# EUR-Lex - 52014PC0050 - EN

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# 52014PC0050

**Proposal for a COUNCIL IMPLEMENTING REGULATION imposing a definitive anti-dumping duty on imports of certain manganese dioxides originating in the Republic of South Africa following an expiry review pursuant to Article 11(2) of Regulation (EC) No 1225/2009 /* COM/2014/050 final - 2014/0025 (NLE) */**

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EXPLANATORY MEMORANDUM

1.           CONTEXT OF THE PROPOSAL

· Grounds for and objectives of the proposal This proposal concerns the application of Council Regulation (EC) No 1225/2009 of 30 November 2009 on protection against dumped imports from countries not members of the European Community ('the basic Regulation') in the expiry review proceeding concerning the anti-dumping duty in force in respect of imports of electrolytic manganese dioxides originating in the Republic of South Africa (‘South Africa’).

· General context This proposal is made in the context of the implementation of the basic Regulation and is the result of an investigation which was carried out in line with the substantive and procedural requirements laid out in the basic Regulation.

· Existing provisions in the area of the proposal The measures currently in force are a definitive anti-dumping duty imposed by Council Regulation (EC) No 221/2008 on imports of certain manganese dioxides originating in South Africa (OJ L69, 13.3.2008, p.1.).

· Consistency with the other policies and objectives of the Union Not applicable.

2.           RESULTS OF CONSULTATIONS
WITH THE INTERESTED PARTIES AND IMPACT ASSESSMENTS

· Consultation of interested parties

Interested parties concerned by the proceeding have had the possibility to defend their interests during the investigation, in line with the provisions of the basic Regulation.

· Collection and use of expertise

There was no need for external expertise.

· Impact assessment This proposal is the result of the implementation of the basic Regulation. The basic Regulation does not provide for a general impact assessment but contains an exhaustive list of conditions that have to be assessed.

3.           LEGAL ELEMENTS OF THE
PROPOSAL

· Summary of the proposed action On 12 March 2013 the Commission initiated an expiry review of the anti-dumping measures applicable to imports of electrolytic manganese dioxides (‘EMD’) originating in South Africa. Following imposition of measures, imports of EMD from South Africa virtually ceased. However, the investigation concluded that there was a likelihood of recurrence of dumping should the measures be allowed to lapse. The Union industry was found to be still in a fragile and vulnerable situation and the likelihood of recurrence of injury was considered to be very high. The investigation further established that the continuation of measures would not be against the Union interest. It is therefore proposed that the Council adopt the attached proposal for a Regulation in order to prolong the measures currently in force on imports of EMD from South Africa, which should be published in the Official Journal of the European Union.

· Legal basis Council Regulation (EC) No 1225/2009 of 30 November 2009 on protection against dumped imports from countries not members of the European Community.

· Subsidiarity principle The proposal falls under the exclusive competence of the Union. The subsidiarity principle therefore does not apply.

· Proportionality principle The proposal complies with the proportionality principle for the following reasons:

The form of action is described in the basic Regulation and leaves no scope for national decision.

Indication of how the financial and administrative burden falling upon the Union, national governments, regional and local authorities, economic operators and citizens is minimized and proportionate to the objective of the proposal is not applicable.

· Choice of instruments

Proposed instruments: Regulation.

Other means would not be adequate for the following reason: The basic Regulation does not provide for alternative options.

4.           BUDGETARY IMPLICATION

The proposal has no implication for the Union
budget.

2014/0025 (NLE)

Proposal for a

COUNCIL IMPLEMENTING REGULATION

imposing a definitive anti-dumping duty on
imports of certain manganese dioxides originating in the Republic of South Africa following an expiry review pursuant to Article 11(2) of Regulation (EC) No
1225/2009

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the
Functioning of the European Union,

Having regard to Council Regulation (EC) No
1225/2009 of 30 November 2009 on protection against dumped imports from
countries not members of the European Community [1] (the ‘basic
Regulation’), and in particular Article 11(2) thereof,

Having regard to the proposal from the
European Commission ('the Commission') after consulting the Advisory Committee,

Whereas:

A. PROCEDURE

1.           Measures in force

(1)       Following
an anti-dumping investigation (‘the original investigation’), the Council
imposed, by Regulation (EC) No 221/2008[2],
a definitive anti-dumping duty of 17.1% on imports of electrolytic manganese
dioxides (i.e. manganese dioxides produced through an electrolytic process) not
heat-treated after the electrolytic process, currently falling within CN code
ex 2820 10 00 originating in the Republic of South Africa (‘South Africa’) (‘the
anti-dumping measures in force’).

2.           Request for an expiry
review

(2)       Following the publication
of a notice of impending expiry[3]
of the anti-dumping measures in force, the Commission received, on 11 December
2012, a request for the initiation of an expiry review of those measures under
Article 11(2) of the basic Regulation. The request was lodged by the companies
Cegasa Internacional SA and Tosoh Hellas A.I.C. (‘the applicants’), the only two
Union producers of EMD.

(3)       The request was based on
the grounds that the expiry of the anti-dumping measures in force would be
likely to result in a recurrence of injurious dumping to the Union industry.

3.           Initiation of an expiry
review

(4)       Having determined, after
consulting the Advisory Committee, that sufficient evidence existed for the
initiation of an expiry review, the Commission announced on 12 March 2013 the
initiation of an expiry review under Article 11(2) of the basic Regulation, by
a notice published in the Official Journal of the European Union[4], ('notice of
initiation').

4.           Investigation

4.1.        Review investigation period
and the period considered

(5)       The investigation of
likelihood of recurrence of dumping covered the period from 1 January 2012 to
31 December 2012 (‘the review investigation period’ or ‘RIP’). The examination
of the trends relevant for the assessment of the likelihood of a continuation
or recurrence of injury covered the period from 1 January 2009 to the end of
the review investigation period (‘the period considered’).

4.2.        Parties concerned by the
investigation

(6)       The Commission officially
advised the applicants, the exporting producer in South Africa, importers,
users in the Union known to be concerned and their associations, and the
representatives of the exporting country concerned, of the initiation of the
expiry review.

(7)       Interested parties were
given the opportunity to make their views known in writing and to request a
hearing within the time limit set out in the notice of initiation. All
interested parties, who so requested and showed that there were particular
reasons why they should be heard, were granted a hearing.

(8)       In view of the limited
number of interested parties which made themselves known, sampling of interested
parties was not necessary.

(9)       Questionnaire replies were
received from the exporting producer in South Africa, the two Union producers
and two users belonging to the same group of related companies.

(10)     The Commission sought and
verified all the information it deemed necessary for a determination of the
likelihood of recurrence of dumping and resulting injury and for the
determination of the Union interest. Verification visits were carried out at
the premises of the following companies:

(a)
Union producers:

–
Cegasa Internacional SA (‘Cegasa’)

–
Tosoh Hellas A.I.C (‘THA’)

(b)
Exporting producers in South Africa:

–
Delta E.M.D. (Pty) Ltd

(c)
Users

–
Panasonic Energy Belgium NV

(11)     On 29 October 2013, the
Commission disclosed to all interested parties the essential facts and
considerations on the basis of which it intended to propose maintaining the
anti-dumping measures in force. Again, parties were given an opportunity to
provide comments and those who so requested were granted a hearing in the
presence of the Hearing Officer. The comments made by the interested parties were
considered by the Commission and responded to below.

B.        PRODUCT CONCERNED AND
LIKE PRODUCT

(12)     The product concerned by
this review is the same as the one defined in Regulation (EC) No 221/2008, namely
electrolytic manganese dioxides (i.e. manganese dioxides produced through an
electrolytic process) not heat-treated after the electrolytic process (‘the
product under review’ or ‘EMD’), originating in the Republic of South Africa,
currently falling within CN code ex 2820 10 00. It comprises two main types, carbon
zinc grade EMD and alkaline grade EMD.

(13)     The review investigation
confirmed that, as in the original investigation, the product under review imported
into the Union market and the products manufactured and sold by the exporting
producer on their domestic market, as well as those manufactured and sold in
the Union by the Union Industry (‘the like product’), have the same basic
physical and chemical characteristics and uses. Therefore, these products are
considered to be like products within the meaning of Article 1(4) of the basic
Regulation.

C.        LIKELIHOOD OF RECURRENCE
OF DUMPING

1.           Preliminary remarks

(14)     In accordance with Article
11(2) of the basic Regulation, the Commission examined whether the expiry of
the existing measures would be likely to lead to a recurrence of dumping.

2.           Dumping of imports during
the RIP

(15)     Imports to the Union from South Africa dropped to almost zero after the imposition of measures, with only a very
small quantity exported in 2010, 2011 and during the RIP. To assess whether the
sole known exporting producer Delta EMD (Pty) Ltd (‘Delta’) was exporting to
the Union at dumped prices during the RIP, the Commission sent a questionnaire
to Delta. It received a reply including data on domestic sales, exports to the Union and exports to other destinations. The reply provided was verified as detailed below.

2.1.        Normal value

(16)     In accordance with Article
2(2) of the basic Regulation Delta’s domestic sales were examined to see whether
the total volume of sales of the like product to independent customers was
representative in comparison with its total volume of export sales to the
Union, i.e. whether the total volume of such sales represented at least 5% of
the total volume of export sales of the product under review to the Union.

(17)     While the domestic sales of
the product under review were representative there were no sales in the
ordinary course of trade as Delta’s domestic sales of EMD were unprofitable. Normal
value was therefore constructed under Article 2(3) of the basic Regulation.

(18)     This was done on the basis
of the actual cost of production of EMD, to which a reasonable amount for
selling, general and administrative expenses (SG&A) and for profit was added
in accordance with Article 2(6) of the basic Regulation.

(19)     The SG&A was calculated
using Article 2(6)(c), as Delta's sales were not in the ordinary course of
trade and since both Article 2(6)(a) and (b) were not applicable given that
respectively there are no other exporters or producers subject to the
investigation, and Delta does not have any other sales of products of the same
general category. Using the SG&A of the original investigation, which gave
an almost identical percentage as the actual SG&A, was therefore considered
a reasonable method.

(20)     After disclosure, Delta
requested the Commission to calculate the constructed normal value by expressing
the SG&A calculated above as a percentage of cost of manufacturing rather
than as a percentage of turnover. Given that all domestic sales were unprofitable,
the use of turnover would result in inflated SG&A costs. The Commission
accepted Delta’s claim and when constructing normal value, the Commission added
SG&A as a percentage of the cost of manufacturing per kg from this review
investigation.

(21)     Profit was also calculated
using the same methodology as in the original investigation, i.e. on the basis
of long-term lending commercial interest rates in South Africa during the RIP
under Article 2(6)(c). Delta does not sell other products on the domestic
market, and there are no other known producers of EMD or other producers of
products of the same general category in South Africa from whom profit data
could be taken.

(22)     After disclosure the Union
industry requested that the Commission use sales to the USA to determine normal value, as they perform the function of sales on the domestic market, under
Article 2(3) of the basic Regulation.

(23)     This was rejected as normal
value was constructed under Article 2(3) of the basic Regulation using the same
methodology as in the original investigation, and therefore  in line with Article
11(9) of the same Regulation.

2.2.        Export price

(24)     The very small quantity of
EMD exported to the Union during the RIP was sold directly to an unrelated
importer in the Union. In accordance with Article 2(8) of the basic Regulation,
the export price was taken as the price paid by the importer to Delta.

2.3.        Comparison

(25)     A comparison was made
between the export price and the constructed normal value by taking account of
the claimed and verified adjustments under Article 2(10) of the basic
Regulation, namely freight costs, insurance, credit costs and handling charges
on the export side. The normal value was constructed on an ex-works basis by
removing freight charges and credit costs. The costs of packaging and technical
assistance were not removed as they were already accounted for in the cost of
manufacturing and therefore included in both the export price and the
constructed normal value.

2.4.        Dumping margin

(26)     The EMD sold to the Union by Delta during the RIP was found not to have been dumped. However the quantity
involved was extremely small and thus this finding could not be fully relied
upon to establish likelihood of recurrence of dumping, should the measures
lapse.

3.           Evidence of likelihood of
recurrence of dumping

(27)     Since no conclusions could
be drawn from the sale to the EU during the RIP, the Commission analysed
whether there was evidence of likelihood of recurrence of dumping should the
measure lapse. When doing so, the following elements were analysed: the export
price from South Africa to other destinations, the production capacity and
spare capacity in South Africa and the attractiveness of the Union market and
other third markets.

3.1.        Exports from South Africa to other destinations

(28)     Delta produces both
alkaline grade EMD and carbon zinc grade EMD, and given that there is a market
in the EU for the alkaline grade EMD and also (to a smaller extent) carbon zinc
grade EMD, the Commission examined the export price of both grades to third
countries during the RIP. These sales were compared to the constructed normal
value as calculated above, taking into account differences which affect price
comparability.

(29)     Sales of alkaline grade EMD
to the USA, Delta’s most important export market, accounted for roughly
two-thirds of Delta’s total exports during the RIP and were not dumped. However
sales of alkaline grade EMD to other destinations (such as Thailand, Korea, China and Brazil), sold in smaller quantities, were found to be exported at dumped
prices, with dumping margins ranging from 2% to 21%. In addition, when looking
at the export sales of carbon zinc grade EMD to other destinations, mainly sold
at low prices and low quantities, the dumping margins were higher, ranging from
13% to 66%.

(30)     Following disclosure the
Union industry claimed that the Commission should ignore the sales made to the USA during the RIP as the prices to that market were not an appropriate guide as to the likely
price level of sales to the EU market should measures lapse.

(31)     Delta, on the other hand,
requested the Commission after disclosure to pay particular attention to the
sales made to the USA, which represents the large majority of its alkaline
grade exports and is the most comparable market to the EU.

(32)     The Commission analysed all
export sales to all destinations, calculated an average weighted export price
of Delta’s exports to all other non-EU destinations but also looked into great
detail at export prices to individual third countries. When looking at the
question of the likelihood of recurrence of dumping, all export sales to all
destinations were found to be relevant, in particular in view of the
significant price differences found on different export markets.

(33)     The USA market has its own particular characteristics, allowing Delta to charge significantly
higher prices there than elsewhere. In the USA demand significantly exceeds domestic
supply. Also, high entry barriers exist for a large number of potential
competitors as high anti-dumping duties are in force against imports from China and Australia.

(34)     In these circumstances
there is no reason why the Commission should base its findings only on the
average export price or only examine export sales to one country instead of
analysing all export sales to all destinations.

(35)     Delta’s price behaviour to
other export markets than the EU shows that although their exports to their
most important market (the USA) were not sold at dumped prices, sales to other
destinations were dumped. Further indicators, as set out below, are therefore
required to assess the likelihood of recurrence of dumping should the measures
lapse.

3.2.        Production capacity and
spare capacity in South Africa

(36)     Delta has spare capacity to
produce EMD that could allow it to resume exports to the Union in some
significant quantity should the measures lapse. Delta has estimated, and the
Commission has confirmed, that this spare capacity was between 4 000 to 6 000
MT per year. This calculation takes into account electricity shortages current
in South Africa and volumes of waste. Given some difficulty in maintaining
quality levels with a manually controlled plant, the Commission conservatively estimates
that between 2 000 to 3 000 MT per year would be alkaline grade EMD whereas the
rest would be carbon zinc grade EMD. Both grades would however be suitable for
the EU market.  Whereas part of the carbon zinc grade EMD quantity might be
absorbed by other third country markets, there are no indications that other
third country markets or the domestic market could absorb the significant spare
capacity of alkaline grade EMD.

(37)     Delta stated during the
verification that they are a long established “top-up” supplier for their
customers on the US market, whereby they fill the gap when domestic producers
cannot produce enough. Delta’s exports to the USA have been stable over the
last 4 years, which suggests that there was no possibility for Delta to
increase its sales to the USA. If it was possible to increase exports to the USA, Delta would have done so already in order to benefit from the higher prices that prevail on the
  US market and also from the increased economies of scale arising from
producing higher quantities.

(38)     Delta’s sales to the Asian
market were more focused on carbon zinc EMD. Delta’s sales to Asia account for
50% of all of Delta’s carbon zinc EMD sales. China has domestic EMD producers
and Delta’s exports to China during the IP remained limited to the very small
quantity of alkaline EMD. As currently EMD exports to Japan are subject to anti-dumping measures and due to the fact that Japan has domestic EMD producers,
it is unlikely that this market would absorb Delta’s spare capacity. Therefore
it is unlikely that the Asian market could absorb Delta’s spare capacity of
alkaline EMD.

(39)     Following disclosure, the
Union industry commented that Delta’s spare capacity was much higher than that
given above, and pointed to several factors that would suggest this to be the
case. They also stated that all of Delta’s spare capacity could be used to produce
alkaline grade EMD of a quality to be sold to the EU market at dumped prices.

(40)     The Union industry also
stated that Delta’s exports to the USA would very likely diminish in the near
future as one US producer had already announced increases in its production
capacity and the very probable decrease in demand for EMD in the USA following the announced exit from the market of a user of EMD. In addition, the Union
industry claimed that sales from South Africa to the USA after the end of the
investigation period had already started to decline. This would mean that Delta
potentially has additional quantities of alkaline EMD that would very likely be
diverted to the EU market should measures lapse.

(41)     Delta’s plant, capacity and
capacity to produce were verified by the Commission during the investigation. As
stated above, in its calculations the Commission based itself on conservative calculations,
in particular the conservative estimate of the split between alkaline and
carbon zinc production based on using its spare capacity.  Even with this conservative
estimate, a significant  spare capacity, in view of the consumption in the EU
of the product concerned, that can be used to produce alkaline grade EMD, was
established.

(42)     As to the claim regarding
the likely evolution of Delta’s exports to the USA the evidence presented to
the Commission suggests that these could come under pressure should USA EMD capacity
continue to increase and demand continue to fall.

(43)     After disclosure, one user
argued that Delta’s spare capacity is low, given that Delta had a market share
of 60-70% before measures were imposed. However, even by using a conservative
estimate of Delta’s  spare capacity, if this spare capacity is used to export
to the EU, Delta could easily significantly increase its market share without
taking into account the possibility that exports to other destinations could be
redirected to the EU. Such a development would result in a further increase of
Delta’s potential market share.

3.3.        Attractiveness of the Union
market and other third markets

(44)     Delta
has a long-standing and profitable sales channel to the USA and no evidence was found that would
suggest that it would be in the interests of the company to deliberately redirect
any of these sales to the Union. However, the spare capacity identified during
the investigation, or at least a substantial part of it, could likely only be
directed to the Union for the reasons mentioned in the recitals above. Moreover,
this is so because the Union market is among the largest in the world. In
addition, before the anti-dumping measures in force were imposed, the Union
market had been very attractive for Delta as it had a market share of between
60-70%.

(45)     If Delta was to compete on
price with the Union producers, then it would be forced to reduce its export
prices and thus to sell at dumped prices to match the prices charged by one
Union producer during the RIP. Delta could also redirect
their exports of alkaline grade EMD that are currently sold to third countries (other
than the USA) to the EU at dumped prices because the Union market is more
attractive than other non-US markets due to its size and generally higher prices.
Furthermore, if Delta in the future might have to reduce the quantities of EMD
exported to the USA then the EU market would be the very likely destination of
such additionally available quantities.

(46)     Following disclosure, Delta
commented that their pricing policy was to sell on the EU market only if it
could achieve a profitable price.

(47)     This may or may not be the
case, but a profitable sale can still be a dumped one, if the export price
remains lower than the normal value. In any case, no evidence could be provided
to back up such a statement as Delta did not export significant quantities to
the EU over the last five years. In addition, the Union industry claimed that the
small quantities of EMD that were sold by Delta to the EU during the IP were
done in order to maintain its certification with EU clients.

(48)     Delta also commented that
the average import price into the EU of EMD during 2012 was EUR 1809 per MT,
which was above their normal value, showing in Delta’s view, that they could
compete with other importers and not dump.

(49)     However this average figure
is made up of some extremely expensive imports from the USA, and some much cheaper imports from China. The imports from the USA could not be included in
this comparison as the extremely high price level, up to three or four times
the normal prices charged on the EU market, shed doubt on the reliability of
these prices and/or the imported product. If Delta was to compete on price with
the Chinese imports, at around EUR 1200 per MT, then Delta would be dumping on
the European market.

4.           Conclusion on the
likelihood of recurrence of dumping

(50)     Given the above, there is a
likelihood that if the measures were to lapse, dumping would reoccur. Alkaline
grade EMD is the product type manufactured by Delta which would most likely be
sold to the Union should measures lapse as this was the product type that was exported
by Delta in the past. Also currently most demand in the EU is still for
alkaline grade EMD. The investigation showed that sales of alkaline grade EMD
to destinations such as South Korea, China and Brazil were found to be exported
at dumped prices, with dumping margins from 2% to 21%.

(51)     In addition, Delta’s spare
capacity is of a significant quantity in comparison to the Union consumption
during the RIP. If this capacity was used to export to the Union and to compete
on price with the Union producers or on price with the major imports from third
countries, then there is a strong likelihood that such exports would be made at
dumped prices.

D.        DEFINITION OF THE UNION
INDUSTRY

(52)     During
the RIP, the like product was produced by two producers in the Union, THA and Cegasa, who cooperated fully in the
investigation. In the original investigation, Cegasa, which at that time did
not produce for the open market but only for captive use, was not a complainant
and did not cooperate but did not oppose the investigation.

(53)     Following disclosure, an
interested party questioned the admissibility of Cegasa as applicant in the
expiry review since it was not a complainant in the original investigation, was
not producing for the open market and thus was not experiencing injury at that
time. This claim was rejected as a request for an expiry review must be lodged
by or on behalf of Union producers but not necessarily by (only) the original
complainant(s).

(54)     The two Union producers
account for all EMD production in the EU, and constitute the 'Union industry'
within the meaning of Article 4(1) and Article 5(4) of the basic Regulation.

(55)     For
the purpose of the injury analysis, due to cooperation of the entire Union
industry, all injury indicators have been established at the microeconomic
levels. To protect confidentiality, all data are
presented in indexed form or given as ranges.

E.        SITUATION ON THE UNION
MARKET

1.           Consumption in the Union
market

(56)     Union
consumption was established on the basis of (i) the verified sales volumes of
the Union industry on the Union market, (ii) verified import volumes from the
sole South African producer and, (iii) imports from other countries based on
Eurostat data.

(57)     Union
consumption of EMD remained stable between 2009 and the RIP. It increased in 2010 and 2011 but in 2012 it went back to the levels
of 2009.

Table
1

|| 2009 || 2010 || 2011 || RIP

Index (2009 = 100) || 100 || 102 || 108 || 100

2.           Imports from South Africa

2.1.        Volume and market share

(58)     Following imposition of
measures, imports from South Africa virtually ceased.

Table
2

|| 2009 || 2010 || 2011 || RIP

Volume of imports subject to measures from South Africa || 100 || 2 || 3 || 1

Market share of imports subject to measures from South Africa   || 100 || 2 || 4 || 1

2.2.        Prices and undercutting

(59)     The very few sales of EMD
from South Africa to the Union during the RIP were not undercutting the Union
industry prices. However, in view of their very small volume, they cannot be
relied upon to draw any meaningful conclusion.

(60)     A comparison was therefore also
made between the prices of EMD produced and sold by the Union industry and
those of EMD produced in South Africa and sold to the rest of the world, based
on two scenarios; including and excluding sales to the USA. The reason for carrying out an analysis excluding Delta's export price to the USA was based on the particular market situation in the USA resulting in very high prices as
compared to Delta’s export prices to other countries (see recitals above).

(61)     The
comparison showed that, during the RIP, sales from South Africa to the rest of the world were
not undercutting the Union industry’s prices if sales to the USA were taken into account , but were undercutting the Union industry’s prices if sales to the USA were excluded. In addition, excluding the sales to the USA, Delta’s export prices were also underselling the Union industry’s prices.

(62)     Following disclosure, the
Union industry maintained that Delta’s prices to the USA are not indicative of
its future pricing to the EU and that due to structural differences between the
EU and the US market, such prices should be disregarded. On the other hand,
Delta reiterated that the US market is a mature EMD market where domestic
producers and importers compete freely and where there are many users,
including users which are also present in the EU. As a consequence, Delta’s
sales to the USA should not be excluded. In addition, Delta considered that for
the purpose of underselling calculations, the Commission should have not used
the target profit achieved by the Union industry in the absence of dumped
imports in the original investigation.

(63)     In the present case where
imports from the country concerned virtually ceased following imposition of
original measures, the investigating authority has to carry out a
forward-looking analysis based on a number of reasonable assumptions, including
the likely price at which Delta would sell its EMD in the Union should the
anti-dumping measures in force be allowed to lapse.

(64)     It is an undisputed fact
that each EMD market (USA, EU, Asia) is different and EMD producers apply
different pricing stategies bearing in mind not only their costs of production
but also the production capacity in the target country, the need to (re)gain
market shares and the local conditions of competition. It is also an undisputed
fact that Delta is pricing its EMD sales to the US market significantly higher
than in other markets. Therefore, it is expected that Delta’s future prices to
the EU will not be determined by its current prices to the USA but will follow the specific EU market conditions and realities.

(65)     In the disclosure document,
for the purposes of dumping calculations, Delta’s selling prices of only alkaline
grade EMD to various markets were compared to the constructed normal value,
whereas for the purpose of undercutting calculations also Delta’s sales of one
type of carbon zinc grade were taken into account. Following disclosure, the
Union industry commented that all Delta’s sales of alkaline and carbon zinc
grade EMD should be taken into account for dumping and injury calculations. In
contrast, Delta claimed that since the vast majority of Union consumption and
Delta’s exports to the Union only consist of alkaline EMD, sales of carbon zinc
grade EMD should not be taken into account at all.

(66)     The Commission has reached
the conclusion that both alkaline and carbon zinc grade EMD, all types
included, should be taken into account for both dumping and injury
calculations, for the following main reasons: First of all, as mentioned above,
there is also a market and consequently demand for carbon zinc grade EMD in the
EU, albeit smaller than the market of alkaline grade EMD, and this market could
also be of interest for Delta’s exports to the Union. Secondly, alkaline grade
and carbon zinc grade EMD are manufacturerd in the same plant and in the same
production line using the same raw material and the same production process. Depending
on the settings of the parameters in the electrolysis process (current density,
temperature, electrolyte concentration etc.), EMD producers can choose to
produce alkaline or carbon zinc EMD. Therefore, it is more appropriate to
calculate the undercutting by comparing the average export price of Delta’s EMD
(both alkaline and carbon zinc) with the average selling price of the Union
producers of EMD (both alkaline and carbon zinc).

(67)     As far as the underselling analysis
is concerned, the Commission used as a reference the target profit achieved by
the Union industry in the absence of dumped imports in the original
investigation, which corresponds to the profit that a capital intensive
industry such as the EMD manufacturers can expect to achieve in normal
conditions of competition. However, the issue of the most appropriate target
profit is irrelevant in the context of this particular expiry review. Indeed, the
Commission acknowledges that there was no continuation of dumping and therefore
there was no continuation of injury due to the undercutting. The focus of the
analysis is therefore forward-looking and aims to predict the likelihood of
recurrence of injury in case of likely recurrence of dumping.

(68)     Delta claimed that
post-importation costs appeared to be underestimated because they did not take
into account the transport costs for the product delivered to customers from
the Antwerp port.

(69)     However, the Commission
compared the Union industry’s prices ex-work with the exporters’ price at Union
borders, and therefore post-importation costs only concerned handling and
testing but not transportation costs. This claim was therefore rejected.

3.           Imports from other third
countries

(70)     The following table shows
the development of imports from other third countries during the period
considered in terms of volume and market share, as well as the average price of
these imports.

Table
3

|| 2009 || 2010 || 2011 || RIP

Volume of imports from other countries (tonnes) || 5 000 – 10 000 || 10 000 – 15 000 || 5 000 – 10 000 || 5 000 – 10 000

Index 2009=100 || 100 || 113 || 92 || 88

Market share of imports from other third countries || 25% - 30% || 30% - 35% || 20% - 25% || 20% - 25%

Values of imports from other countries (EUR) || 10m -15m || 15m-20m || 10m-15 m || 10m -15m

Index 2009=100 || 100 || 113 || 93 || 102

Price of imports (EUR/tonne) || 1 566 || 1 572 || 1 590 || 1 809

Source: Eurostat

(71)     The volume of imports from
other third countries of EMD into the EU decreased in the period considered.
Prices of these imports are above the average level of prices of the Union
industry and Delta’s prices to other markets excluding the USA during the RIP. As mentioned above, the value of 1809 euros per tonne is an average of very
diverse import prices, ranging from low priced imports from China to very expensively priced imports from USA. In particular, recorded price levels of imports
from the USA are extremely high compared to any other price ranges from the
Union producers, Delta and other exporters, that they cannot be reasonably
relied upon to carry out the analysis. Therefore, this average cannot be taken
as such as a reference price for future imports from South Africa. Delta would
not compete on price with the US imports but with the Union industry prices.

4.           Economic situation of the
Union industry

(72)     Under Article 3(5) of the basic
Regulation, all relevant economic factors and indices having a bearing on the
state of the Union industry during the period considered were examined.

(a)
Production

(73)     The Union production
increased by 6% between 2009 and the RIP. More specifically, it increased by 7
percentage points between 2009 and 2011 and then declined by 1 percentage point
during the RIP.

Table
4

|| 2009 || 2010 || 2011 || RIP

Index 2009=100 || 100 || 102 || 107 || 106

Source: Questionnaire replies, Review request

(b)
Production capacity and capacity utilisation

(74)     The production capacity of
the Union producers increased by 9% throughout the period considered, mainly
due to minor improvements to the production process (i.e. no major investments
in new plants or equipments).

(75)     Since the increase in
capacity was higher than the increase in production, the capacity utilisation went
down by 3 percentage points.

Table
5

|| 2009 || 2010 || 2011 || RIP

Production Capacity Index 2009=100 || 100 || 103 || 108 || 109

Capacity Utilisation Index 2009=100 || 100 || 99 || 99 || 97

Source: Questionnaire replies, Review request

(c)
Stocks

(76)     Volume of stock remained
stable during the period considered. It went down in 2011 but returned to 2009 levels
during the RIP.

Table
6

|| 2009 || 2010 || 2011 || RIP

Index 2009=100 || 100 || 103 || 86 || 100

Source: Questionnaire replies

(d)
Sales volume

(77)     The
sales volume of the Union producers to unrelated customers on the Union market
increased by 10% between 2009 and the RIP. In 2011 it increased by 20% in
comparison to 2009, but then decreased sharply by 10 percentage points during
the RIP.

Table
7

|| 2009 || 2010 || 2011 || RIP

Index 2009=100 || 100 || 103 || 120 || 110

Source: Questionnaire replies, Review request

(e)
Market share

(78)     Between 2009 and the RIP the
Union producers gained 10 percentage points in market share. This increase in
market share is explained by the decline in market share of imports into the
EU.

Table
8

|| 2009 || 2010 || 2011 || RIP

Market share of the Union industry || 65% - 70% || 65% - 70% || 75% - 80% || 75% - 80%

Index 2009=100 || 100 || 101 || 111 || 110

Source: Questionnaire replies, Review request and Eurostat

(f)
Growth

(79)     Union
consumption remained stable between 2009 and the RIP as set out in Table 1 above. All other indicators do not show any
significant growth in the Union market for the product under review.

(g)
Employment

(80)     The
employment level of the Union industry shows a decrease of 9 percentage points
between 2009 and the RIP.

Table
9

|| 2009 || 2010 || 2011 || RIP

Index 2009=100 || 100 || 91 || 90 || 91

Source: Questionnaire replies, Review request

(h)
Productivity

(81)     Productivity of the Union
industry workforce, measured as output (tonnes) per employee per year,
increased by 18% in the period considered. This reflects that production
increased by 6%, whilst employment levels decreased by 9%. This is particularly
obvious in 2011, when production increased while the employment level continued
to decrease and productivity was 20 percentage points higher than in 2009.

Table
10

|| 2009 || 2010 || 2011 || RIP

Index 2009=100 || 100 || 112 || 120 || 118

Source: Questionnaire replies and Review request

(i)
Factors affecting sales prices

(82)     The
annual average sales prices of the Union industry on the Union market to unrelated customers decreased by
11% between 2009 and the RIP.

Table
11

|| 2009 || 2010 || 2011 || RIP

Index 2009=100 || 100 || 95 || 93 || 89

Source: Questionnaire replies, Review request

(j)
Magnitude of dumping margin and recovery from
past dumping

(83)     As imports from South Africa virtually ceased after imposition of the anti-dumping measures in force, the
magnitude of dumping margins cannot be assessed. However, in light of the key
economic indicators referred to above as well as further below, the Union
industry was found to be still in a fragile and vulnerable situation.

(k)
Wages

(84)     Despite the fact that the
total labour cost decreased the average labour cost increased during the period
considered as a consequence of the reduction of the overall workforce.

Table
12

|| 2009 || 2010 || 2011 || RIP

Index 2009=100 || 100 || 102 || 103 || 103

Source: Questionnaire replies

(l)
Profitability and return on investments

(85)     During the period
considered, the profitability of the Union industry’s sales of the like product
on the Union market to unrelated customers, expressed as a percentage of net
sales, halved between 2009 and the RIP. The profitability during the RIP is
significantly lower than the target profit established in the original
investigation, which was set at the level of the profit  achieved by the Union
industry in the absence of injurious dumping.

(86)     The return on investments
(ROI), expressed as the profit in percent of the net book value of investments,
broadly followed the profitability trend.

Table
13

|| 2009 || 2010 || 2011 || RIP

Profitability of Union Industry || 5% -10% || 5% - 10% || 5% - 10% || 0% - 5%

Index 2009=100 || 100 || 63 || 63 || 50

ROI (profit in % of net book value of investments) || 15% - 20% || 5% - 10% || 10% - 15% || 5% - 10%

Index 2009=100 || 100 || 64 || 84 || 51

Source: Questionnaire replies

(m)
Cash flow and and ability to raise capital

(87)     The net cash flow from
operating activities dropped considerably over the period considered, although
it remained positive, except for the year 2010.

Table
14

|| 2009 || 2010 || 2011 || RIP

Index 2009=100 || 100 || - 34 || 71 || 10

Source: Questionnaire replies

(88)     There are no indications
that the Union industry would have encountered difficulties in raising capital if
it had tried to, but there were no significant investments during the period
under consideration and therefore the Union industry was not ‘put to the test’.

(n)
Investments

(89)     The Union industry annual
investments in the production of the like product almost halved between 2009
and the RIP. More specifically, it decreased in 2010, increased in 2011 and
decreased again during the RIP. The sharp drop in investments observed between
2011 and the RIP can be partially explained by the fact that the Union industry
had already during the period considered achieved their necessary scheduled
main investments.

Table
15

|| 2009 || 2010 || 2011 || RIP

Index 2009=100 || 100 || 45 || 115 || 52

Source: Questionnaire replies

5.           Conclusion on the
situation of the Union industry

(90)     The analysis of the
economic indicators shows that the Union industry increased its production and
sales during the period considered. However, the observed increase in quantity,
which was not significant as such, should be seen in the context of increased
production capacity and decrease in selling prices, which resulted in the Union
producers’ capacity utilisation and unit selling price dropping respectively by
3 and 11 percentage points.

(91)     At the same time the
economic situation of the Union industry showed a deterioration in terms of profitability,
return on investment, employment and cash flow. In particular, the
profitability, which is an important indicator of the status of the Union industry,
is still significantly below the target profit as established in the original
investigation. The Union industry has not yet fully recovered from the effects
of past dumping, and is still in a fragile situation, and thus very vulnerable
to any recurrence of dumped imports. Average sales prices have decreased over
the years and would in all likelihood decrease further if dumped imports from South Africa were to reoccur, thus exacerbating the already fragile situation of the Union
industry.

(92)     Following disclosure, certain
interested parties claimed that the current fragile and vulnerable situation of
the Union industry was neither due to dumped imports from South Africa nor due to the effects of past dumping.

(93)     They noted that the trends
of the key economic indicators shown above concerned a period (from 2009 to the
end of the RIP) where: (i) the original anti-dumping measures had already been
in force for a while; (ii) imports from South Africa had virtually ceased; and
(iii) a new player (Cegasa) entered the open Union market. Interested parties
looked at the economic indicators of each of the two Union producers
separately, instead of aggregating them, and concluded that the Union industry
was in a difficult situation due to newly experienced internal competition
among the only two Union producers in the market.

(94)     In particular, these interested
parties claimed that the Commission had failed to acknowledge the fundamental
changes occurred in the Union industry since 2009. They noted that following
imposition of the anti-dumping measures in force the economic indicators of the
original and only complainant (THA) improved dramatically, thus removing all
negative effects of the past dumping. However, subsequently, the other Union
producer, Cegasa, which was previously manufacturing EMD only for captive use,
relocated its battery production facility outside the Union. As a consequence,
it freed a significant amount of EMD for the open market, and started selling
it at a low price, thus competing with the only other Union producer and
exerting a strong downward pressure on prices, capacity utilisation and profitability.

(95)     In the disclosure document,
the Commission had already acknowledged the change in the configuration of the Union
industry compared to the original investigation. This has been a positive
development which shows market openess and an increased level of competition
among the various players including imports.

(96)     The Commission also agrees
that under these circumstances and notably in the absence of imports from South
Africa the current state of the Union industry cannot be due to the dumping
from South Africa and should not be qualified as ‘continuation of injury’.

(97)     The Commission has examined
the aggregate trends of both Union producers since 2009 and has concluded that
the key economic indicators are not favourable and that the Union industry is
in a fragile and vulnerable state. Clearly, in the absence of imports from South Africa the reason cannot be the dumping practices of Delta. However, in an expiry
review where the focus is on the likelihood of recurrence of dumping and injury
should the measures lapse, dumping, injury and causation during the RIP are not
the determining factors of the analysis.

(98)     The Commission concludes
that the Union industry is still in a fragile and vulnerable situation and its
profitability is far from the levels that could be expected in such a capital
intensive industry. A comparison with the original investigation can only be
made for one Union producer, as the other did not sell on the open Union market
at that time. For that Union producer, profits in the RIP were significantly
lower than found in the original investigation in the absence of dumped
imports.

F. LIKELIHOOD OF RECURRENCE OF
INJURY

1.           Impact of the projected
volume of imports and price effects in case of repeal of measures

(99)     The only known South
African producer (Delta) of EMD has spare capacity and a potential to restart exporting
to the Union market in significant quantities. During the original period
considered (2002 to 2005/6) the market share of Delta increased strongly from
around 30-40% to 60-70%. Delta has thus already shown its capability to rapidly
increase export volumes to the Union.

(100)   The CIF export prices of
Delta to the other markets, excluding the USA and including all types and all
grades of EMD, were lower than the prices of the Union industry in the RIP and
undercut them. Lower prices on the other markets could be an incentive for
Delta to divert these exports to the EU market should the measures lapse.

(101)   Given the spare capacity
identified during the investigation, the saturation of other export markets combined
with the attractiveness of the Union market, Delta would in all likelihood try
to regain its substantial market share in the Union which was lost after
imposition of the measures in force. As concluded above, for Delta to regain market share it
would need to export at dumped prices. Consequently, in the absence of
anti-dumping duties on imports of EMD originating in South Africa, any recurrence
of dumped imports would exercise an even stronger price pressure on the Union
industry and in all likelihood cause material injury.

2.           Conclusion on the
likelihood of recurrence of injury

(102)   The repeal of the measures
would in all likelihood result in a recurrence of dumped imports from South Africa resulting in a downwards pressure on Union industry prices and a worsening of its
economic situation. The repeal of measures against South Africa would therefore
likely result in a recurrence of injury due to the likely exacerbation of the
already fragile and vulnerable situation in which the Union industry was
currently found to be.

G. UNION INTEREST

1.           Introduction

(103)   Under Article 21 of the
basic Regulation, the Commission examined whether maintaining the existing
anti-dumping measures against South Africa would be against the interest of the
Union as a whole. The determination of the Union interest was based on an
appreciation of all the various interests concerned.

(104)   All interested parties were
given the opportunity to make their views known pursuant to Article 21(2) of
the basic Regulation.

(105)   In the original
investigation the imposition of measures was considered not to be against the
interest of the Union. As this investigation is a review, it analyses a
situation in which anti-dumping measures have already been in place, thereby allowing
the assessment of any undue negative impact on the parties concerned by the
current anti-dumping measures.

(106)   Despite the conclusions on
the likelihood of recurrence of injurious dumping, the Commission examined whether
compelling reasons existed which would lead to the conclusion that it is not in
the Union interest to maintain measures against imports of EMD originating in
South Africa.

2.           Interest of the Union
industry and other Union producers

(107)   Although the anti-dumping
measures in force prevented dumped imports from entering the Union market, the
Union industry is still in a fragile and vulnerable situation, as confirmed by
the negative trends of some key injury indicators.

(108)   Should the measures be allowed
to lapse, it is likely that the current situation of the Union industry will continue
and further deteriorate given the likely influx of substantial volumes of
dumped imports from South Africa. This influx would cause, amongst others, loss
of market share, decrease in sales price, decrease in capacity utilisation and
in general a serious deterioration of the Union industry's financial situation.

(109)   It is therefore clear that the
maintenance of anti-dumping measures against South Africa would not be against
the interest of the Union industry.

3.           Interest of importers

(110)   In the original
investigation it was found that the impact of the imposition of measures was
not likely to have a serious negative effect on the situation of importers in
the Union. No traders/importers cooperated in the current investigation.
Bearing in mind that there is no evidence suggesting
that the measures in force have considerably affected importers, it can be
concluded that the continuation of measures will not negatively affect the
Union importers to any significant extent.

4.           Interest of users

(111)   All
known users of EMD in the Union (used by battery producers as raw material) were
contacted. Replies were received from two companies belonging to the same
multinational group. In the original investigation two additional battery
producers cooperated, which opposed the imposition of measures.

(112)   The cooperating user
explained the difficult economic situation faced by battery producers in the
Union due to the downward pressure on prices exerted by their main customers
(retailers), and the consequent risk of loss of jobs. However, it could not
provide any explanations or arguments as to why and how the termination of the
measures against imports of EMD from South Africa would improve the situation.

(113)   EMD accounts for only 10-15%
of the total cost of production of batteries. This value decreased compared to
the original investigation. In addition, following imposition of measures, the
average sales price of EMD in the Union actually decreased. In reality, no
evidence was provided that maintaining the measures in force would have a
non-negligible influence on the costs of production of battery producers.

(114)   In the absence of such
evidence, the Commission concludes that maintaining the measures would not
unduly affect the EMD users.

(115)   Following disclosure, the
same user disagreed with the Commission’s assessment of the situation and
commented that following imposition of measures one source of good quality EMD
disappeared, prices for EMD increased and even if EMD accounts for only 10-15%
of the production costs this has a a significant impact on the already small
profitability of EU battery producers.

(116)   Notwithstanding the claim,
the evidence in the file shows that the user’s choice not to make use of
Delta’s EMD was not linked to the imposition of anti-dumping duties and that
the threat to the user’s profitability and jobs is not an increase in EMD price
but is in fact the downward pressure on price exerted by their main customers (multinational
retailers with significant purchasing power) and by Chinese battery producers.

(117)   The same user of EMD
commented that the measures should not be maintained, as the investigation
found no dumping to the EU during the RIP and that there was no risk of
recurrence of dumping due to the small market share possible for Delta if all
its spare capacity was directed to the Union.

(118)   This argument was rejected
as Delta's potential market share identified would clearly be significant and
these exports to the Union would likely be made at dumped prices.

5.           Future developments

(119)   The complainants mentioned
in the request for an expiry review that if demand for electric cars increases
in the EU in the future, there will be an upstream increase in demand for EMD
which is said to be the raw material most frequently used in the production of
lithium manganese oxide (LMO) which in turns serves as cathode material for
rechargeable lithium ion batteries (LIB) used in many models of electric vehicles.
They claim that if injury from dumped South African imports re-occurs, the
Union EMD industry may not be around to service this potential future demand in
new technologies.

(120)   The investigation did not
find conclusive evidence in support or against the claim that any future
development in the electric car sector would significantly impact the EMD
industry and the demand for EMD. However, it is a fact that the Union industry is
testing the feasibility of manufacturing LMO using EMD, is able to obtain the
know-how and the equipment to do so in the future and is participating in a
number of EU funded projects related to the research and development of
lithium-ion batteries.

(121)   Following disclosure, this
issue was briefly mentioned by some interested parties, but again no conclusive
evidence was provided on the possible impact of any future development in the electric
car sector in the Union and/or in other markets on the product concerned.

6.           Conclusion on Union
interest

(122)   Given the evidence above, there
are no compelling reasons against the maintenance of the current anti-dumping
measures.

(123)   Therefore under Article
11(2) of the basic Regulation, the anti-dumping measures applicable to imports
of certain electrolytic manganese dioxides originating in South Africa should
be maintained for an additional period of five years,

HAS ADOPTED THIS REGULATION:

Article 1

1.           A
definitive anti-dumping duty is imposed on imports of electrolytic
manganese dioxides (i.e. manganese dioxides produced through an electrolytic
process) not heat-treated after the electrolytic process, currently falling
within CN code ex 2820 10 00 (TARIC code 2820 10 00 10) and originating in the
Republic of South Africa.

2.           The
rate of the definitive anti-dumping duty applicable to the net,
free-at-Union-frontier price, before duty, for the products manufactured by the
companies listed below shall be as follows:

Company || Anti-Dumping Duty || TARIC Additional Code

Delta E.M.D. (Pty) Ltd. || 17,1% || A828

All other companies || 17,1% || A999

3.           Unless
otherwise specified, the provisions in force concerning customs duties shall
apply.

Article 2

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

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

Done at Brussels,

For
the Council

The
President

[1]               OJ L 343, 22.12.2009, p. 51.

[2]               OJ L 69, 13.3.2008, p. 1.

[3]               OJ C 180, 21.6.2012, p. 15.

[4]               OJ C 72, 12.3.2013, p. 8.