Commission Implementing Regulation (EU) 2023/111 of 18 January 2023 imposing a definitive anti-dumping duty on imports of fatty acid originating in Indonesia

(165) The Musim Mas group also stated that ICOF Singapore serves as the marketing unit of Musim Mas Holdings (‘MMH’) and its subsidiaries. MMH is the ultimate corporate parent of various entities. Therefore, according to the Musim Mas group, MMH is a consolidated corporate legal entity which constitutes a single economic entity. Furthermore, it was stated that Musim Mas was 95 % owned by Musim Mas Resources which in turn is 99,95 % owned by MMH. ICOF Europe is a 100 % subsidiary of ICOF Singapore. Furthermore, the Musim Mas group stated that all accounts, including profit and loss information were consolidated into MMH. Therefore, it was stated that, as MMH is a single economic entity, the profit used by the Commission in calculating the dumping rate for the Musim Mas group should be inclusive of all profit for MMH and its subsidiary as Musim Mas, ICOF Singapore and ICOF Europe are all subsidiaries of MMH. Therefore, the Commission should not deduct the 6,9 % profit for sales made through ICOF Europe because this would result in a duplicative adjustment of profit resulting from the profit in constructed normal value, or the profit generated from sales made on the domestic market. Furthermore, it was stated that as regards ICOF Singapore, the Commission should not have deducted the hypothetical profit of 6,9 % and the actual SG&A of ICOF Singapore. In this regard, the Musim Mas group referred to the Biodiesel investigation where the Commission deducted ICOF Singapore’s actual mark-up for biodiesel.

(166) The Commission disagreed with the Musim Mas group’s claim that Musim Mas and ICOF Singapore form a single economic entity. The Commission did not consider that Musim Mas had demonstrated, based on all relevant factors, that Musim Mas and ICOF Singapore formed a single economic entity. In fact, the investigation revealed that the sales between Musim Mas and ICOF Singapore were governed by a framework agreement. Moreover, as recalled in recital (146), ICOF Singapore traded a large array goods other than the product concerned, and it was not a party to any of the domestic sales of Musim Mas. More details regarding the Commission’s assessment were provided to Musim Mas in its specific disclosure as it included business confidential information.

(167) However, in view of this framework agreement, the Commission revised the calculation of the export price for the sales via ICOF Singapore by deducting the actual mark-up from the export price instead of the profit of unrelated importer and the SG&A of ICOF Singapore.

(168) As concerns the export sales via the related importer ICOF Europe, the Commission disagrees with the claim that no profit of unrelated importer and SG&A should be deducted. As ICOF Europe is an importer in the Union, the export price of its Union sales should be established pursuant to Article 2(9) of the basic Regulation.

(169) 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.

(171) 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.

(172) On this basis, the definitive dumping margin of the cooperating exporting producers outside the sample is 26,6 %.

(173) For all other exporting producers in Indonesia, 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 IP, that were established on the basis of the methodology explained in recital (195).

(174) The level of cooperation in this case was high because the exports of the cooperating exporting producers covered the totality of imports during the IP. On this basis, the Commission decided to establish the dumping margin for non-cooperating exporting producers at the level of the sampled company with the highest dumping margin.

(176) In their comments following final disclosure, the Greven group claimed that the Commission was not transparent enough with the calculation of the dumping margins and it should disclose more information on this.

(177) The Commission disagreed with this claim. The calculation methodology is fully explained in recitals (129) to (175). However, the Commission cannot disclose the calculations of the individual dumping margins of the sampled exporting producers to other interested parties as those calculations include confidential information. The Commission has disclosed the details of the calculations to the sampled exporting producers and they were able to provide comments in this regard. The Commission addressed these comments in recitals (147) to (168) and revised the calculations when appropriate. Therefore, this claim was rejected.

(178) The Greven group also argued that the high difference between the dumping margins of the two sampled exporting producers did not seem reasonable.

(179) The dumping margins of the two sampled exporting producers have been calculated based on their own sales and cost data which was verified during the on-spot verification visit at their premises. The fact that for one exporting producer the dumping margin was higher than for the other one is irrelevant. Therefore, the claim was rejected.

(180) The investigation showed that 15 producers in the Union were manufacturing the like product during the investigation period. They constitute the ‘Union industry’ within the meaning of Article 4(1) of the basic Regulation.

(181) The total Union production during the investigation period was established at around 872 000 tonnes. The Commission established that figure on the basis of the macro data contained in the questionnaire supplied by CUTFA. The sampled Union producers represented around 61 % of the total Union production of the like product.

(182) Wilmar and the Musim Mas group claimed that certain Union producers should be excluded from the definition of the Union industry because of a relationship with Indonesian and Malaysian producers of the product concerned. In particular, Wilmar and the Musim Mas group stated that KLK, a sampled Union producer, was part of a Malaysian group related to a fatty acid producer in Indonesia. Wilmar and the Musim Mas group also stated that Oleon was related to a Malaysian producer of fatty acid, Oleon Asia-Pacific Sdn Bhd and Oleon Port Klang Sdn Bhd, who exported to the Union and was in competition with the imports of Indonesia. The GOI also requested the Commission to examine this claim.

(183) The examination of the above claim showed that KLK imported limited quantities of fatty acid from Indonesia and that less than 5 % of its Union sales were resales of imported products. Furthermore, the fact that Oleon was related to a company in Malaysia is not relevant for the current investigation as this investigation covers imports from Indonesia. The Commission, therefore, found no grounds to exclude this company from the definition of the Union industry, either on the grounds of being an importer of fatty acid, or because of its relationship to companies in Indonesia or Malaysia.

(184) Wilmar also claimed that Temix International – Temix Oleo was part of the same group of companies as P.T. Sinar Mas Agro Resources and Technology TbK which is an Indonesian exporting producer. Golden Agri Resources Ltd held 92 % stake in P.T. Sinar Mas and 25 % in Temix Oleo S.r.l. Therefore, Wilmar claimed that on the basis of this relationship, Temix Oleo S.r.l should be removed from the definition of the Union industry.

(185) However, it should be noted that Temix International – Temix Oleo was not a sampled producer and data relating to this company has only been used to establish macroeconomic trends, such as sales and production volumes. As such data could not be distorted by a relationship with an exporting producer, it was not considered appropriate to examine this matter further.

(186) The Commission established the Union consumption on the basis of the verified Union industry data supplied by CUTFA concerning the sales in the EU free market and the transfers for captive use by all 15 producers included in the definition of the Union industry. Import volumes from all countries were obtained from Eurostat.

(187) Fatty acids are normally sold on the free market but can also be used as an intermediate material for the manufacture of downstream products. The Commission found that around 11 % of the Union producers’ production of the like product was destined for captive use. These quantities were simply transferred (without invoicing), and/or delivered at transfer prices, within the same company or groups of companies for further downstream processing.

(188) To provide a picture of the Union industry that is as complete as possible, the Commission obtained data for the entire product activity and determined the production destined for captive use and that for the free market.

(189) Table 1 below shows that only a small part of the total Union industry’s production was destined for captive use during the period considered. It also shows that the captive market was stable at around 8 % of consumption in that period. For the sake of completeness, and where appropriate, the figures for the small captive market are shown, and separately analysed as part of the overall assessment of the relevant injury indicator. For other indicators, such as production, capacity, productivity, employment and wages, the figures quoted below relate to the whole activity and no separation of figures was considered to be necessary.

(191) The free market consumption in the Union decreased by 5 % during the period considered. A detailed analysis shows that from 2018 to 2019 the Union market increased by 1 % from around 1,19 to 1,20 million tonnes and in 2020 it fell by 4 % to around 1,15 million tonnes. In the IP, free market consumption fell by a further 2,5 % to reach 1,12 million tonnes.

(192) The fluctuation and overall decrease over the period considered was due to the development in certain sectors of users, such as home care, often due to factors relating to the Covid-19 pandemic in particular in 2020 and the IP. Apart from this temporary phenomenon, the Union producers considered that demand for fatty acids in the Union market was in general stable.

(193) The trends and development in the total market (namely including captive use) were very similar to those observed in the free market.

(194) Developments in the captive market are shown and analysed at Table 5 below.

(195) The Commission established the volume of imports on the basis of Eurostat figures collected for the CN and Taric codes mentioned in the Notice of Initiation. In order to obtain reliable import data for the product concerned, the import figures available were adjusted because not all codes were fully related to the product concerned. For import codes partially related to the product concerned, a percentage was obtained from the Taric codes set up at the date of the Notice of Initiation. The data covered the period from December 2021 to April 2022. For such codes, a percentage was calculated for both imports from Indonesia and those from third countries. For all countries, a further 2 % deduction to the import volume was applied to cover imports which were recorded under the relevant codes but which were below 97 % in terms of the DoS. The 2 % figure was calculated on the basis of the sampling form replies of the cooperating exporting producers, which revised the sampling form replies after the Commission clarified the product scope as stated in recital (71).

(196) The above methodology for calculating imports was described in a Note to the file, dated 2 June 2022, and interested parties were given the opportunity to comment on it. The volume of imports does not include the fatty acid that was excluded from the product scope of the investigation.

(197) Several interested parties commented on the Note but did not object to the methodology as such, nor did they suggest an alternative methodology to reliably establish the import volumes of the fatty acids concerned by the investigation.

(198) CUTFA suggested that the adjustment of 2 % was not appropriate, arguing that the Commission’s methodology relying on percentages already took account of fatty acids with a DoS value of at least 97 %.

(199) The Commission noted that at least until the end of April 2022, the description of the codes listed in the complaint did not cover the DoS criterion. Therefore, the suggestion to abandon the 2 % adjustment was not justified and could not be accepted.

(200) The market share of the imports from all third countries was established on the basis of the total imports established per country and compared to the free market consumption shown in Table 1 above.

(202) The volume of dumped imports from the country concerned increased from around 203 000 tonnes to around 228 000 tonnes over the period considered, an overall increase of 13 %. Import quantities rose by 11 % in 2019, but after that remained stable at around 230 000 tonnes. The information collected during the investigation suggested that some exporting producers experienced problems relating to the Covid-19 pandemic, including supply chain issues (see in particular recital (266)).

(203) Nevertheless, the market share of those imports increased in all years, from 17,1 % to 20,3 % over the period considered, an overall increase of 3,2 percentage points or by 19 %.

(204) The Commission established the prices of imports on the basis of Eurostat figures. The relevant imports were identified using the methodology explained in recital (195). These figures were crosschecked to the figures of the sampled exporting producers, confirming the same trends.

(206) Import prices from Indonesia increased from 912 to 1 023 EUR/tonne over the period considered, a rise of 12 %. Prices fell by 12 % from 2018 to 2020 but then rose by 27 % from 2020 to the IP. These developments should be seen in the light of the worldwide raw material price increase in that period, which is the main reason for the increase in costs. As shown in Table 7, the increase in raw material prices was the main reason for the increases of the Union prices. Similarly, the unit costs of production of Indonesian exporters also increased in the IP as compared to 2020 due to an increase in their raw materials prices.

(208) Where the sale from the sampled Indonesian exporting producers to the first independent customer in the Union market was made through a related sales company based in the Union, the price of the import was established on a CIF basis, by adjusting the sales price to the first independent customer. All costs incurred between the importation and resale, including the SG&A of the related importer and the profit margin as established in recital (143), applying Article 2(9) of the basic Regulation by analogy, were taken into account.

(209) 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’ turnover during the investigation period. It showed a weighted average undercutting margin of over 20 %. The actual figures calculated are not recorded here for reasons of confidentiality (as they are based on two companies only), but have been disclosed to the cooperating exporting producers concerned and are within the range of 11 % to 29 %. All sales of the sampled Union producers were made directly to independent customers, without related selling entities. One sampled exporting producer sold also directly to independent customers in the Union, without the participation of its related selling entities in the Union. As regards the other exporting producer, the majority of its sales were made through a related selling entity in the Union. No interested party disputed the existence of significant undercutting.

(210) The Commission further considered other price effects, in particular the existence of significant price depression. Already in the beginning of the period considered, the sales prices and profitability of the Union industry were low (see profitability figures in Table 10). In 2019, the Union industry was forced to decrease its prices further, incurring losses. But for the dumped imports, which showed their highest increase in 2019 and remained at elevated levels in 2020 and the IP, the Union industry would likely have been able to keep its prices at least at the level needed to sell without losses in 2019 and 2020. During 2020 and the IP, Union’s sales prices increased (in parallel with the increase in the costs of production), but again at levels that resulted in losses in 2020 and only marginal profitability in the IP. The Union producers consistently lost market share between 2019 and IP. Thus, the dumped imports were capable of exercising significant price pressure on Union sales, preventing Union producers from increasing prices to accommodate costs increases in a way that would have allowed them to obtain reasonable profits.

(211) 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.

(212) 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 macro questionnaire supplied by CUTFA. The data related to all Union producers. The Commission evaluated the microeconomic indicators on the basis of data contained in the questionnaire replies from the four sampled Union producers. Both sets of data were found to be representative of the economic situation of the Union industry.

(213) The macroeconomic indicators were produced by CUTFA based on a report of LMC International Ltd (36), an independent company conducting market research in the agriculture and agribusiness sectors, including oleo-chemical products such as fatty acids (‘report data’). The report data has wider scope than the fatty acids covered by this investigation and is widely used by the oleochemical industry. To distinguish the like product from other products, CUTFA used additional information on quantities of raw materials used, relying on the fact that the like product was produced only with specific raw materials, such as palm oil, palm kernel oil or tallow. The products not covered by the investigation use other raw materials, such as rapeseed oil or soya oil. By using this methodology, it was possible to establish the quantity of production and sales of both the product under investigation and other products. Report data was available for the period 2018-2020. Data for the IP was estimated pro rata, based on developments in production and sales of the companies which made their data directly available to CUTFA. Data for other indicators, mentioned below, was also established using the same company data. The calculations made by CUTFA were verified and the macro data was crosschecked with the data collected by the Commission from the sampled Union producers, which represent 61 % of total Union production.

(214) Wilmar queried why the macro data submitted by CUTFA was lower in volume than the report data, which was available widely to the oleochemical industry.

(215) This was because of the necessary adjustments, explained in recital (213), made by CUTFA to exclude products out of product scope.

(216) 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.

(217) The four sampled producers were the source of the data of the microeconomic indicators.

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

(220) For reasons of efficiency, Union production of the product under investigation is planned for 24 hours per day except in periods of normal maintenance. However, in some cases and to a certain extent, the investigation showed that other products can be produced on the same production facilities. Production is based on orders. Table 4 indicated a spare capacity of around 20 % each year.

(221) Throughout the period considered the production volume of the Union industry decreased by 7 %. A detailed analysis shows that this fall in production took place mainly in 2020.

(222) The Union production capacity was calculated on the basis of an achievable maximum production in the long-term, taking into account maintenance. During the period considered, Union production capacity decreased by 4 %. This decrease reflects a reallocation of capacity to other products because of reduced orders of fatty acids. Yet, the Union industry was unable to fully replace the production of fatty acids with other products.

(223) During the period considered, despite a 4 % reduction in production capacity, Union capacity utilisation fell by 3 %.

(225) The trend of Union industry sales (including captive use) was similar to production over the period considered. This is because production in this industry is driven by sales orders. Storage space is typically limited, and stocks of finished goods can over time deteriorate in quality or fall outside specifications. Therefore, inventories are normally kept at very low volumes.

(226) Throughout the period considered, the total Union sales volume of the Union industry decreased by 9 %.

(227) Union sales volume on the free market decreased by 10 % over the period considered. From 2018 to 2019 Union sales volumes were stable. However, from 2019 to the IP these volumes decreased by 10 %.

(228) The Union’s industry captive market (expressed as a percentage of its total Union sales including captive use) was around 10-11 % throughout the period considered.

(229) The market share of Union sales on the free market decreased from 72,1 % to 68,3 % over the period considered, a fall of 3,9 percentage points or by 5 %.

Growth

(230) Bearing in mind that the Union industry lost 5 % of market share over the period considered, and its sales on the free market fell by 10 %, it is clear that no growth took place, but rather it was a period of contraction in both absolute terms and in relation to the free market consumption.

(232) The Union industry employment fell by 5 % over the period considered on a full time equivalent (FTE) basis.

(233) Productivity in terms of tonnes per employee fell in 2020, but overall remained largely stable over the period considered.

(234) 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 considered substantial, given the volume and prices of imports from the country concerned.

(235) This is the first anti-dumping investigation regarding fatty acid. Therefore, no data were available to assess the effects of possible past dumping.

(237) Sales on the Union market to unrelated customers were made to both independent traders and to end-users in a large number of user sectors. Prices to both types of customers and to the various sectors were set in the same way and at a similar level.

(238) Sales prices on the Union market to unrelated parties (in the free market) increased from 879 EUR/tonne to 1 101 EUR/tonne over the period considered, an increase of 25 %. These sales prices fell by 12 % in 2019, but increased by 12 % in 2020 and 28 % in the IP.

(239) This apparent positive trend should be seen in the context of important increases in raw material costs. During the IP, these costs represented more than 70 % of the full unit production cost. This unit cost of production increased by 23 %, over the period considered, namely at a rate similar to the average sales prices increase in the free Union market.

(241) The average labour costs per employee increased by 8 % over the period considered. Developments in salaries were negotiated with labour unions and other employee related costs were set by national administrations.

(243) The stocks of the sampled Union producers decreased by 23 % over the period considered. However, closing stocks as a percentage of production were low throughout the period. As mentioned in recital (225) above, this is because the fatty acid industry generally operates on a production to order basis and stocks are kept at a low level because they can deteriorate in quality or change specifications. This indicator is therefore of a lesser importance in the overall injury analysis.

(245) The Commission established the profitability of the sampled Union producers by expressing the pre-tax net profit of the sales of the like product to unrelated customers in the Union as a percentage of the turnover of those sales. The profitability of the sampled producers remained low, namely below 3 %, throughout the period considered and even declined from 1,9 % in 2018 to – 2,1 % in 2020. In the investigation period, profitability recovered to 2,5 %, although it remained at low levels. The slight recovery in the IP was because customers in the Union market were more likely to accept price increases from Union producers as exporting producers were impacted by the supply chain crisis in the context of the COVID-19 pandemic.

(246) The development of profitability, when seen together with the sales prices and production cost in Table 7 and the low prices of the Indonesian imports, shows evidence of significant price suppression. The Union industry was unable to raise its prices to sufficiently reflect cost increases in order to sell at reasonably profitable prices. This meant that the profitability of the Union industry remained low throughout the period considered, when Indonesian dumped imports already started at a high penetration (17,1 % market share) and were able to increase in volume by 22 % and reach a 20,3 % market share as shown at Table 2. In addition, despite significant raw material price increases, the average price of these imports increased by only 12 % as shown at Table 3. Over the same period, Union industry prices had to increase by 25 % only to sustain costs. As also concluded in recital (210), there was continuous downward pressure exerted by imports from Indonesia (both in terms of constant high volumes and in terms of low prices) already from the beginning of the period considered. Indeed, Indonesian prices were consistently lower than Union industry prices as of 2019 and possibly before (see recital (302)). This resulted in depressed and inadequate profit levels throughout the period considered and, in particular, during the investigation period.

(247) Wilmar made comments on the lack of price suppression, however, its conclusion was based on indexed trends, rather than on the actual level of profitability of the Union producers.

(248) The Commission found that the conclusions reached by Wilmar were incorrect as it did not take into account the penetration of the dumped imports during the whole period considered and the resulting low profitability levels of the Union industry. Therefore, the claim was dismissed.

(249) Musim Mas group submitted the annual reports of two Union producers and argued that the information contained therein, in particular the indicators of profitability during the IP, shows a lack of injury to these companies.

(250) In this respect, the Commission notes that the scope of these reports is substantially wider than the business of the two Union producers related to the product under investigation. Therefore, the claim was rejected.

(251) The net cash flow reflects the ability of the Union producers to self-finance their activities. The trend in net cash flow developed in a similar manner to the return on turnover, falling in 2019 and 2020 and experiencing a modest increase in the IP. Overall, the cash flow showed a negative trend over the period considered, it decreased by 16 %.

(252) The return on investments is the profit as a percentage of the net book value of investments. The trend in return on investments also developed in a similar manner to the return on turnover, falling in 2019 and 2020 and experiencing a modest increase in the IP.

(253) The sampled Union producers continued to invest during the period considered, as demonstrated by the investment figures above. Investments were between 7 and 12 million EUR per year and were mainly made in order to make efficiency gains and maintain existing facilities. The Union industry is serving a diverse customer base, which has continuously developing requirements. The Union industry has to remain flexible in its ability to manufacture the range and quantity of products it can offer to the market. Such investments are threatened by a decreasing ability to raise capital.

(254) The investigation also showed that other investments to increase capacity had not gone ahead as planned during the period considered. Whilst those investments are essential to ensure the perennity of the industry, all sampled companies, including those that are part of larger groups, had to delay investments in that period. The inadequate level of the return on investments also jeopardises the future ability of the Union industry to raise capital and thus its survival in the medium and long term.

(255) The development of stocks and captive use showed a modest improvement in the period considered. The increase in captive consumption was limited to 2 % and stock levels decreased. The investigation showed that the captive use is not directly affected by the dumped imports and that stocks are less relevant for the fatty acid industry, which is mainly working on orders. This means that these factors are not key factors in the injury analysis.

(256) Some other indicators, such as sales prices, profitability, return on investment and investment, showed an apparently positive trend during the period considered. The investigation, however, showed that the positive development of sales prices was related to the development in raw material prices, which significantly increased in that period. Also, the modest improvement in profitability and return on investment did not change the fact that the performance during the period considered remained at a level that was inadequate to ensure the viability of the Union industry in the medium and long-term (see also recitals (266) to (269)).

(257) In fact, the low profitability, when seen together with the trends in sales prices and costs of production is a clear demonstration of price suppression. In particular, throughout the period considered, when the dumped imports remained at increased levels and low prices, the Union industry was unable to raise prices to a level that would allow it to cover its costs and reach the target profit margin (6 %).

(258) Despite keeping investments as high as possible in order to maintain efficiency, the Union industry was clearly not delivering sufficient profits to encourage investments to develop their businesses during the period considered and, in particular, in the investigation period. The deterioration in the economic situation of the Union industry took place in a market with a relatively stable consumption (the decline in consumption in 2020 and the IP were largely temporary because of the impact of the Covid-19 pandemic). The Union industry market share declined by 5 % over the period considered, from 72,1 % in 2018 to 68,3 % in the IP.

(259) Although, the injury in this investigation consisted mainly of price and performance indicators such as profitability and ability to raise capital, the Union industry also suffered a decline in the volume indicators examined. Production, capacity, capacity utilisation, sales volume and market share on the Union market all declined over the period considered. Furthermore, declines were also seen in employment and productivity, which were related to the lower levels of production and sales volume.

Comments after disclosure

(260) In its comments following final disclosure, the GOI commented on certain injury indicators and concluded that the Union industry was not injured over the period considered. This opinion was made on the basis that: (1) Table 4 showed an increase in production and capacity from 2020 to the IP; (2) Table 5 showed an increase in market share, including captive use, from 2020 to the investigation period, (3) Table 7 showed an increase in selling price over the period considered which was followed by an increase in profits from – 2,1 % in 2020 to 2,5 % in the IP, (4) Table 9 showed a decrease in stocks over the period considered, and (5) Table 10 showed an increase in profitability, cash flow and return on investment from 2020 to the investigation period. The GOI also claimed that the Commission used arbitrarily a target profit of 6 % without any basis and that that the increase in profit of the Union industry from – 2,1 % in 2020 to 2,5 % in the investigation period was significant, unprecedented and it was achieved during the Covid-19 pandemic. Wilmar claimed that the Commission did not analyse Table 10 correctly, claiming that profitability increased over the period considered and was high in the investigation period.

(261) The Commission disagreed with the claim that the relevant data failed to show material injury. As mentioned in recital (202), while during the period considered consumption decreased by 5 %, the volume of imports from Indonesia increased by 13 %. Indonesian imports also managed to increase their market share in such a context. Furthermore, as explained in recital (192), Union consumption is generally stable (37) and is expected to recover following the temporary decrease of 2020 and the IP, which was due to factors relating to the Covid-19 pandemic (38).

(262) Similarly, as concerns market share of the Union industry, the market share including captive use indeed increased from 70,6 % to 70,8 %. However, the market share of the Union industry sales on the free market, which is the relevant indicator, decreased from 68,4 % in 2020 to 68,3 % in the investigation period. During the whole period considered the market share of the Union industry sales on the free market continuously decreased from 72,1 % in 2018 to 70,8 % in 2019, to 68,4 % in 2020 and to 68,3 % in the IP. Contrary to this, at the same time, the market share of the Indonesian imports continuously increased from 17,1 % in 2018 to 19,0 % in 2019, to 20 % in 2020, and to 20,3 % in the investigation period.

(263) Likewise, the claim concerning the increase of the average selling price must be seen in the context of a significant increase of the cost of raw material, as explained in recital (256). Furthermore, as explained in recital (243), the closing stocks as a percentage of production remained rather stable over the period considered and the industry operated on a production to order basis, so stocks were kept at a low level.

(264) The allegation about the performance indicators in Table 10 ignored the full context. For example, the level of cash flow in the period considered constantly decreased from 2018 to 2020, turning negative in 2020. In the investigation period, the cash flow increased and became positive as the Union industry managed to increase its profits as explained in recital (251) and (266). However, the cash flow in the IP was still substantially below the levels of cash flow in 2018. Overall, the cash flow decreased by 16 %.

(265) As concerns the level of the target profit, the Commission considered that using a 6 % as the minimum profit was appropriate. Article 7(2c) of the basic Regulation considers 6 % as the minimum level of profitability to be expected under normal conditions of competition for the calculation of the injury margin. This level was set on the basis of the long-term profitability figures established for the industries in the Union. No evidence was put forward that such a level was manifestly inappropriate for the industry at issue (see recital (268)). Therefore, this claim could be dismissed on this basis.

(266) Nevertheless, the Commission noted that the profit of the Union industry was slightly above break-even only in 2018 (1,9 %) and in the IP (2,5 %), whereas it was negative in 2019 and 2020 (– 0,5 % and – 2,1 % respectively). Furthermore, the positive level reached during 2021, which covers 9 months of the investigation period, must be seen in the context of significant supply chain disturbances on the market derived from the COVID-19 pandemic and severely affecting Indonesian exports to the Union. Fatty acid supply to the Union was hindered by vessel delays from Asia, caused by a lack of cargo ships, tankers and workers resulting from Covid-19, and extreme hikes in freight costs as a result (39). These temporary disturbances affected prices globally in the industry, as well as imports from Indonesia, which decreased in absolute terms between 2020 and the IP. As a result, the Union industry explained that it was able to benefit from these specific temporary disturbances on the market by increasing prices to profitable levels on the Union market without major sacrifices to their market share Overall, the Union industry’s profitability oscillated around the breakeven point during the whole period considered, the volume of imports from Indonesia were significant and their market share increased significantly from 17,1 % and 20,3 % despite a slightly decreasing consumption. All the factors clearly show that profitability of the Union industry has been negatively affected throughout the period considered by the dumped Indonesian imports, and the peak in profitability at 2,5 % during the IP, was reached in a context of supply issues for Indonesian exporters, mainly due to the aftermath of Covid-19.

(267) The profitability in Table 10 is calculated based on the cost of goods sold of the fatty acid produced and sold on the Union market to unrelated customers by the Union industry. While the Union industry in general produces based on orders, there are still small stocks as indicated in Table 9. Therefore, in an industry with small inventories, there is a small difference between unit cost of production and unit cost of goods sold. It follows, that although in 2019 and 2020, the Union industry average unit selling price was higher or equal to the average unit cost of production, the Union industry incurred losses as indicated in Table 10.

(268) As for the standard level of profit of fatty acid in normal conditions of competition, the GOI did not explain why the profit level of 2,5 % achieved by the industry in the IP was allegedly sufficient. Also, the GOI failed to substantiate which level of profit should be used instead when criticising the legally mandated 6 % threshold used by the Commission, and it also failed to explain the alleged impact of Covid-19 pandemic on the level of profitability. The Commission noted that there is no other evidence on file on the level of historical profitability of the fatty acid industry in the absence of dumped imports from Indonesia that would support the GOI’s assertion that the 2,5 % profitability was sufficient, or undermine the choice of the 6 % level of profit used. By contrast, the Commission’s findings were supported by publicly available information and information on the open file. The Commission noted that according to a report prepared by the European Chemical Industry Council (‘CEFIC’) regarding, among other things, the profitability of the broader European chemical industry for 2020, the gross operating surplus (40) as a percentage of turnover in the chemical industry is around 11 %. Furthermore, based on the statistics collected by CSIMarket (41), the pre-tax margins of a chemical manufacturing industry in 2021 was around 13 %. Moreover, in their comments on final disclosure, the Greven group stated that the EBIT margins (earnings before interest and taxes) of the chemical industry in Europe in 2020 was around 7 % (see in more detail recital (294). Thus, on the basis of available evidence, the Commission considered that the Union industry did not reach a profitability level in accordance with normal market conditions of competition throughout the entire period considered.

(269) Even more significantly, the Commission noted that, as explained in recitals (253) and (254), the investments made by the Union industry were limited over the period considered, focusing on efficiency gains and maintaining a smooth running of the existing facilities. The Union industry, because of the negative or low profitability level throughout the period considered, was unable to undertake required investments to innovate and achieve required efficiency and productivity gains to be able to compete in the market. The Union industry is serving a diverse customer base which has continuously evolving requirements. During the period considered, the depreciation expenses represented only around 2 % of the cost of production. An increase of the depreciation expenses following investments to 4 % of cost of production would make the Union industry break even in the scenario that it will manage to maintain the higher prices of the investigation period, which is highly unlikely given the reasons for which these prices increased in the IP. Therefore, the profit level achieved by the industry throughout the period considered is insufficient to undertake the required level of investment needed in this sector. All these elements squarely contradicted the GOI’s unsubstantiated assertions on the required profitability level of the Union industry.

(270) Finally, the Commission noted that its analysis was complete and comprehensive, because it covered all 4 years and all injury indicators required by Article 3(5) of the basic Regulation. In addition, the Commission used all data in its analysis whether developments were positive or negative. The Commission, therefore, demonstrated that its conclusion of material injury was legally and economically sound. Therefore, these claims were rejected.

(271) The GOI also claimed that the finding of injury was inconsistent with the letter of KLK dated 19 August 2022 which commented on competition between KLK and Indonesian exporting producers and KLK’s profitability.

(272) The Commission rejected this claim as the letter is from a single Union producer and does not constitute a full assessment of injury. Such a statement, therefore, cannot override the Commission’s conclusions on material injury.

(273) The GOI also claimed that although fatty acid used for the production of biodiesel was excluded from the product scope, the Commission failed to adjust the import statistics accordingly.

(274) The Commission rejected this claim, confirming that the import statistics do not include the imported quantities of fatty acid produced from waste and used for biodiesel production.

(275) Wilmar claimed that the developments of production and capacity utilisation shown at Table 4 were not injurious.

(276) The Commission noted that production fell by 7 % over the period considered and capacity utilisation by 3 % as mentioned in Table 4. Wilmar did not assess these trends in their proper context. In a market with a decreased consumption by 5 % in the period considered, the imports from Indonesia increased by 13 % and their market share increased from 17,1 % in 2018 to 20,3 % in the investigation period. Therefore, the Commission rejected the claims concerning production and capacity utilisation.

(277) Wilmar claimed that the Commission was wrong to state that stock levels shown at Table 9 were of lesser importance in the injury analysis and claimed that lower stocks were a sign of increased sales.

(278) The Commission noted that sales volumes fell throughout the analysis period as shown in Table 5. Also, bearing in mind the low closing stock levels, which were below 4,5 % of production volumes throughout the period, the Commission maintained its views on stock issues in the overall injury analysis.

(279) Wilmar claimed that the developments of investments and return on investment shown at Table 10 were not injurious.

(280) As concerns investments, the claim was addressed in recital (269). The return on investments is the value of the total profit of the product under investigation divided by the value of the total fixed assets used for the production of the product under investigation. During the period considered, the value of the total fixed assets was rather stable. Therefore, the trend of the return of investment follows the trend of the profitability. It follows that between 2018 and 2020 the return on investment decreased. In the investigation period the return of investment increased as the profitability of the Union industry increased as compared to the previous years. However, as explained in recital (266), the increase in profitability in the investigation period was only temporary. The Commission therefore maintained its conclusion that investment levels were inadequate for the future survival of the Union industry (see recitals (253), (254) and (269)) and therefore this claim was rejected.

(281) In their comments following final disclosure the Musim Mas group claimed that there was no injury to the Union industry during the IP. Indeed, this group requested the Commission to focus the injury analysis on the investigation period claiming that in that year there were positive developments in production, production capacity, market share, average prices, return on investment, cash flow, profitability and stocks. In particular, the Musim Mas group pointed out that profitability was at its highest in the investigation period (2,5 %).

(282) The Commission must carry out the injury assessment for the entire period considered and not only during the investigation period. The methodology suggested by the Musim Mas group, like the assessment of the GOI and Wilmar above, would not represent a full and accurate analysis of the injury situation of the Union industry as required by Article 3 of the basic Regulation. The small increase in production volume (1,2 %), production capacity (1,9 %), and the decrease in stocks was due to the temporary increase in profitability, as explained in recital (266). The cash flow and return of investment followed the development of profitability. The market share of the Union industry on the free market decreased in the IP as compared to 2020 from 68,4 % to 68,3 %. The selling price of the Union industry increased in line with the increased unit cost of production due to the increase in raw materials prices, which was rendered possible by the temporary supply disruptions and the effects of the COVID-19 pandemic in particular during the IP. Therefore, the claim was rejected.

(283) The Musim Mas group also questioned the undercutting (mistakenly referred to by the Musim Mas group as ‘underselling’) calculations of the Indonesian imports arguing that the disclosure document regarding average unit values, in Tables 3 and 7, indicates a much more modest price effect on the Union industry’s prices, namely from an overcutting of 4 % in 2018 to a modest undercutting of 7 % in the IP.

(284) This exporting producer reached a conclusion on price undercutting based on a straight comparison of the average import price of Indonesian producers to the Union with the average price of the Union industry, ignoring that all exporters and all producers in the Union have product mixes that can differ significantly. In order to reach more reliable undercutting margins, prices should be compared for comparable product types at the level of the exporting producers, where the dataset is available. During the IP, the exporter claim that price undercutting was 7 % on an average basis, whereas the comparison at product type level revealed an undercutting margin above 20 %. The comments of the exporter concerning undercutting margins were rejected.

(285) In their comments following final disclosure CUTFA agreed with the Commission’s conclusions regarding injury and pointed out that the analysis of sales prices, undercutting, underselling, price suppression, unit costs and performance indicators such as return on turnover demonstrated that the Union industry had suffered injury over the period concerned. CUTFA also pointed to the Commission’s analysis of volume indicators such as production, capacity, capacity utilisation, sales volume and market share, which demonstrated that the Union industry suffered injury also in respect of volume indicators. Furthermore, CUTFA confirmed that slight improvement in profitability in the IP had not created a sustainable and competitive situation for the Industry on the Union market.

(286) On the basis of the above, the Commission concluded that the Union industry suffered material injury within the meaning of Article 3(5) of the basic Regulation during the investigation period.

(287) In accordance with Article 3(6) of the basic Regulation, the Commission examined whether the dumped imports from the country concerned caused material injury to the Union industry. In accordance with Article 3(7) of the basic Regulation, the Commission also examined whether other known factors could at the same time have injured the Union industry. The Commission ensured that any possible injury caused by factors other than the dumped imports from the country concerned was not attributed to the dumped imports. These factors are: imports from other sources than Indonesia, the export performance of the Union industry, developments in captive use, developments in consumption, raw material issues and alleged inefficiencies of the Union industry.

(288) As shown in Table 2, the volume of dumped imports from Indonesia increased from around 203 000 tonnes in 2018 to around 228 000 tonnes in the investigation period, an increase of 13 %. In terms of market share, the increase over the same period was from 17,1 % to 20,3 %, an increase of 19 %. These observations coincided with a 10 % decrease in the Union industry sales on the free market and a fall of market share from 72,1 % to 68,3 %, a fall of 5 %. In that period, the sales on the smaller captive market were stable. The investigation showed that dumped imports have also increased steadily on a year-on-year basis in terms of volume and market share. In absolute terms, the increase in import volumes in 2019 did not continue at the same pace in 2020 and in the IP because of problems relating to the Covid-19 pandemic. Nevertheless, despite a 5 % fall in consumption over the period considered, it is evident that it has been mainly imports from Indonesia which improved their situation on the market despite exporters experiencing supply difficulties as stated in recital (202).

(289) As explained in recital (210), imports from Indonesia had caused a depression on prices of the Union industry already in the beginning of the period considered. Moreover, in a context of a significant worldwide fluctuations in raw material costs, Union producers have been unable to adjust their prices in a way that would allow them to reach reasonable profit levels, or even to remain profitable at all.

(290) The penetration of Indonesian imports over the period considered was possible because the product under investigation is a commodity and price plays a major role in the decision making of customers. The coincidence in time between the deterioration in the economic situation of the Union industry and the significant presence of dumped imports from Indonesia, undercutting the Union industry’s prices, and supressing EU market price levels, confirms a causal link between the two.

(291) Finally, as explained above, supply problems for the exporting producers temporarily lessened the pressure on the Union industry in the investigation period. This allowed the Union industry to increase prices to a level whereby some profit was made, but not sufficiently to allow them to reach a reasonable profit level under normal conditions of competition.

(292) Furthermore, the Commission found that between 2018 and 2020, when consumption in the free market decreased by 3 %, Indonesian imports grew by 14 % and prices were reduced by 12 %. In the same period, the Union industry saw its sales volume shrinking by 8 % and its prices reduced by 2 %. This led to financial losses, which also affected the financial situation of the Union industry in the investigation period where pressure from dumped imports persisted.

(293) In their comments following final disclosure CUTFA agreed with the Commission’s analysis of causation in light of the injury indicators and price comparisons established above and the volumes, market share and prices of the imports from Indonesia. CUTFA pointed out that the price pressure exerted by the imports from Indonesian had prevented adequate price increases needed due to the increase in raw material prices. In addition, CUTFA mentioned that the increase of imports from Indonesia had contributed to the injury suffered.

(294) In their comments following final disclosure, the Greven group commented on the profitability of the Union industry, arguing that it followed the general trend of the European chemical industry over the period considered. To support this argument, the Greven group provided a chart with the EBIT margins (earnings before interest and taxes) of the European chemical industry, which showed a decline of 33,9 % or 3,4 percentage points, from 10,4 % in 2018 to 7,0 % in 2020. In light of this information, the Greven group concluded that the profitability decline of the Union industry must be considered as average for the European chemical industry and therefore, it was immaterial and could be attributed to factors other than the dumped imports from Indonesia.

(295) The Commission noted that the Greven group used for comparison the period from 2018 to 2020. Considering as a starting point the actual Union industry profitability of 1,9 % in 2018, a decline of 33,9 % would mean a drop to 1,26 % in 2020. Instead, the Union industry profitability dropped to negative levels (– 2,1 %) in 2020. Such decline cannot be considered immaterial, or as being even close to the trend of the (broader) European chemical industry. More importantly, the claims by the Greven group are based on profitability trends of relative changes in profitability, while completely ignoring the actual, absolute levels of profitability of the chemical industry. Furthermore, a decrease in percentage points from 10,4 % to 7,0 % does not have the same impact on the activity of a company whose profits decrease from 1,9 % to – 1,5 %. In the first scenario, the company simply recorded less profits, while in the second scenario the company became loss making, jeopardizing its future. It is undisputable that these negative or low absolute levels of profitability of the fatty acid industry are below the normal profit averages of the European chemical industry. As explained at recitals (266) and (269), the negative or very low levels of profitability throughout the period considered were insufficient for the Union industry to continue their business activity under normal conditions, as they could not raise prices to the necessary level to absorb the increase in cost of raw materials and achieve a regular profit. Nor could the industry effect the necessary investments to innovate and keep up with demand from their customers for specific products (see recitals (253), (254) and (269)). The Greven group did not show how such negative or low profitability levels of the fatty acid industry in absolute terms could be justified under normal conditions of competition, nor did they substantiate which specific factors other than dumped imports from Indonesia affected the Union industry profitability, other than by generically referring to the profitability trends of the chemical industry. Based on all these elements, the Commission concluded that the assertion that that the low profitability was attributable to other factors unrelated to the dumped imports of fatty acid from Indonesia is not only unsubstantiated, but also baseless in substance as the above arguments demonstrate, and therefore must be rejected.

(296) Wilmar claimed that the growth of imports from Indonesia had no impact on the volume of sales of the Union industry. In particular, Wilmar claimed that Table 2 showed no significant increase in imports within the meaning of Article 3(3) of the basic Regulation. Wilmar claimed that imports from Indonesia were stable apart from 2019 when they increased by 25 384 tonnes, which was insignificant against the total consumption of 1 295 034 tonnes. The volumes of imports remained relatively stable since then, growing by 1 % in 2020 and decreasing by 1 % in the investigation period, which, according to Wilmar, amounted to standard market fluctuations. Furthermore, Wilmar claimed that the overall growth of import over the period considered was 13 % and took place only in 2019, i.e. there was no growth of import in subsequent years, despite the alleged dumping. By comparison, imports from Malaysia, showed a steady growth between 2018 and 2020. Wilmar argued that an increase in imports, which happened in 2019, did not affect the sales of the Union industry in absolute terms in the same year. Furthermore, Wilmar claimed that the major downturn of sales of the Union industry took place in 2020 and the investigation period, in a period when import from Indonesia did not increase. Wilmar added that the market share of imports from Indonesia increased by 1,9 % in 2019 and further by 1 % in 2020. The overall increase between 2018 and the investigation period was 3,2 %. Such an increase took place against the background of a decrease in the Union consumption in 2020 and further in the investigation period due to the effects of COVID, economic slowdown and downturn in specific industries (e.g. automotive).

(297) The Commission noted that during the period considered the imports from Indonesia increased by 13 % and their market share increased by 19 %. Furthermore, between 2018 and 2019, on a rather stable market when the consumption increased by 1 %, the imports from Indonesia increased by 13 %, while the sales of the Union industry remained almost constant. This was translated into an increase in market share of the Indonesian imports from 17,1 % to 19,0 %, while the Union industry’s market share decreased from 72,1 % to 70,8 %. While in absolute terms, the sales of the Union industry did not decrease between 2018 and 2019, the Union industry lost market share and was not able to maintain prices at profitable levels in 2019 and 2020. It follows that during this period, the increase in imports from Indonesia, contrary to what Wilmar claimed, had impacted the Union industry as the Union industry lost market share and became loss making.

(298) Between 2019 and 2020, on a market with a decreased consumption (by 4 %), the volume of imports from Indonesia continued to increase, but to a lower degree, by 1,4 % and gaining an additional 1 percentage point market share. On the other hand, the Union industry lost even more market share, that is, 2,4 percentage points, but had to decrease their prices even more not to lose more market share and therefore incurred higher losses as compared to 2019, that is, – 2,1 %. Therefore, between 2019 and 2020, the Indonesian exports continued to increase market share, while the Union industry lost more market share and incurred higher losses than in 2019.

(299) The Commission further noted that from the beginning of the period considered, the Indonesian imports had a significant market share, that is, 17,1 %. Therefore, it is not surprising that in a period with a slight decrease in consumption, the imports of Indonesia did not increase as of 2019, as sharp as between 2018 and 2019. The Union industry chose to maintain its market share and incurred losses due to the price pressure exercised by Indonesian imports. Had the Union industry chosen to maintain higher prices and sacrifice more market share, Indonesian fatty acid exporters would have increased their exports even more and established their position as suppliers of main customers in the Union. Therefore, the slower increase of imports from Indonesia between 2019 and 2020 as compared to 2018 and 2019 has to be seen in correlation with the Union industry’s response to protect its market share.

(300) Between 2020 and the investigation period, the Union market changed because of the Covid-19 pandemic. The consumption decreased by 2,5 %, the volume of imports from Indonesia deceased by 2,3 % and the sales of the Union industry also decreased by 2,6 %. During this period of time, due to the Covid-19 pandemic that disrupted supply chains and increased prices globally, as explained in recital (266), the Indonesian imports even managed to slightly increase their market share by 0,3 percentage points while the Union industry decreased its market share by 0,1 percentage points. In the absence of the supply chain issues, the Indonesian imports would likely have increased even more. It is recalled that as stated at recital (259), the injury in this case relates mainly to price effects, although volume injury was also found. The significant level of price undercutting and price depression found during the investigation as detailed at recitals (209) and (210), as well as the change in the level of Indonesian imports and market shares throughout the period considered, confirm this. Therefore, the claim that the growth of import from Indonesia had no impact on the volume of sales of the Union industry was rejected.

(301) Wilmar also claimed that the Union industry was not impacted by price effects caused by the imports from Indonesia. Wilmar used as evidence the information on average prices in Tables 3 and 7, and the price increases achieved by the Union industry. It also claimed that the imports from Indonesia did not compete with those of the Union industry and therefore could not exert price pressure. Wilmar further claimed that the Commission relied solely on ‘end to end’ (i.e. price comparisons from 2018 to the end of the investigation period) to reach its conclusions on price.

(302) As concerns import prices from Indonesia, the Commission established the volume and prices of imports from Indonesia on the methodology stated in recitals (195) and (199). While this methodology is highly accurate for volume of imports, as concerns prices, after the comments received from parties, the Commission considers it necessary to compare the prices in Table 3 with the export prices reported by Wilmar, especially for 2018. In 2018, Wilmar exported the vast majority of total imports from Indonesia on the Union market and therefore its export price is a reasonable benchmark for the import price in 2018. The average unit export price of Wilmar in 2018 was lower than the imports price in Table 3 and lower than the unit selling price of the Union industry in Table 7.

(303) Furthermore, it should be recalled that the Commission’s analysis of price trends and price suppression in this case pointed out that increases in raw material prices must also be taken into account. Therefore, the Commission analysis took into account Union industry unit costs, profitability and the prices of both the Union industry and prices of imports from Indonesia. The price increase that the Union industry managed to achieve during the IP was just sufficient to be able to compensate for the increase in cost of production due to the increase in price of raw materials borne by the industry. Furthermore, the industry managed to increase prices in the IP just due to the supply chain issues suffered by the Indonesian exporters linked to the Covid-19 issues, as explained at recital (266). As stated by the Union sampled producers, absent the temporary situation of the market derived from the effects of the COVID-19 pandemic, the industry would have been unable to raise the prices in the IP in line with the higher cost of production, and the injury suffered would have been even more significant. Furthermore, the fact that the Indonesian exporting producers managed to maintain their exports and increase their market share in the IP, despite these supply chain issues, further shows that the injurious effects of their dumped imports can and will likely continue to inflict injury to the Union industry.

(304) In addition, a price undercutting analysis was performed for the investigation period on a type by type basis. This demonstrated that competition between the Union industry and imports from Indonesia was strong, and the majority of imported product types competed with identical types sold by the Union industry. Also taking into account that fatty acids are commodities sold mainly on the basis of price, it was considered that the price pressure on the Union market was very strong. The fact that price increases took place over the period considered, as raw material costs increased, is not a sign of health, if, as is the case here, those increased prices are at levels to simply cover costs and without achieving the necessary profit levels. This is demonstrated by the fact that over the period considered Union industry growth and sales stagnated because of inadequate prices leading to insufficient profitability levels. Therefore these claims were rejected.

(305) Wilmar also claimed that the development of cash flow was not injurious and suggested that cash flow problems derived from Union industry customers delaying payment of invoices or from large investment projects.

(306) These allegations are unsubstantiated and speculative. No evidence was provided to support either of these allegations. On the contrary, the low and falling cash flow situation of the industry is consistent with the return on turnover and other indicators, which were essentially created by low sales prices and low profitability levels. Therefore, the Commission rejected these claims.

(307) Wilmar also claimed that the development of employment and productivity did not correlate with the trend in import volumes from Indonesia.

(308) First, it should be stated that not all injury indicators need to show a direct correlation with imports from Indonesia in order for an overall determination of material injury within the context of Article 3 of the basic Regulation. Also, both employment levels and productivity fell during the period considered, and the Commission gave adequate consideration to these factors in the Section ‘Conclusion on Injury’. However, as stated at recital (259) the dumped imports caused negative price effects to the Union industry suffering material injury as they could not increase their prices to a level allowing for a reasonable level of profits. Therefore, the Commission rejected the claims concerning employment and productivity.

(309) Wilmar also compared prices on the Union market to the export prices of the Union industry during the period considered, and suggested that they were very similar. Making the assumption that the Union industry’s export prices were set at the level of global market prices, Wilmar reached the conclusion that Union industry prices were not suppressed by the imports from Indonesia, but were set at the global price level.

(310) The Commission noted that the assumption that the Union industry’s export prices were set at a global price level was not explained or substantiated. The Commission directly compared Union industry’s sales prices and Wilmar’s export sales prices on a PCN per PCN basis, and showed that Wilmar prices significantly undercut the Union industry’s prices. Therefore, the Commission rejected this claim.

(311) In their comments following final disclosure the Musim Mas group submitted comments and analysis of volume of imports from Indonesia and average prices, and made comparisons with Union industry average prices and profitability in order to demonstrate that imports from Indonesia were not a cause of the injury suffered by the Union industry.

(312) However, being based on average prices, the comparisons and conclusions reached are less accurate than the findings made on the basis of specific undercutting calculations, which show clear price pressure. In addition the comment that profitability was highest in the investigation period ignores the fact that, even in this particular year, the profitability was too low to ensure the viability of the industry, as explained at recitals (266) and (269). Contrary to what this party claims, these circumstances show precisely the causal link between Indonesian dumped exports and the injury suffered by the EU industry. Indeed, the slight recovery of the Union industry because of this temporary shortage from Indonesia and the insecurities of the Indonesian exports arriving on the Union market permitted that the users were led to purchase fatty acid from Union producers rather than Indonesian exporters as explained in recital (266). These comments were therefore rejected.

(313) Based on the above, the Commission concluded that the dumped imports from Indonesian caused material injury to the Union industry.

(315) Import volumes from Malaysia were relatively stable over the period considered. In terms of volume they were at a similar level in the IP as they were in 2018 at around 88 000 tonnes. The market share of these imports was between 7,5 and 8,3 % during the period considered, although overall there was an increase in market share of 5 %, due to the fall in consumption.

(316) Imports from Malaysia entered the Union market mainly under CN codes 3823 11 00, 3823 12 00 and 3823 19 10. These were also the main codes used by Indonesian imports. The information available suggests that the product mix of the imports from the two countries remained stable over the period considered. Average import prices from Malaysia were at levels consistently higher than those of both Indonesia (by more than 10 % each year) and the Union industry.

(317) Import volumes from other third countries increased by 2 % over the period considered. Throughout the period these imports remained stable at around 40 000 tonnes and represented together less than 4 % in terms of market share.

(318) Imports from other countries were also made mainly under CN codes 3823 11 00, 3823 12 00 and 3823 19 10, suggesting a similar product mix. Average import prices from these other third countries were at levels consistently higher than those of both Indonesia and the Union industry.

(319) Wilmar claimed that the import prices from Argentina were causing injury to the Union producers.

(320) However, bearing in mind that such imports were negligible, accounting for only around 4 000 tonnes and 0,4 % market share in the IP, this claim was rejected.

(321) Therefore, the Commission concluded that the imports from third countries did not cause material injury to the Union industry or attenuate the causal link with respect to the imports from Indonesia.

(323) The export volume of the Union industry decreased by 6 % over the period considered. The sales prices of these exports increased by 19 % over the same period, considering that those prices were also affected by the development in costs shown in Table 7.

(324) Bearing in mind that export volumes represented only around 10 % of Union sales volumes and that the trend of sales volumes and prices were similar to those observed for Union industry sales on the Union free market, it is evident that the export performance of the Union industry is not a key element in the overall assessment of the economic situation of the Union industry.

(325) Therefore, the Commission concluded that the export performance of the Union industry did not cause material injury to the Union industry or was able to attenuate the causal link with respect to Indonesian imports.

(326) Consumption fell by 5 % in the free Union market over the period considered as shown in Table 1. When captive use is also taken into account, the total Union market also fell by 5 %. The investigation showed that the decrease in consumption was mainly due to factors relating to the Covid-19 pandemic and its impact on user sectors in the Union, such as home care, as stated in recital (191).

(327) Wilmar and P&G submitted that developments in the automotive sector during the Covid-19 pandemic were partly responsible for the fall in consumption. In addition, they claimed the introduction of legislation relating to maximum levels for 3‐monochloropropanediol (3-MCPD) had also impacted sales to the food sector.

(328) The Commission found that the temporary decrease in consumption during the Covid-19 pandemic could not explain the material injury suffered by the Union industry. The developments in the automotive and food sectors did not play a big role in the overall development of consumption, whose decrease was limited to 5 %. The injury analysis showed that the material injury suffered by the Union industry was related to price issues, such as undercutting and price suppression, which prevented the Union from increasing price in line with costs to a level of adequate profits.

(329) The investigation showed that the Union industry losses in terms of production and sales volume were greater than the fall in consumption over the period considered. In fact, despite the shrinking consumption, the main beneficiary from market developments were the dumped imports from Indonesia, which increased their market share by 19 % over the period considered, as shown above in Table 2.

(330) Based on the above, is the Commission concluded that the development in consumption was not a cause of the material injury to the Union industry.

(331) The main raw materials of the product under investigation are tallow, a material derived from animal fat, and/or vegetable oils such as CPO. These make up around 70 % of total costs for the production of fatty acids.

(332) The Union producers used tallow as a major feedstock, but also use large quantities of vegetable oil, including CPO, which were sourced from the Union or from South East Asia, including Indonesia. Tallow is locally available and suitable for the production of most user segments of fatty acids. The exporting producers in Indonesia mainly used CPO, CPKO and small volumes of other locally available vegetable oils, such as coconut oil in their production. The investigation showed that in general terms, the quality and specification of the fatty acid depend on the raw material input, although there was a large interchangeability between tallow and CPO-based products. In addition, products manufactured can be further refined or developed into products with different characteristics by hydrogenation and fractionation in order to satisfy certain customer requirements.

(333) Wilmar and P&G claimed that the Union industry’s dependence on tallow as a feedstock rather than CPO had a negative impact on their costs and profitability. It claimed that developments in the tallow market in the Union had increased competition for tallow and pushed up tallow prices. The Greven group argued that the increasing usage of rendered animal fats for biofuel production had an adverse impact on the availability of tallow for the oleochemical industry and the scarcity had caused drastic price increases.

(334) The Commission noted that the cause of injury was the low prices of Indonesian imports. That these low prices are enabled by the possibility to source cheap raw materials (43) is immaterial for the purposes of the injury analysis, given that the investigation has established that the Indonesian exporters have engaged in dumping practices.

(335) Furthermore, the Commission noted that the Union industry’s raw material costs showed that the costs for both tallow and CPO had increased up to 40 % in the period considered. In addition, the average purchase prices of both tallow and CPO were very similar, as CPO had to be imported from South East Asia. Transport costs had increased for imported products, especially during the pandemic when logistics costs had been impacted by supply issues. The use of tallow by the Union industry (in addition to a mix of other types of raw materials) was thus a rational and efficient choice based on sound business logic and could not be considered to be a source of self-inflicted injury. The claims were, therefore, rejected.

(336) Wilmar also claimed that the uses of the product under investigation were restricted if tallow was used as a raw material, because such products could not be used in the Halal and Kosher markets. In addition, fatty acids produced from tallow as feedstock could not be used as animal feed.

(337) However, the investigation revealed that the home care sector was by far the largest buyer for such fatty acids, which represented over 50 % of Union consumption. In addition, Union producers were able to ensure compliance with requirements such as Kosher and Halal by dedicating part of their production facilities to exclusively produce fatty acids with vegetable oils as a feedstock. Therefore, the claim was rejected.

(338) Wilmar also claimed that the unavailability of tallow meant that Union industry production and sales were restricted.

(339) Wilmar did not provide any evidence to substantiate their point in the non-confidential version of its submission. In fact, the confidential evidence submitted showed an increase in the share of tallow consumption in the production of fatty acid over the period considered. Therefore, the claim was rejected.

(340) Bearing in mind that tallow and vegetable oil feedstock prices were comparable, in particular in the investigation period, the large interchangeability for tallow and CPO-based products, and the limited nature of the restrictions on the use of tallow based fatty acids, the Commission found that the use of tallow as a feedstock was not a cause of the material injury to the Union industry.

(341) In their comments following final disclosure, the Greven group, Wilmar, the Musim Mas group and the Schill + Seilacher group commented on issues relating to the developments in the cost of tallow as a feedstock, due to its increased use by other industries, and on the reduced availability of raw materials for the Union industry. The main point made by these parties was that the Commission did not give enough weight, in the final disclosure, to the impact of the deterioration in tallow’s availability, which resulted in an increase in tallow costs in comparison to palm oil as a feedstock for fatty acid production. To support its views, the Greven group submitted statistics and analyses showing the evolution of the relationship between tallow and palm oil prices during the period from 2008 to 2022. Moreover, the Greven group argued that tallow prices would continue to increase in the future and that the Union industry failed to undertake the significant investments, required to allow a shift of their production to CPO as the main feedstock.

(342) The Commission does not dispute that tallow availability in the Union has reduced over the years, that tallow prices have increased as a result, or that there has been a historical shift in the competitiveness of tallow prices as compared to vegetable oil feedstock prices. As in all industries, increases in raw material prices, especially for industries making low profits, need to be passed on to customers at some stage, in order that they remain viable. In the period considered, the Union industry experienced raw material cost increases of around 40 % for both palm oil and tallow. The Union industry was not able to increase fatty acid prices sufficiently to reflect these cost increases and to reach adequate profitability levels, while the raw material costs represent around 70 % of total costs. Also, the tallow costs were similar to CPO costs (including logistics costs) over the period considered, based on the verified cost data of the sampled Union producers. The reason why raw material prices had not been adequately passed on to customers is because of the price pressure on the like product caused by dumped import prices from Indonesia. In any event, as discussed above, CPO and tallow input prices (including transport costs) were very similar for Union producers of fatty acid.

(343) As regards the ability of Union producers to shift their production from one type of feedstock to another, the Commission noted that all four sampled Union producers already make use of different types of feedstock, including tallow and palm oil, taking into account market conditions. In any case, expectations about future market developments, such as on the evolution of tallow prices, are not relevant to the assessment of injury and causation in the period considered.

(344) Therefore, the Union sales prices increased because of the increase in the raw materials prices; yet, the Union industry could not set its prices at a reasonable level because of the low priced dumped imports. Therefore this claim cannot be accepted.

(345) Wilmar and P&G submitted that Indonesian exporters were vertically integrated to the extent that they owned palm oil plantations and therefore enjoyed competitive advantages over the Union industry, which was inefficient.

(346) The Commission considers that any alleged competitive advantage cannot justify the injurious dumping practiced by Indonesian exporters on the Union market. As explained in the Section ‘Dumping’ above, the Commission compared the price charged by the exporters concerned to EU-based customers with their normal value in Indonesia and found that significant dumping existed. This means that the dumping found is solely conditioned by the commercial behaviour of the Indonesian exporting producers who decided to export at prices below their domestic sales prices or costs. The investigation demonstrated that this behaviour caused material injury to the Union industry.

(347) Wilmar also claimed that the Union industry was suffering from a lack of investment, which would explain the injury found.

(348) As mentioned above, the Union industry mainly made investments in maintaining existing capacity and improving efficiency. The investigation concluded that the inadequate profitability levels and the reduced ability to raise capital caused by the dumped imports led to restricted investment levels. Thus, the alleged lack of investments were not the cause but rather the consequence of the material injury caused by dumped imports from Indonesia. The massive presence of dumped imports in the Union market had a negative impact on the Union industry’s profitability and ability to raise capital and certain structural investments could not go ahead as planned, in particular during the investigation period.

(349) Wilmar claimed that certain Union producers, including KLK, had imported fatty acids from Indonesia during the period considered. Wilmar claimed that any injury must be considered to have been at least partially self-inflicted.

(350) The investigation showed that the purchases of the sampled Union producers, including KLK, from Indonesia were negligible, namely less than 3 % of their production volumes per year and throughout the period considered. Therefore, the claim was rejected.

(351) Wilmar also claimed that the Union industry suffered from poor geographical location, namely from locations not giving access to deep-water port facilities for the procurement of raw materials and sales of finished goods.

(352) The Commission rejected this claim as the investigation showed that at least all four of the sampled Union producers which, as stated in recital (36), represented 61 % of the Union production, had access to deep-water sea or river port facilities during the period considered. Therefore, while certain smaller Union producers might not have access to deep-water port facilities, this is not true for the Union industry as a whole and, therefore, would not explain the material injury.

(353) Wilmar also claimed that the acquisition of the Dusseldorf site by the KLK Group created further inefficiency within the Union industry. This claim is based on the fact that the site uses tallow as a feedstock.

(354) However, as pointed out in recitals (331) to (340), tallow price is similar to the price of other feedstocks and tallow is technically suitable for the production of the majority of user segments. Therefore, this claim was considered to be without merit.

(355) P&G and Wilmar claimed that the Union industry was inefficient and employed a large number of staff and thus suffered from high employment costs.

(356) Bearing in mind that the Union industry employment costs (salaries plus all other employment related costs) represented only 7,2 % of total costs in the period considered, this cost was not considered to be potentially able to cause material injury to the Union industry. Thus, the claim was rejected.

(357) Wilmar claimed that the Union industry was inefficient in terms of meeting delivery times and ensuring the delivery of relevant quantities demanded by the Union market. This claim was not accompanied by any evidence.

(358) Nevertheless, it is clear from Table 4 above that the Union industry has over 200 000 tonnes of spare capacity which it could immediately use, should sufficient orders be received. In the absence of any evidence that the Union industry was unable or unwilling to supply, the claim was rejected.

(359) Based on the above facts and considerations, the Commission concluded that any alleged efficiency and raw material issues were not such as to cause material injury to the Union industry or to have attenuated the causal link with respect to Indonesian imports.

(360) In their comments following final disclosure Wilmar claimed that the reason for the injury suffered by the Union industry was increases in logistics costs resulting from the Covid-19 pandemic and in labour costs. It was claimed that these issues made the Union industry uncompetitive as compared to Indonesian exporting producers.

(361) Logistics costs are a relatively small part in the total cost (below 5 %). Also, labour costs per employee rose by only 8 % over the 4 years of the period considered in accordance with negotiations with labour union and national administrations. Labour costs represented only around 7,2 % of total costs. Therefore, the Commission rejects the claim that increased logistics and labour costs caused injury.

(362) Wilmar also claimed that the reason for the unprofitable sales in 2019 and 2020 was because of increases in SG&A and finance costs.

(363) However, this claim was made due to a misunderstanding by Wilmar of Table 7 relating to production costs. In that table, the terms ‘production costs’ mean the full costs of the Union producers, including SG&A and finance costs. In fact, SG&A and finance costs were relatively stable over the period considered. Therefore, the Commission rejected the claim that increased SGA and finance costs caused injury.

(364) In their comments following final disclosure, the Greven group questioned that Union producers have enough capacity to replace the imports from Indonesia, even though in theory a 20 % market share might be covered by the 20 % spare capacity of the Union industry. To support this claim, the Greven group provided data showing that the current capacity utilisation of the Union fatty acid industry (80 %) is already at the long-term average of the broader European chemical industry. In view of this, the Greven group argued that a 100 % capacity utilisation was neither sustainable, nor achievable over an extended period of time. Furthermore, the Greven group referred to its own demand, which as of 2020 could not be fulfilled by Union producers, because of either insufficient capacity, or insufficient supply in raw material. In particular for the pharmaceutical, feed and food sectors, the Greven group claimed that there was insufficient production capacity from Union producers, as fatty acids for these sectors could be produced only from vegetable or palm-based material and have to be RSPO (Roundtable on Sustainable Palm Oil) Mass Balance, Kosher and Halal certified.

(365) The Commission recalled that the Union production capacity for fatty acid was calculated on the basis of an achievable maximum production in the long-term, taking into account maintenance. Therefore, the fact that the long term average capacity utilisation of the broader chemical industry is at 80 % does not call into question the ability of the Union fatty acid industry to fully utilise its spare capacity as calculated by the Commission in the present case. Moreover, the Greven group has not provided evidence that the alleged inability of the Union industry to serve its demand has been due to systematic rather than circumstantial factors and would persist in the long run. As regards fatty acids for the pharmaceutical, feed and food sectors, the Commission took the view that by restoring profitability, a level playing field in the Union fatty acid market would enable and incentivise the Union industry to undertake any investments required to address capacity gaps related to specific products. In view of the above, these arguments were rejected.

(366) Captive use increased by around 2 % in absolute terms over the period considered and comprised around 10 % of total market consumption in each year of the period considered as stated in Table 5. The Commission, therefore, considered that developments in captive use were stable or slightly positive for the Union industry.

(367) The development in captive use could therefore not have caused material injury to the Union industry or to have attenuated the causal link with respect to Indonesian imports.

(368) There were 15 producers of fatty acids in the Union in the investigation period and they sold to a vast array of customers in many user sectors. The investigation showed that the presence of low price dumped imports from Indonesia had the effect of suppressing prices in the Union market during the period considered. This meant that the price level of the Union industry could not match the raw material price increases through the whole period considered. Consequently, the profitability of the Union industry sales was low, or even negative, throughout the period considered. Such profitability is below the profits that the industry should obtain under normal conditions of competition and is clearly inadequate to ensure the industry’s long-term survival. Investment by the Union industry had to be made to maintain the existing facilities but the reduced ability to raise capital threatened investment levels.

(369) Significant quantities of Indonesian low-priced dumped imports were present in the Union free market. Whilst that market shrunk by 5 % over the period considered, the volume of Indonesian imports increased by 13 % and market share by 18 %. As a result, they represented around two thirds of all imports to the Union market in the investigation period. The investigation showed that this market penetration also had negative consequences on the Union industry, in particular on production and sales volumes, which respectively decreased by 7 % and 10 % over the period considered. This is shown in Tables 4 and 5.

(370) Other factors examined were imports from other sources, the export performance of the Union industry, developments in captive use, developments in consumption and alleged inefficiencies of the Union industry.

(371) Therefore, the Commission has distinguished and separated the effects of all known factors affecting the situation of the Union industry from the injurious effects of the dumped imports. None of the factors, collectively or separately, were found to have a bearing on the situation of the Union industry sufficient to call into question the conclusion that the Indonesian imports were causing material injury.

(372) On the basis of the above, the Commission concluded that the dumped imports from the country concerned caused material injury to the Union industry. The injury consists mainly of price suppression, inadequate profitability, return on investments, cash flow, ability to raise capital, a loss of market share, and falls in production, productivity, sales volume and employment.

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

(374) The complainant claimed the existence of raw material distortions within the meaning of Article 7(2a) of the basic Regulation. Thus, in order to conduct the assessment on the appropriate level of measures, the Commission first established the amount of duty necessary to eliminate the injury suffered by the Union industry in the absence of distortions under Article 7(2a) of the basic Regulation. Then it examined whether the dumping margin of sampled exporting producers would be higher than their injury margin (see Section 6.2 below).

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

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

(377) Information relating to the establishment of the normal profit was included in the questionnaires sent to the sampled Union producers. This included the profitability of the like product for the 10 years preceding the investigation period. However, the Union producers were unable to supply complete data because of changes to accounting systems and organisational changes. In addition, the profitability of the like product in the period considered was lower than 6 % as shown in Table 10.

(378) Certain sampled Union producers claimed that their level of investments, R & D and innovation during the period considered would have been higher under normal conditions of competition.

(379) However, the producers were not able to quantify these claims. Therefore, it was concluded that the target profit should be set at 6 % in accordance with Article 7(2c) of the basic Regulation

(380) In accordance with article 7(2d) of the basic Regulation, the Commission assessed the future costs resulting from Multilateral Environmental Agreements, and protocols thereunder, to which the Union is a party, and from the ILO Conventions listed in Annex Ia to the basic Regulation, that the Union industry will incur during the period of the application of the measure pursuant to Article 11(2). The Commission established an additional cost of 0,1 % which was added to the non-injurious price. A note to the file on how the Commission established this additional cost is available in the file for inspection by interested parties.