(1)

On 14 October 2020, the European Commission (‘the Commission’) initiated an anti-dumping investigation with regard to imports of mono ethylene glycol (‘MEG’) originating in the United States of America (‘US’) and the Kingdom of Saudi Arabia (‘KSA’) (‘the countries concerned’) on the basis of Article 5 of Regulation (EU) 2016/1036 of the European Parliament and of the Council (‘the basic Regulation’). It published a Notice of Initiation in the Official Journal of the European Union (2) (‘the Notice of Initiation’).

(2)

The Commission initiated the investigation following a complaint lodged on 31 August 2020 by the Defence Committee of European MEG Producers (‘the complainant’). The complaint was made on behalf of the Union industry of MEG in the sense of Article 5(4) of the basic Regulation. The complaint contained evidence of dumping and of resulting material injury that was sufficient to justify the initiation of the investigation.

(3)

Pursuant to Article 14(5a) of the basic Regulation, the Commission should register imports subject to an anti-dumping investigation during the period of pre-disclosure unless it has sufficient evidence within the meaning of Article 5 that the requirements either under point (c) or (d) of Article 10(4) are not met.

(4)

In the case at hand, the complainant did not request registration and the Commission found that the requirements under point (d) were not met, as there was not, in addition to the level of imports which caused injury during the investigation period, a further substantial rise in imports thereafter. According to Eurostat data, the average monthly volume of imports of MEG from the countries concerned in the first five months following the initiation of the investigation (i.e. from November 2020 to March 2021) decreased by 15 % when compared to the average monthly volume of imports during the investigation period. Individually on the same basis, imports from the US decreased by 30 % and imports from KSA by 4 %. This was linked to the temporary disruptions (1) in US companies caused by extreme weather events; and (2) in the Union due to slowing demand due to COVID. Therefore, the Commission did not register imports during the period of pre-disclosure.

(5)

In the Notice of Initiation, the Commission invited interested parties to contact it in order to participate in the investigation. In addition, the Commission specifically informed the complainant, other known Union producers, the known exporting producers, the authorities in the countries concerned, known importers, traders and users, and invited them to participate.

(6)

Interested parties had an opportunity to comment on the initiation of the investigation and to request a hearing with the Commission and/or the Hearing Officer in trade proceedings.

(7)

A hearing took place with Saudi Basic Industries Corporation (‘SABIC’), which took part in the hearing together with Arabian Petrochemical Company (‘Petrokemya’), Eastern Petrochemical Company (‘SHARQ’), Jubail United Petrochemical Company (‘United’), SABIC Italia S.r.l, SABIC Petrochemicals B.V., Saudi Kayan Petrochemical Company (‘Saudi Kayan’), Saudi Yanbu Petrochemical Company (‘Yanpet’) and Yanbu National Petrochemical Company (‘Yansab’).

(8)

Hearings also took place with Arteco NV (‘Arteco’), Indorama group, Oxyde Belgium BV (‘Oxyde’), Mitsubishi Corporation (‘Mitsubishi’), the Committee of PET Manufacturers in Europe (‘CPME’) and HELM AG (‘Helm’).

(9)

The Commission received comments on initiation from:

(10)

As regards the assessment of dumping, Mitsubishi submitted that, given that price indexes play a significant role in how MEG is sold in the Union, the Commission should investigate whether the alleged dumping could not be attributable to a conscious commercial policy, but it could rather be simply caused by the differences in trends in the Union and non-Union indexes over time. Contract prices are agreed by negotiating discounts against various indexes and contracts are typically of 1 or 2 years duration. Producers agreeing prices in a 1- or 2-year contract will not know whether there will ultimately be a price difference between their Union and non-Union contracts until after the moment when the contract is settled and prices are determined and paid.

(11)

The complainant replied that the role of the Union price indicator employed is overstated and misinterpreted. This index is the indication of a price in the Union at a given time, which is the result of the equilibrium between supply and demand based on multiple buyers and sellers. The complaining Union producers, since they are on the sales side only, cannot control or manipulate this index.

(12)

The complainant replied recalling that a finding of dumping is a purely objective comparison between the normal value and the export price. The concept of intent is alien to the rules to determine dumping.

(13)

The analysis of the evidence provided by the complainants, in accordance with the principles of Article 2 of the Basic Regulation, has yielded the result that the complaint contained sufficient evidence of dumping in the EU market.

(14)

In particular, the complainant has provided sufficient evidence on export price and normal value showing that the dumping margins are significant. The figures on which the normal value was based were supported by sufficient evidence as confirmed by the Commission services’ analysis. The necessary adjustments were taken into account in the Commission’s analysis of dumping. In conclusion, it was found that, based on a fair comparison of normal value and export price, dumping margins were significant.

(15)

In this sense, the Commission agrees with the complainant that the issue of intent is alien to the statutory analysis just described.

(16)

The KSA submitted that the complainant incorrectly constructed the normal value for MEG produced in Saudi Arabia based on cost elements that do not relate to Saudi Arabia and failed to establish a fair comparison between the normal value and the export price.

(17)

The KSA also submitted that, in constructing the normal value, the complainant erred in its assessment of the facts, as (i) SABIC does not produce MEG – the MEG producers are listed in the Complaint; (ii) SABIC and Saudi Aramco were not related during the period considered in the Complaint; and (iii) Saudi producers of MEG do not purchase ethylene from Saudi Aramco.

(18)

Moreover, the complainant made no attempt to adapt the surrogate value for ethylene used to construct normal value such that it relates to the actual cost of production in Saudi Arabia.

(19)

Furthermore, the complainant reported an average electricity of 0,067 EUR/kWh, whereas the published electricity tariff corresponds to 0,043 EUR/kWh.

(20)

All this first set of remarks has been reiterated in SABIC’s comments.

(21)

It is recalled that, according to Article 5(2) of the Basic Regulation, a complaint shall contain such information as is reasonably available to the complainant. In this respect, it must be recalled that the legal standard of evidence required for a complaint (‘sufficient prima facie’ evidence) makes it clear that the quantity and quality of information in the complaint is not the same as the one available at the end of an investigation. At the stage of the complaint, it is not necessary that the investigating authority (in this case, the Commission) has before it the same evidence of dumping and injury (within the meaning of Articles 2 and 3) that would be necessary to support the imposition of provisional or definitive anti-dumping (hereinafter: ‘AD’) duties. An AD investigation is a process where certainty on the existence of the elements necessary to adopt a measure or to terminate a proceeding is reached gradually as the investigation moves forward. It is not excluded that changes will occur between the stage of the complaint and the conclusion of the investigation. However, it is not considered that such changes have an impact on the overall conclusion that the file merits investigation since there is sufficient evidence of injurious dumping.

(22)

In this sense, the information provided on costs was considered to be sufficiently adequate and accurate to establish normal value, in the prima facie context applicable at initiation, against the backdrop of the evidence available to the applicant.

(23)

As for the claims by KSA on the factual elements of the complaint, the Commission underlines that ethylene is the main feedstock for the production of MEG and that the complainant correctly pointed out that the ethylene supply chain in Saudi Arabia was vertically integrated, even before the acquisition of SABIC by Saudi Aramco.

(24)

Secondly, concerning the comparison between the normal value and the export price in the complaint, according to the KSA and SABIC this was not fair because the complainant did not make it at ex-works level. In fact, according to Saudi Arabia, it compared the FOB export price, because it only deducted estimated freight charges from the CIF statistical value, with a constructed normal value, which certainly included direct selling costs.

(25)

Regarding the comparison between the normal value and the export price, the Commission recalls that the dumping margin calculated in the complaint does not necessarily reflect the exact degree of dumping which will be calculated in the investigation on a transaction by transaction and type per type basis.

(26)

However, in light of the information available, the complainant has provided sufficient evidence on export price and normal value showing the existence of dumping. The figures on which the normal value was based were supported by sufficient evidence, as confirmed by the Commission services’ analysis and the necessary adjustments were taken into account in the Commission’s analysis of dumping.

(27)

On the same line as Saudi Arabia and SABIC, ExxonMobil objected to the calculation of the cost of production of mono ethylene glycol in Saudi Arabia, in particular for the raw material ethylene, described in the complaint.

(28)

It underlined that the cost to produce ethylene is primarily determined by the type of feedstock used in the steam cracker, and the costs of such feedstocks can differ significantly.

(29)

ExxonMobil’s joint venture with SABIC, called Saudi Yanbu Petrochemical Company (‘Yanpet’), purchases the feedstock from Saudi Aramco. Instead, the complainant referred to the ethylene price in the Asian market, which is not suitable to determine the ethylene price in Saudi Arabia, where ethylene production costs are much lower than in Asia.

(30)

Indeed, Yanpet’s steam cracker uses ethane as a primary feedstock to produce ethylene, whereas steam crackers in Asia and the Union generally use naphtha.

(31)

Therefore, the assertion by the complainant that production processes are similar in all countries is misleading according to ExxonMobil.

(32)

In particular, ethylene production from naphtha is generally more expensive than that from ethane, thus the Union cost of production is higher compared to Saudi Arabia and the United States of America, as both are primarily based on ethane feedstock.

(33)

Moreover, the use of the Asian price does not take into account the different situation of an integrated producer which produces both the ethylene and the mono ethylene glycol, such as Yanpet.

(34)

The Commission acknowledged the existence of differences in the production of ethylene but it did not consider that such difference in costs of raw materials made the situation of Union and KSA’s industry radically different and incomparable.

(35)

Therefore, the Commission considered that the complainant, given the information available to it, brought sufficient evidence of the existence of dumping justifying the initiation of an investigation.

(36)

SABIC and the Mission of the Kingdom of Saudi Arabia submitted that the requests for confidential treatment in the complaint were unwarranted such as the total consumption of MEG in the Union and the macroeconomic indicators which was based on the data of 12 Union MEG producers. Furthermore, SABIC and the Mission of the Kingdom of Saudi Arabia claimed that the complainant failed to provide non-confidential summaries of the information provided on a confidential basis such as for captive market. It was further argued that the limited disclosure of information by the complainant and the absence of enforcement by the Commission of clear rules regarding the treatment of confidential information impairs the rights of defence of the KSA.

(37)

The Commission considered that the version open for inspection by interested parties of the complaint contained all the essential evidence and meaningful non-confidential summaries of data provided under confidential cover in order for interested parties to exercise their right of defence throughout the proceeding. Article 19 of the basic Regulation and Article 6(5) of the WTO ADA allow for the safeguarding of confidential information in circumstances where disclosure would be of significant competitive advantage to a competitor or would have a significantly adverse effect upon a person supplying the information or upon a person from whom that person has acquired the information. The information provided under confidential cover and in the limited annexes to the complaint falls under these categories. At any rate, the complainant disclosed additional information in this regard.

(38)

The Mission of the Kingdom of Saudi Arabia contested the inclusion of imports into the United Kingdom in the complaint and in the scope of investigation.

(39)

On 31 January 2020 the United Kingdom withdrew from the Union. The Union and the United Kingdom jointly agreed on a transition period during which the UK remained subject to Union law, which ended on 31 December 2020 (3). The complaint was based on EU-28 data as it was lodged before the end of the transition period. As of 1 January 2021, companies and associations from the United Kingdom no longer qualified as interested parties in trade defence proceedings. Therefore, the investigation was carried out on an EU-27 basis.

(40)

SABIC believed that there were a number of open questions concerning the reliability of the standing calculation and the overall representativeness of the complainants. In this regard, SABIC claimed that one of the complainants consistently imported MEG from the KSA and therefore it should not have been part of the complaint. Furthermore, a related company to a supporting Union producer also imported MEG from the KSA and, therefore, if these companies were suffering injury then it was self-inflicted injury. SABIC also claimed that another MEG producer approached SABIC to market MEG from the KSA into the Union. Furthermore, SABIC claimed that BASF SE and Ineos Lavera are not complainants and that the limited number of Union producers that were part of the Complainant raised questions as to their representativeness. SABIC also claimed that the Commission should investigate the reason that led to the non-inclusion of IQOXE in the complaint so as to ensure that the exclusion of IQOXE was not made on grounds other than the incident that took place in January 2020. Oxyde also raised the question of the non-cooperation of the other Union producers.

(41)

The Commission recalls that all Union producers mentioned in the complaint and otherwise known to the Commission before initiation have been contacted in the framework of the examination as to the degree of support for, or opposition to, the complaint. This calculation was based on the quantities of MEG produced as outlined by individual declarations by such producers and associations of producers and on information contained in the complaint which also includes information on the total Union production. Therefore, at initiation stage, it was concluded that the conditions of Article 5(4) of the basic Regulation were met.

(42)

In line with Article 4(1) and 4(2) of the basic Regulation, producers which are related to exporters or importers and/or are themselves importers of the allegedly dumped product may be excluded from the Union industry if their relationship with the exporters or importers of the dumped product and/or their imports is such as to cause them to behave differently from non-related producers. In the pre-initiation analysis no reason to exclude any of the complainant producers from the definition of the Union industry was found. Furthermore, the Commission assessed this aspect during the investigation as stated in recitals (135) to (140). Regarding the claim that BASF SE and Ineos Lavera were not part of the complaint, this claim is factually wrong. These two producers are part of the complaint as indicated in Annex A-1 of the non-confidential version of the complaint.

(43)

SABIC and the Mission of the Kingdom of Saudi Arabia claimed that there were no factual or legal grounds for cumulating the imports from the KSA and the US and these imports were influenced by different dynamics, had different trends in the Union and the import price from the KSA did not undercut the Union prices while the imports from the US did.

(44)

After performing the relevant analysis, the Commission found that the conditions for cumulation of the countries concerned at the stage of the complaint were met on the basis of the available information and statistics. The dumping margins were found to be above de minimis. As shown by available official import statistics, dumped imports were not negligible (above de minimis) in terms of volumes for all countries concerned. Furthermore, MEG is a commodity and the competition between products imported from the KSA and the US and the Union industry products is identical and strictly based on price, irrespective of sales channels. The absence of price undercutting in the complaint for the imports from the KSA does not mean that there is no effect on prices. Therefore, at initiation stage, it was concluded that the conditions of Article 3(4) of the basic Regulation were met.

(45)

SABIC and the Mission of the Kingdom of Saudi Arabia claimed that the complainant did not assess injury objectively under Article 3(2) of the basic Regulation and the existence of material injury was not supported by factual information. The assessment of injury and causal link based on a comparison of data for different periods, i.e., January – December 2017, 2018 and 2019 and April 2019 – March 2020 did not provide an accurate and unbiased picture of the situation as the year 2019 and the IP largely overlap but instead it should have examined the data for the periods April – March 2016/2017, 2017/2018, 2018/2019 and 2019/2020 to assess injury and causal link. In addition, it was argued that the comparison was distorted by the seasonal and cyclical nature of MEG sales. It was further claimed that the macroeconomic data provided by the complainant for the domestic industry as a whole showed that it performed well over the period considered, while the microindicators, which only related to the complainant, underperformed when compared to the other Union MEG producers, which also raised concerns regarding the representativeness of the complainant. Moreover, it was argued that the complainant did not provide any evidence that its profitability fell because of pressure from imports that caused prices to fall at a faster pace as compared to raw material costs. SABIC also claimed that the complainant failed to provide an accurate picture of the situation as it calculated only the profitability on sales to unrelated customers and that the complainant did not provide a proper justification for the exclusion of the captive market from the Union consumption. Furthermore, SABIC claimed, without evidence, that the high profitability margins registered by the Union industry in 2017 and 2018 on domestic sales to unrelated customers might have been a consequence of the cartel that was in place until 2017 and therefore it would not be appropriate to use a profit margin of 18 % for the underselling analysis, given that this profitability is based on 2016 numbers when the cartel was in full stream. Also the Mission of the Kingdom of Saudi Arabia claimed that the calculation of the underselling margin based on a profit that does not appear to be based on a reasonable profitability raises questions.

(46)

As a preliminary comment, it is recalled that a prima facie finding of material injury requires an examination, inter alia, of the relevant factors as described in Article 5(2) (d) of the basic Regulation. Indeed, the wording of Article 5(2) of the basic Regulation states that the complaint shall contain the information on changes in the volume of the allegedly dumped imports, the effect of those imports on prices of the like product on the Union market and the consequent impact of the imports on the Union industry, as demonstrated by relevant (not necessarily all) factors and indices having a bearing on the state of the Union industry, such as those listed in Articles 3(3) and 3(5). Article 3(5) of the basic Regulation states that the list is not exhaustive, nor can any one or more of these factors necessarily give decisive guidance. Therefore, not all factors must show deterioration in order for a prima facie finding of material injury to be established. Furthermore, the existence of other factors which may have an impact on the situation of the Union industry does not necessarily imply that the effect of dumped imports on this industry is not material.

(47)

The specific injury analysis of the complaint performed by the Commission showed that there was sufficient evidence pointing to increased penetration of the Union market (both in absolute and relative terms) by imports from the KSA and the US at prices which undercut (in the case of the US imports) and substantially undersell the Union industry’s own prices. This appears to have had a materially injurious impact upon the state of the Union industry, shown for example by decrease in production, sales and market share, by a deterioration of financial results or by the level of prices charged by the Union industry. Regarding the claim for the period considered and the investigation period, it is the Commission practice to select an investigation period of one year and previous three calendar years, also at complaint stage. In respect of SABIC’s comment on captive sales, the complainant provided evidence regarding captive sales. As a consequence, there was an examination of the totality of the market and, for certain aspects of the injury analysis, a focus on the free market. The subsequent analysis by the Commission of the information at its disposal found inter alia a separation between free and captive markets. Regarding the claim that the profitability calculation of underselling was not accurate as it was based on an unreasonable profit margin, it is noted that the Commission was satisfied with the evidence of the underselling brought forward by the complainant and considered it sufficient prima facie evidence.

(48)

Mitsubishi claimed that year 2017 could have been an exceptional year for the Union industry and therefore 2017 could not be an appropriate reference year for the injury assessment and the period considered in the complaint should have been extended to earlier years. Furthermore, it was argued that the use of one to two years duration contracts in the industry could also require an assessment over a longer period. Mitsubishi claimed that the complaint showed that there was no price undercutting at the overall level by the US and the KSA imports during the investigation period and that the requirement of evidence of material price undercutting was particularly important in the current case given that the majority of sales are made under contracts which are typically of one or two years duration. The Commission considered that none of Mitsubishi’s allegations disproved the conclusion that there was sufficient evidence for the initiation of an anti-dumping proceeding. There was no exceptional event that justified the extension of the period considered prior to 1 January 2017. The period considered allows to take into account the peculiarity of one or two years contracts. Indeed, the complaint contained sufficient evidence that dumped imports had a materially injurious impact on the state of the Union industry and the Commission was satisfied with the evidence of the undercutting brought forward by the applicant—as well as the evidence of price depression and sales below Union industry costs.

(49)

SABIC and the Mission of the Kingdom of Saudi Arabia claimed that the complainant did not demonstrate the existence of a causal link under Article 3(6) of the basic Regulation as the complainant only examined the prices effects, and not the correlation between the volume of imports from the KSA and the US. It further argued that the volume of imports of MEG from the KSA decreased over the period considered and that the prices of imports from the KSA could not have negatively affected the complainant as there was no undercutting.

(50)

The complainant analysed the effect of volumes on a cumulated basis as the conditions of Article 3(4) of the basic Regulation were met at that stage. The simultaneity of the deterioration of the situation of the Union industry and of the increased penetration of dumped imports strongly indicates the existence of a causal link. The absence of undercutting does not mean that export prices could not have caused injury when Union industry prices were the result of the strong price pressure exerted by the low-priced dumped imports. The crucial factor for the determination of injury and causation is that Union producers had no option but to decrease their sales prices in order to defend their market share and maintain reasonable levels of production. Furthermore, the situation of the Union industry was aggravated by the fact that the dumped imports were sold in an open and transparent market where prices were well known, forcing the Union industry to decrease its sales prices to limit its loss of market share.

(51)

SABIC and the Mission of the Kingdom of Saudi Arabia claimed that the complainant did not examine other causes of injury such as the effects of the ethylene purchasers’ cartel that ran up until at least March 2017 and likely had effects after that too. SABIC highlighted other factors such as (i) the non-competitiveness of the Union industry as the average cost of production in the Union was higher than in the Middle East and North America; (ii) the declining share of ethylene oxide used for MEG production to favour other ethylene oxide derivatives; (iii) the increase in imports of polyethylene terephthalate (‘PET’) which had a direct impact on the consumption of MEG; (iv) self-inflicted injury caused by imports of MEG from the KSA. It, therefore, claimed that by failing to even disclose the above listed other known causes of injury and not undertaking a non-attribution analysis, the Complainant did not observe the requirements set forth in Article 3(7) of the basic Regulation. Mitsubishi also claimed that the alleged injury was attributable to (i) the global depression in MEG prices, (ii) Union industry’s lack of competitiveness rather than any alleged dumping. It also claimed that the non-complainant Union producers performed better than the complainant Union producers and are recovering.

(52)

The Commission’s analysis confirmed that none of the elements mentioned, whether factually correct or not, disprove the conclusion that there was sufficient evidence for the initiation of an anti-dumping proceeding with regard to the point that dumped imports had a materially injurious impact on the state of the Union industry.

(53)

CIRFS claimed that the complaints should have included the negative consequences of the COVID-19 pandemic as a factor causing injury for 2020 by wrongly stating that the investigation period in the complaint covered the period from 1 July 2019 to 30 June 2020.

(54)

In fact the investigation period of the complaint started from 1 April 2019 and ended 31 March 2020 and therefore any the impact of COVID-19 pandemic would have been felt by the Union industry after the investigation period.

(55)

On the basis of the above, the Commission confirmed that the complainant provided sufficient evidence of dumping, injury and a causal link, thereby satisfying the requirements set out in Article 5.2 of the ADA and Article 5(2) of the basic Regulation. Therefore, the complaint met the requirements for initiation.

(56)

The Commission considered and addressed all the other relevant comments in the sections below.

(57)

In the Notice of Initiation, the Commission stated that it might sample the interested parties in accordance with Article 17 of the basic Regulation.

(58)

In its Notice of Initiation, the Commission stated that it had provisionally selected a sample of Union producers. The Commission selected the sample on the basis of the volume of production and sales of the like product in the Union reported by the Union producers in the context of the pre-initiation standing analysis. This sample consisted of three Union producers, out of which two were related. The sampled Union producers accounted for 64,1 % of total Union production and 65 % of total Union sales. The sample was considered representative of the Union industry. The Commission invited interested parties to comment on the provisional sample. No comments were received and therefore the sample was confirmed.

(59)

To decide whether sampling is necessary and, if so, to select a sample, the Commission asked unrelated importers to provide the information specified in the Notice of Initiation.

(60)

Two unrelated importers provided the requested information and agreed to be included in the sample. In view of the low number of replies, the Commission decided that sampling was not necessary.

(61)

To decide whether sampling was necessary and, if so, to select a sample, the Commission asked all exporting producers in the United States of America to provide the information specified in the Notice of Initiation. In addition, the Commission asked the Mission of the United States of America to identify and/or contact other exporting producers, if any, that could be interested in participating in the investigation.

(62)

Five exporting producers in the United States of America provided the requested information and agreed to be included in the sample. In accordance with Article 17(1) of the basic Regulation, the Commission selected a sample of two groups of exporting producers on the basis of the largest representative volume of exports to the Union which could reasonably be investigated within the time available. The sampled groups of exporting producers represented approximately 55 % of imports from the United States of America to the Union-EU27 during the investigation period. In accordance with Article 17(2) of the basic Regulation, all known exporting producers concerned and the authorities of the United States of America were consulted on the selection of the sample. No comments were received and the sample was confirmed.

(63)

To decide whether sampling was necessary and, if so, to select a sample, the Commission asked all exporting producers in the KSA to provide the information specified in the Notice of Initiation. In addition, the Commission asked the Mission of the KSA to identify and/or contact other exporting producers, if any, that could be interested in participating in the investigation.

(64)

Four producers in the KSA provided the requested information and agreed to be included in the sample. However, one of them declared no exports during the investigation period, whereas the other three are related because two of these produce in the KSA via joint venture agreement with the third producer. In view of the above, the Commission decided not to resort to sampling of exporting producers in the KSA.

(65)

The questionnaires for Union producers, unrelated importers, users and exporting producers were made available online (4) on the day of initiation.

(66)

The Commission received questionnaire replies from the three sampled Union producers, two unrelated importers (Helm and Oxyde), seven users (Arteco, Indorama Group, Neo Group, Novapet, PlastiVerd, Selenis, SIR Industriale) and eight exporting producers (Lotte Chemical Louisiana LLC, MEGlobal Americas Inc, Saudi Kayan petrochemical company, Yanbu National Petrochemical Company, Eastern Petrochemical Company, Saudi Yanbu Petrochemical Company, Arabian Petrochemical Company, Jubail United Petrochemical Company).

(67)

The Commission sought and cross-checked all the information deemed necessary for a provisional determination of dumping, resulting injury and Union interest. Due to the outbreak of the COVID-19 pandemic and the consequent measures taken to deal with the outbreak (‘the COVID-19 Notice’) (5), the Commission was unable to carry out verification visits at the premises of the sampled companies and cooperating users. Instead, the Commission performed remote cross-checks (‘RCCs’) of the information provided by the following companies via videoconference:

Union producers:

Exporting producers in the United States of America:

Related traders, importers and processors:

Exporting producers in the KSA:

Related traders to the exporting producers in the KSA

Related traders, importers and processors:

(68)

The investigation of dumping and injury covered the period from 1 July 2019 to 30 June 2020 (‘the investigation period’). The examination of trends relevant for the assessment of injury covered the period from 1 January 2017 to the end of the investigation period (‘the period considered’).

(69)

CPME claimed that the investigation period chosen by the Commission did not include the period immediately prior to the initiation of the investigation as required under Article 6(1) of the basic Regulation. CPME argued that as the investigation was opened on 14 October 2020, the period July – September 2020 should have been included in the investigation period. CPME claimed that the period January 2020 to June 2020 included in the investigation period was distorted by the effects of the COVID-19 pandemic. Therefore, CPME believed that the Commission should collect post-IP data for the purpose of the injury and the Union interest assessment.

(70)

The Commission has discretion in selecting the investigation period. In this case, the period selected has the twin advantage of immediacy to the date of initiation and of being based on half-year period which facilitates cooperation by companies and thus accuracy and adequacy of the findings. The effects of the COVID-19 pandemic are analysed under causality, as may be relevant for factors which may attenuate the causal link. The claim was thus rejected.

(71)

The product concerned is mono ethylene glycol (current EC-number 203-473-3), originating in the United States of America and the Kingdom of Saudi Arabia, currently falling under CN code ex 2905 31 00 (TARIC code 2905310010) (‘the product concerned’).

(72)

MEG is also designated with the names ethylene glycol, ethanediol and ethane-1,2-diol.

(73)

MEG is produced starting from various feedstocks (ethane, propane, NGL, butane) to make ethylene. Ethylene is then mixed with oxygen to form ethylene oxide and then with water to produce mono ethylene glycol.

(74)

MEG is a commodity commercially available in two different grades: fibre grade and technical grade. The fibre grade is characterised by high purity (99,9 %), whereas the technical grade has lower purity levels.

(75)

Fibre grade MEG is predominantly used in the production of PET, polyester fibres, resins and films. Technical grade MEG is mainly used in the automotive sector as anti-freezing. Additional MEG applications include heat transfer agent, de-icing fluids, surface coatings, unsaturated polyester resins, polyester polyols, and natural gas dehydrogenation.

(76)

The investigation showed that the following products have the same basic physical, chemical and technical characteristics as well as the same basic uses:

(77)

The Commission decided at this stage that those products are therefore like products within the meaning of Article 1(4) of the basic Regulation.

(78)

SABIC claimed that the product scope was overly broad and requested the exclusion from the investigation of ‘off-spec MEG’, arguing that this product was not comparable to and did not compete with prime grade (‘on-spec’) MEG. Furthermore, SABIC argued that in case the Commission decided not to exclude off-spec MEG from the scope of the investigation, it should amend the product control number (‘PCN’) construction to cover off-spec MEG as well.

(79)

The off-spec MEG is not a different product type, but a deteriorated MEG as a result of oxygenation that occurred by mistake during transportation. The MEG producers do not manufacture such product on purpose. Depending on the level of deterioration, off-spec MEG can be either discarded, or can be mixed with prime grade MEG and used in certain applications such as engine coolant for the automotive industry. Therefore, the claim was rejected and the PCN did not need to be amended.

(80)

Sampling was not applied for exporting producers in the KSA. The sole company group, SABIC, has six production entities, each of them was checked separately for their costs of manufacturing. Only one of the six production entities produced for the domestic market, and therefore its cost of manufacturing was used in the calculation of normal value. However, both domestic sales and exports to the Union were examined at the company group level.

(81)

The Commission first examined whether the total volume of domestic sales for the exporting producer group was representative, in accordance with Article 2(2) of the basic Regulation. The domestic sales are representative if the total domestic sales volume of the like product to independent customers on the domestic market per exporting producer represented at least 5 % of its total export sales volume of the product concerned to the Union during the investigation period. On this basis, the total sales of the like product on the domestic market were representative.

(82)

Given that there was only one product type sold on the domestic market, and also exported to the Union, the Commission did not need to check the representativeness at product type level.

(83)

The Commission next defined the proportion of profitable sales to independent customers on the domestic market during the investigation period in order to decide whether to use actual domestic sales for the calculation of the normal value, in accordance with Article 2(4) of the basic Regulation.

(84)

The normal value is based on the actual domestic price, irrespective of whether those sales are profitable or not, if:

(85)

In this case, the normal value is the weighted average of the prices of all domestic sales during the IP.

(86)

The normal value is the actual domestic price of only the profitable domestic sales during the IP, if:

(87)

The cooperating exporting producers purchase the feedstock, and in particular propane, for the production of MEG from a related company, state-owned Saudi Aramco, the monopoly supplier in the country.

(88)

SABIC was owned by the KSA Public Investment Fund (‘PIF’), a government entity, until the end of June 2020, when their 70 % shareholding was bought by Saudi Aramco. The KSA government owns 95,8 % of Saudi Aramco and the Chairman of Aramco since 2016, H.E. Yasir O. Al-Rumayyan, is also the Governor and Director of the PIF since 2015. Therefore, the two companies are considered to be related, as the government is a common shareholder of the company, and as H.E. Yasir O. AL Rumayyan is an officer/director in both companies.

(89)

Due to the relationship, the feedstock purchases cannot be considered in the ordinary course of trade and cannot therefore be used to establish the normal value. In the specific case of propane (the feedstock used to produce ethylene and subsequently, MEG), prices are set by the government in view of the activity of its related companies. Prices are therefore directly affected by the relationship, as per art. 2(1) of the basic Regulation.

(90)

Therefore, the Commission examined in detail the feedstock purchases and used the method described below to calculate the normal value. SABIC purchases propane from Saudi Aramco at the government fixed price of 20 % below Japanese propane price (6).

(91)

Under Article 2(5) paragraph 2 of the basic Regulation, if costs associated with the production and sale of the product concerned are not reasonably reflected in the records of the party concerned, they shall be adjusted or established on the basis of other producers or exporters in the same country or, where such information is not available or cannot be used, on any other reasonable basis, including information from other representative markets.

(92)

The Commission established that cost of the propane feedstock was not reasonably reflected in the records of SABIC because of its relationship with the supplier. Therefore, the Commission resorted to adjust the cost of propane by increasing the price paid by SABIC to Saudi Aramco so as to remove the 20 % discount and bring it to the level of the benchmark used by the government of KSA.

(93)

On the basis of the adjustments made to the costs of propane, the Commission adjusted the cost of ethylene used by SABIC in the cost of production of MEG.

(94)

Based on the adjusted cost of manufacturing, the analysis of domestic sales showed that less than 80 % of all domestic sales were profitable and that the weighted average sales price was lower than the cost of production. Accordingly, the normal value was calculated as a weighted average of the profitable sales only.

(95)

The MEG exported to the Union from the KSA was manufactured by six exporting producers, two of which are joint ventures with ExxonMobil and SPDC (a company related to Mitsubishi Corporation). The MEG is then exported through three different networks of related traders and importers in the Union: one for SABIC, one for ExxonMobil and one for SPDC.

(96)

The export price was established on the basis of the price at which the imported product was first resold to independent customers in the Union, in accordance with Article 2(9) of the basic Regulation. In this case, adjustments to the price were made for all costs incurred between importation and resale, including SG&A expenses, and for profits accruing.

(97)

As to the profit margin, due to confidentiality reasons regarding the data of the cooperating unrelated importers, the Commission provisionally decided to resort to the profit margin used in a previous proceeding concerning another chemical product manufactured by a similar industry and imported under similar circumstances, namely a profit margin of 6,89 % (7) established in the recent PVA investigation. At this stage, this profit margin is the most objective basis available for the purpose of arriving at a satisfactory estimate of an arm's length export price.

(98)

During the investigation, the complainant submitted documentation whereby it had reasons to believe that Lotte and Mitsubishi had entered into a form of association or compensatory arrangement regarding the distribution and sales of MEG, including in the Union. The complainant noted, as a consequence, that in cases where it appears that the export price is unreliable because of an association or a compensatory arrangement between the exporter and the importer or a third party, the export price may be constructed on the basis of the price at which the imported products are first resold to an independent buyer.

(99)

Lotte firmly denied that it is in association with Mitsubishi regarding the distribution and sales of MEG, including in the Union. The information reported by the complainant was outdated and referred to 2015, when discussions between Lotte and Mitsubishi regarding the possibility of starting a joint venture were ongoing but did not materialise. Lotte and Mitsubishi are thus not related.

(100)

Mitsubishi stated that the information referred to by the complainant is outdated and that it is not associated to Lotte for the purposes of the basic Regulation. It clarified that there are no compensatory arrangements between Mitsubishi Corporation and Lotte which could render Lotte’s export sales prices of MEG to Mitsubishi as not being in the ordinary course of trade.

(101)

Due to the timeframe of the investigation, the Commission could not examine these comments fully at this stage, and will further look into this matter for the purposes of the definitive determination, including on its admissibility.

(102)

The Commission compared the normal value and the export price on an ex-works basis.

(103)

Where justified by the need to ensure a fair comparison, the Commission adjusted the normal value and the export price for differences affecting prices and price comparability, in accordance with Article 2(10) of the basic Regulation. Adjustments were made for domestic insurance, freight in the KSA, commission, handling and loading and ancillary expenses in the KSA, ocean freight, ocean insurance, customs duties in the EU, credit cost, technical assistance, bank charges, year-end rebates and other allowances.

(104)

The Commission compared the weighted average normal value of the like product with the weighted average export price of the product concerned, in accordance with Article 2(11) and (12) of the basic Regulation.

(105)

For all other exporting producers in the KSA, the Commission established the dumping margin on the basis of the facts available, in accordance with Article 18 of the basic Regulation. To this end, the Commission determined the level of cooperation of the exporting producers. The level of cooperation is the volume of exports of the cooperating exporting producers to the Union expressed as proportion of the total imports from the KSA during the IP, that were established on the basis of Eurostat data.

(106)

The level of cooperation in this case is high because the exports of the cooperating exporting producers constituted around 100 % of the total imports during the IP. On this basis, the Commission decided to establish the dumping margin for all other companies at the level of the company with the highest dumping margin.

(107)

The provisional dumping margins, expressed as a percentage of the CIF Union frontier price, duty unpaid, are as follows:

(108)

The Commission first examined whether the total volume of domestic sales for each sampled exporting producer was representative, in accordance with Article 2(2) of the basic Regulation. The domestic sales are representative if the total domestic sales volume of the like product to independent customers on the domestic market per exporting producer represented at least 5 % of its total export sales volume of the product concerned to the Union during the investigation period. On this basis, the total sales by each sampled exporting producer of the like product on the domestic market were representative.

(109)

Given that there was only one product type sold on the domestic market, and also exported to the Union, the Commission did not need to check the representativeness at product type level.

(110)

The Commission next defined the proportion of profitable sales to independent customers on the domestic market during the investigation period in order to decide whether to use actual domestic sales for the calculation of the normal value, in accordance with Article 2(4) of the basic Regulation.

(111)

The normal value is based on the actual domestic price, irrespective of whether those sales are profitable or not, if:

(112)

In this case, the normal value is the weighted average of the prices of all domestic sales during the IP.

(113)

The normal value is the actual domestic price of only the profitable domestic sales of the product types during the IP, if:

(114)

On the basis of the cost allocation historically applied by the company, the analysis of domestic sales showed that for Lotte Chemicals Louisiana LLC less than 80 % of all domestic sales were profitable and that the weighted average sales price was lower than the cost of production. Accordingly, the normal value was calculated as a weighted average of the profitable sales only.

(115)

For MEGlobal Americas Inc, less than 80 % of all domestic sales were profitable and the weighted average sales price was higher than the cost of production. Accordingly, the normal value was calculated as a weighted average of the profitable sales only.

(116)

The sampled exporting producers exported to the Union either directly to independent customers or through related companies.

(117)

For the exporting producer that exported the product concerned directly to independent customers in the Union, the export price was the price actually paid or payable for the product concerned when sold for export to the Union, in accordance with Article 2(8) of the basic Regulation.

(118)

For the exporting producer that exported the product concerned to the Union through a related company acting as an importer in Switzerland, the export price was established on the basis of the price at which the imported product was first resold to independent customers in the Union, in accordance with Article 2(9) of the basic Regulation. In this case, adjustments to the price were made for all costs incurred between importation and resale, including SG&A expenses, and for profits accruing. As to the latter, the same profit margin as described in the Export price section of KSA was applied.

(119)

For MEGlobal Americas, some of their sales from their related importer in the Union were to unrelated customers, and therefore the methodology in Section 3.2.3 above was used.

(120)

However, some of their sales from their related importer in the Union were to a related processor of MEG, who then produced a different product (PET) for sale to other parties. The related processor cooperated with the investigation and provided data as requested.

(121)

Given that there was no resale price under Article 2(9) of the basic Regulation the Commission established an export price under ‘any reasonable basis’, i.e. the cost structure of PET.

(122)

The price of MEG so established was then used to calculate the export price using the methodology in Section 3.2.3 above, given the presence of the related importer.

(123)

The Commission compared the normal value and the export price of the sampled exporting producers on an ex-works basis.

(124)

Where justified by the need to ensure a fair comparison, the Commission adjusted the normal value and the export price for differences affecting prices and price comparability, in accordance with Article 2(10) of the basic Regulation. Adjustments were made for handling and loading, freight in the exporting country, ocean freight, ocean insurance, customs duty and other import charges, freight in the Union, credit cost, domestic insurance.

(125)

For the sampled exporting producers, the Commission compared the weighted average normal value of the like product with the weighted average export price of the product concerned, in accordance with Article 2(11) of the basic Regulation.

(126)

On this basis, the provisional weighted average dumping margins pursuant to Article 2(12) expressed as a percentage of the CIF Union frontier price, duty unpaid, are as follows:

(127)

For the cooperating exporting producers outside the sample, the Commission calculated the weighted average dumping margin in accordance with Article 9(6) of the basic Regulation. That margin was established on the basis of the margins of the sampled exporting producers.

(128)

On this basis, the provisional dumping margin of the cooperating exporting producers outside the sample is 13,5 %.

(129)

For all other exporting producers in the US, the Commission established the dumping margin on the basis of the facts available, in accordance with Article 18 of the basic Regulation. To this end, the Commission determined the level of cooperation of the exporting producers. The level of cooperation is the volume of exports of the cooperating exporting producers to the Union expressed as proportion of the total imports from the US during the IP, that were established on the basis of Eurostat data.

(130)

In this case, the exports of the cooperating exporting producers constituted around 59 % of the total imports during the IP. On this basis, the Commission decided to establish the residual dumping margin at the level of the margin established for the largest representative group of transactions per customer by the cooperating exporting producer with the highest dumping margin.

(131)

The provisional dumping margins, expressed as a percentage of the CIF Union frontier price, duty unpaid, are as follows:

(132)

The like product was manufactured by 12 producers or nine groups of producers in the Union during the investigation period. They constitute the ‘Union industry’ within the meaning of Article 4(1) of the basic Regulation.

(133)

The total Union production during the investigation period was established at 942 911 tonnes. The Commission established the figure on the basis of all the available information concerning the Union industry, such as the data of the complainant which was cross-checked for reliability and completeness with information supplied by sampled Union producers. The data of the non-cooperating Union producers was estimated by the complainant based on market intelligence. As indicated in recital (58) the three sampled Union producers represented 64,1 % of the total Union production of the like product.

(134)

According to Article 4(1) of the basic Regulation, producers which are related to Saudi and/or American exporters or importers and/or are themselves importers of the allegedly dumped product may be excluded from the Union industry. Article 4(2) defines when producers are to be considered related to exporter or importers.

(135)

SABIC claimed that one of the complainants has consistently imported MEG from the KSA and therefore it should not be considered a Union producer.

(136)

The investigation revealed that it was not the MEG producer as such who was importing MEG from the KSA but two related companies. These related companies imported very marginal volumes of MEG from the KSA during the investigation period, to punctually complement their supplies. These related companies are users of MEG. Therefore, the Commission concluded there was no reason to exclude this producer from the Union industry.

(137)

Mitsubishi claimed that one of the complainants imported MEG from the countries concerned and therefore it should not be considered a Union producer.

(138)

The investigation revealed that the company did not import the product concerned from the countries concerned during the IP. Previous imports were very marginal to punctually complement their production. Therefore, the Commission concluded there was no reason to exclude this producer from the Union industry.

(139)

SABIC also claimed that a related company to a supporting producer also imported MEG from the KSA. The company did not cooperate and there was no other evidence at hand allowing the Commission to conclude that it should be excluded from the definition of Union industry. At any rate, should this company be excluded, it would not have had a material impact on the determination of injury and causal link, given its limited size.

(140)

The Commission also investigated the existing relationships of the Union industry with exporters or importers of the product concerned. The investigation showed that one of the main shareholders of a non-cooperating Union producer is the Saudi MEG producer and two more non-cooperating Union producers are owned by US MEG producers. Given the lack of cooperation of these companies and the lack of other evidence at hand in this regard, Commission could not conclude that they should be excluded from the definition of Union industry.

(141)

To establish whether the Union industry suffered injury and to determine consumption and the various economic indicators related to the situation of the Union industry, the Commission examined whether and to what extent the subsequent use of the Union industry’s production of the like product had to be taken into account in the analysis.

(142)

To provide a picture of the Union industry that was as complete as possible, the Commission obtained data for the entire MEG activity and determined whether the production was destined for captive use or for the free market.

(143)

The Commission found that around 7 % of the total Union consumption was captive during the investigation period as shown in Table 1 below. The captive market decreased by 28 % over the period considered.

(144)

The distinction between captive and free market is relevant for the injury analysis because products destined for captive use are not exposed to direct competition from imports. By contrast, production destined for free market sale is in direct competition with imports of the product concerned.

(145)

One of the sampled MEG producers is swapping part of its MEG production in exchange for an equivalent volume of ethylene oxide under a long-term swap agreement which includes also a conversion fee set up at the time of signing the swap agreement. The volume of MEG part of this contract is included in the assessment of the macroeconomic indicators, but are excluded from the microeconomic indicators as the conversion fee received by the sampled Union producer is not based on market conditions. Nevertheless, the inclusion of the sales under this swap agreement in the assessment of the microeconomic indicators would not have affected the profitability trend nor the conclusion that Union industry suffered material injury as stated in recital (197) and (206).

(146)

The Commission examined certain economic indicators relating to the Union industry on the basis of data for the free market. These indicators are: sales volume and sales prices on the Union market, market share, growth, export volume and prices, profitability, return on investment, and cash flow. Where possible and justified, the findings of the examination were compared with the data for the captive market in order to provide a complete picture of the situation of the Union industry.

(147)

However, other economic indicators could meaningfully be examined only by referring to the whole activity, including the captive use of the Union industry. These are: production, production capacity, capacity utilisation, investments, stocks, employment, productivity, wages, and ability to raise capital. They depend on the whole activity, whether the production is captive or sold on the free market.

(148)

The Commission established the Union consumption on the basis of total Union sales as determined by the complainant plus imports from all third countries as recorded in Eurostat.

(149)

Union consumption developed as follows:

(150)

Overall the free market consumption in the Union was fairly stable, decreasing by 1 %. From 2017 to 2019 the Union market increased by 6 % from 1 522 668 tonnes to 1 614 888 tonnes before decreasing in the investigation period by 6,8 % reaching 1 505 068 tonnes, almost at the same level as in 2017.

(151)

The Commission examined whether imports of MEG originating in the countries concerned should be assessed cumulatively, in accordance with Article 3(4) of the basic Regulation.

(152)

That provision stipulates that the effects of imports from more than one country shall be cumulatively assessed only if it is determined that:

(153)

The margins of dumping established in relation to the imports from the US and the KSA were above the de minimis threshold laid down in Article 9(3) of the basic Regulation. The volume of imports from each of the countries concerned was not negligible within the meaning of Article 5(7) of the basic Regulation. Indeed, market shares in the investigation period were 16,7 % for imports from the US and 24,2 % from the KSA.

(154)

The conditions of competition between the dumped imports form the US and the KSA and between the dumped imports from the countries concerned and the like product were similar. More specifically, the imported products compete fiercely with each other and with the MEG produced in the Union because MEG is a very price sensitive homogenous commodity, which is sold to similar categories of customers. While there might be some differences regarding sales channels (the Union industry sells directly to the unrelated customers, the US exporting producers sell either directly or via related importers/traders and the Saudi exporting producers sell mostly via related importers/traders) the competition is primarily based on lowest price and not on those sales channels.

(155)

In addition, imports from both countries were sold at prices well below Union industry costs as stated in recital (211), thus contributing in a similar fashion to the price depression suffered by the Union industry as described in recitals (188) to (190).

(156)

Therefore, all the criteria set out in Article 3(4) of the basic Regulation were met and imports from the US and the KSA were examined cumulatively for the purposes of the injury determination.

(157)

SABIC claimed that the imports from the KSA should not be cumulated with the imports from the US as (i) imports from the KSA and the US followed different trends; (ii) ‘the average unit value of imports’ from the KSA was 5 % higher than from the US; (iii) Saudi and US producers sell MEG to the EU through different channels and at different prices.

(158)

The Commission rejected those claims. The decision as to whether or not imports should be assessed cumulatively must be based on the criteria set out in Article 3(4) of the basic Regulation, which were met in this case as highlighted in recitals (153) to (155). None of the aspects raised by SABIC could question the appropriateness of examining imports from the KSA together with those from the US.

(159)

The Commission established the volume of imports on the basis of Eurostat data. The market share of the imports was established by comparing the volume of imports with the Union consumption.

(160)

Imports into the Union from the countries concerned developed as follows:

(161)

Imports from the countries concerned increased by 38 % during the period considered. The increase in market share was even more pronounced as the market share of the imports concerned increased by 12,5 percentage points, from 31.6 % in 2017 to 44,1 % in the investigation period. As consumption was rather stable in the investigation period as compared to 2017, the sharp increase in market share by the countries concerned was clearly to the detriment of other market participants, especially the Union industry.

(162)

The Commission established the prices of imports on the basis of Eurostat data. It is important to clarify that the level of these statistical prices might differ from verified prices for co-operating exporting producers as such, as most of the imports from the countries concerned, in particular for the KSA, are made through related importers/traders. Information on the latter confirm the trends and general levels mentioned below.

(163)

The weighted average price of imports into the Union from the countries concerned developed as follows:

(164)

The average import price from the countries concerned fell by 35 % during the period considered. In fact, the prices of imports from both countries concerned fell, i.e. by 41 % from the US and by 33 % from the KSA during the period considered. This fall was particular evident from 2018 to 2019 when the US exporting producers increased their market share by 8,3 percentage points to the detriment on the Union industry while the Saudi exporting producers maintained their market share by decreasing the prices as well, also in a very significant fashion.

(165)

The Commission determined price undercutting during the investigation period by comparing:

(166)

The price comparison was made on a type-by-type basis for transactions at the same level of trade, duly adjusted where necessary, and after deduction of rebates and discounts. The result of the comparison was expressed as a percentage of the sampled Union producers’ theoretical turnover during the investigation period. It showed a weighted average undercutting margin of [10,7 – 13,0] % for the imports from the KSA, while on a weighted average basis of all transactions of the two American companies concerned there was no undercutting by the US imports.

(167)

In the investigation period, comparing the sales prices on a type-by-type basis for transactions as the same level of trade, imports from the countries concerned undercut the prices of the Union industry by [7,6 – 9,3] % on average.

(168)

Bearing in mind that the product concerned is a commodity and that competition is largely based on price alone and that its prices are very transparent (i.e. known in the market), such margins are considered significant. A low price difference will make the buyer switch suppliers. This was also confirmed by the replies of the users. Furthermore, as showed in Tables 3 and 7, the import price from both countries concerned was below the cost of production of the Union industry during the investigation period.

(169)

In accordance with Article 3(5) of the basic Regulation, the examination of the impact of the dumped imports on the Union industry included an evaluation of all economic indicators having a bearing on the state of the Union industry during the period considered.

(170)

As mentioned in recital (58), sampling was used for the determination of possible injury suffered by the Union industry.

(171)

For the injury determination, the Commission distinguished between macroeconomic and microeconomic injury indicators. The Commission evaluated the macroeconomic indicators on the basis of data contained in the response to the questionnaire submitted by the complainant. The data related to all Union producers. The Commission evaluated the microeconomic indicators on the basis of data contained in the questionnaire replies from the sampled Union producers. Both sets of data were found to be representative of the economic situation of the Union industry.

(172)

The macroeconomic indicators are: production, production capacity, capacity utilisation, sales volume, market share, growth, employment, productivity, magnitude of the dumping margin, and recovery from past dumping.

(173)

The microeconomic indicators are: average unit prices, unit cost, labour costs, inventories, profitability, cash flow, investments, return on investments, and ability to raise capital.

(174)

The total Union production, production capacity and capacity utilisation developed over the period considered as follows:

(175)

The Union industry’s production volume was rather stable until 2018, then decreased by 14,4 % in 2019 as compared to 2018, and by 5,4 % in the investigation period as compared to 2019. This decrease in production volume coincided with the sharp increase in import volume and decrease of import prices observed in 2019, as shown in Tables 2 and 3 above. Overall, the production volume decreased by 19 % during the period considered.

(176)

The production capacity was almost constant during the period considered. It slightly decreased in the investigation period, also due to an accident in the plant of one of the Union producers in January 2020 (8).

(177)

The capacity utilisation reflected the trend of production volume and decreased by 13 percentage points over the period considered.

(178)

The Union industry’s sales volume and market share developed over the period considered as follows:

(179)

Total sales in the Union decreased by 20 % during the period considered. This decrease, which began in 2019, occurred against a background of the concurrent significant increase in import volume from the countries concerned.

(180)

The sales for the captive market decreased by 28 % as well during the period considered.

(181)

Throughout the period considered the total sales on the free market by the Union industry decreased by 18 %. The trend in total Union industry’s sales translated into a loss in market share of the Union industry of 8,3 percentage points, from 55,8 % in 2017 to 47,5 % in the investigation period. During the same period, the countries concerned increased their market share from 31,6 % in 2017 to 44,1 % in the investigation period, namely an increase by more than 12,5 percentage points as stated in recital (161).

(182)

The above figures in respect of production, sales volume and marker share demonstrate that the Union industry was not able to grow, either in absolute terms or in relation to the consumption, over the period considered.

(183)

Employment and productivity developed over the period considered as follows:

(184)

In view of the deteriorating market circumstances, the number of employees of the Union industry fell by 8 % over the period considered. Furthermore, as production decreased even more, the productivity fell by 13 % over the period considered.

(185)

All dumping margins were above the de minimis level. The impact of the magnitude of the actual margins of dumping on the Union industry was substantial, given the volume and prices of imports from the countries concerned and high price sensitivity of the product concerned.

(186)

This is the first anti-dumping investigation regarding the product concerned. Therefore, no data were available to assess the effects of possible past dumping.

(187)

The weighted average unit sales prices of the sampled Union producers to unrelated customers in the Union developed over the period considered as follows:

(188)

The Union producers’ average unit sales prices to unrelated parties on the free market decreased by 40 % over the period considered. The largest fall in prices year-on-year was in 2019, when the low-priced imports from the countries concerned increased by 38 % and the consumption was rather constant.

(189)

The unit cost of production of the sampled producers was fairly stable in the period 2017-2019, and then decreased in the investigation period, albeit at a lower rate than the sales price, mainly due to lower cost of ethylene, the main raw material to manufacture MEG.

(190)

This demonstrates the significant price pressure caused by the sharp increase in volume of imports at dumped prices from the countries concerned.

(191)

The average labour costs of the sampled Union producers developed over the period considered as follows:

(192)

The average labour costs per employee of the sampled Union producers increased by 5 % over the period considered. This increase is mainly due to inflation and a small yearly increase in salaries of employees working in the chemical industry.

(193)

Stock levels of the sampled Union producers developed over the period considered as follows:

(194)

The closing stocks of the sampled Union producers increased by 42 % over the period considered.

(195)

The stocks as a percentage of production increased as well over the period considered by 62 %.

(196)

Profitability, cash flow, investments and return on investments of the sampled Union producers developed over the period considered as follows:

(197)

The Commission established the profitability of the sampled Union producers by expressing the pre-tax net profit of the sales of the like product to unrelated customers in the Union as a percentage of the turnover of those sales. Profitability deteriorated dramatically during the period considered starting as of 2019 because of the development in the average sales prices and cost of production described in recitals (188) and (189). Under the pressure of the significant volumes of imports from the countries concerned, the Union industry had to decrease the sales prices significantly below the cost of production, thus registering major losses of between 10,8 % and 13,2 % during the investigation period.

(198)

The net cash flow is the ability of the Union producers to self-finance their activities. The trend in net cash flow developed broadly in line with the trend in profitability. Until 2018, the sampled Union producers generated positive cash flow, while from 2019 onwards they reported increasingly negative cash balance. Overall, the cash flow decreased by 127 % during the period considered. This seriously jeopardises the Union industry’s ability to finance its operations.

(199)

Investments decreased as well by 67 % during the period considered. Almost all investments were made to replace obsolete fixed assets. Investments aimed at increasing capacity or increasing efficiency were marginal, reflecting deteriorating market prospects in view of the decreasing market share and profitability.

(200)

The return on investments is the profit in percentage of the net book value of investments. It increased slightly in 2018 and then fell sharply to negative values over the remaining period considered, reflecting the trend in profitability.

(201)

The three sampled Union producers’ are part of large groups of companies, hence their ability to raise capital is better than stand-alone companies in a similar financial situation. However, with their financial situation deteriorating so significantly, their ability to raise capital in the future is clearly in jeopardy.

(202)

The volume of imports from the countries concerned grew by 38 % over the period considered. Given a fairly stable Union consumption, the imports from the countries concerned increased their market share from 31,6 % in 2017 to 44,1 % in the investigation period. This increase in market share came at the detriment of the Union industry who lost 10,7 percentage points of their market share on the free market.

(203)

The increase in market share of the countries concerned on the Union market was possible through significant price pressure, as in the investigation period, imports from the countries concerned were on average [12-15] % lower than Union industry costs. Thus, the import price from the countries concerned decreased by 35 % during the period considered. In order to maintain a reasonable market share and production volumes at economical levels, the Union industry had no choice but to decrease the prices as well. Although the cost of production decreased as well due to the decrease in the price of ethylene, the price pressure exerted by the imports was of such magnitude that it forced the Union industry to decrease prices below the cost of production, thus registering significant losses by the end of the investigation period.

(204)

Due to this situation of the market, all main macroeconomic injury indicators showed a negative trend during the period considered. Production volume and sales volume on the free market decreased by 19 % and 18 % respectively. Employment and productivity decreased by 7 % and 13 % respectively.

(205)

Similarly, the main microeconomic indicators deteriorated as well. The Union producers’ average unit sales prices to unrelated parties on the free market decreased by 40 % over the period considered while their costs only decreased by 13 %, leading to a pronounced deterioration of their profitability, from profits between 16,7 and 20,5 % in 2017 to losses between 10,8 % and 13,2 % during the investigation period. The closing stocks increased by 42 %. Cash flow and the investments decreased by 127 % and 63 % respectively.

(206)

On the basis of the above, the Commission concluded at this stage that the Union industry suffered material injury within the meaning of Article 3(5) of the basic Regulation.

(207)

CPME claimed that the post-IP data showed that the Union industry was recovering from the alleged injury suffered in the first half of 2020 as the prices of MEG increased in the period July – November 2020.

(208)

Such information falls outside the investigation period and is in any event too fragmentary to draw any conclusions regarding injurious dumping. Therefore, it was rejected.

(209)

In accordance with Article 3(6) of the basic Regulation, the Commission examined whether the dumped imports from the countries concerned caused material injury to the Union industry. In accordance with Article 3(7) of the basic Regulation, the Commission also examined whether other known factors could at the same time have injured the Union industry. The Commission ensured that any possible injury caused by factors other than the dumped imports from the countries concerned was not attributed to the dumped imports. These factors are: imports from third countries, export performance of the Union industry, captive sales, other more profitable products than MEG, depreciation expenses, cost of raw materials/lack of competitiveness, COVID-19 pandemic, MEG as a globally traded commodity, price of oil, US-China ‘trade war’, global depression in prices during the period considered, self-inflicted injury, and imports of PET into the Union.

(210)

The volume of imports from the countries concerned grew by 38 % over the period considered, increasing their market share from 31,6 % in 2017 to 44,1 % by the investigation period. This development took place despite a rather stable consumption during the period considered.

(211)

Import prices from the countries concerned fell on average by 35 % during the period considered, by 41 % from the US and by 33 % from the KSA. This fall in sales prices was particularly apparent in 2019 when, at the same time, the volume of imports from the countries concerned increased by 46 % as compared to 2017. In the investigation period, imports from the countries concerned undercut the prices of the Union industry by [7,6 – 9,3] % on average, and were on average [12-15] % lower than Union industry costs.

(212)

It is clear that the large increase in imports at falling prices played a substantial role in the rapid deterioration of the Union industry's economic indicators. MEG is a homogenous commodity sold to customers based almost exclusively on price. Therefore, only a small difference in price has significant consequences.

(213)

In any event, regardless of any price undercutting, the Commission found that the dumped imports depressed the prices of the Union producers to a level where Union producers incurred significant losses. Although the Union industry’s average unit costs decreased by 13 % over the period considered, this was not enough to counterbalance the effects of severe price depression caused by the dumped imports. Indeed, the Union producers’ average unit sales prices to unrelated parties on the free market decreased by 40 % over the period considered, a much more pronounced decrease that that of their costs. As a result, the Union industry, which registered profits before the influx of dumped imports, turned heavily unprofitable from 2019 onwards, recording losses between 8,3 % and 10,2 % in 2019 and between 10,8 % and 13,2 % in the investigation period. These significant losses question the business case for continuation of Union industry activity altogether.

(214)

The volume of imports from other third countries developed over the period considered as follows:

(215)

Imports from the countries concerned accounted for around 90 % of total imports in the Union in 2019 and in the investigation period. The imports from Russia and Kuwait represented 2,7 % and 1,3 % respectively of total Union imports in the investigation period.

(216)

Imports from Russia decreased by 1 % over the period considered and its market share declined in 2018 and 2019 before increasing in the investigation period to the same level as in 2017, namely 1,2 %. The average import price from Russia was higher in 2017 and 2018 and lower in 2019 and in the investigation period than import prices from the countries concerned.

(217)

Imports from Kuwait decreased by 21 % between 2018 and the investigation period (there were no imports from Kuwait in 2017) and its market share declined from 0,7 % to 0,6 % during the same period. The average import prices from Kuwait were lower than import prices from the countries concerned.

(218)

Imports from other third countries and their market share decreased by almost half during the period considered reaching a market share of 2,7 % in the investigation period. The import prices from other third countries were higher than the import prices from the countries concerned throughout the whole period considered.

(219)

On this basis, the Commission provisionally concluded that the evolution of imports from other countries could only have a marginal impact on the situation of the Union industry, if any.

(220)

The volume of exports of the Union producers developed over the period considered as follows:

(221)

Their exports represented on average around 3 % of total production during the period considered as well as in the investigation period.

(222)

Overall, the exports of the Union industry and their prices decreased by 47 % and 50 % respectively.

(223)

Given the limited and decreasing share of the export sales in the total production of the Union industry, the Commission provisionally concluded that the export performance did not contribute to the material injury suffered by the Union industry.

(224)

Mitsubishi Corporation claimed that the Union industry poor export performance was the cause of injury for the Union industry.

(225)

The Commission disagrees with this claim. The Union industry is not export-oriented as the demand on the Union market is higher than the production capacity of the Union industry. The Union industry was also not export-oriented in 2017 and 2018 when it registered positive profits.

(226)

As shown at Table 1, during the period considered the Union industry’s sales to the captive market fell by 28 %. However, it represented a relatively small part of total Union industry production, i.e. 12,6 %.

(227)

Bearing in mind the limited size of the captive market, its developments do not contribute in any significant manner to nor explain the deterioration of the Union industry.

(228)

Several interested parties (CPME, Arteco, HELM, Oxyde) claimed that the injury suffered by the Union industry was due to its decision to focus on more profitable products other than MEG as the MEG producers could switch their production from MEG to other ethylene oxide derivatives. It was further argued that this decision led to an increase of fixed costs per unit for the MEG production. In addition, Arteco claimed that the MEG production capacity and capacity utilization cannot be seen separately from the increase in production of ethylene oxide derivatives on the same production lines. Furthermore, it argued that MEG profitability can also not be seen separately from the profitability of ethylene oxide derivatives.

(229)

The investigation did not confirm these allegations. The Union industry remains committed to manufacturing MEG in the Union. In fact, the sampled Union producers are manufacturing ethylene within the group and, in addition to using it internally for the production of MEG and other products, they also sell it to other parties. Thus, the MEG producers have access to enough ethylene oxide to manufacture enough MEG as well as other ethylene oxide derivatives in line with their production capacity. The Union industry is also planning to increase the production capacity of ethylene oxide as was also highlighted by several interested parties such as HELM. The Union industry was forced to reduce the production of MEG as its selling price was significant below the cost of production due to the price pressure exercised by the imports from the countries concerned. Once the level playing field is re-established on the Union market, the Union industry will continue to manufacture MEG in higher volumes as it did before the surge of imports from the countries concerned.

(230)

As a result, any impact on fixed costs emanates directly from the negative impact of dumped imports, not ethylene oxide derivatives production.

(231)

In addition, the Union industry is not manufacturing other products such as ethylene oxide derivatives on the same production line as MEG. The injury indicators assessed in recitals (174) to (201) are limited to the production and sales of MEG only. Therefore, the profitability of MEG cannot be linked to the profitability of other products such as ethylene oxide derivatives as these products are not covered by the investigation. Therefore, these claims were rejected.

(232)

Several interested parties (Arteco, HELM, Oxyde) argued that the performance of the Union industry deteriorated because of the high levels of depreciation expenses.

(233)

The investigation found that depreciation expenses are not high, representing between 1 % and 3 % in the cost of production. They thus did not have a noteworthy impact on the financial performance of the Union industry. Therefore, the claim was rejected.

(234)

Several interested parties, (Mitsubishi Corporation, Arteco, Oxyde), claimed that Union industry’s deteriorated performance was due to higher cost of production compared to producers in the countries concerned as Union producers use more expensive raw materials (naphtha) than their US and Saudi competitors (shale gas and ethane) to manufacture ethylene and therefore they lacked competitiveness. Arteco also claimed that the production process in the US and the KSA was producing less by-products making the plants cheaper to construct and less complicated to operate. Furthermore, it argued that the profitability of the Union industry was depressed because of the high energy costs.

(235)

The Commission disagreed with this allegation. While it is true that the US and Saudi producers may have had some cost advantage in certain raw materials, it did not prevent the Union industry from registering high profit margins in 2017 and 2018 as showed in Table 10, that is to say before the high increase in imports at sharply decreasing prices from the countries concerned. It is thus the dumped imports, and not the different raw materials used, that contributed to the dire financial situation of the Union industry.

(236)

Regarding the claim concerning by-products, Arteco did not substantiate its claim with any evidence and did not specify exactly to which by-products it referred. The Commission can only assume that Arteco was referring to the other glycols that are generated in the manufacturing process of MEG such as Diethylene Glycol (DEG) and triethylene glycol (TEG). However, these products are generated in the manufacturing process of MEG irrespective of the feedstock used to manufacture ethylene. While there might be some variations in volume terms for TEG and DEG from one producer to the other, these variations are narrow and therefore cannot have a major impact on the performance of a producer. Nevertheless, there is a market for DEG and TEG and therefore these products generate revenues for the companies. Regarding the construction and the operation of these plants, Arteco again does not substantiate its claim. MEG plants are fully automated in the Union, requiring minimum involvement of labour as the manufacturing process of MEG is fairly simple. Finally, regarding energy costs, the investigation revealed that they represent about 3 % in the cost of production of the Union industry and therefore it could not have a major impact on the competitiveness of the Union industry. Therefore, these claims were rejected.

(237)

Several interested parties (CPME, Arteco, HELM, Oxyde) claimed that the COVID-19 pandemic had an impact of the Union MEG industry in the first quarter of 2020 and even more so in the second quarter of 2020. CPME claimed that the decrease in the MEG production and sales in the Union followed a drop in the Union demand for MEG due to the COVID-19 pandemic. In particular, it argued that the stop to car sales (and car manufacture) and to flights during the lockdown led to a drop in the EU demand for MEG used to produce anti-freezing and de-icing fluids.

(238)

The investigation revealed that the situation of the Union industry started to deteriorate significantly already in 2019, well before the COVID-19 pandemic started in the Union in early 2020. None of the Union producers closed their production sites during the pandemic, except for maintenance operations. Furthermore, the effects of the pandemic on Union consumption were mixed, with less demand for car engine coolants being compensated by increasing demand for PET for essential protective packaging for water, food and hand sanitizer during the outbreak, which was also highlighted by SABIC.

(239)

While consumption thus dropped by a moderate 1 % during the investigation period as compared to 2017, production by the Union industry dropped by 19 %, capacity utilisation by almost 14 percentage points, free market sales by 20 %, and market share by 10,7 percentage points.

(240)

In sum, while it is not excluded that the COVID-19 pandemic had a certain impact on the situation of the Union industry at the end of the investigation period, it was not the major cause of material injury suffered by the Union industry.

(241)

Arteco and Oxyde claimed that the imports from the US and the KSA into the Union did not influence the price-setting mechanism for MEG, as it was a globally traded product and that the complainant set the European Contract Price (‘ECP’). Furthermore, it was argued that (i) these prices reflect the prices on the Asian market, as China is the largest MEG market globally; and (ii) the prices for MEG closely follow the trend of the prices for its essential feedstock, i.e., ethylene. Furthermore, it was claimed that the gap between the ethylene prices and MEG prices widened from March 2019 through March 2020, allegedly following the impact of the China-driven global supply/demand situation for MEG, and that the profitability of the Union producers was negatively affected as a result of the increasing spread.

(242)

This claim is factually incorrect. The Union MEG producers do not set the European Contract Price (‘ECP’). The ECP is an indication of a price in the EU at a given time, an index. In a market with multiple buyers and sellers, a price is the equilibrium between supply and demand on the market, and can therefore not be set by one or several parties independently from the others. A seller alone cannot set the price of a transaction. As the complainant is on the sales side only, it cannot manipulate this index. In practice, several data providers report the ECP. These reports are established and published by independent market consultants. We count four main providers: ICIS (10), IHS (11), Wood Mackenzie Chemicals (12) and Tecnon (13). These market consultants rely on anonymous surveys collecting prices agreed between buyers and sellers. Broadly speaking, the ECPs reported by these firms are generally aligned. Participation in the ECP surveys is also open to any party selling or buying MEG in a material way in the marketplace including the importers. Indeed, the ECP follows to a certain extent the MEG price in Asia and the evolution of the price of ethylene, as the main raw material, has an influence on the selling price of MEG.

(243)

On the Union market, MEG is sold under a long-term contract or one-time delivery sales (‘spot sales’). It is estimated that the sales made under contractual terms represent around 80 % of total sales in the Union and the spot sales account for the remaining 20 %. In the contract sales, the price formula is based on the ECP minus a discount. While ECP is a monthly index published by market intelligence as explained in recital (242), the discount is confidential. The competition between sellers is on the discount. The contractual price is negotiated on a monthly basis and it is influenced by the spot prices as MEG is a commodity traded in a very transparent market where market players quickly adapt to the situation created by the dumped imports. The US and the Saudi exporters, even if they link their selling price on the Union market to ECP, depressed the selling price of MEG by increasing the discount offered to the buyers. Therefore, the injurious effects on the Union market cannot be attributable to the ECP index as such. Injury was caused by the influx of low priced imports on the Union market which depressed spot and contract prices to the benefit of buyers. Therefore, these claims were rejected.

(244)

CPME and CIRFS claimed that the drop in the price of oil which occurred in the second part of the investigation period was the cause for a decrease in the price for MEG in the Union and not the dumped imports from the countries concerned.

(245)

As stated in recital (234), in the Union, the ethylene production is based on naphtha, a product obtained through the refining of crude oil. Therefore, the evolution of the price of oil influences the cost and price of ethylene as well as the cost and price of MEG. As explained in recital (205), the cost of production of the Union industry decreased by 13 % during the period considered, while the selling price of MEG decreased much more, i.e. by 40 %. Therefore, the claim was rejected.

(246)

In August 2018, China imposed additional import duties of 25 % on US MEG, which allegedly led the US producers to divert exports from China to the Union. Thus, several interested parties (Mitsubishi Corporation, Arteco, Oxyde) claimed that the deterioration of the trade relations between China and the US was the main cause of injury. The parties argued that, after the 2020 introduction of temporary waivers of these tariffs, the situation on the Union market would return to the status quo ante.

(247)

These considerations are irrelevant, as the legal standard set by basic Regulation and the WTO ADA is the existence of injury caused by dumped imports—not the political or other extraneous considerations which may be linked to such practices. In any event, the Commission observes that although the restrictions were indeed relaxed, the additional tariffs continue to apply as a rule and it is unclear how the situation will evolve. Furthermore, the US MEG industry is export-oriented with an increasing production capacity. Moreover, the Chinese MEG industry is also increasing production capacity with the aim of becoming self-sufficient. Therefore, US producers are likely to continue their keen interest in the Union market, irrespective of any dispute between the US and China.

(248)

Several interested parties (Mitsubishi, CIRFS) claimed that the injury suffered by the Union industry coincided with one of the deepest depressions in global prices of MEG over the past ten years, which was not exclusive to the Union market but was in line with prices in the global market. It was claimed that the significant increase in global MEG capacity and lack of corresponding global demand – in late 2018 alone, an additional [1,5-2,5] million tonnes per year capacity was added in China. As of November 2019, total global MEG capacity was around [37,5-38,5] million tonnes per year representing an excess in supply of around [10-20] %, while significant additional capacity was added during 2020. Therefore, the injury was allegedly being caused by the historic low prices on the global markets rather than any dumping.

(249)

These considerations may well provide an ultimate explanation why imports were sold at dumped prices in the Union. But the fact remains that those dumped imports generated via the aforementioned price and volume effects material injury to the Union industry – the applicable legal standard set by basic Regulation and the WTO ADA, which do not foresee an analysis of the reasons underlying the decision to dump. The investigation revealed that indeed there is a global overcapacity of MEG production. The Saudi and the US producers have significantly increased their production capacity and it is estimated that the US exporters are going to increase the production capacity to reach around 6 million tonnes per year. Because of this overcapacity the US and the Saudi exporting producers were in search for markets and therefore they sold significant volumes of MEG on the Union market at dumped prices during the investigation period. Therefore, the claim was rejected.

(250)

SABIC claimed that one Union producer contacted SABIC to market MEG on the Union market and that several companies related to Union producers (as stated in recital (40)) imported MEG from the KSA causing self-inflicted injury.

(251)

Regarding the claim that one Union producer contacted SABIC to market Saudi MEG on the Union market, the investigation revealed that the contract had not been finalised between SABIC and the Union producer concerned. Furthermore, the Union producer itself contacted SABIC in this regard, as due to the price depression on the Union market causing significant losses, this producer was looking for other options to continue operations in the MEG Union market. This is another indication of the difficult situation on the Union industry. Therefore, the claim was rejected.

(252)

Several interested parties, Arteco, HELM, and Oxyde claimed, without any supporting evidence, that the increase in imports of PET into the Union affected the MEG consumption.

(253)

This claim is factually wrong. The imports of PET in the Union fluctuated over the period considered. Furthermore, as stated in recital (150), the consumption on free market was fairly stable by the end of the investigation period. The claim is thus rejected.

(254)

There was a clear coincidence in time between the substantial increase of imports at dumped prices and market share of the countries concerned and the significant decrease in sales and market share of the Union producers, coupled with the price depression, and the deteriorated financial situation of the Union industry.

(255)

The Commission distinguished and separated the effects of all known factors on the situation of the Union industry from the injurious effects of the dumped imports. The effect of all other factors, on the Union industry’s negative developments in terms of declining production and sales, loss of market share, price depression, negative profitability, return on investment and cash flow was only limited.

(256)

On the basis of the above, the Commission concluded at this stage that the dumped imports from the countries concerned caused material injury to the Union industry and that the other factors, considered individually or collectively, did not attenuate the causal link between the dumped imports and the material injury. The injury consists of declining production and sales, loss of market share, price depression, negative profitability, return on investment and cash flow.

(257)

To determine the level of the measures, the Commission examined whether a duty lower than the margin of dumping would be sufficient to remove the injury caused by dumped imports to the Union industry.

(258)

The injury would be removed if the Union industry were able to obtain a target profit by selling at a target price in the sense of Articles 7(2c) and 7(2d) of the basic regulation.

(259)

In accordance with Article 7(2c) of the basic Regulation, for establishing the target profit, the Commission took into account the following factors: the level of profitability before the increase in imports from the countries concerned, the level of profitability needed to cover full costs and investments, research and development (R&D) and innovation, and the level of profitability to be expected under normal conditions of competition. Such profit margin should not be lower than 6 %.

(260)

Import volume from the countries concerned increased significantly and import prices fell abruptly from 2019 onwards (as shown in Tables 2 and 3) turning the Union producers unprofitable. Given that, the Commission established a basic profit covering full costs under normal conditions of competition on the basis of the profitability of the Union producers before the surge of dumped imports, namely as a weighted average of profit margins recorded by the Union producers for years 2017 and 2018. The basic profit thus calculated amounts to [17,5 – 19,5] %.

(261)

None of the sampled producers made a claim under Article 7(2c) of the basic Regulation for investments foregone or R&D and innovation costs.

(262)

On this basis, the non-injurious price is [610 - 746] EUR/tonne, resulting from applying the above-mentioned profit margin of [17,5 – 19,5] % to the cost of production during the IP of the sampled Union producers

(263)

In accordance with article 7(2d) of the basic Regulation, the Commission assessed the future costs resulting from Multilateral Environmental Agreements, and protocols thereunder, to which the Union is a party, and of ILO Conventions listed in Annex Ia that the Union industry will incur during the period of the application of the measure pursuant to Article 11(2).

(264)

These costs comprised the additional future costs (i.e. after deduction of actual costs incurred in the IP) to ensure compliance with the EU Emissions Trading System (‘EU ETS’) and the EU Industrial Emissions Directive (‘IED’). The EU ETS is a cornerstone of the EU's policy to comply with Multilateral Environmental Agreements. Likewise, the IED is the main EU instrument regulating pollutant emissions from industrial installations and, as such, also ensures compliance with Multilateral Environmental Agreements.

(265)

The costs of compliance with the EU ETS were calculated on the basis of the average estimated additional EU Allowances (‘EUA’) which will have to be purchased during the period of the application of the measures (2021 to 2025). The EUAs used in the calculation were net of free allowances receivable and related solely to the product concerned. The costs of the EUAs were established based on data from Bloomberg New Energy Finance (extraction dated 7 February 2021). The average projected price for EUAs for the period 2021-2025 is 36,24 EUR/tonne of CO2 emitted. The costs of compliance with the IED were calculated based on data reported by the sampled Union producers and cross-checked by the Commission. A note to the file on how the Commission established these additional future compliance costs is available in the file for inspection by interested parties.

(266)

The Commission established that these future compliance costs amounted to [0,7 – 0,9] % of the cost of production in the investigation period and added them to the non-injurious price mentioned in recital (262) to obtain a total non-injurious price of the like product for the Union industry, that is to say [616 - 752] EUR/tonne.

(267)

The Commission then determined the underselling margin level on the basis of a comparison of the weighted average import price of the sampled cooperating exporting producers in the countries concerned, as established for the price undercutting calculations, with the weighted average non-injurious price of the like product sold by the sampled Union producers on the Union market during the investigation period. Any difference resulting from this comparison was expressed as a percentage of the weighted average import CIF value.

(268)

The injury elimination level for ‘other cooperating companies’ and for ‘all other companies’ is defined in the same manner as the dumping margin for these companies (see recitals (127) to (130)).

(269)

Following the above assessment, provisional anti-dumping duties should be set as below in accordance with Article 7(2) of the basic Regulation:

(270)

The Commission examined whether it could clearly conclude that it was not in the Union interest to adopt measures in this case, despite the determination of injurious dumping, in accordance with Article 21 of the basic Regulation. The determination of the Union interest was based on an appreciation of all the various interests involved, including those of the Union industry, importers/traders, users and suppliers.

(271)

The Commission sent questionnaires to known interested parties. It received questionnaire replies from two unrelated importers (Helm and Oxyde) and seven users (Arteco, Indorama Group, Neo Group, Novapet, PlastiVerd, Selenis, SIR Industriale).

(272)

There are 12 producers in nine groups of producers of MEG in the Union. The imposition of measures would allow the Union industry to recover lost market share, while improving their profitability towards levels considered sustainable.

(273)

The magnitude of the injury suffered by the Union industry renders its situation untenable, given the high level of losses (-10,8 % – -13,2 % in the IP), resulting from the simultaneous effect of abnormally low prices (a decrease by 40 % on the free market) and dropping sales (-18 % on the free market) and production (-19 %), which put pressure on costs.

(274)

The imposition of measures is essential to keep the massive impact of dumped imports in check and maintain MEG production in the Union. Indeed, without measures, the twin pressure of depressed prices and the erosion of sales and production would prevent the Union industry from making any profits, leaving it little choice but to discontinue production for the open market—with the virtual disappearance of Union industry producers not linked to Saudi or US interests.

(275)

This pressure is due to increase, as global excess capacity rises, according to specialised consultants following closely the market such as Wood Mackenzie and ISIC. Driven by China and the US, capacity increases will outstrip demand by several million tonnes in 2021-2022. Important Chinese increases in capacity will progressively reduce opportunities for US exports there, enhancing incentives for the latter to find outlets elsewhere. This will be mainly in the export front, including the Union, as US demand is slated to increase only marginally. Coupled with Saudi Arabia’s approach to follow prices downwards (the key manner to secure presence in this price-driven market), constant price pressure appears likely. The combined US and Saudi presence is thus likely to cause further injury to the already deteriorated Union industry.

(276)

Measures would release a good part of the twin pressure caused by dumped imports, allowing industry to increase both prices and volumes (sales, production, and capacity utilisation). The level of measures would allow for the elimination of the financial losses which jeopardise the Union industry’s immediate future.

(277)

It is therefore concluded that the imposition of provisional measures would be in the interest of the Union industry.

(278)

The investigation has found that around 55 % of Union consumption of organic chemical MEG serves as input for polyethylene terephthalate (‘PET’ for plastic bottle manufacture); just under 25 % of MEG is used to produce automotive engine coolants; and the remaining quarter is a raw material in other industrial products.

(279)

Three points are important for the analysis of the interests of Union importers/trades and users.

(280)

First, non-imposition of measures would lead complainants to discontinue production for the open market, thus reducing the available sources of supply on the Union market. The Union would be dependent on imports from third countries – primarily from the KSA and the US. This would be undesirable for users not only in terms of competition, but of security of supply of importers/traders and users.

(281)

Second, Taiwan, Singapore and Korea are available sources of alternative supply, whose unused capacity can, according to specialised consultants, fully cover the volume of imports from the KSA and US, in the unlikely case that these should disappear. Nevertheless, it is recalled that the purpose of the imposition of the anti-dumping measures is not to stop the imports but to restore the level playing field on the Union market.

(282)

Third, proposed measures are mostly in the 8,5 % to 13,5 % range – a level which is significant yet not prohibitive.

(283)

The level of cooperation of unrelated importers/traders was high, with the two main companies in this highly concentrated sector participating. They account for the large majority of imports from the US. These companies also import from the KSA, even though much less as at is the related SABIC importers that channel most of the volume from the KSA on the Union market.

(284)

While both unrelated importers/traders are against measures, the impact thereof would not be disproportionate. Part of these duties can be passed on to users (particularly in the coolant and other industrial use segments – see below). In the case of one importer, its Union MEG activity does not represent a significant part of its turnover, so even full duties would have a marginal impact on its business. For the other, the MEG activity on the Union market is more significant, so a larger impact may occur. This will depend on the ability to target the segment where price increases can be passed on more readily, in part or in full. At any rate, the investigation revealed that the financial situation of the company is not necessarily determined by reasons linked to MEG.

(285)

In any event, other sources of supply are available for all importers/traders, mitigating the impact of measures.

(286)

For these reasons, it is determined that the impact of measures would not be disproportionate for importers/traders.

(287)

Replies were received from users covering all three segments of downstream production using MEG, expressing their opposition to measures.

(288)

The coolant business, where MEG is a key input, is split in two main sub-segments. Automobile companies (up to half of the coolant business) require specific, certified product formulas as well as a guaranteed, stable stream of supply. As explained above in recital (274), measures would, by maintaining domestic production, contribute to guarantee a stable stream of supply. Also, given the marginal impact of coolants on automobile costs, duties in this sub-segment can in all likelihood be largely passed on. Therefore, the impact on users in this segment would not be disproportionate in case of measures.

(289)

On the other hand, the aftermarket sub-segment entails basic products where it is more difficult to pass prices on. The situation of the cooperating user in this segment does not indicate that the impact of measures would be disproportionate. At any rate, other sources of supply are available for all importers/traders, mitigating the impact of measures.

(290)

Three users from the other industrial products segment (fibres, films, resins) cooperated. There is no clear pattern for the impact of measures, ranging from the marginal to the significant. This mixed picture points to the existence of company-specific situations that are not related to the level of MEG prices, but to other factors. Measures would thus not be decisive on the future activity of these companies. This would not point to a disproportionate impact on such users, particularly when balanced against the longer-term benefits of the diversity and stability of supply that the Union industry brings, and that would not exist in the absence of measures.

(291)

The PET segment accounts for almost 55 % of total MEG use. MEG contributes around one fifth of full costs of PET, a product under large price pressure where profits are typically slim. Therefore, the impact of between one to two percentage points in terms of profitability can be significant.

(292)

Seven companies belonging to four groups have participated in the investigation. The situation varies on a company-by-company basis. For some companies, profits would decrease but still be positive; others with low profitability would be brought to breakeven levels; for worst performers already heavy losses would be increased, even though by proportionally moderate amounts.

(293)

The situation of the worst performers is structurally determined by other factors, and its activity and the hundreds of jobs it supports are thus not ultimately determined by the proposed measures, the impact of which would thus not be disproportionate.

(294)

As regards the companies whose profits would oscillate around breakeven, measures would not lead to a fundamental variation in their situation. This could well call for exogenous actions (e.g. trade defence measures in case of injurious unfair trade) or endogenous adjustments of their business model to cement competitiveness. While the impact of measures may not be decisive, a few hundred jobs may be at stake.

(295)

Companies with continuing profits could be somewhat affected by measures, but not disproportionately so.

(296)

At any rate, the aforementioned possible impacts in the short term would have to be balanced against three risks in the medium term associated with non-imposition of measures (and the likely discontinuation of Union industry activity as the current situation is not sustainable): less sources of supply, lower stability of supply, and higher MEG prices. The latter can easily reach the moderate level of proposed measures—with negative impacts which may well equal, if not exceed, those generated by the proposed measures themselves.

(297)

On balance, the potential negative impacts that could unfortunately occur in the short term for PET producers are not considered overall as sufficient to halt the imposition of measures.

(298)

The aggregated picture of all user segments shows some negative impacts, but not disproportionate to the benefits the measure would bring. This matter will be the subject of continuing attention by the investigation for definitive stage.

(299)

ExxonMobil, as a manufacturer of paraxylene (raw material to manufacture PTA which is then used to manufacture PET), was the sole supplier to make comments. It claimed that the adverse impact of the anti-dumping measures on PET producers will also have an adverse effect on the Union paraxylene suppliers which would lose sales on the Union market as the Union PET producers would not be able to compete with PET imports from other regions. It was further claimed that the Union paraxylene producers already faced challenges due to excess global capacity and increased imports. Furthermore, it was argued that paraxylene producers were integrated with refineries and therefore any adverse impact on paraxylene would impact the Union refinery industries as well, which already face challenges due to excess global capacity, shifting fuel demand patterns and high costs.

(300)

These claims were unsubstantiated and cannot be accepted at this stage. In addition, reference is made to the analysis regarding users making PET, whose outcome indicates that potential negative impacts may affect only some producers whose situation does not fundamentally depend on the absence of measures on MEG. As a result, it cannot be concluded that the impacts of such measures would be disproportionate for suppliers.

(301)

Several interested parties (CPME, CIFRS, Mitsubishi, Arteco, Proviron, Oxyde, HELM, NEO Group) claimed that the imposition of anti-dumping measures would not be in the interest of the Union as the Union producers cannot meet the demand of MEG users in the Union and therefore imports are needed. In addition, it was claimed that the seasonality of MEG market made it impossible to always use the full production capacity. It was further argued that the imports of MEG from the US and Saudi Arabia cannot be replaced by imports from other third countries, such as Canada, China, Kuwait, India, Mexico, Russia and Turkey, in view of insufficient production capacity, high transportation costs and growing internal demand characterising other exporting countries. Arteco claimed that to ensure the viability of its engine coolants activity in the Union, it needs a secure supply of MEG as guaranteed by the ability to source from multiple sources. HELM argued that although the MEG Union producers are planning to increase the production capacity of ethylene oxide, there have no plans to increase the production capacity of MEG.

(302)

As stated in recital (274), the imposition of measures is essential to keep the massive impact of dumped imports in check and maintain MEG production in the Union. Without a Union industry, the users of MEG will be dependent on imports and therefore they will not have a secure supply of MEG from multiple sources. Furthermore, the purpose of the imposition of the anti-dumping measures is not to stop the imports but to restore the level playing field on the Union market. Notwithstanding this, as stated in recital (281), there are other sources of supply available, apart from the KSA and the US, such as Taiwan, Singapore and Korea. Furthermore, whereas the investigation revealed that the sampled Union producers indeed do not have plans to increase production capacity in the Union in the near future, it is recalled that, as stated in recital (249), there is an overcapacity of MEG in the world. Therefore, these claims were rejected.

(303)

CPME claimed that the imposition of anti-dumping duties is not in the Union interest and it would severely affect the PET industry, driving the PET producers out of the market.

(304)

As explained in recitals (290) to (297), the potential negative impact that could unfortunately occur in the short term for PET producers is not considered overall as sufficient to justify the non-imposition of measures. Therefore, the claim was rejected.

(305)

Mitsubishi claimed that it is not in the Union interest to impose anti-dumping measures as the trade relations between the US and China may be expected to improve under a new US administration and therefore the cause of dumping and injury will no longer be relevant.

(306)

As stated in recital (247), although the restrictions were indeed relaxed, the additional tariffs continue to apply as a rule and it is unclear how the situation will evolve. Furthermore, despite the evolution of trade relations between the US and China, the US MEG industry is export-oriented with an increasing production capacity and therefore US producers are likely to continue their keen interest in the Union market, especially given that China is expanding its own MEG capacity. Therefore, this claim was rejected.

(307)

Arteco claimed that the imposition of measures would only serve the interests of two major companies, one of whom is Arteco’s main competitor on the downstream coolants market. Similarly, Oxyde claimed that, as BASF was a very large antifreeze producer using its own MEG, it would have competitive advantage over its competitors, Arteco, HVL and Solventis, who would need to pay anti-dumping duties on imports of MEG.

(308)

The Commission disagrees with these claims. The imposition of measures will benefit the entire Union industry not only two producers. Indeed, one of the entities within BASF group manufactures coolants. However, the investigation revealed that this company buys MEG from its related company at market prices, the same as Arteco and other users.

(309)

Arteco claimed that, as MEG is a commodity that is traded and transported globally, after the imposition of measures, there will be a significant shift in trade flows and increased transportation, leading to higher emissions of global shipping, which is detrimental to the on-going efforts to mitigate climate change.

(310)

The Commission disagrees with this claim as well. The shift in trade has already happened in the period considered when imports from the countries concerned replaced a significant part of domestic production. The non-imposition of measures will completely replace domestic production with imports and therefore the shift in trade will increase even more.

(311)

On the basis of the above, the Commission concluded that there were no compelling reasons that it was not in the Union interest to impose measures on imports of MEG originating in countries concerned at this stage of the investigation.

(312)

On the basis of the conclusions reached by the Commission on dumping, injury, causation and Union interest, provisional measures should be imposed to prevent further injury being caused to the Union industry by the dumped imports.

(313)

Provisional anti-dumping measures should be imposed on imports of mono ethylene glycol originating in the United States of America and in the Kingdom of Saudi Arabia, in accordance with the lesser duty rule in Article 7(2) of the basic Regulation. The Commission compared the underselling margins and the dumping margins. The amount of the duties was set at the level of the lower of the dumping and the injury margins.

(314)

On the basis of the above, the provisional anti-dumping duty rates, expressed on the CIF Union border price, customs duty unpaid, should be as follows:

(315)

The individual company anti-dumping duty rates specified in this Regulation were established on the basis of the provisional findings of this investigation. Therefore, they reflect the situation found during this investigation with respect to these companies. These duty rates are exclusively applicable to imports of the product concerned originating in the countries concerned and produced by the named legal entities. Imports of the product concerned produced by any other company not specifically mentioned in the operative part of this Regulation, including entities related to those specifically mentioned, should be subject to the duty rate applicable to ‘all other companies’. They should not be subject to any of the individual anti-dumping duty rates.

(316)

To ensure a proper enforcement of the anti-dumping duties, the anti-dumping duty for all other US companies should apply not only to the non-cooperating US exporting producers in this investigation, but also to the US producers which did not have exports to the Union during the investigation period.

(317)

In accordance with Article 19a of the basic Regulation, the Commission informed interested parties about the planned imposition of provisional duties. This information was also made available to the general public via DG TRADE’s website. Interested parties were given three working days to provide comments on the accuracy of the calculations specifically disclosed to them.

(318)

No comments on the accuracy of the calculations were received.

(319)

In the interests of sound administration, the Commission will invite the interested parties to submit written comments and/or to request a hearing with the Commission and/or the Hearing Officer in trade proceedings within a fixed deadline.

(320)

The findings concerning the imposition of provisional duties are provisional and may be amended at the definitive stage of the investigation,