Wacker’s and Simcoa’s joint brief to the ITC

Wacker and Simcoa decided to join forces to fight Ferroglobe’s silicon metal dumping case against imports from Australia, Brazil, Kazakhstan and Norway. In its prehearing brief, the two companies’ used many of the same arguments that Elkem and Dow Silicones used.

Wacker and Simcoa wrote: “This final investigation represents the culmination of an untoward effort by Petitioner Ferroglobe to extend and solidify its dominance of the US silicon metal market. We respectfully request that the International Trade Commission listen to the array of US voices (Dow Corning, Wacker, REC Silicon, Momentive Performance Materials, Alcoa, and Service Aluminum to name but a few) that are deeply concerned about Ferroglobe’s US market power and then follow the facts demonstrating that subject imports from Australia, Brazil, Kazakhstan, and Norway have not caused material injury, nor threaten material injury, to the U.S. industry producing silicon metal.”

* At its core, this case is about Ferroglobe’s efforts to reinforce its control of the US silicon market. It is unquestioned that Ferroglobe is the dominant company in the US (and global) silicon metal market. Ferroglobe’s own 2017 20-F financial statements explain that Petitioner now controls nearly one-third of the global merchant market and over 80% of the North American merchant market. The removal of producers in Brazil, Australia, Norway, and Kazakhstan from the U.S. market due to these trade actions will lead to Ferroglobe controlling over 90% of the US merchant market via both its US production operations and its overseas plants in South Africa, Canada, and Europe.

*Ferroglobe is executing a well-established and publicly announced corporate strategy to exclude the last non-Ferroglobe affiliated foreign producers from the U.S. market—this is nothing short of a brazen effort to seize market share and exert monopoly power. If successful, Ferroglobe’s strategy will yield supply shortages in the US market – a market in which US demand cannot be met by U.S. suppliers – and will harm important downstream U.S. industries (i.e., the vital polysilicon, silicones, and aluminum sectors) and the thousands of U.S. jobs supported by them.

* The two companies maintained that the temporary price decline for silicon metal coincided with: (1) a global price decline (and subsequent rise), consistent with the ordinary business cycle for silicon metal; (2) the merger between Globe Specialty Metals and Grupo FerroAtlántica, and (3) the US market entry of Mississippi Silicon.

* Ferroglobe has employed an aggressive playbook to ensure its dominance of the U.S. market…Ferroglobe then turned to the trade remedy laws in multiple jurisdictions – first Canada (dismissed), then the USA (ongoing), and most recently Europe (ongoing) – to eliminate its competition. Ferroglobe also has employed questionable business practices to thwart its US competitors, Mississippi Silicon and Dow Corning. The public record reflects, for example, that Ferroglobe did everything in its power to slow or thwart Mississippi Silicon from building its plant and starting operations.

* Ferroglobe’s tactics also extend to pricing. Ferroglobe’s CEO announced in late 2016 to an industry conference that Petitioner intended to raise prices, eliminate discounts, and change its price indexing practices. In response, US and global silicon metal prices quickly rose and are now above the price levels before the temporary downturn and still rising. Ferroglobe has claimed that its reduced financial performance in 2016 and 2017 was due to subject imports.

* Ferroglobe is both the industry and price leader, notwithstanding overwhelming evidence that the Petitioner’s products and service are deficient. Purchaser declarations enclosed with this brief detail a myriad of problems experienced by Ferroglobe’s customers, including missing delivery windows, shirking its promises, supplying substandard product, and abandoning aluminum producers when higher-margin, contract sales in the chemical sector become available.

* Ferroglobe’s customers are also scared by Petitioner’s ability to switch production to ferrosilicon, a profit-enhancing practice previously employed by Ferroglobe (but one that both Dow Corning and Mississippi Silicon can’t do.)

* The CITT found that Ferroglobe’s Canadian operations had not been injured by imports and that any injury was due to global market developments to which Ferroglobe is a major (and, even dominant) contributor. For example, the CITT concluded that “{a}ny injury suffered by {the domestic ndustry} was due to unrelated factors, including the global pricing downturn, Ferroglobe’s strategic decision with respect to imports from non-subject affiliates, and {the domestic industry’s} high raw material costs.”

* The CITT also found that Ferroglobe employed questionable business practices and aggressive competitive behavior to corner the market. For example, the CITT (at para. 69) stated that “…Ferroglobe’s corporate practice precludes competition from foreign subsidiaries in markets where it owns a domestic producer.”
* The CITT’s findings are highly probative of Ferroglobe’s behavior and tactics in the U.S. market and should be carefully considered by the Commission to assess Petitioner’s claims of alleged injury and causation by subject imports.

* The domestic industry’s short-term prospects are strong, and so cumulated imports will not impact its bottom line imminently. Each country individually does not threaten material injury to the domestic industry, as each lacks the capacity and the incentive to do so.

* Finally, no critical circumstances exist for Australia. The Commission applies a very high legal standard in such analysis, and the sole Australian prouder/exporter, Simcoa, is operating at full capacity and has low inventories. These facts, as well as Simcoa’s small size compared with the US market, command a negative critical circumstances determination.

* We endorse Dow Corning’s position that it is a significant US producer with substantial interests as a domestic manufacturer and, as such, is part of the U.S. domestic industry. Indeed, artificially excluding Dow’s operations from the domestic industry creates a distorted picture of the domestic industry’s condition and performance during the investigation. Accordingly, the Commission should include all three companies in the domestic industry in its final determination.

* Silicon metal is not a commodity product. Instead, silicon metal going to different sectors, including primary aluminum, secondary aluminum, silicones, and polysilicon, is very specific to each sector. The CITT recently described the product as “procured almost as though it is a capital good, in contrast to a typical commodity; it is bought and sold on the basis of clearly specified quantities, technical specifications, delivery schedules and payment terms, as opposed to price alone” and “not sold on the basis of the lowest price.” We agree with this characterization, and so should the Commission.

* Purchasers do not switch suppliers to meet the best price offer. Instead, silicon metal is a highly differentiated product, and customers demand rigorous and particularized quality, delivery, and qualification requirements.

* After the merger was announced, purchasers had a greater interest in seeking new suppliers, particularly those purchasers that relied mostly on Globe and FerroAtlantica for their silicon metal supply. For example, purchaser [ ] states: “When we place our orders for silicon, we have no knowledge of where the origin of the material might be coming from. For instance, our annual contract with FerroGlobe, they could supply us material from their plant outside of US, such as France, Spain, and South Africa, which they have done. All we want is diversity in supply with minimum of two suppliers.”

Attached is the full brief:

Wacker and Simcoa Prehearing Brief Narrative – PUB

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