Commission Implementing Regulation (EU) 2021/939 of 10 June 2021 imposing a provisional anti-dumping duty on imports of mono ethylene glycol originating in the United States of America and the Kingdom of Saudi Arabia

(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.

(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.

(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,

HAS ADOPTED THIS REGULATION:

Article 1

Article 2

Article 3

This Regulation shall enter into force on the day following that of its publication in the Official Journal of the European Union.

Article 1 shall apply for a period of six months.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels, 10 June 2021.

For the Commission The President Ursula VON DER LEYEN

(1) OJ L 176, 30.6.2016, p. 21.

(2) Notice of initiation of an anti-dumping proceeding concerning imports of mono ethylene glycol originating in the United States of America and the Kingdom of Saudi Arabia (OJ C 342, 14.10.2020, p. 12).

(3) Council Decision (EU) 2020/135 of 30 January 2020 on the conclusion of the Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community (OJ L 29, 31.1.2020, p. 1).

(4) http://trade.ec.europa.eu/tdi/case_details.cfm?ref=ong&id=2485

(5) Notice on the consequences of the COVID-19 outbreak on anti-dumping and anti-subsidy investigations (OJ C 86, 16.3.2020, p. 6).

(6) http://www.jadwa.com/en/download/petrochemicals-and-the-vision-2030/research-13-1-1-1-1-1-1 (accessed on 11 May 2021).

(7) Recital (352) of Commission Implementing Regulation (EU) 2020/1336, of 25 September 2020 imposing definitive anti-dumping duties on imports of certain polyvinyl alcohols originating in the People’s Republic of China (OJ L 315, 29.9.2020, p. 1).

(8) https://www.icis.com/explore/resources/news/2020/01/16/10459681/explosion-at-reactor-caused-iqoxe-s-blast-death-toll-rises-to-three

(9) The data from the sampled Union companies in this regulation is presented in ranges because of the risk that any sampled company reverse-engineers its competitors’ data, especially given that two of the three sampled companies are related.

(10) https://www.icis.com/explore/

(11) https://ihsmarkit.com/index.html

(12) https://www.woodmac.com/research/products/chemicals-polymers-fibres/

(13) https://www.orbichem.com/chemical-data-portfolio/ethylene-glycol-ethylene-oxide