Magnesium From China and Russia Investigation Nos. 731-TA-1071-1072 (Review) Publication 4214 February 2011 Washington, DC 20436 U.S. International Trade Commission COMMISSIONERS Deanna Tanner Okun, Chairman Irving A Williamson, Vice Chairman Charlotte R. Lane Daniel R. Pearson Shara L. Aranoff Dean A. Pinkert Karen Laney Acting Director of Operations Staff assigned Mary Messer, Investigator Vincent DeSapio, Industry Analyst Aimee Larsen, Economist Charles Yost, Accountant Peter Sultan, Attorney Steven Hudgens, Statistician George Deyman, Supervisor Investigator Address all communications to Secretary to the Commission United States International Trade Commission Washington, DC 20436 U.S. International Trade Commission Washington, DC 20436 www.usitc.gov Magnesium From China and Russia Investigation Nos. 731-TA-1071-1072 (Review) Publication 4214 February 2011 CONTENTS Page Determinations ................................................................. 1 Views of the Commission ......................................................... 3 Part I: Introduction and overview Background .................................................................. I-1 The original investigations...................................................... I-2 Summary data................................................................ I-3 Related investigations.......................................................... I-7 Title VII investigations and reviews ............................................ I-7 Other investigations......................................................... I-10 Statutory criteria and organization of the report...................................... I-10 Statutory criteria ........................................................... I-10 Organization of the report.................................................... I-12 Commerce’s determinations..................................................... I-12 Administrative reviews ...................................................... I-14 Commerce’s results of initial five-year reviews ................................... I-14 Changed-circumstances reviews ............................................... I-14 Scope inquiry reviews ....................................................... I-15 Distribution of Continued Dumping and Subsidy Offset Act funds ....................... I-15 The subject product ............................................................ I-17 Commerce’s scope.......................................................... I-17 Tariff treatment ............................................................ I-19 The product .................................................................. I-21 Description and uses ........................................................ I-21 Production process .......................................................... I-22 Domestic like product and domestic industry issues .................................. I-25 The Commission’ original determinations ....................................... I-25 Positions of parties in these reviews ............................................ I-26 Pure vs. alloy magnesium .................................................... I-27 Primary vs. secondary magnesium ............................................. I-31 Cast vs. granular magnesium.................................................. I-32 U.S. market participants........................................................ I-35 U.S. producers............................................................. I-35 U.S. importers............................................................. I-39 U.S. purchasers ............................................................ I-40 Apparent U.S. consumption and market shares ...................................... I-40 Part II: Conditions of competition in the U.S. market U.S. market characteristics...................................................... II-1 Pure vs. alloy magnesium .................................................... II-1 Primary vs. secondary magnesium ............................................. II-5 Primary pure vs. secondary alloy magnesium ..................................... II-5 Channels of distribution........................................................ II-5 Geographic markets ........................................................... II-6 Supply and demand considerations ................................................ II-8 Supply ................................................................... II-8 U.S. demand .............................................................. II-12 i CONTENTS Page Part II: Conditions of competition in the U.S. market–Continued Substitutability issues .......................................................... II-20 Factors affecting purchasing decisions .......................................... II-21 Comparisons of domestic product and subject imports .............................. II-23 Other country comparisons ................................................... II-25 Elasticity estimates............................................................ II-27 U.S. supply elasticity ........................................................ II-27 U.S. demand elasticity....................................................... II-28 Substitution elasticity ....................................................... II-28 Part III: Condition of the U.S. industry Overview.................................................................... III-1 U.S. producers............................................................. III-1 Existing operations ......................................................... III-6 Anticipated changes in existing operations....................................... III-6 U.S. producers’ capacity, production, and capacity utilization .......................... III-7 Constraints on capacity...................................................... III-8 Alternative products ........................................................ III-8 U.S. producers’ domestic shipments, company transfers, and export shipments ............. III-8 U.S. producers’ purchases and direct imports ....................................... III-9 U.S. producers’ inventories ..................................................... III-10 U.S. producers’ employment, wages, and productivity ................................ III-10 U.S. tolling operations ......................................................... III-11 Financial experience of U.S. firms................................................ III-11 Background ............................................................... III-11 Operations on pure and alloy magnesium........................................ III-11 Tolling of alloy magnesium................................................... III-13 Variance analysis........................................................... III-14 Capital expenditures and research and development expenses ........................ III-15 Assets and return on investment ............................................... III-15 Grinders.................................................................. III-15 Part IV: U.S. imports and the foreign industries U.S. imports ................................................................. IV-1 U.S. importers’ current orders ................................................... IV-8 U.S. importers’ shipments ...................................................... IV-8 U.S. importers’ inventories...................................................... IV-9 Cumulation considerations...................................................... IV-9 Fungibility ................................................................ IV-9 Geographic markets......................................................... IV-10 Presence in the market ....................................................... IV-10 General information on the subject foreign industries ................................. IV-15 Capacity.................................................................. IV-15 Net trade balance........................................................... IV-17 Tariff or non-tariff barriers to trade ............................................. IV-19 ii CONTENTS Page Part IV: U.S. imports and the foreign industries–Continued Information received from producers in China ....................................... IV-21 Alloy magnesium capacity and production in China ................................ IV-22 Actual and anticipated changes in capacity in China ............................... IV-23 Shipments of magnesium produced in China ..................................... IV-23 Information received from producers in Russia ...................................... IV-24 Magnesium capacity and production in Russia .................................... IV-25 Actual and anticipated changes in capacity in Russia............................... IV-25 Shipments of magnesium produced in Russia..................................... IV-26 World market ................................................................ IV-26 Worldwide capacity, production, and capacity utilization ........................... IV-26 Global exports ............................................................. IV-28 Part V: Pricing and related information Factors affecting prices......................................................... V-1 Raw material costs.......................................................... V-1 U.S. inland transportation costs................................................ V-1 Pricing practices.............................................................