UKRAINE: USITC ANTIDUMPING INVESTIGATION ON SILICON METAL

UNCLAS KYIV 000220 SIPDIS SIPDIS STATE PLEASE PASS TO USITC FOR LMSCHLITT STATE PLEASE PASS TO USTR FOR KLEIN/MOLNAR USDOC FOR 4231/ITA/OEENIS/NISD/CLUCYCK STATE FOR EUR/UMB, EB/TPP/BTA, EB/TPP/MTA E.O. 12958: N/A TAGS: ETRD ECON UP SUBJECT: UKRAINE: USITC ANTIDUMPING INVESTIGATION ON SILICON METAL FROM RUSSIA REF: STATE 4821 ¶1. Post provides the following information regarding silicon metal production in Ukraine in response to reftel request. This response contains no business proprietary information. Overview of Metallurgy Industry -------------- ¶2. Metallurgy is one of the Ukrainian economy's largest sectors, accounting for approximately 40% of GDP. The metallurgy industry started in Ukraine in the 19th century, when blast furnaces sprang up throughout eastern Ukraine. Proximity to raw materials -- iron and manganese ore deposits, coking coal, and non-metallic materials (limestone, molding sand, refractory clay, etc.) -- has continued to fuel the sector's growth. Ferrous and non-ferrous metals and products accounted for 43% of Ukraine's exports in 2006. Ukraine generally exports about 75-80% of its total production. Most enterprises in the industry are engaged in the production of ferrous metals (over 44%) and extraction and enrichment of crude ore (over 30%),with coke production coming in third. The non-ferrous metallurgy sub-sector is much smaller, ranking fourth. The largest branch of the non-ferrous metallurgy industry is aluminum production. Silicon Production -------------- ¶3. Ukrainian production of silicon can be broken down into three main categories: -- Ferrosilicon, covered by several subheadings of the Harmonized Tariff Schedule of the United States (HTS); -- Silicon metal containing less than 99.99% silicon, and matching HTS subheadings 2804.69.10 and 2804.69.50, of interest to the USITC in this case; and -- Semiconductor-grade silicon metal containing more than 99.99% silicon, covered by HTS subheading 2804.61.00. Ukrainian producers use different terminology, however, calling these three categories "technical," "polycrystal," and "monocrystal" silicon. Ukrainian terminology may not exactly correspond to the U.S. classifications. ¶4. Non-ferrous metallurgy, of which silicon is only a small part, makes up roughly 6% of total metallurgical production. Silicon products therefore constitute a tiny fraction of Ukraine's metallurgy industry. Additionally, silicon metal containing less than 99.99% silicon accounts for only 0.81% of the total silicon exports (by value) during 1999-2002. During this period, Ukraine exported ten times more semiconductor-grade silicon metal (containing more than 99.99% silicon),and over a hundred times more ferrosilicon (both by value in USD). ¶5. Post was unable to locate most of the specific data requested reftel. There is very little publicly-available information on Ukraine's silicon industry, especially going back to 1999-2002. Post filed a formal request for information with the Ministry of Industrial Policy, which maintains oversight of the metallurgy industry, and is responsible for state-owned enterprises operating in this sphere. Ministry officials cautioned us in advance that they would likely be unable to provide the data we requested. In the end, the Ministry did not respond to our request as of February ¶1. Ukrainian Exports, 1999-2002 -------------- ¶6. Below are figures for Ukrainian exports of silicon metal containing less than 99.99% silicon, 1999-2002: (Note: Quantity is expressed in short tons; value in thousands of U.S. dollars. End note.) To USA Total (to World) -------------- -------------- Quantity Value Quantity Value -------------- -------------- -------------- -------------- Year -------------- 1999 0 0 593 637 2000 0 0 635 588 2001 0 0 499 448 2002 300 253 446 406 Ukraine's Top Export Partners (by value): 1999: Russia (94.5%),Netherlands (4.5%),Belarus (1.0%) 2000: Russia (83.9%),Tajikistan (13.2%),Belarus (2.9%) 2001: Russia (82.3%),Tajikistan (17.2%),Belarus (0.3%), Israel (0.2%) 2002: United States (62.3%),Russia (26.1%),Bulgaria (6.3%),Israel (2.5%),Moldova (2.2%),Other (0.6%) Source: United Nations Commodity Trade Statistics Database Note: Data is for HS1992 and HS1996 code 280469, which designates silicon metal with less than 99.99% silicon content. This data should capture both the 2804.69.10 and 2804.69.50 subheadings, noted in reftel as the subjects of this investigation, and nothing more. End Note. The Zaporizhskiy Titanium-Magnesium Combine (ZTMC) -------------- -------------- ¶7. Reftel listed the Zaporizhskiy Titanium-Magnesium Combine (ZTMC) as the sole Ukrainian firm believed to have produced silicon metal with less than 99.99% silicon during 1999-2002. In the early 1990s ZTMC was a major producer of silicon in Ukraine. The plant produced several different metals, but silicon accounted for 80% of the total plant output at that time. In 1998, however, ZTMC management halted silicon production, claiming that it was unprofitable. At the same time, ZTMC restarted production of titanium, previously halted in 1993, as the government had launched a program to promote titanium production. ¶8. ZTMC is a state-owned enterprise and has struggled under the market conditions of post-Soviet Ukraine. Some industry analysts have accused ZTMC's management of intentionally and systematically bringing ZTMC to bankruptcy, and even of laundering money for the state budget. ZTMC has regularly recorded losses of several million dollars, and by 2003 held about 80 million dollars worth of debt. ¶9. Although ZTMC halted silicon production in 1998, other firms have tried to use ZTMC's facilities to produce some silicon. From 1999-2004, several foreign companies rented the silicon-production facilities at ZTMC, including the Russian firm Grafi. In 2002, a semiconductor plant was established at ZTMC, along with two other companies -- Kremniypolymer and Gamma. Currently, only one part of ZTMC's semiconductor plant is officially in operation; it is rented by a small firm named Siltec, which produces semiconductor-grade silicon metal (containing more than 99.99% silicon),predominantly for domestic consumers. Serhiy Terekhov, Chief Engineer of the semiconductor plant, estimated that ZTMC facilities produced approximately three to four tons of silicon metal (of various types) per month during 1999-2002. TAYLOR