Commission Implementing Regulation (EU) 2024/1923 of 10 July 2024 imposing a provisional anti-dumping duty on imports of titanium dioxide originating in the People’s Republic of China

• (150) The CCP interference into the business decisions is apparent in LB Group’s website, which describes the role of the Party within the Group as follows: ‘[p]arty building leads the way and enterprises set sail. In recent years, the Party Committee of Lomon Billions Group Co., Ltd. Has continued to innovate the party-building work model, continuously improved the party-building cultural position, and actively explored the deep integration of party-building work with the central work of the enterprise, stimulating vitality and adding impetus to the high-quality development of the enterprise. Xu Gang, Secretary of the Party Committee and Chairman of Lomon Billions, concluded: “Lomon Billions always adheres to the unchanged organization, publicity, and discipline inspection pattern of the party’s work institutions in the enterprise. The party organization guarantees the supervision of the party and the country’s policies and major deployments. The role of enterprise implementation remains unchanged, the principle that the Party manages cadres and the Party manages talents remains unchanged, and the practice of ‘building branches wherever there are party members’ remains unchanged, so that the enterprise’s party building always maintains strong combat effectiveness.” […] Lomon Billions Party Committee has explored a good practice of deeply integrating non-public party building with enterprise central work: insisting on full coverage of party organizations and party work, vertical in-depth and horizontal expansion […]’ ⁵⁰.

• (151) Notably, LB Group is deeply influenced by governmental authorities, as shown in the previous recitals (see recital (137)).

• (152) The state’s presence and intervention in the financial markets as well as in the provision of raw materials and inputs further have an additional distorting effect on the market ⁵¹. Thus, the state presence in firms, in the TiO2 and other sectors (such as the financial and input sectors) allows the GOC to interfere with respect to prices and costs.

3.2.5.   Significant distortions according to Article 2(6a)(b), third indent of the basic Regulation: public policies or measures discriminating in favour of domestic suppliers or otherwise influencing free market forces

• (153) The direction of the Chinese economy is to a significant degree determined by an elaborate system of planning which sets out priorities and prescribes the goals the central, provincial and local governments must focus on. Relevant plans exist at all levels of government and cover virtually all economic sectors. The objectives set by the planning instruments are of a binding nature and the authorities at each administrative level monitor the implementation of the plans by the corresponding lower level of government.

• (154) Overall, the system of planning in China results in resources being driven to sectors designated as strategic or otherwise politically important by the government, rather than being allocated in line with market forces ⁵².

• (155) The Chinese authorities have enacted a number of policies guiding the functioning of the sector of the product concerned.

• (156) The 14^th FYP (see recital (90)) aims to ‘Transform and upgrade traditional industries, promote the layout optimization and structural adjustment of raw material industries such as petrochemicals, steel, nonferrous metals, and building materials, expand the supply of high-quality products such as light industry, and textiles, accelerate the transformation and upgrading of enterprises in key industries such as chemical industry […] In-depth implementation of special projects to enhance the core competitiveness and technological transformation of the manufacturing industry, encourage enterprises to apply advanced and applicable technologies, strengthen equipment updates and large-scale application of new products’ ⁵³.

• (157) Similarly, the Guiding Opinion on Promoting the High-quality Development of the Petrochemical and Chemical Industry During the 14th Five Years Plan Period (‘the Guiding Opinion’), emphasizes the need to ‘[…] accelerate the transformation and upgrading of traditional industries, and vigorously develop new chemical materials and fine chemicals. Accelerate the digital transformation of the industry […] and promote China’s progress from a large petrochemical and chemical country to a strong petrochemical and chemical country’ ⁵⁴. The main objectives are set as follows: ‘[b]y 2025, the petrochemical industry shall basically follow a high-quality development pattern with strong independent innovation capability, reasonable structure and layout, green, safe and low-carbon with significant improvements in the ability to guarantee high-end products, a significant increase in core competitiveness, and a solid step of high-level self-reliance and self-improvement’ ⁵⁵.

• (158) The above-mentioned objectives are further specified in the subsequent sections of the Guiding Opinion. For instance, the issuing authorities intend to ‘[s]upport enterprises to take the lead in forming collaborative innovation organizations such as industrial technology innovation alliances and upstream and downstream cooperation mechanisms and support the rational layout of local governments to build regional innovation centers and pilot bases’, to ‘[c]onquer core technologies and enhance the momentum of innovation and development, […] accelerate breakthroughs in key technologies […]’ ⁵⁶.

• (159) Moreover, the 2024 version of Guidance Catalogue for the Industry Structural Adjustment (‘Guidance Catalogue’) directly addresses the sector of the product by listing the TiO2 sulfuric acid process as a restricted industry, while its 2019 version lists the TiO2 chloride process as an encouraged one ⁵⁷.

• (160) On the provincial level, policy objectives and corresponding support tools become more specific and targeted.

• (161) For instance, the 14^th FYP on high-end development of chemical industry of Jiangsu ⁵⁸ (‘Jiangsu Chemical Plan’) sets major objectives for the sector of the product concerned: ‘[b]y the end of the “14th Five Years Plan”, the industrial structure of dye pigments and their intermediates shall be significantly optimized’, and again ‘[w]e shall strive to increase the total output value of the ink industry to RMB 8 billion, the superior production capacity shall be included into the development and integration of chemical parks (concentration areas)’.

• (162) Regarding the inorganic chemical industry, the Jiangsu Chemical plan sets the goals of: ‘[t]otal quantity control, quality and efficiency improvement, optimization of configuration […] Adopt advanced energy saving and emission reduction technologies to transform and upgrade industries and enterprises […] [P]romote the downstream industries of chlorine and hydrogen to develop towards high-end, functional and refined direction. Extend and expand the regional chlorine industry chain […]’ ⁵⁹.

• (163) The Jiangsu Chemical Plan further specifies the goals for each coastal industrial zone. For instance, in Lianyungang the goals are to: ‘[p]romote the integration of refining and chemicals. […] Development of high-end polyolefins. […] Promote the deep processing of raw materials’ ⁶⁰. In Yancheng the industries have to develop new chemical materials, among which sulfuric acid.

• (164) In Henan, the Notice from the General Office of the People’s Government of Henan Province on the issuance of Henan Province’s Action Plan (2022-2025) to accelerate the restructuration and leadership of the materials industry sets the following goals for titanium-based new materials: ‘[a]ccelerate the localization of high-quality chloride titanium dioxide raw materials and the research and development of new high-performance green titanium dioxide, and establish titanium, zirconium, vanadium and scandium resources. The new green comprehensive extraction system promotes the development of titanium industry clusters in Jiaozuo, Luoyang and other places’ ⁶¹.

• (165) In Sichuan, the Decision of the Sichuan Provincial Committee of the Communist Party of China on promoting the high-quality development of green and low-carbon advantageous industries with the goal of achieving carbon peak and carbon neutrality also sets numerous objectives: ‘Deepen the comprehensive development and utilization of vanadium and titanium resources. […] strengthen the titanium industry, create a world-class vanadium and titanium industry base, and build Panzhihua as the “Vanadium and Titanium Capital of China”. […] Implement the project to strengthen and extend the chain of the vanadium and titanium industry and accelerate the development of high-end vanadium and titanium products, functional materials, special parts […]’ ⁶².

• (166) At the same time, Sichuan Province’s Guide for the high-quality development of vanadium, titanium, steel, and rare earth industries urges the ‘Breakthrough in key core technologies. Break through the comprehensive utilization technology of vanadium-titanium magnetite, realize the industrialization technology of high-value titanium extraction from high-titanium blast furnace slag, accelerate high-grade chloride titanium dioxide, aviation titanium and titanium alloy products’ ⁶³.

• (167) The Chuxiong 14^th FYP accurately addresses and influences the sector of the product concerned, as already seen (see recital (137)). The plan lists also the following objectives: ‘[t]he chemical industry chain and the titanium metallurgical industry chain will create a whole industry chain, improve the sustainable development capabilities, core competitiveness and market share of the titanium industry, and become an important national chloride titanium dioxide production base and the world’s largest sponge titanium production base. Form a 100-billion-level titanium industry. Standardize the titanium ore mining and dressing industry, build a model green mine, integrate, transform, and upgrade high-titanium slag and sulfuric acid titanium dioxide production technology and equipment, and optimize regional layout. Vigorously develop high-end chloride titanium dioxide and rotor-grade sponge titanium and encourage various enterprises to actively develop marketable products such as titanium alloys and titanium products, as well as high-end titanium materials in aviation, aerospace, navigation and other fields’ ⁶⁴. It continues by setting the goals to: ‘[c]reate a whole industrial chain. Accelerate the construction of the titanium metallurgical industry chain of “ilmenite – titanium concentrate – high titanium slag – sponge titanium (titanium dioxide) – titanium profiles (titanium alloy or coating)”, and the “high titanium slag – titanium dioxide – coating – plastic” titanium chemical industry industrial chain, accelerate the development of high-end chloride titanium dioxide, and expand titanium dioxide production capacity and technical advantages […]’ ⁶⁵.

• (168) Furthermore, the product concerned is subject to several export restrictions.

• (169) First, titanium dioxide and other titanium related products are subject to non-automatic export licensing ⁶⁶, forcing exporting companies to receive prior approval from the government in the form of licenses or permits in order to export the product. Such procedures not only give the government control over the exporters and the amounts of exported goods but may also increase transaction costs or prevent exporters from reacting quickly to sales opportunities abroad due to long processing times ⁶⁷.

• (170) Second, the product concerned is not subject to VAT export refund ⁶⁸.

• (171) Therefore, through these and other means, the GOC directs and controls virtually every aspect in the development and functioning of the sector, as well as the upstream inputs.

• (172) In sum, the GOC has measures in place to induce operators to comply with the public policy objectives concerning the sector. Such measures impede market forces from operating freely.

3.2.6.   Significant distortions according to Article 2(6a)(b), fourth indent of the basic Regulation: the lack, discriminatory application or inadequate enforcement of bankruptcy, corporate or property laws

• (173) According to the information on file, the Chinese bankruptcy system delivers inadequately on its own main objectives such as to fairly settle claims and debts and to safeguard the lawful rights and interests of creditors and debtors. This appears to be rooted in the fact that while the Chinese bankruptcy law formally rests on principles that are similar to those applied in corresponding laws in countries other than China, the Chinese system is characterised by systematic under-enforcement.

• (174) The number of bankruptcies remains notoriously low in relation to the size of the country’s economy, not least because the insolvency proceedings suffer from a number of shortcomings, which effectively function as a disincentive for bankruptcy filings. Moreover, the role of the state in the insolvency proceedings remains strong and active, often having direct influence on the outcome of the proceedings ⁶⁹.

• (175) In addition, the shortcomings of the system of property rights are particularly obvious in relation to ownership of land and land-use rights in China ⁷⁰. All land is owned by the state (collectively owned rural land and State-owned urban land) and its allocation remains solely dependent on the state. There are legal provisions that aim at allocating land use rights in a transparent manner and at market prices, for instance by introducing bidding procedures. However, these provisions are regularly not respected, with certain buyers obtaining their land for free or below market rates ⁷¹. Moreover, authorities often pursue specific political goals including the implementation of the economic plans when allocating land ⁷².

• (176) Much like other sectors in the Chinese economy, the producers of the product concerned are subject to the ordinary rules on Chinese bankruptcy, corporate, and property laws. That has the effect that these companies, too, are subject to the top-down distortions arising from the discriminatory application or inadequate enforcement of bankruptcy and property laws. Those considerations, on the basis of the evidence available, appear to be fully applicable also in the sector of the product concerned. The present investigation revealed nothing that would call those findings into question.

• (177) In light of the above, the Commission concluded that there was discriminatory application or inadequate enforcement of bankruptcy and property laws in the sector of the product concerned.

3.2.7.   Significant distortions according to Article 2(6a)(b), fifth indent of the basic Regulation: wage costs being distorted

• (178) A system of market-based wages cannot fully develop in China as workers and employers are impeded in their rights to collective organisation. China has not ratified a number of essential conventions of the International Labour Organization, in particular those on freedom of association and on collective bargaining ⁷³.

• (179) 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 ⁷⁴. 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.

• (180) 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 ⁷⁵. Those findings lead to the distortion of wage costs in China.

• (181) No evidence was submitted to the effect that the TiO2 sector would not be subject to the Chinese labour law system described. The 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 China).

3.2.8.   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

• (182) Access to capital for corporate actors in China is subject to various distortions.

• (183) First, the Chinese financial system is characterised by the strong position of state-owned banks ⁷⁶, which, when granting access to finance, take into consideration criteria other than the economic viability of a project. Similar 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) ⁷⁷ and they regularly implement public policies designed by the GOC.

• (184) For instance, in the sector of the product concerned, the 14^th FYP on Developing Raw Materials Industry has the central objective to improve chemical industry’s competitiveness. In this regard, ‘[f]inancial institutions will be encouraged to […] provide comprehensive financial services for raw materials enterprises that have implemented mergers and reorganization as well as transformation and upgrading’ ⁷⁸.

• (185) The Guiding Opinion also reveals the range of support tools and policies used to pursue the industrial policy objectives: ‘[i]mprove supporting policies. Strengthen the coordination between fiscal, financial, regional, investment, import and export, energy, ecological environment, price and other policies and industrial policies. Involve national industry-finance cooperation platforms and promote bank-enterprise connections and industry-finance cooperation. […]’ ⁷⁹

• (186) 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 ⁸⁰. 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.

• (187) For example, the GOC has 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 ⁸¹. 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’. ⁸²

• (188) 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 ⁸³. This is compounded by additional existing rules, which direct finances into sectors designated by the government as encouraged or otherwise important ⁸⁴. 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.

• (189) 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.

• (190) Thirdly, although nominal interest rate liberalization 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 ⁸⁵ and, in 2020, official media in China have reported that the CCP called for ‘guiding the loan market interest rate downwards’ ⁸⁶. Artificially low interest rates result in under-pricing, and consequently, the excessive utilization of capital.

• (191) Overall credit growth in the China 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, with the GOC a number of times opting to either avoid defaults, thus creating so called ‘zombie’ companies, or to transfer 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.

• (192) In essence, despite the steps that have been taken to liberalize the market, the corporate credit system in China is affected by significant distortions resulting from the continuing pervasive role of the state in the capital markets. Therefore, the substantial government intervention in the financial system leads to the market conditions being severely affected at all levels.

• (193) No evidence was submitted in the present investigation demonstrating that the sector of the product concerned is not affected by the government intervention in the financial system in the sense of Article 2(6a)(b), sixth indent of the basic Regulation. Therefore, the substantial government intervention in the financial system leads to the market conditions being severely affected at all levels.

3.2.9.   Systemic nature of the distortions described

• (194) The Commission noted that the distortions described in the updated Report are characteristic for the Chinese economy. The evidence available shows that the facts and features of the Chinese system as described above as well as in Part I of the updated 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 and in Part II of the updated Report.

• (195) The Commission recalls that in order to produce the product concerned, certain inputs are needed. When the producers of the product concerned 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. These distortions were described in detail in Sections 3.2.2-3.2.8 above. The Commission pointed out that the regulatory setup underpinning those distortions is generally applicable, TiO2 producers being subject to those rules as any other economic operator in China. The distortions have therefore a direct bearing on the cost structure of the product concerned.

• (196) As a consequence, not only the domestic sales prices of the product concerned 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 I and II of the updated Report.

• (197) Indeed, the government interventions described in relation to the allocation of capital, land, labour, energy, and raw materials are present throughout China. This means, for instance, that an input that in itself was produced in China 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.

• (198) No evidence or argument to the contrary has been adduced by the GOC or the exporting producers in the present investigation.

3.2.10.   Conclusion

• (199) The analysis set out in this section, which includes an examination of all the available evidence relating to China’s intervention in its economy in general as well as in the sector of the product concerned showed that prices and 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.

• (200) On that basis, the Commission concluded that it is not appropriate to use domestic prices and costs to establish normal value in this case.

• (201) 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.

3.3.   Representative country

3.3.1.   General remarks

• (202) 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 ⁸⁷;

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

• — Availability of relevant public data in the representative country; and

• — 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.

• (203) As explained in recitals (76)-(77), the Commission issued two notes for the file on the sources for the determination of the normal value. These notes described the facts and evidence underlying the relevant criteria and addressed the comments received by the parties on these elements and on the relevant sources. In the Second Note, the Commission informed interested parties of its intention to Brazil 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.

3.3.2.   A level of economic development similar to the PRC

• (204) In the First Note, the Commission identified Brazil, Malaysia, Mexico and the Russian Federation as TiO2 producing countries with a similar level of economic development as the PRC according to the World Bank (i.e. ‘upper-middle income’ countries on a gross national income basis). However, the Russian Federation could not be used as a representative country because no reliable import statistics are available to the Commission. No comments were received concerning the countries identified in the First Note.

3.3.3.   Readily available data in the representative country

• (205) For the countries considered and mentioned above, the Commission further verified the readily available data, including the data on imports of factors of production as well as of financial data from the producers of the product under investigation in these potential representative countries.

• (206) The analysis of imports of the main factors of production (namely titanium ores and concentrates with varying concentrations of TiO2 and titanium slags) showed that, irrespective of the potential representative country, either no reliable statistics or no statistics allowing for differentiation based on TiO2 concentration in the ores are available.

• (207) Therefore, the Commission resorted to the use of an international price benchmark from a widely recognized ore market platform (TZMI ⁸⁸) in accordance with Article 2(6a)(a) of the basic Regulation for the titanium ores and concentrates, namely ilmenite, rutile, calciner discharge, synthetic rutile and titanium slags.

• (208) Furthermore, the Commission analysis showed that only for Brazil data on representative undistorted volumes of other key inputs for production of TiO2 (principally sulfuric acid) as well as a representative company data showing a reasonable amount for profitability and for SG&A for the investigation period (or part thereof) were available, as opposed to Mexico and Malaysia. Moreover, Brazilian imports were not materially affected by imports from the PRC or any of the countries listed in Annex I to Regulation (EU) 2015/755 of the European Parliament and of the Council ⁸⁹. Furthermore, the TiO2 production and production capacity is significant in Brazil and no particular trade distortions on TiO2 are known to exist in the country. While Brazil makes exports of ilmenite, one of the raw materials used in the production of TiO2, subject to licensing requirement, such potential trade distortion is irrelevant given the use of TZMI benchmark instead of the Brazilian import data for ilmenite in this case. It is further noted that no interested party argued against the use of Brazil as a representative country.

• (209) Regarding the producers in Brazil and the availability of their data, the Commission identified a TiO2 producer, Tronox Brazil, for which financial results showing reasonable amount for profitability and for SG&A specifically in the TiO2 segment are available for 2022, thus period overlapping by one quarter with the investigation period.

• (210) The Commission used the profitability and SG&A data for 2022 despite availability of financial data also for the entire investigation period (Q4 2022-Q3 2023). This is because, according to the financial statements of the company, the market and business performance of Tronox Brazil in 2023 was affected by a reduction of market demand combined with imports from China of TiO2, which resulted in reduction of profitability, net revenues, sales volume, and average sales price of Tronox Brazil on the TiO2 market. This made the relevant amounts for profit and SG&A not reasonable within the meaning of Article 2(6a) of the basic Regulation.

• (211) The LB Group objected to the Commission’s decision to use financial data from Tronox Brazil for 2022 and argued that the Commission had the possibility of using data that would fully overlap with the investigation period.

• (212) It is noted that while the financial data of Tronox Brazil, showing reasonable profitability for the entire investigation period is available, such data concerns the entire business operations of the company, including activity not related strictly to the TiO2 segment. On the contrary, when extracting solely data for the TiO2 segment, financial data for 2023 are not reasonable for the reasons set out in recital (210) above. As a result, the investigation period data for TiO2 segment of Tronox Brazil would show operating results close to the breakeven point, which could not be deemed reasonable within the meaning of Article 2(6a)(a) of the basic Regulation. Instead, 2022 data for TiO2 segment is the best available source for reasonable amounts for profit and SG&A, given that the data concerns exclusively the TiO2 segment, under Article 2(6a)(a) of the basic Regulation.

• (213) In view of the above, the Commission considered the 2022 financial information available for Tronox Brazil for TiO2 segment the most appropriate for the purposes of Article 2(6a)(a) of the basic Regulation.

3.3.4.   Level of social and environmental protection

• (214) Having established that Brazil 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.

3.3.5.   Conclusion

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

3.4.   Sources used to establish undistorted costs and benchmarks

• (216) In the First Note, the Commission listed the factors of production such as materials, energy 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.

• (217) Subsequently, in the Second Note, the Commission stated that, to construct the normal value in accordance with Article 2(6a)(a) of the basic Regulation, it would use Global Trade Atlas (‘GTA’) and TZMI data to establish the undistorted cost of most of the factors of production, notably the raw materials. In addition, the Commission stated that it would use the Instituto Brasileiro de Geografia e Estatística (‘IGBE’) and Ministry of Mines and Energy of Brazil respectively for establishing undistorted costs of labour ⁹⁰ and energy ⁹¹.

• (218) 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 were grouped under ‘consumables’. The Commission calculated the percentage of the consumables on the total cost of raw materials and applied this percentage to the recalculated cost of raw materials when using the established undistorted benchmarks in Brazil.

• (219) AkzoNobel argued following the First and Second Note that the GTA price for sulfuric acid cannot be representative, insisting that instead, a conversion factor of 1,05 be used for calculation of CIF prices from FOB prices available in the Brazilian or International Trade Center (‘ITC’) statistics. The user further sought to undermine the reliability of the GTA data by referring to the excessive GTA prices for a number of countries (Poland, Finland and Germany). Moreover AkzoNobel alleged, with reference to the average cost of freight for TiO2 shipped to Brazil, that the cost of freight for the acid is in the range of 5-7 % of the acid price.

• (220) Article 2(6a)(a) of the basic Regulation prescribes the use of corresponding data in an appropriate representative country ‘provided the relevant data are readily available’. The Commission does not have at its disposal data on domestic prices of the sulfuric acid in Brazil, and such data are not readily available. By contrast, data on import prices of the sulfuric acid are readily available in the Global Trade Atlas (GTA). Considering that these imports compete on the Brazilian domestic market they are considered to reflect the relevant domestic prices.

• (221) Further to the argument on unrepresentativeness of GTA import values for certain countries, it was noted that relative to the total imports of sulfuric acid, imports from the disputed countries, in particular Finland and Germany account only for around 5 % of total imports into Brazil. Overall, the Commission checked that there were sufficient representative quantities of the sulfuric acid imports so that the average price used reduces the impact of any potentially abnormal prices at the lower and higher end of the range. As long as the import quantities were sufficiently representative, which was the case for sulfuric acid, and there were no other specific circumstances rendering them unrepresentative or unsuitable, there was no objective reason to exclude the GTA data from the analysis.

• (222) Furthermore, the suggested use of the percentage ratio of freight on the price of TiO2 as a reference point for determining the transport cost for sulfuric acid cannot be sustained. AkzoNobel seemed to ignore the fact that sulfuric acid is a much cheaper material compared to TiO2. Instead, it would be more appropriate to consider the absolute unit costs of freight as a reference point, given the contrast in the prices of TiO2 and sulfuric acid.

• (223) Therefore, in the absence of any plausible evidence showing that the GTA data for sulfuric acid used would not be representative, the Commission rejected this claim.

3.4.1.   Factors of production

• (224) 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 to determine the normal value in accordance with Article 2(6a)(a) of the basic Regulation:

Table 1

Factors of production of TiO2

Factor of Production	Commodity Codes /available codes and source of data	Commodity Codes /available codes and source of data	Price in CNY	Unit of measurement
Raw materials	Raw materials	Raw materials	Raw materials	Raw materials
Ilmenite (Sulphate Process)	2614 00	TZMI	2 842,20	Tonne
Ilmenite (Chloride Process)	2614 00	TZMI	2 772,72	Tonne
Synthetic Rutile	2614 00	TZMI	9 827,98	Tonne
Refined Synthetic Rutile / Calciner Discharge / Rough TiO2 – Rutile	2614 00	TZMI	10 568,24	Tonne
(High) Titanium Slag / Chloride Process Slag	2620 99	TZMI	6 757,92	Tonne
Sulfuric acid (98 %)	2807000010	Global Trade Atlas (GTA)92 / MacMap93	912,61	Tonne
Sulphur	2503000000	GTA / MacMap	1 250,16	Tonne
Calcined petroleum coke	2713129000	GTA / MacMap	5 271,81	Tonne
(Liquid) caustic soda / Sodium hydroxide (32 %)	2815110000 , 2815120000	GTA / MacMap	3 386,93	Tonne
Bituminous coal	2701 12	GTA / MacMap	1 762,22	Tonne
Zirconyl Chloride94	2827 49 12 , 2827 49 29	GTA / MacMap	16 761,84	Tonne
Iron Powder	7205 29 10 , 7205 29 20 , 7205 29 90	GTA / MacMap	13 049,93	Tonne
Aluminium Powder	7603 10	GTA / MacMap	39 179,62	Tonne
Aluminium Hydroxide	2818 30	GTA / MacMap	13 943,93	Tonne
Phosphoric acid	2809 20 11 , 2809 20 19 , 2809 20 20 , 2809 20 30 , 2809 20 90	GTA / MacMap	6 062,29	Tonne
Labour	Labour	Labour	Labour	Labour
Labour	[N/A]	Instituto Brasileiro de Geografia e Estatística95	79,05	FTE
Energy	Energy	Energy	Energy	Energy
Electricity	[N/A]	Ministério de Minas e Energia96	0,8868	kWh
Natural Gas	[N/A]	Ministério de Minas e Energia97	4,58	m3
Steam	[N/A]	Ministério de Minas e Energia98	356,66	Tonne

3.4.2.   Raw materials

• (225) To establish the undistorted price of raw materials as delivered at the gate of a representative country producer, for raw materials other than the titanium ores and concentrates, the Commission used as a basis the weighted average import price to the representative country as reported in the GTA at the national tariff level, to which import duties and transport costs were added.

• (226) An import price in the representative country was determined as a weighted average of unit prices of imports from all third countries excluding the PRC and countries which are not members of the WTO, listed in Annex 1 of Regulation (EU) 2015/755 ⁹⁹.

• (227) The Commission decided to exclude imports from the PRC into the representative country as it concluded in Section 3.2.10 that it is not appropriate to use domestic prices and costs in the PRC 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 export prices. The remaining volumes were deemed to be representative.

• (228) For the undistorted prices of titanium ores and concentrates, the Commission used as a basis the prices as reported by TZMI, to which transport costs were added. The unit cost of transport was set as a difference between the CIF price of ilmenite as reported in Metal Bulletin/Fast Markets ¹⁰⁰ and the FOB price for the same type of titanium ore, as reported by TZMI.

• (229) 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 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.

• (230) LB claimed that the cost of titanium ore sourced domestically from related mines is actually incurred and not distorted within the meaning of Article 2(6a)(a) of the basic Regulation. The Commission recalls that to produce TiO2, a range of inputs is needed, including the ores. When the producers of TiO2 source these inputs domestically, the prices they pay (and which are recorded as their costs) are clearly exposed to the same distortions as outlined in recital (195) above. More specifically, an input that in itself was produced in China by combining a range of factors of production and input costs (such as raw materials, energy, land, financing, labour, etc.) is also exposed to significant distortions. No evidence or argument to the contrary has been adduced by the GOC or the exporting producers in the present investigation and hence LB’s argument had to be dismissed.

3.4.3.   Labour

• (231) The Commission used the statistics published by the IBGE ¹⁰¹ to determine the wages in Brazil using the detailed information on wages in the producing sector for 2021, for the economic activity 20.1 ‘Manufacture of inorganic chemical products’ according to NACE Rev.2 classification.

• (232) The IBGE statistics provide information on the total annual wages and related charges and on the number of employees in the chemical sector. Only information related to staff linked to production was considered. Values were indexed to the investigation period using the national consumer price index ¹⁰².

3.4.4.   Electricity

• (233) The Commission used the industrial electricity price statistics published by the Ministry of Mines and Energy of Brazil ¹⁰³ for the investigation period. The rates published in the monthly bulletin included the ‘Imposto sobre Circulação de Mercadorias e Serviços’ (‘ICMS’), a tax levied by the Brazilian states on the circulation of goods and the provision of interstate and inter municipal transportation and communications services. This tax could be claimed back by the industrial users and was therefore not effectively paid. As ICMS was collected by most states at the rate of 17 % to 18 % during the investigation period, the Commission recalculated the electricity benchmark, deducting an average of 17,5 % from the rates published.

3.4.5.   Natural gas

• (234) The Commission used the price of natural gas for industrial users in Brazil as published by the Ministry of Mines and Energy of Brazil ¹⁰⁴ for the investigation period. The rates published in the monthly bulletin included the ICMS tax, and the Commission applied the methodology used for determination of the electricity prices, as outlined in recital (233).

3.4.6.   Steam

• (235) The Commission calculated the price of steam in Brazil using the methodology suggested by the U.S. Department of Energy ¹⁰⁵. This methodology provides a cost for steam based on the heat input required to produce it. To this end, the Commission used natural gas as heat input and used the price of gas for industrial users in Brazil as published by the Ministry of Mines and Energy of Brazil covering the investigation period.

3.4.7.   Manufacturing overhead costs, SG&A and profits

• (236) 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.

• (237) 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.

• (238) For establishing an undistorted and reasonable amount for SG&A and for profit at the ex-works level of trade, the Commission relied on the financial data for 2022 for Tronox Brazil as extracted from the company’s website ¹⁰⁶.

3.4.8.   Calculation

• (239) 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.

• (240) 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 were verified during the verifications. The Commission multiplied the usage factors by the undistorted costs per unit observed in the representative country, as described in Section 3.4.1.

• (241) Once the undistorted manufacturing cost was established, the Commission applied the manufacturing overheads, SG&A and profit as noted in Section 3.4.7. The SG&A and profit were determined on the basis of the financial statements of Tronox Brazil as explained in section 3.3.3. SG&A expressed as a percentage of the Costs of Goods Sold (‘COGS’) and applied to the undistorted costs of production, amounted to 5,9 %. The profit expressed as a percentage of the COGS and applied to the undistorted costs of production, amounted to 5,0 %.

• (242) 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.

3.5.   Export price

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

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

• (245) For the exporting producers that exported the product concerned to the Union also through a related company acting as an importer, the export price was established on the basis of the price at which the imported product was first resold to independent customers in the Union, in accordance with Article 2(9) of the basic Regulation. In this case, adjustments to the price were made for all costs incurred between importation and resale, including SG&A expenses of the related importer, and a reasonable profit.

• (246) In the absence of cooperation of unrelated importers in the present case, a reasonable profit established at 6,89 % in the recent polyvinyl alcohols (‘PVA’) ¹⁰⁷ investigation for another chemical product was used in the present investigation, to establish a reliable export price at the Union frontier level.

3.6.   Comparison

• (247) Article 2(10) of the basic Regulation requires the Commission to make a fair comparison between the normal value and the export price at the same level of trade and to make allowances for differences in factors which affect prices and price comparability. In the case at hand the Commission chose to compare the normal value and the export price of the sampled exporting producers at the ex-works level of trade. As further explained below, where appropriate, the normal value and the export price were adjusted in order to: (i) net them back to the ex-works level; and (ii) make allowances for differences in factors which were claimed, and demonstrated, to affect prices and price comparability.

3.6.1.   Adjustments made to the normal value

• (248) As explained in recital (239), the normal value was established at the ex-works level of trade by using costs of production together with amounts for SG&A and for profit, which were considered to be reasonable for that level of trade. Therefore, no adjustments were necessary to net the normal value back to the ex-works level.

• (249) The Commission found no reasons for making any allowances to the normal value (other than the adjustment for VAT, which was payable on the export sales without refund), nor were such allowances claimed by any of the sampled exporting producers.

3.6.2.   Adjustments made to the export price

• (250) In order to net the export price back to the ex-works level of trade, adjustments were made on the account of transport, warehousing costs, customs duties, insurance, handling and loading expenses.

• (251) Allowances were made for the following factors affecting prices and price comparability: commission, credit costs and bank charges.

• (252) Regarding the adjustment for commissions, during the investigation period, LB exported TiO2 to the Union through related traders located outside the Union, namely in Hong Kong and in the UK. The traders bore the responsibility for the selling process and commercial risks associated therewith and received a markup for the sales. Therefore, the Commission found that the functions of these traders were similar to those of an agent working on a commission basis. Consequently, an adjustment under Article 2(10)(i) was also made for sales through the related trading companies. The adjustment consisted of the deduction of SG&A of the trading companies and a 6,89 % profit established as set out in recital (246).

3.7.   Dumping margins

• (253) 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.

• (254) 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
LB group: — LB GROUP CO., LTD. — HENAN BILLIONS ADVANCED MATERIAL CO., LTD. — LB LUFENG TITANIUM INDUSTRY CO., LTD. — LB SICHUAN TITANIUM INDUSTRY CO., LTD. — LB XIANGYANG TITANIUM INDUSTRY CO., LTD.	39,7  %
Anhui Gold Star group: — Anhui Gold Star Titanium Dioxide (Group) Co., Ltd. — ANHUI GOLD STAR TITANIUM DIOXIDE TRADING COMPANY LIMITED	14,4  %

• (255) 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.

• (256) On this basis, the provisional dumping margin of the cooperating exporting producers outside the sample is 35,0 %.

• (257) For all other exporting producers in the PRC, 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.

• (258) 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.

• (259) The level of cooperation in this case is high because the exports of the cooperating exporting producers constituted over 96 % of the total imports during the investigation period. On this basis, the Commission decided to establish the dumping margin for non-cooperating exporting producers at the level of the cooperating sampled company with the highest dumping margin.

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

Company	Provisional dumping margin
LB group: — LB GROUP CO., LTD. — HENAN BILLIONS ADVANCED MATERIAL CO., LTD. — LB LUFENG TITANIUM INDUSTRY CO., LTD. — LB SICHUAN TITANIUM INDUSTRY CO., LTD. — LB XIANGYANG TITANIUM INDUSTRY CO., LTD.	39,7  %
Anhui Gold Star group: — Anhui Gold Star Titanium Dioxide (Group) Co., Ltd. — ANHUI GOLD STAR TITANIUM DIOXIDE TRADING COMPANY LIMITED	14,4  %
Other cooperating companies	35,0  %
All other companies	39,7  %

4. INJURY

4.1.   Definition of the Union industry and Union production

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

• (262) The total Union production during the investigation period was established at around 560 000 tonnes. The Commission established the figure on the basis of all the available information concerning the Union industry, such as the macro questionnaire submitted by the complainant. As indicated in recital (8), the three sampled Union producers represented 50 % of the total Union production of the like product.

4.2.   Determination of the relevant Union market

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

• (264) The Commission found that a small part of the total Union producers’ production was destined for the captive market. Only two of all eleven Union producers reported having sold the product captively and due to the business confidential nature of this data, the exact volumes cannot be disclosed in this Regulation. The two producers were not among the sampled producers. The captive market was stable and below 1 % of total Union consumption throughout the period considered.

• (265) The Commission examined certain macroeconomic indicators relating to the Union industry on the basis of data of sales on the free market. These indicators are: sales volume on the Union market and market shares.

• (266) Other macroeconomic indicators could meaningfully be examined only by referring to the whole activity, including the captive use and captive sales of the Union industry. These are: production volumes; capacity; capacity utilisation; employment; productivity; and export sales. They depend on the whole activity, whether the production is captive or sold on the free market.

• (267) Finally, considering that only two non-sampled producers reported very limited amounts of captive sales, those sales are not reflected in the analysis of microeconomic indicators, which are based on data reported by the sampled Union producers.

• (268) Given that only a small part of the Union producers’ production was destined for the captive market, the investigation found no meaningful difference between the economic indicators whether examined referring to the whole activity or on the basis of data for the free market.

4.3.   Union consumption

• (269) The Commission established the Union consumption on the basis of the Union industry’s sales volume to the Union market, sourced from the verified questionnaire replies of the sampled Union producers and the macro-questionnaire submitted by the complainant, and the imports into the Union of the product concerned from third countries based on Eurostat statistics.

• (270) Union consumption developed as follows:

Table 2

Union consumption (tonnes)

	2020	2021	2022	Investigation period
Total Union consumption	1 220 424	1 267 582	1 125 734	954 998
Index	100	104	92	78
Source: verified questionnaire replies of the sampled Union producers, macro-questionnaire, Eurostat.	Source: verified questionnaire replies of the sampled Union producers, macro-questionnaire, Eurostat.	Source: verified questionnaire replies of the sampled Union producers, macro-questionnaire, Eurostat.	Source: verified questionnaire replies of the sampled Union producers, macro-questionnaire, Eurostat.	Source: verified questionnaire replies of the sampled Union producers, macro-questionnaire, Eurostat.

• (271) Union consumption increased by 4 percentage points from 2020 to 2021 and was higher than usual in both years. This was mainly because of Covid-19 lockdowns which prompted people to renovate their homes, which resulted in high demand for indoor paints and coatings and, consequently, for TiO2 as their main raw material. Since Covid-19 pandemic was present throughout the year 2021 (as opposed to only being declared mid-March 2020), it logically follows that the resulting positive effects on demand in the Union market were more pronounced in 2021.

• (272) After such peaking demand, the Union consumption decreased in 2022 by 12 percentage points, and in the investigation period by further 14 percentage points.

4.4.   Imports from the country concerned

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

• (273) The Commission established the volume of imports on the basis of Eurostat statistics. The market share of the imports was established on the basis of the import volume and total Union consumption as established in Table 2 above.

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

Table 3

Import volume (tonnes) and market share

	2020	2021	2022	Investigation period
Volume of imports from the country concerned (tonnes)	178 256	169 146	186 885	209 375
Index	100	95	105	117
Market share	15 %	13 %	17 %	22 %
Index	100	91	114	150
Source: Eurostat.	Source: Eurostat.	Source: Eurostat.	Source: Eurostat.	Source: Eurostat.

• (275) Chinese imports were present in the Union market from the beginning of the period concerned. Imports show an increasing trend, resulting in an overall 17 % increase from 2020 to the investigation period. In the shrinking market observed in 2022 and the investigation period (see Table 2 above), this resulted in a significant 50 % increase of Chinese market share from 2020 to the investigation period.

• (276) In 2021, there was a temporary reversal of this continuous increase in Chinese import volumes and market share due to extraordinary circumstances of the shipping crisis which was prevalent in 2021. The volume of imports from China and their market share decreased that year by 5 % and 9 %, respectively.

• (277) However, as soon as the shipping crisis began to abate in 2022, Chinese imports started increasing again, gaining 10 percentage points in volume terms in 2022 and additional 12 percentage points in the investigation period.

4.4.2.   Prices of the imports from the country concerned and price undercutting

• (278) The Commission established the prices of imports on the basis of Eurostat statistics 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.

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

Table 4

Import prices (EUR/tonne)

	2020	2021	2022	Investigation period
China	1 826	2 507	3 032	2 235
Index	100	137	166	122
Source: Eurostat.	Source: Eurostat.	Source: Eurostat.	Source: Eurostat.	Source: Eurostat.

• (280) Import prices from China increased in 2021 and 2022. The complainant claimed that such increase coincided with an increase in global prices of the ilmenite ore, as well as with increased shipping costs experienced in 2021 and 2022. As the shipping costs decreased closer to historic levels by the end of 2022 (i.e., in the beginning of the investigation period), the Chinese prices dropped in tandem, despite the cost of main raw materials remaining high.

• (281) Despite this, Chinese landed prices remained below Union industry’s prices throughout the period considered, with the exception in 2021, when container prices from China to the Union reached their peak.

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

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

• (2) the corresponding weighted average prices per product type of the imports from the sampled cooperating Chinese exporting 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.

• (283) The price comparison was made on a type-by-type basis for transactions at the same level of trade, duly adjusted where necessary, and after deduction of rebates and discounts. The result of the comparison was expressed as a percentage of the sampled Union producers’ theoretical turnover during the investigation period. It showed a weighted average undercutting margin of between 14 % and 15,3 % by the imports from the sampled exporting producers on the Union market. The volume of imports found to be undercutting this way represents around 70 % of total imports from China in the investigation period.

• (284) The Commission furthermore established the existence of price suppression throughout the period considered, and price depression in the investigation period.

• (285) While Chinese import prices were increasing in 2021 and 2022, they were consistently below the Union industry prices, except in 2021 when the shipping costs were at their all-time high. As shown in Table 8 below, the gap between Union industry’s sales prices and their costs of production was narrowing in each year of the period considered, demonstrating price suppression.

• (286) Furthermore, in the investigation period the Chinese import prices dropped by more than one quarter compared to 2022, while increasing their volume and market share in the Union market. This caused significant price depression on the Union industry in the investigation period, as the Union industry had to decrease its prices below its cost of production and absorb losses in order to retain some market share, despite the costs of production continuing to increase.

4.5.   Economic situation of the Union industry

4.5.1.   General remarks

• (287) 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.

• (288) As mentioned in recital (19), sampling was used for the determination of possible injury suffered by the Union industry.

• (289) For the injury determination, the Commission distinguished between macroeconomic and microeconomic injury indicators. The Commission evaluated the macroeconomic indicators on the basis of data contained in the reply to the macro-questionnaire provided by the complainant and Eurostat data on imports of the product under investigation. The data related to all Union producers. The Commission evaluated the microeconomic indicators on the basis of data contained in the verified questionnaire replies from the sampled Union producers. The data related to the sampled Union producers. Both sets of data were found to be representative of the economic situation of the Union industry.

• (290) 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.

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

4.5.2.   Macroeconomic indicators

4.5.2.1.   Production, production capacity and capacity utilisation

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

Table 5

Production, production capacity and capacity utilisation

	2020	2021	2022	Investigation period
Production volume (tonnes)	809 485	843 918	743 733	560 647
Index	100	104	92	69
Production capacity (tonnes)	964 000	934 300	941 900	943 200
Index	100	97	98	98
Capacity utilisation	84 %	90 %	79 %	59 %
Index	100	108	94	71
Source: Macro-questionnaire provided by the complainant.	Source: Macro-questionnaire provided by the complainant.	Source: Macro-questionnaire provided by the complainant.	Source: Macro-questionnaire provided by the complainant.	Source: Macro-questionnaire provided by the complainant.

• (293) The production volume of the Union industry decreased by 31 % between 2020 and the investigation period, closely following the trends observed in sales volume depicted in Table 6 below. This decrease in production volume was more significant than the 22 % decrease in the Union consumption over the period considered. The temporary increase in production volumes observed in 2021 is attributable to the uptick in demand caused, as explained in recital (271) above, by the ‘stay-at-home’ economy during Covid-19 lockdowns, which the Union industry managed to particularly benefit from due to decrease of Chinese imports that year.

• (294) Total Union capacity fluctuated by 2-3 % throughout the period considered. The drop in capacity observed in 2021 is due to one month stoppage of production for maintenance that one of the producers had to undertake that year, and the closure of Kronos Leverkusen sulphate production line. In 2022 and the investigation period capacity slightly increased, mostly due to completion of projects which resulted in debottlenecking at some of the plants in the Union.