capacity increased to over 2,460 million MT in 2022, 1.2% higher than its 2021 level.^{Footnote 85} This marks four consecutive years of global steelmaking capacity increases. Information on the record suggests that global steel production as a share of capacity, a rough indicator of the global utilization rate, could decrease from 78.5% in 2021 to 77.1% in 2022.^{Footnote 86}

[117] Information on the record indicates that global steel demand is weakening, only worsening global steel overcapacity issues. According to the OECD’s most recent Steel Market Developments report, the outlook for global steel markets has sharply deteriorated due to the current global economic slowdown, accelerating inflation, the effects of the ongoing war in Ukraine, and an economic downturn in China.^{Footnote 87} Looking forward, the OECD anticipates that global steel demand will be stagnant in 2023.^{Footnote 88}

[118] Overcapacity in the Chinese steel industry has been a well-recognized problem over a number of years, including throughout the POR. China accounted for 54% of the global steel production in 2021 and is the biggest driver behind the excess global capacity problem the steel industry faces. Korean steel exporters have increased capacity similarly to Chinese pipe and tube producers. Line pipe producers in China will continue to aggressively compete for export markets, which compete with Korean line pipe producers. Chinese, and Korean pipe and tube producers have shown little desire to decrease capacity and/or production despite stagnant demand.

[119] 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 89} In addition, information on the record confirms that China disengaged from the Global Forum on Steel Excess Capacity (GFSEC) in 2019.^{Footnote 90}

[120] Information on the record indicates that the line pipe producers in Korea face the same overcapacity challenges as the rest of the steel market globally. Evraz sets out the details of the capacity of Korean producers in Table 4: Capacity of Korean API 5L line pipe producers.^{Footnote 91} Considering the Canadian apparent market size in 2023, based on confidential estimates on the record, Korean pipe producers have significant capacity available to introduce more line pipe into the Canadian market.

[121] Information on the record shows that Korean exporters of line pipe have excess capacity to utilize. Table 5: Total Korean exports of line pipe and OCTG provides data on the total exports of line pipe and OCTG from Korea. When comparing total exports of pipe and tube products to the capacity of the five exporters detailed in Table 4 above, it’s apparent that Korean producers have significant production capacity available to cover the entire Canadian market.

[122] Although the Canadian market for line pipe is expected to continue to experience challenges, it remains an attractive destination for Korean exports of line pipe. The excess capacity in global, and more specifically Korean, steel pipe production remains a substantial problem. Korean producers continue to increase capacity despite declining expectations for the line pipe market in 2023.

Demand

[123] Information on the record shows that line pipe demand during the POR declined substantially in 2020 due to the COVID-19 pandemic and declining oil prices. As discussed previously, the number of oil rigs is a major indicator of line pipe demand. The number of oil rigs operating dropped substantially to 1,016 globally in October 2020. The worldwide rig count increased considerably since October 2020 and was up to 1,890 globally by the end of the POR. The rebound in rig counts in 2021 and 2022 supports the fact that line pipe demand was up considerably from its 2020 low at the end of the POR.^{Footnote 93} With that being said, rig counts were still well below 2018 levels. Looking forward, rig count forecasts, and by proxy, line pipe forecasts have dampened due to the macroeconomic factors discussed previously.^{Footnote 94}

[124] Demand for line pipe depends on demand for energy products, such as oil and natural gas, which require pipe capable of gathering, transmitting, and distributing these products under pressure. The main factors that influence demand for certain welded line pipe include overall economic growth, oil and natural gas prices, oil and gas production and rig counts, and the number of projects for new construction and repair of pipelines.

[125] Referring back to Table 1: Imports of line pipe during the POR, demand for line pipe was improving generally speaking during the POR. Information on the record suggests that this was well below market size in 2018 though. Furthermore, evidence on the record indicates recent weakening economic conditions have dampened line pipe expectations.

[126] Canadian producers and purchasers indicated in their questionnaire responses that line pipe demand has decreased since the start of the POR. In general, the market was healthy in 2018, declined in 2019 and 2020, and started to recover between the end of 2020 and current day. Demand for line pipe is estimated to be less than what it was in 2018 today, despite the recent recovery. Actual forecasts provided by Canadian producers were considered confidential.

[127] In summary, global steel overcapacity continues to remain a major threat to the line pipe industry. Korean excess pipe and tube capacity, weakening demand, and weakening global market conditions all support the position that overcapacity will remain a threat to the Canadian line pipe market. Analysis of the overcapacity in the global line pipe industry supports the position that the continued dumping of subject goods would be likely without anti-dumping duties in place.

Trade measures in Canada and other jurisdictions

[128] Counsel for the Canadian producers argued that Korea has a history of dumping steel pipe products into the Canadian market and that this is evident because of the number of anti-dumping findings in place with respect to steel pipe products originating in or exported from Korea. In addition to subject line pipe, the CBSA has anti-dumping measures in force on carbon steel welded pipe, cold-rolled steel, concrete reinforcing bar, copper pipe fittings, copper tube, corrosion-resistant steel sheet, hollow structural sections, large power transformers, OCTG, small power transformers and steel plate.^{Footnote 95}

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

[130] Certain measures referenced in the table above have recently undergone administrative reviews by the respective investigating authorities. For example, in 2021 the United States Department of Commerce (US DOC) conducted a sunset review with respect to Welded line pipe (≤24” outside diameter) A-580-876, where the Department of Commerce made a finding of likely resumed or continued dumping if the finding were to expire.^{Footnote 97} In the most recent administrative review of the finding previously mentioned, Nexteel and SeAH were found to have company specific weighted average dumping margins of 2.6% and 4.2% respectively.^{Footnote 98} Similarly, on October 31, 2022, the US DOC found that revoking the measure in force on welded stainless steel pipe from South Korea would likely lead to continued or resumed dumping.^{Footnote 99}

[131] The presence of these trade measures, further limit the markets that Korean line pipe can access, thereby increasing the risk of diversion of subject goods to Canada. While the anti-dumping measures currently in place in Canada with respect to the subject goods have limited imports of Korean line pipe during the POR when they reflect current market conditions, the removal of these measures is likely to result in an increase of shipments to Canada at dumped prices.

Ability of Korean 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 oil country tubular goods and other tubular products such as standard pipe and piling pipe.^{Footnote 100} This was confirmed by Evraz and Tenaris Canada, two producers of like goods in Canada, who confirm that they use certain common machinery and equipment for the production of line pipe and in the production of other tubular products.^{Footnote 101} Likewise, evidence on the record suggests that a number of companies in Korea hold active licenses/certifications to produce both API 5L line pipe and API 5CT oil country tubular goods.^{Footnote 102} 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 23, 2020, the CBSA determined that the expiry of the order in respect of certain OCTG from Korea was likely to result in the continuation or resumption of dumping of the goods exported to Canada.^{Footnote 103} The CITT subsequently continued its order. Notably, OCTG is also subject to trade measures in the United States as previously mentioned.^{Footnote 104} As markets for Korean 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 if the finding in question in this expiry review was rescinded.

Conclusion

[135] For the purpose of making a determination in this expiry review investigation, the CBSA conducted its analysis within the scope of the factors found under subsection 37.2(1) of the SIMR and considering any other factors relevant in the circumstances. Based on the foregoing analysis of pertinent factors and consideration of information on the record, on March 30, 2023 the CBSA made a determination pursuant to paragraph 76.03(7)(a) of SIMA that the expiry of the finding made by the CITT on January 4, 2018, in Inquiry No. NQ-2017-002, in respect of certain line pipe originating in or exported from South Korea is likely to result in the continuation or resumption of dumping of the goods into Canada.

Future action

[136] The CITT has now initiated its expiry review to determine whether the continued or resumed dumping is likely to result in injury. The CITT’s Expiry Review schedule indicates that it will make its decision by September 6, 2023.

[137] If the CITT determines that the expiry of the finding with respect to the goods is likely to result in injury, the finding will be continued in respect of those goods, with or without amendment. If this is the case, the CBSA will continue to levy anti-dumping duties on dumped importations of the subject goods.

[138] If the CITT determines that the expiry of the finding with respect to the goods is not likely to result in injury, the finding will be rescinded in respect of those goods. Anti-dumping duties would then no longer be levied on importations of the subject goods, and any anti-dumping duties paid in respect of goods that were released after the date that the finding was scheduled to expire will be returned to the importer.

Contact us

[139] For further information, please contact the officer listed below:

• Telephone:
• Jordan Harris: 343-573-3003

Email: simaregistry-depotlmsi@cbsa-asfc.gc.ca