ECONOMIC CONSULTING SERVICES, LLC

BEFORE THE UNITED STATES INTERNATIONAL TRADE COMMISSION

IN THE MATTER OF

WELDED STAINLESS STEEL PRESSURE PIPE FROM MALAYSIA, THAILAND, AND VIETNAM

Inv. No(s). 731-TA-1210-1212 (Final)

EXHIBITS TO TESTIMONY OF JIM DOUGAN

SENIOR ECONOMIST ECONOMIC CONSULTING SERVICES, LLC

May 22, 2014

Washington, D.C.

Demand for WSSPP Was Flat Over the POI:

Apparent U.S. Consumption (in ST), 2011-2013

80,000

70,000

60,000

50,000

40,000

30,000

20,000

10,000

64,321 b 4 , y U 9 64,005

i i

2011 2012 Source: Prehearing Staff Report (Public Version) at p.IV-14. Table IV-8

2013

I

The Domestic Industry's Volume and Employment Indicia Improved overthe POI

2011 2012 2013

Change

2011-2013

Product ion 33,537 35,133 34,806 3.8%

Capacity Ut i l izat ion 50.4% 52.8% 5 2 . 1 % + 1.7 pet. Pts

U.S. Shipments 32,827 34,122 33,505 2 . 1 %

Market Share 51.0% 52.6% 52.3% + 1.3 pet. Pts

Product ion-Related Workers (PRWs) 363 371 372 2.5%

Hourly Wages 19.15 19.83 20.11 5.0%

Product iv i ty (ST per 1,000 hrs) 45 .1 46.4 42.9 -4.8%

Source: Prehearing Staff Report (Public Version) at Tables 111-2,111-4,111-7, and IV-9

2

The Data Do Not Support The Domestic Industry's Story About Pricing and Market Share

Change

2011 2012 2011-2012

Net Sales AUV ($ per ST) 5,414 4,619 -14.7%

Domestic Market Share 51.0% 52.6% +1.6 pet pts

Change

2012 2013 2012-2013

Net Sales AUV ($ per ST) 4,619 3,935 -14.8%

Domestic Market Share 52.6% 52.3% -0.3 pet pts

Source: Prehearing Staff Report (Public Version) at Tables IV-9 and VI-1

There Is No Causal Link Between Domestic Industry Concentration in Small-Diameter WSSPP and Its

Financial Performance

2011 2012 2013 Domestic Industry Operating Margin

(% of Sales) -3.7% -7 .1% -12.0%

Share of U.S. Producers' Shipments in Sizes of:

<= 1 inch

> 1 inch <= 2 inches

Total <= 2 inches

Source: Prehearing Staff Report (Public Version) at Tables 111-5 and VI-1

26.9% 25.7% 27.3%

24.9% 20.3% 22.6%

51.8% 46.0% 49.9%

The Price of Nickel - The Key Raw Material Reference Point for Pricing and Surcharges - Plummeted

1.20

1.00

0.80

0.60

0.40

0.20

0.00

, Nickel Price Index

March 2014: 0 . 6 1 x

X • N N

^ ^ ^ ' ~~ ^ ' ^

December 2013: 0.54 ^

i

Jan-11 Jan-12 Jan-13 Jan-14

Source: ITC Doc # 532146-2-912046

5

Nickel Prices and Domestic Industry Profitability Are Highly Correlated (China Case)

Jan-Sep 2007: 11.7%

1 1 1 / \

2006: 4.2% // \

i j£t

1 /

1/

Oct-Dec

2005"

2007: -8.6%

Jan-Sep \ 2008: V^,

C \J \J m # 1

-2.7% i

i I I I I I I I I I I I

-0.4%

2 5

= 2 0

a 15

cz

^ 1 0

' i i i i ' . , 2 0 0 7 2008

Si 'i )i P I i inonlli fi >fvvnrcl price

Figures in Blue are Domestic Industry Operating Profit/Net Sales

Source: USITC Publication 4064, Figure V-2 (p.V-1) Table VI-1 (p.VI-2 - VI-3).

The Commission and the Domestic Industry Have Recognized The Historical Link Between Raw Material

Costs and Profitability

"Lastly, since pipe producers bill their customers the surcharge amount in effect when the finished pipe is shipped, if surcharges are increasing (as they generally did from 2005 through 2007), an important component of reported profits can be the difference between higher surcharges in effect when the finished pipe is shipped and lower surcharges imbedded in the cost of the pipe. If surcharges decline (as they generally did in 2008), then the reverse will be true, and pipe producers will be charging lower prices for finished pipe that has higher costs."

Source: USITC Publ icat ion 4064, p. VI-3 - VI-4. Cites to Hearing Transcript pp. 19-21 (Henke) and 78,

87 (Cornelius); conference t ranscr ipt , pp. 75-76 (Henke), 76-77 (Cornelius), and 77-79 (Schagrin)

Nickel Prices and Domestic Industry Profitability Are Highly Correlated (Current POI)

1.2

1.0

0.8

0.6

0.4

0.2

0.0

/ *» Nickel Price Index \

' N

2011: -3.7% 2012:

-7.1% 2013:

1

-12.0% i ,

Jan-11 Jan-12 Jan-13 Jan-14

Figures in Blue are Domestic Industry Operating Profit/Net Sales

Source: Prehearing Staff Report (Public Version) Table VI-1 and ITC Doc # 532146-2-912046

The Small Gap Between the Rates of Decline in Domestic Industry Prices and Raw Materials Cost Can

be Explained by Timing

Change

($perST) 2011 2012 2013 2011-2013

Net Sales 5,414 4,619 3,935 -27.3%

Raw Materials 4,304 3,671 3,196 -25.7%

Source: Prehearing Staff Report (Public Version) at Table VI-1 and U.S. Producers' QRs at Ill-lOa

9

WSSPP Imports by Month, 2011-2013

Source: Petitioners' Pre-Hearing Brief, Pg. 8

WSSPP Imports by Month, 2011-2013 (kg)

1,200,000

1,000,000

800,000

600,000

400,000

200,000

Petitions Filed

Malaysia

Thailand

Vietnam

Source: ITC Dataweb. U.S Imports for Consumption of HTS 7306.40.5005, 7306.40.5040, 7306.40.5062, 7306.40.5064, 7306.40.5085, 7306.40.1010, 7306.40.1015, 7306.40.5042, 7306.40.5044, 7306.40.5080, 7306.40.5090.

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WSSPP Imports by Month, 2011-2013 (kg)

2,500,000

2,000,000

1,500,000

1,000,000

500,000

Petitions Filed

Malaysia

— Thailand

Vietnam

Taiwan

Korea

Source: ITC Dataweb. U.S Imports for Consumption of HTS 7306.40.5005, 7306.40.5040, 7306.40.5062, 7306.40.5064, 7306.40.5085, 7306.40.1010, 7306.40.1015, 7306.40.5042, 7306.40.5044, 7306.40.5080, 7306.40.5090.

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