Commission Implementing Regulation (EU) 2023/2120 of 12 October 2023 imposing a provisional anti-dumping duty on imports of electrolytic manganese dioxides originating in the People’s Republic of China

• (105) A system of market-based wages cannot fully develop in the PRC as workers and employers are impeded in their rights to collective organisation. The PRC has not ratified a number of essential conventions of the International Labour Organisation (‘ILO’), in particular those on freedom of association and on collective bargaining ⁶⁰. Under national law, only one trade union organisation is active. However, this organisation lacks independence from the State authorities and its engagement in collective bargaining and protection of workers’ rights remains rudimentary ⁶¹. Moreover, the mobility of the Chinese workforce is restricted by the household registration system, which limits access to the full range of social security and other benefits to local residents of a given administrative area. This typically results in workers who are not in possession of the local residence registration finding themselves in a vulnerable employment position and receiving lower income than the holders of the residence registration ⁶². Those findings lead to the distortion of wage costs in the PRC.

• (106) No evidence was submitted to the effect that the EMD sector would not be subject to the Chinese labour law system described. EMD sector is thus affected by the distortions of wage costs both directly (when making the product concerned or the main raw material for its production) as well as indirectly (when having access to capital or inputs from companies subject to the same labour system in the PRC).

3.2.1.8.   Significant distortions according to Article 2(6a)(b), sixth indent of the basic Regulation: access to finance granted by institutions which implement public policy objectives or otherwise not acting independently of the State

• (107) Access to capital for corporate actors in the PRC is subject to various distortions.

• (108) First, the Chinese financial system is characterised by the strong position of State-owned banks ⁶³, which, when granting access to finance, take into consideration criteria other than the economic viability of a project. Similarly to non-financial SOEs, the banks remain connected to the State not only through ownership but also via personal relations (the top executives of large State-owned financial institutions are ultimately appointed by the CCP) ⁶⁴ and, again just like non-financial SOEs, the banks regularly implement public policies designed by the government. In doing so, the banks comply with an explicit legal obligation to conduct their business in accordance with the needs of the national economic and social development and under the guidance of the industrial policies of the State ⁶⁵. This is compounded by additional existing rules, which direct finances into sectors designated by the government as encouraged or otherwise important ⁶⁶.

• (109) While it is acknowledged that various legal provisions refer to the need to respect normal banking behaviour and prudential rules such as the need to examine the creditworthiness of the borrower, the overwhelming evidence, including findings made in trade defence investigations, suggests that these provisions play only a secondary role in the application of the various legal instruments.

• (110) For example, the GOC has very recently clarified that even private commercial banking decisions must be overseen by the CCP and remain in line with national policies. One of the State’s three overarching goals in relation to banking governance is now to strengthen the Party’s leadership in the banking and insurance sector, including in relation to operational and management issues in companies ⁶⁷. Also, the performance evaluation criteria of commercial banks have now to, notably, take into account how entities ‘serve the national development objectives and the real economy’, and in particular how they ‘serve strategic and emerging industries’ ⁶⁸.

• (111) Furthermore, bond and credit ratings are often distorted for a variety of reasons including the fact that the risk assessment is influenced by the firm’s strategic importance to the GOC and the strength of any implicit guarantee by the government. Estimates strongly suggest that Chinese credit ratings systematically correspond to lower international ratings ⁶⁹.

• (112) This is compounded by additional existing rules, which direct finances into sectors designated by the government as encouraged or otherwise important ⁷⁰. This results in a bias in favour of lending to SOEs, large well-connected private firms and firms in key industrial sectors, which implies that the availability and cost of capital is not equal for all players on the market.

• (113) Second, borrowing costs have been kept artificially low to stimulate investment growth. This has led to the excessive use of capital investment with ever lower returns on investment. This is illustrated by the growth in corporate leverage in the State sector despite a sharp fall in profitability, which suggests that the mechanisms at work in the banking system do not follow normal commercial responses.

• (114) Third, although nominal interest rate liberalisation was achieved in October 2015, price signals are still not the result of free market forces but are influenced by government-induced distortions. The share of lending at or below the benchmark rate still represented at least one-third of all lending as of the end of 2018 ⁷¹. Official media in the PRC have recently reported that the CCP called for ‘guiding the loan market interest rate downwards’ ⁷². Artificially low interest rates result in under-pricing, and consequently, the excessive utilisation of capital.

• (115) Overall credit growth in the PRC indicates a worsening efficiency of capital allocation without any signs of credit tightening that would be expected in an undistorted market environment. As a result, non-performing loans have increased rapidly in recent years. Faced with a situation of increasing debt-at-risk, the GOC has opted to avoid defaults. Consequently, bad debt issues have been handled by rolling over debt, thus creating so-called ‘zombie’ companies, or by transferring the ownership of the debt (e.g. via mergers or debt-to-equity swaps), without necessarily removing the overall debt problem or addressing its root causes.

• (116) In essence, despite the steps that have been taken to liberalise the market, the corporate credit system in the PRC is affected by significant distortions resulting from the continuing pervasive role of the state in the capital markets.

• (117) No evidence was submitted to the effect that the EMD sector, would be exempted from the above-described government intervention in the financial system. Therefore, the substantial government intervention in the financial system leads to the market conditions being severely affected at all levels.

3.2.1.9.   Systemic nature of the distortions described

• (118) The Commission noted that the distortions described in the Report are characteristic for the Chinese economy. The evidence available shows that the facts and features of the Chinese system as described above in Sections 3.2.1.2–3.2.1.8 as well as in Part A of the Report apply throughout the country and across the sectors of the economy. The same holds true for the description of the factors of production as set out above in Sections 3.2.1.6–3.2.1.8 above and in Part B of the Report.

• (119) The Commission recalls that in order to produce EMD, a broad range of inputs is needed. When the producers of EMD purchase/contract these inputs, the prices they pay (and which are recorded as their costs) are clearly exposed to the same systemic distortions mentioned before. For instance, suppliers of inputs employ labour that is subject to the distortions. They may borrow money that is subject to the distortions on the financial sector/capital allocation. In addition, they are subject to the planning system that applies across all levels of government and sectors.

• (120) As a consequence, not only the domestic sales prices of EMD are not appropriate for use within the meaning of Article 2(6a)(a) of the basic Regulation, but all the input costs (including raw materials, energy, land, financing, labour, etc.) are also affected because their price formation is affected by substantial government intervention, as described in Parts A and B of the Report. Indeed, the government interventions described in relation to the allocation of capital, land, labour, energy, and raw materials are present throughout the PRC. This means, for instance, that an input that was produced in the PRC by combining a range of factors of production is exposed to significant distortions. The same applies for the input to the input and so forth. No evidence or argument to the contrary has been adduced by the GOC or the exporting producers in the present investigation.

3.2.1.10.   Conclusion

• (121) The analysis set out in Sections 3.2.1.2 to 3.2.1.9, which includes an examination of all the available evidence relating to the PRC’s intervention in its economy in general as well as in the EMD sector in particular, showed that prices or costs of the product concerned, including the costs of raw materials, energy and labour, are not the result of free market forces because they are affected by substantial government intervention within the meaning of Article 2(6a)(b) of the basic Regulation as shown by the actual or potential impact of one or more of the relevant elements listed therein. On that basis, and in the absence of any cooperation from the GOC, the Commission concluded that it is not appropriate to use domestic prices and costs to establish normal value in this case.

• (122) Consequently, the Commission proceeded to construct the normal value exclusively on the basis of costs of production and sale reflecting undistorted prices or benchmarks, that is, in this case, on the basis of corresponding costs of production and sale in an appropriate representative country, in accordance with Article 2(6a)(a) of the basic Regulation, as discussed in the following section.

3.2.2.   Representative country

3.2.2.1.   General remarks

• (123) The choice of the representative country was based on the following criteria pursuant to Article 2(6a) of the basic Regulation:

• — a level of economic development similar to the PRC. For this purpose, the Commission used countries with a gross national income per capita similar to the PRC on the basis of the database of the World Bank ⁷³;

• — production of the product under investigation in that country;

• — availability of relevant public data in the representative country.

Where there is more than one possible representative country, preference was given, where appropriate, to the country with an adequate level of social and environmental protection.

• (124) The First and the Second Note discussed above described the facts and evidence underlying the relevant criteria, and also addressed the comments received by the parties on these elements and on the relevant sources. The Commission also informed interested parties of its intention to consider Colombia as an appropriate representative country in the present case if the existence of significant distortions pursuant to Article 2(6a) of the basic Regulation would be confirmed.

3.2.2.2.   A level of economic development similar to China and production of the product under investigation

• (125) In the First Note, the Commission explained that Colombia was the only country with a similar level of economic development as China according to the World Bank (i.e. it is classified by the World Bank as an ‘upper-middle income’ country on a gross national income basis) where production of the product under investigation was known to take place.

• (126) Following the First Note Guiliu claimed that Mexico should be used as a representative country as it produces manganese ore (the main raw material for EMD production) and, apart from the manganese ore import data, it has sufficient import quantities of other raw materials. Guiliu suggested to use Colombia for the manganese ores import prices and Autlan EMD for the SG&A and profit.

• (127) The production of the product under investigation is one of the criteria the Commission uses when constructing the normal value in line with Article 2(6a)(a) of the basic Regulation. Unlike Colombia, which has production of the product under investigation, Mexico does not have any and it can therefore not be considered an appropriate representative country. This claim was therefore rejected.

• (128) Varta considered the selection of Colombia as a representative country as questionable, due to the allegedly incorrect comparison with electricity costs in China and suggested that the type of electricity generation and the costs of electricity distributions need to be considered.

• (129) Varta did not demonstrate to what extent the benchmark price of electricity of Colombia would not be representative of the undistorted price in China, nor provided any concrete alternatives. Its claim was therefore rejected.

• (130) To the Commission’s knowledge, there are no other countries at the level of economic development similar to that of China where EMD is produced, and no interested parties brought any new information on this matter, therefore in the Second Note Colombia was confirmed as an appropriate representative country pursuant to Article 2(6a)(a) of the basic Regulation.

3.2.2.3.   Availability of relevant public data in the representative country

• (131) In the First Note the Commission indicated that for the country identified as the country where the product under investigation is being produced, i.e. Colombia, the availability of public data needed to be further verified in particular with regard to the public financial data for the investigation period from producers of the product under investigation or in a similar production segment.

• (132) Guiliu, in its comments to the First Note, claimed that import quantities for certain factors of production (‘FOPs’) into Colombia are insufficient and that the prices of those FOPs should be based on worldwide imports instead.

• (133) The Commission assessed the total imports into Colombia of the following factors of production, which the exporting producers reported as being used in their production processes: sulphuric acid, lignite, bituminous and anthracite coal types and pyrite. The Commission noted that the import quantities for each of those FOPs were indeed very low (less than 0,02 % of imports to all countries at the level of economic development similar to China) and that the corresponding import prices were abnormal if compared to the average import prices into the same pool of countries (the differences with the same pool of countries were 102 %, 1 115 %, 1 233 % and 2 608 % for the four out of the five abovementioned products). For the fifth product, bituminous coal, the price difference was lower (29 %) but the import quantities in the investigation period were extremely low at 3,8 thousand tonnes, representing less than 0,00006 % of imports to all countries at the level of economic development similar to China.

• (134) Since the quantities of imports of the five aforementioned inputs were low and the resulting prices unreasonable, indicating that the import data was influenced by imports of specialised or unconventional product types declared under the relevant customs code, which are not used in the EMD production process.

• (135) No comments on this approach were received from the interested parties.

• (136) For those inputs the Commission searched for an alternative country in the list of countries with a level of economic development similar to China and where imports for all these five factors of production were representative. Among all the countries, Türkiye was found to have the highest aggregate volumes of imports of representative quantities and prices for all five FOPs in comparison with the other countries where imports of these factors of production were present. Therefore, the Commission concluded that Türkiye was an appropriate alternative source of import prices for the above five factors of production.

• (137) In the Second Note, the Commission also noted that it did not have at its disposal data showing a reasonable amount of profits and SG&A for the investigation period within the meaning of Article 2(6a)(a) of the basic Regulation for the Colombian EMD producer Quintal. This presented a challenge in the process of searching for a source of undistorted and reasonable SGA and profit data. EMD industry is very peculiar with a notably limited number of producers and users outside of China or the Union. Neither the Commission nor any interested party could identify another EMD producer in the countries with a level of economic development similar to China. Moreover, EMD is predominantly utilised in the production of dry cell batteries and consequently efforts to locate a producer of products in the same general category of products capable of providing a reasonable number for SG&A yielded no viable results.

• (138) In this specific situation, the Commission was compelled to find a viable alternative and with the production process being a key determinant of the overall financial performance data, it found a company Quimpac de Colombia S.A., which use the same electrolysis process in its production. The rationale is that the cost structure of an electrolysis plant with the specialised fixed assets and relatively high electricity consumption offers a reasonable source of the required data. Furthermore, Quimpac’s customer base, being also big scale industrial users reasonably mirrors the SG&A of the EMD producer, given that both entities sell to a limited number of customers in high volumes.

• (139) Given the public availability of Quimpac de Colombia’s full and comprehensive annual report for 2022, the Commission resorted to the use of the information included therein.

• (140) In light of the above considerations, the Commission informed the interested parties with the Second Note that it intended to use Colombia as an appropriate representative country and the Quimpac de Colombia S.A., in accordance with Article 2(6a)(a), first ident of the basic Regulation in order to source undistorted prices or benchmarks for the calculation of normal value.

• (141) Interested parties were invited to comment on the appropriateness of Colombia as a representative country and of Quimpac de Colombia as producer in a similar production segment in the representative country.

3.2.2.4.   Comments of the parties

• (142) Following the Second Note, Autlan argued that Türkiye was not a valid alternative source of import prices for the five FOPs identified in recital (133) because import prices of coal products into Türkiye were abnormal during the investigation period when compared to the average prices of other countries with a similar level of economic development. According to Autlan, the GTA data disclosed by the Commission in the Second Note showed that Russia was the largest exporter to Türkiye of the two main types of coal used in the production of EMD and its prices considerably lower than the average import prices of the corresponding products from other third countries.

• (143) The Commission analysed this claim in detail and compared the import prices of coal into Türkiye from Russia with import prices from other countries and found that import prices from Russia were abnormal when compared to the average prices of imports from other countries. As the imports from Russia represented the majority of all imports of anthracite and bituminous coal into Türkiye and could have an impact on the prices of imports from other countries, the Commission decided to use Brazil, representing the second highest aggregate volumes of imports of representative quantities and prices, net of Russian imports, to establish the undistorted costs of the bituminous coal and anthracite coal.

• (144) Xiangtan argued that the Commission wrongly disregarded the other possible countries principally based on the argument that the other proposed countries do not have any EMD production. In its view, Article 2(6a)(a) of the basic Regulation does not contain a pre-requisite condition that there must exist production of the product under investigation in the representative country.

• (145) Furthermore, it claimed that the methodology applied by the Commission in the selection of an appropriate representative country is manifestly contradictory. It discarded other possible countries due to the absence of EMD production in these countries while, having found the financial data of the sole EMD producer identified in the country inappropriate, decided to use instead that of another Colombian company in a totally different business sector unrelated to EMD operation and decided to use another third country and an international benchmark as an alternative source of import prices for some factors of production.

• (146) In addition, Xiangtan argued that the SG&A and profit of Quimpac are not representative of an EMD producer and suggested to use the data of a Japanese EMD producer, Tosoh Corporation Japan.

• (147) As regards the provision of Article 2(6a)(a), of the basic Regulation the Commission notes that production of the product concerned in the representative country is an essential requisite to select a representative country. Indeed, the existence of such production ensures that the costs of production and sales in a representative country are corresponding the undistorted costs and sales of the production of the product concerned in accordance with Article 2(6a)(a), first indent.

• (148) Regarding Quimpac, the Commission noted that in the event when no financial information is readily available specifically and solely in relation to product concerned by investigation (in this case EMD), the Commission seeks to identify the closest readily available proxy. The process is described in detail in recital (138).

• (149) As regards the suggestion to use, with appropriate adjustments the data from Tosoh Corporation Japan, the Commission underlined that the choice of the representative country should be based on the three criteria of which, the first, is the level of economic development. Tosoh Corporation Japan is located in a country with higher level of economic development and it could not therefore be considered representative. Therefore, this claim was dismissed.

• (150) CCCMC & GMIA and Daxin claimed that the price of energy in Colombia and the labour cost are influenced by several factors and are significantly different even between different countries with a similar level of economic development as China. As an alternative, CCCMC & GMIA and Daxin claimed that the Commission should use the Chinese exporters’ own data on labour cost and energy.

• (151) This claim had to be rejected. The Commission observed that the choice of the representative country was based on the three criteria: level of economic development, production of the product concerned and availability of relevant public data. All these criteria were considered by the Commission as sufficiently representative to arrive at the undistorted cost of production in China and neither CCCMC & GMIA nor Daxin provided evidence that the selected benchmarks for labour and energy were either distorted or not corresponding.

• (152) Moreover, the Commission noted that once the existence of significant distortions affecting the product under investigation in the exporting country is established in accordance with Article 2(6a)(b) of the basic Regulation, it is prevented from using the actual costs of individual exporting producers, unless they were positively established not to be distorted on the basis of accurate and appropriate evidence. This was not the case and, as a result, the relevant costs were found to be distorted.

3.2.2.5.   Level of social and environmental protection

• (153) Having established that Colombia was the only available appropriate representative country, based on all of the above elements, there was no need to carry out an assessment of the level of social and environmental protection in accordance with the last sentence of Article 2(6a)(a) first indent of the basic Regulation.

3.2.2.6.   Conclusion

• (154) In view of the above analysis, Colombia met the criteria laid down in Article 2(6a)(a), first indent of the basic Regulation in order to be considered as an appropriate representative country.

3.2.3.   Sources used to establish undistorted costs

• (155) In the First Note, the Commission listed the factors of production such as materials, energy, water and labour used in the production of the product under investigation by the exporting producers and invited the interested parties to comment and propose publicly available information on undistorted values for each of the factors of production mentioned in that note.

• (156) Subsequently, in the Second Note, the Commission stated that, in order to construct the normal value in accordance with Article 2(6a)(a) of the basic Regulation, it would use:

• (a) publicly available data on manganese ore prices for 2022, provided by Fastmarkets, one of the main international cross-commodity price reporting agencies, to establish the undistorted cost of the main factor of production of EMD;

• (b) Global Trade Atlas (‘GTA’) to establish the undistorted cost of the other raw materials.

• (157) In addition, the Commission stated that it would use the ILO statistics for labour cost in Colombia ⁷⁴, the industrial electricity price charged by the company ENEL S.A. for energy ⁷⁵ and the water tariff charged by the Acueducto de Bogota ⁷⁶ for water.

• (158) In the Second Note, the Commission also informed the interested parties that due to the large number of factors of production of the sampled exporting producers that provided complete information and the negligible weight of some of the raw materials in the total cost of production, these negligible items, representing less than 5 % of the total cost of production reported by the sampled exporting producers, were grouped under ‘consumables’. Further, the Commission informed that it will calculate the percentage of the consumables on the total cost of raw materials and apply this percentage to the recalculated cost of raw materials when using the established undistorted benchmarks in the appropriate representative country.

3.2.4.   Undistorted costs and benchmarks

• (159) Considering all the information submitted by the interested parties and collected during the verification visits, the following factors of production and their sources have been identified in order to determine the normal value in accordance with Article 2(6a)(a) of the basic Regulation:

Table 2

Factors of production

Factor of Production	Commodity Code	Undistorted value	Source of the data
Raw materials	Raw materials	Raw materials	Raw materials
Manganese ore77	2602 00	36,63 RMB/DMTU (dry metric tonne unit, expressed as value per % of manganese content)	Fastmarkets.com
Pyrite	2601 11	802 RMB/tonne	GTA imports for Türkiye
Anthracite coal	2701 11	1 923 RMB/tonne	GTA imports for Brazil
Bituminous coal	2701 12	2 225 RMB/tonne	GTA imports for Brazil
Lignite coal Brown coal	2702 10	1 005 RMB/tonne	GTA imports for Türkiye
Sulfuric acid78	2807 00 00 00 19	812 RMB/tonne	GTA imports for Türkiye
Consumables	Consumables	Consumables	Consumables
Labour	Labour	Labour	Labour
Labour wages in manufacturing sector	N/A	29,51 RMB/h	Colombian Statistical Office/ILO
Energy	Energy	Energy	Energy
Electricity	N/A	0,92 RMB/KWh	EMPRESAS MUNICIPALES DE CALI EICE E.S.P
Water	N/A	6,05 RMB/tonne	Acueducto de Bogota

3.2.4.1.   Manganese ore

• (160) Following the First Note Xiangtan claimed that manganese ore import prices into Colombia should not be used as a representative price for the input of the Chinese exporting producers. The manganese ores used in China have much lower concentration of manganese in the ore (between 11 %–20 %) and could not be replaced with an ore of much higher manganese content imported into Colombia from Brazil, with an average manganese content of 37 %.

• (161) The Commission duly considered this argument and looked for an alternative international benchmark that would more closely reflect the grade and quality of the manganese ore used in the production of the product under investigation. On this basis, in the absence of an alternative representative country and of an international benchmark for manganese ore with a lower concentration of manganese, the Commission considered that the most suitable available international benchmark is the 2022 data provided by Fastmarkets.com for manganese ore with 37 % Manganese content. To take into account the difference in manganese content, the price for the ores used by the Chinese exporting producers was calculated by multiplying the benchmark price by the concentration of manganese ore used by the Chinese producers. This was applied for both manganese dioxides and manganese carbonate.

• (162) Therefore, for manganese ore the Commission used the publicly available for 2022 data provided by Fastmarkets.com for index MB-MNO-0004 delivered to Tianjin port.

3.2.4.2.   Other raw materials and consumables

• (163) In order to establish the undistorted price of raw materials as delivered at the gate of a representative country producer, for sulphuric acid, lignite, and pyrite the Commission used as a basis the weighted average import price to Türkiye as reported in GTA while for bituminous coal and anthracite coal the Commission used the weighted average import price to Brazil as reported in GTA. To these prices import duties and transport costs were added, as explained in recital (174). An import price in the representative country was determined as a weighted average of unit prices of imports from all third countries excluding China and countries which are not members of the WTO, listed in Annex I to Regulation (EU) 2015/755 of the European Parliament and the Council ⁷⁹. The Commission decided to exclude imports from China into Brazil and Türkiye as it concluded in recital (122) that it is not appropriate to use domestic prices and costs in China due to the existence of significant distortions in accordance with Article 2(6a)(b) of the basic Regulation. Given that there is no evidence showing that the same distortions do not equally affect products intended for export, the Commission considered that the same distortions affected the export prices. Moreover, as explained in recital (143), imports from Russia of bituminous coal and anthracite coal, were also excluded.

• (164) For a number of factors of production, the actual costs incurred by the cooperating exporting producers represented a negligible share of total raw material costs in the review investigation period. As the value used for these had no appreciable impact on the dumping margin calculations, regardless of the source used, the Commission decided to include those costs into consumables as explained in the recital (158) and added them to the undistorted cost of manufacturing.

• (165) The Commission expressed the transport cost incurred by the cooperating exporting producers for the supply of raw materials as a percentage of the actual cost of such raw materials and then applied the same percentage to the undistorted cost of the same raw materials in order to obtain the undistorted transport cost. The Commission considered that, in the context of this investigation, the ratio between the exporting producer’s raw material and the reported transport costs could be reasonably used as an indication to estimate the undistorted transport costs of raw materials when delivered to the company’s factory.

• (166) CCCMC & GMIA submitted, in response to the Second Note, that the Commission did not clarify the criteria for identifying the main FOPs mentioned in recital (133) and the FOPs treated as consumables, and that different Chinese exporting producers use different materials and therefore these FOPs should be tailored to any Chinese exporter separately.

• (167) This claim is unfounded. The Commission identified the main FOPs mentioned in recital (133) and the ones to be treated as consumables based on the actual list of FOPs and consumption quantities data reported by each of the sampled exporting producers.

• (168) CCCMC & GMIA and Daxin argued that the benchmark selected by the Commission for manganese ore has still a significantly higher concentration of manganese as compared with the manganese ore locally sourced by the Chinese exporting producers. In their view, this different concentration results in a different unit price and therefore, the benchmark selected by the Commission cannot be used to replace the price of the Chinese manganese ore.

• (169) Xiangtan also argued that the Commission ignored the correlation between the price reflected by the price index for manganese ore and the concentration of manganese in the ore that the price index represents. In Xiangtan’s view the price index varies following the concentration of manganese in the ore. Therefore, it would be wrong to establish the benchmark price of manganese ore with manganese content other than 37 % by directly multiplying the benchmark index by the concentration of manganese ore, as explained in recital (161).

• (170) Xiangtan further suggested two alternative methodologies to establish the manganese ore benchmark that, in its view, would take better into account the different manganese contents. In the first methodology Xiangtan proposed to divide the benchmark index established by the Commission by a conversion factor based on the company’s manganese ore concentration and the manganese content of the ore of the benchmark (37 %). In the second methodology, Xiangtan proposed to use a coefficient to reflect the accurate market value of corresponding manganese content of the ores used by the Chinese producers. This coefficient express the value per unit manganese for the types of manganese ores (based on concentration of manganese) published by the industrial intelligence agency Asian Metal. The benchmark should be obtained by multiplying the average coefficient and the actual content of the manganese ore used by the company.

• (171) The Commission considered the argument of the manganese content in the ore and developed the methodology explained in recital (161) to tailor the benchmark price to the actual manganese content of the ore used by each of the sampled exporting producers. In the absence of any other available international undistorted price or benchmark for manganese ore with a concentration lower that 37 % the Commission considered that the proposed methodology fairly reflects the undistorted costs for the different concentration of manganese ore. This methodology when applied is also in line with the first methodology proposed by Xiangtan. The Commission did not examine the second methodology proposed by Xiangtan in detail, as Xiangtan did not explain why the second methodology would be more reasonable than the first methodology which was duly disclosed to the interested parties.

• (172) Therefore, the claims on the selection of the appropriate benchmark for manganese ore were dismissed.

• (173) CCCMC & GMIA and Daxin claimed that, for the FOPs established as explained in recital (136) the import price from GTA is at CIF level. Therefore, it contains ocean freight costs and insurance fees while Chinese producers purchase raw materials and other inputs from the local market at prices that do not include any ocean freight costs and insurance fees. Therefore, in their view, ocean freight costs and insurance fees should be deducted from the GTA prices for Türkiye to reach fair comparison.

• (174) In its investigations the Commission strives to establish a purchase price of the inputs available on domestic market of the representative country. As a result, the Commission uses consistently the CIF price available in the trade statistics. In addition, as explained in recital (163), the Commission adds the applicable import duties and transport costs, in order to ensure that it uses as a benchmark as delivered to the factory gate of a representative country producer. This price is in direct competition with the domestic prices in the representative country and therefore can be used as a benchmark for the purposes of the investigations. On this basis, the claim was rejected.

3.2.5.   Labour

• (175) In the Second Note, the Commission indicated that it would use ILO statistics ⁸⁰ on average monthly wages and average weekly hours worked in 2022 in the manufacturing sector to determine the wages in Colombia. It announced that it intended to consider thirteen months of salary and then add the contributions to social security and pension schemes. It would then calculate the annual hours actually worked by multiplying the weekly hours actually worked with the number of weeks in a year, and then deducting the days not worked.

• (176) Following the Second Note, the Commission received the following comments:

• (a) Xiangtan argued that the 13th month salary and some categories of contributions to social security and pension schemes do not apply to the whole workforce. Also, the worked hours provided by ILO already excluded annual public holidays and non-working days.

• (b) Autlan EMD argued that the Commission should distinguish between ‘personnel employed in the manufacturing of the product under investigation’ and ‘personnel employed in sales and administration’ and calculate a separate benchmark for the labour cost for each category of employees.

• (177) The Commission researched an alternative source which could provide more accurate data to establish the benchmark for labour cost in Colombia. The Colombian Statistical Office (‘DANE’) ⁸¹ published a survey on the manufacturing industry, which provided detailed information on the total annual wages and related charges and the number of employees for the year 2021. The Commission considered this source as the most appropriate source to determine the average labour cost for employee, as it was a primary data source from the Colombian national statistical office. Values were indexed to 2022 using the manufacturing industry real wages index ⁸².

• (178) Since information on worked hours was not available in the survey, the Commission used the data on weekly worked hours as provided by the ILO. Following Xiangtan’s comment, the Commission reviewed the definition of worked hours provided by the ILO and concluded that public holidays and non-working days were already deducted on an annual basis; therefore, there was no need to further deduct non-working days.

• (179) As regards Autlan’s claim, the Commission clarified that the labour costs for the personnel employed in sales and administration was included in the undistorted cost for SG&A, calculated as explained below in Section 3.2.8. Therefore, the distinction suggested would have no tangible effect on the benchmark. The claim was therefore dismissed.

3.2.6.   Electricity

• (180) In the First and Second Notes, the Commission indicated that it intended to use the data of the industrial electricity prices applicable in Colombia as charged by one of the largest electricity suppliers in Colombia, the company ENEL S.A. Interested parties commented that:

• (a) the company ENEL S.A. did not serve the area of Cali, where the company ‘Quimpac’ was established; the supplier EMPRESAS MUNICIPALES DE CALI EICE E.S.P. (EMCALI) was suggested as a more suitable source;

• (b) the Commission used the simple tariff in establishing the benchmark for electricity instead of time option tariffs, differentiating peak and off-peak time tariffs. It would be more appropriate to use the latter as this is normally used by companies operating in high energy consumption sectors like EMD;

• (c) the Commission should ensure that the benchmark price for electricity was net of VAT.

• (181) After having analysed the comments, the Commission concluded that it would use the data on the industrial electricity prices applicable in the city of Cali, where ‘Quimpac’ is established, as published by EMCALI ⁸³. EMCALI offers several energy tariffs: a single tariff, a peak/off-peak tariff and a triple tariff. The differences between the tariffs are very low (around 1 % price difference both between the peak and off peak tariffs and the peak/off peak average compared to the single tariff. The Commission therefore used a conservative approach and selected the single tariff for the electricity, which was the lowest. The Commission also ascertained that the electricity tariff was exempt from VAT according to Article 476(4) of the Colombian tax statute ⁸⁴.

• (182) Varta in its submission claimed the type of electricity generation in the respective country, the cost of electricity distribution should be considered to obtain reasonable conclusions.

• (183) The Commission notes that the distribution costs are included in the electricity price and will be therefore taken into account. Its claim is therefore dismissed.

3.2.7.   Water

• (184) In the Second Note, the Commission indicated that it would use the water tariff for industrial use as published by the ‘Acueducto de Bogota’, responsible for water supply, sewage collection and treatment in the capital since no publicly available data were available for the city of Cali. As for electricity, water provision is exempt from VAT according to Article 476(4) of the Colombia tax statute.

3.2.8.   Manufacturing overhead costs, SG&A and profits

• (185) According to Article 2(6a)(a) of the basic Regulation, ‘the constructed normal value shall include an undistorted and reasonable amount for administrative, selling and general costs and for profits’. In addition, a value for manufacturing overhead costs needs to be established to cover costs not included in the factors of production referred to above.

• (186) The manufacturing overheads incurred by the cooperating exporting producers were expressed as a share of the costs of manufacturing actually incurred by the exporting producers. This percentage was applied to the undistorted costs of manufacturing.

• (187) For establishing an undistorted and reasonable amount for SG&A, profit, the Commission relied on the financial data for 2022 for Quimpac as extracted from the official publicly available database of the Colombian government, Sistema Integrado de Informacion Societaria (‘SIIS’) ⁸⁵.

3.2.9.   Calculation of the normal value

• (188) On the basis of the above, the Commission constructed the normal value per product type on an ex-works basis in accordance with Article 2(6a)(a) of the basic Regulation.

• (189) First, the Commission established the undistorted manufacturing costs. The Commission applied the undistorted unit costs to the actual consumption of the individual factors of production of the cooperating exporting producers. These consumption rates provided by the sampled exporting producers were verified during the verification visits. The Commission multiplied the usage factors by the undistorted costs per unit observed in the representative country.

• (190) Once the undistorted manufacturing cost were established, the Commission applied the manufacturing overheads, as noted in recital (186).

• (191) To the costs of production established as described in the previous recital, the Commission applied SG&A of 20,33 % and profit of 24,72 % of Quimpac de Colombia S.A. as explained in recital (187), both expressed as a percentage of the Costs of Goods Sold (‘COGS’).

• (192) On that basis, the Commission constructed the normal value per product type on an ex-works basis in accordance with Article 2(6a)(a) of the basic Regulation.

3.3.   Export price

• (193) None of the sampled exporting producers sold via related importers in the Union.

• (194) Consequently, for all sampled exporting producers, 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.

3.4.   Comparison

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

• (196) Where justified by the need to ensure a fair comparison, the Commission adjusted the normal value and/or the export price for differences affecting prices and price comparability, in accordance with Article 2(10) of the basic Regulation. Adjustments were made for transport, insurance, handling, loading costs, customs duty, credit costs and bank charges.

3.5.   Dumping margins

• (197) For the sampled cooperating exporting producers, the Commission compared the weighted average normal value of each type of the like product with the weighted average export price of the corresponding type of the product concerned, in accordance with Article 2(11) and (12) of the basic Regulation.

• (198) On this basis, the provisional weighted average dumping margins expressed as a percentage of the CIF Union frontier price, duty unpaid, are as follows:

Company	Provisional dumping margin
Xiangtan	46,1  %
Guiliu	54,2  %
Daxin	18,3  %

• (199) 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. Therefore, that margin was established on the basis of the margins of the sampled exporting producers.

• (200) On this basis, the provisional dumping margin of the cooperating exporting producers outside the sample is 44,5 %.

• (201) For all other exporting producers in the country concerned, 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 country concerned to the Union in the investigation period, that were established on the basis of Eurostat statistics.

• (202) The level of cooperation in this case is low because the imports of the cooperating exporting producers constituted around 65 % of the total exports to the Union during the investigation period. On this basis, the Commission considered it appropriate to establish the dumping margin for all other companies at the level of the ten transactions with the highest margin of the sampled exporting producers in view of the fact that those represented around 14 % of the total volume exported to the Union by the company in question, which was considered sufficiently representative. Therefore, the country-wide dumping margin applicable to all other non-cooperating exporting producers was set at the level of 101,7 %

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

Company	Provisional dumping margin
Xiangtan	46,1  %
Guiliu	54,2  %
Daxin	18,3  %
Other cooperating companies	44,5  %
All other companies	102,2  %

4. INJURY

4.1.   Definition of the Union industry and Union production

• (204) According to the information available to the Commission, the like product was manufactured by two producers in the Union during the investigation period. They constitute the ‘Union industry’ within the meaning of Article 4(1) of the basic Regulation.

• (205) Given the limited number of the parties operating on the Union market, the Commission could not disclose the data regarding the two Union producers and the market shares as it is market sensitive and confidential under Article 19 of the basic Regulation. The disclosure of this information could allow parties to calculate back company-specific confidential data. The Commission therefore provided this information in ranges and indexes, which gave sufficient meaningful information to all interested parties to understand the Commission’s analysis and conclusions and provide comments in this regard. The data was also provided in the form of meaningful trends so that all interested parties could defend their interests. The Commission could not disclose the method for creating the ranges as this would allow the parties to retrieve the exact numbers from the ranges.

• (206) The total Union production during the investigation period was established at around [25,0–27,0] million kilograms. The Commission established the figure on the basis of the verified questionnaire replies of the two Union producers. As indicated in recital (204), the two Union producers represented 100 % of the total Union production of the like product.

4.2.   Union consumption

• (207) The Commission established the Union consumption on the basis of the Union industry’s sales volume on the Union market sourced from the verified questionnaire replies of the two Union producers and the imports into the Union of the product concerned from third countries based on Eurostat statistics.

• (208) Union consumption developed as follows:

Table 3

Union consumption (kg)

	2019	2020	2021	Investigation period
Total Union consumption	[38 000 000 – 40 000 000 ]	[37 000 000 – 39 000 000 ]	[39 000 000 – 41 000 000 ]	[36 000 000 – 38 000 000 ]
Index	100	96	102	94
Source: verified questionnaire replies of the two Union producers, Eurostat.	Source: verified questionnaire replies of the two Union producers, Eurostat.	Source: verified questionnaire replies of the two Union producers, Eurostat.	Source: verified questionnaire replies of the two Union producers, Eurostat.	Source: verified questionnaire replies of the two Union producers, Eurostat.

• (209) On this basis, the Union consumption fluctuated by decreasing in 2020 (– 4 % compared to 2019), then increasing in 2021 (+ 2 % compared to 2019) and finally decreasing again in the investigation period (– 6 % compared to 2019). The increase in 2021 was mainly due to the COVID-19 pandemic and the intensified consumption of the dry-cell batteries.

4.3.   Imports from the country concerned

4.3.1.   Volume and market share of the imports from the country concerned

• (210) The Commission established the volume of imports on the basis of Eurostat statistics. However, because the CN code ⁸⁶ comprised of a wider range of products other than EMD, the Commission had to estimate the volumes of imports that constituted EMD. This was done by including only the imports from countries where there was EMD production, since EMD was imported mostly from these countries historically [^ntr87-L_202302120EN.000101-E0087]:

• — imports under the full CN code from China, Japan and Colombia were included, since these imports corresponded to historical flows reported under the 10-digit TARIC code;

• — imports under the CN code for the USA and India were corrected downwards based on the ratio of historical import flows reported under TARIC code in the CN code in the period 2015–2018 ⁸⁸.

• (211) The estimated import volumes were cross-checked, where possible, with sales reported by cooperating exporting producers, purchases reported by cooperating users, Union producers, other export statistics provided by the applicant and were in line.

• (212) The market share of imports was established on the basis of the import volume and total Union consumption.

• (213) Imports into the Union from the country concerned developed as follows:

Table 4

Import volume (kg) and market share

	2019	2020	2021	Investigation period
Volume of imports from the country concerned (kg)	6 640 500	5 437 300	10 260 000	12 582 700
Index	100	82	155	189
Market share	[12 –19 ] %	[10 –17 ] %	[20 –30 ] %	[30 –40 ] %
Index	100	85	152	201
Source: Eurostat.	Source: Eurostat.	Source: Eurostat.	Source: Eurostat.	Source: Eurostat.

• (214) Import volumes of EMD from China decreased by 18 % from 2019 to 2020 due to COVID-19 restrictive measures, however they started to increase significantly in 2021 (+ 55 % compared to 2019) and the investigation period (+ 89 % compared to 2019). In absolute value, imports of EMD from China were substantial in the investigation period (12,6 million kg). Chinese imports expanded their market share overall during the period considered by [15–19] percentage points, passing from [12–19] % in 2019 to [30–40] % during the investigation period.

4.3.2.   Prices of the imports from the country concerned, price undercutting and price suppression

• (215) The Commission established the prices of imports on the basis of Eurostat dividing the total values of Chinese imports by the total volume of those imports. Price undercutting of the imports was established on the basis of verified questionnaire replies of the sampled exporting producers in China.

• (216) The weighted average price of imports into the Union from the country concerned developed as follows:

Table 5

Import prices (EUR/kg)

	2019	2020	2021	Investigation period
The People’s Republic of China	1,61	1,54	1,53	2,37
Index	100	96	95	147
Source: Eurostat.	Source: Eurostat.	Source: Eurostat.	Source: Eurostat.	Source: Eurostat.

• (217) Over the period considered, Chinese average import prices rose by 47 %, mainly due to the increase in freight cost.

• (218) The Commission determined the price undercutting during the investigation period by comparing:

• (a) the weighted average sales prices per product type of the two Union producers charged to unrelated customers on the Union market, adjusted to an ex-works level; and

• (b) the corresponding weighted average prices per product type of the imports from the sampled cooperating Chinese producers to the first independent customer on the Union market, established on a cost, insurance, freight (CIF) basis, with appropriate adjustments for customs duties and post-importation costs.

• (219) The price comparison was made on a type-by-type basis for transactions at the same level of trade. The result of the comparison was expressed as a percentage of the two Union producers’ theoretical turnover during the investigation period. Two of the sampled exporting producers were found not to undercut, with their average prices on the Union market above the Union industry’s prices, while for the third exporting producer undercutting was found, although below de minimis.

• (220) However, despite no undercutting found on a transaction-by-transaction basis for two out of the three sampled exporting producers, the average price of total Chinese imports into the Union market was around [5 %–9 %] lower than the Union industry’s average price, throughout the period considered. This difference was around [8 %–12 %] in 2019, then [2 %–6 %] in 2021 and then more prominent in the second part of this period (2021 and the investigation period), at around [5 %–7 %], which coincided with the massive increase in the Chinese import volumes (above 50 % increase) and their gaining of the Union market shares ([15–19] percentage points in the investigation period).

• (221) Furthermore, the Commission established the existence of price suppression. The average import price of total Chinese imports was also lower than the Union industry’s cost of production throughout the whole period considered. The price pressure on the cost of the Union industry was also most prominent in the second part of the period considered, where prices of Chinese imports were around [10 %–15 %] lower than the average COP of the Union industry. As shown in Table 8, the Union industry was selling below the cost of production in the second part of the period considered. Due to the significant price pressure caused by the low-priced dumped imports, the Union industry was prevented from increasing its sales prices to achieve a sustainable profit level and positive financial situation, thus, resulting in very low profits in 2021 and the investigation period, together with severely decreasing cash flow in 2021, which switched to negative in the investigation period. This is reflected in the underselling established for two of the sampled exporting producers as well as for all the other non-sampled companies as described in recitals (296) and (297) below.

4.4.   Economic situation of the Union industry

4.4.1.   General remarks

• (222) 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.

• (223) For the injury determination, the Commission distinguished between macroeconomic and microeconomic injury indicators. The Commission evaluated the macroeconomic and microeconomic indicators on the basis of data contained in the verified questionnaire replies of the two Union producers. The set of data was found to be representative of the economic situation of the Union industry.

• (224) 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.

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

4.4.2.   Macroeconomic indicators

4.4.2.1.   Production, production capacity and capacity utilisation

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

Table 6

Production, production capacity and capacity utilisation

	2019	2020	2021	Investigation period
Production volume (kg)	[29 000 000 – 31 000 000 ]	[29 000 000 – 31 000 000 ]	[30 000 000 – 32 000 000 ]	[25 000 000 – 27 000 000 ]
Index	100	101	103	87
Production capacity (kg)	[34 000 000 – 36 000 000 ]	[34 000 000 – 36 000 000 ]	[34 000 000 – 36 000 000 ]	[34 000 000 – 36 000 000 ]
Index	100	100	100	100
Capacity utilisation	[85 –90 ] %	[86 –91 ] %	[90 –95 ] %	[75 –80 ] %
Index	100	101	103	87
Source: verified questionnaire replies of the two Union producers.	Source: verified questionnaire replies of the two Union producers.	Source: verified questionnaire replies of the two Union producers.	Source: verified questionnaire replies of the two Union producers.	Source: verified questionnaire replies of the two Union producers.

• (227) The Union industry’s production started to increase in 2020 and jumped in 2021. However, it dropped in the investigation period by around [3–6] million kg in one year due to the loss in sales (which started in 2021). Overall, the production decreased by - 13 % over the period considered.

• (228) Production capacity of the Union industry was stable over the period considered, thus production capacity utilisation decreased to [75–80] % in the investigation period, in line with a decrease in production.

4.4.2.2.   Sales volume and market share

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

Table 7

Sales volume and market share

	2019	2020	2021	Investigation period
Sales volume on the Union market (kg)	[29 000 000 – 31 000 000 ]	[29 000 000 – 31 000 000 ]	[27 000 000 – 29 000 000 ]	[22 000 000 – 24 000 000 ]
Index	100	100	91	73
Market share	[75 –82 ] %	[77 –85 ] %	[65 –75 ] %	[55 –65 ] %
Index	100	104	89	78
Source: verified questionnaire replies of the two Union producers.	Source: verified questionnaire replies of the two Union producers.	Source: verified questionnaire replies of the two Union producers.	Source: verified questionnaire replies of the two Union producers.	Source: verified questionnaire replies of the two Union producers.

• (230) The sales volume of the Union industry remained stable from 2019 to 2020. However, they started to decrease in 2021 (– 9 % from 2020 to 2021), despite the peak in consumption in that year. The fall continued in the investigation period. Overall, the sales decreased by – 27 % over the period considered.

• (231) Decrease in sales was reflected in the loss of market shares, a decrease from [75–82] % in 2019 to [55–65] % in the investigation period. Overall, a loss of [15–19] percentage points of market share to the favour of the Chinese imports over the period considered.

4.4.2.3.   Growth

• (232) Despite the increase in consumption in 2021, the Union industry not only lost sales volumes in the Union, but also the market share.

4.4.2.4.   Employment and productivity

• (233) Employment and productivity developed over the period considered as follows:

Table 8

Employment and productivity

	2019	2020	2021	Investigation period
Number of employees	[120 –135 ]	[120 –135 ]	[130 –140 ]	[130 –142 ]
Index	100	100	104	108
Productivity (kg/employee)	[225 000 – 250 000 ]	[225 000 – 250 000 ]	[225 000 – 250 000 ]	[175 000 – 200 000 ]
Index	100	101	99	80
Source: verified questionnaire replies of the two Union producers.	Source: verified questionnaire replies of the two Union producers.	Source: verified questionnaire replies of the two Union producers.	Source: verified questionnaire replies of the two Union producers.	Source: verified questionnaire replies of the two Union producers.

• (234) Employment increased by + 8 % over the period considered. The increase was due to the temporary hiring following the absenteeism, new hires for support for maintenance, R & D functions and environmental operations.

• (235) Productivity developed in line with the changes in production and employment, i.e. it decreased by – 20 % over the period considered.

4.4.2.5.   Magnitude of the dumping margin and recovery from past dumping

• (236) All dumping margins were significantly 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 country concerned.

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

4.4.3.   Microeconomic indicators

4.4.3.1.   Prices and factors affecting prices

• (238) The weighted average unit sales prices of the two Union producers to unrelated customers in the Union developed over the period considered as follows:

Table 9

Sales prices in the Union

	2019	2020	2021	Investigation period
Average unit sales price in the Union on the total market (EUR/kg)	[1,70 –1,90 ]	[1,50 –1,70 ]	[1,50 –1,70 ]	[2,40 –2,60 ]
Index	100	90	92	142
Unit cost of production (EUR/kg)	[1,50 –1,70 ]	[1,40 –1,60 ]	[1,70 –1,80 ]	[2,50 –2,70 ]
Index	100	96	109	164
Source: verified questionnaire replies of the two Union producers.	Source: verified questionnaire replies of the two Union producers.	Source: verified questionnaire replies of the two Union producers.	Source: verified questionnaire replies of the two Union producers.	Source: verified questionnaire replies of the two Union producers.

• (239) The average price of the Union producers decreased in 2020 (to [1,50–1,70] EUR/kg) and stayed at [1,50–1,70] EUR/kg in 2021. It then increased to [2,40–2,60] EUR/kg in the investigation period, following the increase in the cost of production. Overall, the average price increased by + 42 % over the period considered.

• (240) Average cost of production started to increase in 2021 (by + 9 % compared to 2019) and peaked in the investigation period, due to the sharp increase in energy ⁸⁹ and certain raw material pricing ⁹⁰. Overall, the average cost of production increased by + 64 % over the period considered.

• (241) The increase in the average price was less pronounced than the increase in the cost of production over the period considered. The inability of the Union producers to increase their prices in line with increasing cost is the result of the price suppression by the Chinese exporters, which peeked in the last two years of this period. As mentioned in recital (220), and unlike in 2019–2020, where the price pressure exercised by dumped imports was less acute, as of 2021, the Union industry was not able to increase prices in step with increasing cost of production because of the price pressure exerted by the increasing volumes of dumped Chinese imports on the Union market. Consequently, due the existence of price suppression, the Union industry was selling below the cost of production since 2021. Due to the significant price pressure caused by the low-priced dumped imports, the Union industry was prevented from increasing its sales prices to achieve its target profit, resulting in decreasing profitability. This situation severely impacted the Union industry’s financial performance, as analysed later, in Part 4.4.3.4

4.4.3.2.   Labour costs

• (242) The average labour costs of the two Union producers developed over the period considered as follows:

Table 10

Average labour costs per employee

	2019	2020	2021	Investigation period
Average labour costs per employee (EUR)	[45 000 –50 000 ]	[45 000 –50 000 ]	[45 000 –50 000 ]	[50 000 –55 000 ]
Index	100	101	98	107
Source: verified questionnaire replies of the two Union producers.	Source: verified questionnaire replies of the two Union producers.	Source: verified questionnaire replies of the two Union producers.	Source: verified questionnaire replies of the two Union producers.	Source: verified questionnaire replies of the two Union producers.

• (243) Average labour cost per employee increased by + 7 % over the period considered.

4.4.3.3.   Inventories

• (244) Inventory levels of the two Union producers developed over the period considered as follows:

Table 11

Inventories

	2019	2020	2021	Investigation period
Closing stocks (kg)	[7 000 000 – 7 500 000 ]	[6 500 000 – 7 000 000 ]	[6 000 000 – 6 500 000 ]	[8 500 000 – 9 000 000 ]
Index	100	93	82	119
Closing stocks as a percentage of production	[25 –30 ] %	[20 –25 ] %	[15 –20 ] %	[30 –35 ] %
Index	100	92	79	137
Source: verified questionnaire replies of the two Union producers.	Source: verified questionnaire replies of the two Union producers.	Source: verified questionnaire replies of the two Union producers.	Source: verified questionnaire replies of the two Union producers.	Source: verified questionnaire replies of the two Union producers.

• (245) The level of inventory decreased to [6,5–7,0] million kg in 2020 and to [6,0–6,5] million kg in 2021 following the increasing consumption on the Union market, however they jumped to [8,5–9,0] million kg in the investigation period, following the loss of sales and represented around [30–35] % of the production volume in that period.

4.4.3.4.   Profitability, cash flow, investments, return on investments and ability to raise capital

• (246) Profitability, cash flow, investments and return on investments of the two Union producers developed over the period considered as follows:

Table 12

Profitability, cash flow, investments and return on investments