The measures currently in force take form of a fixed duty per tonne and are based on the injury margin, except for EuroChem. The level was set for EuroChem in the 2008 review based on the dumping margin.

The Commission received a request for a partial interim review (‘review request’) pursuant to Article 11(3) of the basic Regulation from the following eight European farmers associations (the ‘Applicant’): Association Générale des Producteurs de Blé et autres céréales (‘AGPB’, France), Confederazione Italiana Agricoltori (‘CIA’, Italy), Confagricoltura (Italy), Coop de France (France), Irish Farmers' Association (‘IFA’, Ireland), Office of Finnish Agriculture (‘MTK’, Finland), National Farmers' Union (‘NFU’, UK), and Unión de Pequeños Agricultores y Ganaderos (‘UPA’, Spain). The request was limited in scope to the examination of injury. The Applicant argued that Union farmers, as users of ammonium nitrate, are suffering from the anti-dumping measures that have been in place for more than 20 years, and that the injury situation of the Union industry should be reviewed due to lasting changes.

Separately, the Applicant also called on the Commission to immediately suspend the measures pursuant to Article 14(4) of the basic Regulation.

The product concerned is solid fertilizers with an ammonium nitrate content exceeding 80 % by weight, currently falling within CN codes 3102 30 90, 3102 40 90, ex 3102 29 00, ex 3102 60 00, ex 3102 90 00, ex 3105 10 00, ex 3105 20 10, ex 3105 51 00, ex 3105 59 00 and ex 3105 90 20 and originating in Russia (‘the product concerned’). However, with regard to ammonium nitrate produced by the Kirovo branch of the Uralchem group, only ammonium nitrate currently falling within CN codes 3102 30 90 and 3102 40 90 is the product concerned pursuant to Regulation (EC) No 989/2009.

As set out in section 1.1, for the company Kirovo the anti-dumping duty (EUR 47,07 per tonne) applies only to imports of AN currently falling within CN codes 3102 30 90 and 3102 40 90.

AN is a solid nitrogen fertiliser commonly used in agriculture, but is also used for industrial purposes such as the production of explosives (for instance used in mining). AN used both for agricultural and for explosive purposes is covered by the anti-dumping measures in force. Both types of AN have the same technical and chemical characteristics, are easily interchangeable and are considered as the product concerned.

In farming, AN is used, among others, for cereal crops, such as wheat. The use of AN is restricted in several Member States due to its explosive properties. For instance, in Ireland, farmers use calcium ammonium nitrate (‘CAN’).

The main raw material used in the production of AN is natural gas, which accounts for a large majority of the total costs of production.

As in the previous investigations described in section 1.1, the Commission found that the following products have the same basic physical and chemical characteristics: (a) the product concerned; (b) the AN produced and sold on the domestic Russian market and other export markets; and (c) the AN produced and sold in the Union by the Union industry.

The Commission therefore concluded that those products are like products for the purposes of this investigation within the meaning of Article 1(4) of the basic Regulation.

Based on data received from cooperating Union producers, four large groups (Yara, CF, Borealis and EuroChem) account for nearly 6 out of 8 million metric tonnes of Union production of AN. Accordingly, the Union production of AN is now dominated by a few large corporate groups of significant scale.

In order to assess the impact of a consolidation process involving so many companies over more than 15 years, the Commission analysed the evolution of the Community industry as defined in the 2002 review.

In the 2002 review, four companies had been visited: Grande Paroisse (France), Kemira Ince (UK), Terra Nitrogen (UK), and Hydro Agri France. As the Grand Paroisse ammonium nitrate plant exploded in 2001, causing several deaths in France, the Commission eliminated this company from the analysis.

As for the other five companies that were not visited in the 2002 review but were part of the Community industry, two were also part of Hydro Agri and one part of Kemira (Belgium) which eventually is now part of the Yara group.

It follows from the above public statements that the mergers lead, among others, to the lowering of costs (UK), economies of scale (Yara), operational synergies (EuroChem) and logistical efficacy (Fertiberia). Therefore, efficiency gains were observed in all AN producers of the then-Community industry. These included an increase in purchasing power and the possibility to optimise production and sales process. At the same time, the Union industry enlarged through the 2004, 2007 and 2013 accessions, making an overall cost comparison for each company impossible. However, as mentioned in recital (47), also several companies from the accession countries took part in the restructuring process.

The Commission concluded that the Union industry is more concentrated than in the 2002 review, that this consolidation is of a lasting nature, and that it had a beneficial impact on the overall cost structure.

Following the disclosure, two Union producers submitted that EuroChem should not be analysed due to links to a Russian entity, and the inclusion of the UK producer was questionable as the UK would soon leave the Union. The Commission rejected these claims. EuroChem was analysed as part of the then-Community industry and the UK producer was a proper part of the Union industry as the UK is a Member State of the Union at the time of the investigation.

In addition, these producers submitted that the Commission had not established how the changed circumstance of the restructuring of the Union industry directly impacted the injury calculation. The Commission recalled that it first established the existence of lasting changes affecting the Union industry since the 2002 review, when the level of the measures was last set. Subsequently it assessed the present situation of the Union industry, leading to new injury margin calculations. Those two analyses are carried out distinctively and independent from each other.

Furthermore, Fertilizers Europe submitted that the changes linked to the restructuring of the Union industry were not significant compared to the Russian gas advantage. The Commission noted that the lasting change found is not about the Russian gas situation, but about the Union industry that consolidated since the 2002 review.

The Commission noted that gas is indeed the most important raw material for ammonium nitrate representing over 60 % of the total cost of production. It established that domestic gas prices in Russia are regulated by the State via federal laws and do not reflect normal market conditions, where prices are principally set by production costs and profit expectations.

The situation concerning domestic gas prices in Russia is only relevant for the establishment of dumping as it only concerns the determination of the normal value. The Commission recalled that this review relates to the injury situation only.

Following the disclosure, Fertilizers Europe and one Union producer noted that the gas price levels had already increased faster than expected in the World Bank forecast from April 2018 (Table 1 above). The World Bank also changed its forecast in the September 2018 edition.

The Commission observed that there has been a lot of fluctuation since the 2002 review when the level of measures was fixed. There was a notable decrease between 2014 and 2016, but since then prices are steadily increasing again. This change has been partly reflected in Union producers' cost of production. Since 2014, the cost of production for sampled companies has gone down by over 20 % for the sampled companies. The recent developments in 2018 confirm the significant fluctuation in the gas price level in Europe.

In principle, changes in domestic raw material prices do not qualify as a change of lasting nature because they are normally the result of volatile market forces. In the Union gas prices are established in an open market. Moreover, there has been no stable trend since 2002. Therefore, the Commission concluded that the changes in the gas prices in the Union cannot be considered as of lasting nature.

The Commission also considered that global changes in AN market observed since 2002 are an element relevant to the assessment.

• 2,2 million metric tonnes in the investigation period of the 2002 review46;
• 5,5 million metric tonnes in 201447;

• 7 million metric tonnes in 201647.

In this context, the Union market is in terms of volume less attractive than in 2002 as well as than in 2014.52

In addition, the situation in the United States (‘US’) has evolved since the 2002 review. The US stopped in August 2016 its anti-dumping measures on AN from Russia. This was in the context of the shale gas boom leading to cheaper gas prices for US producers. US shale gas production has increased steeply since 2000, and this production is expected to increase even further in the future. The shale gas boom has led and still leads to the development of capacities of US producers' nitrogen fertilizers.

These global changes in AN market are of a lasting nature and can impact the injury situation, including on likelihood of recurrence of injury.

The Commission concluded that two circumstances, the restructuring of the Union industry and the global market for AN, have changed since the 2002 review, and that these changes are of a lasting nature.

In the RIP, Russian imports of AN continued to enter the Union and account in the RIP for 0,1 million metric tonnes (around 35 % of all imports, after Georgia).

Imports from Russia were at a very low level in the RIP and have been sharply decreasing during the period considered. It is noted that the sales of dirty AN by Kirovo, not subject to an anti-dumping duty, constitute the overwhelming majority of Russian exports to the Union in the RIP. Excluding sales by Kirovo of dirty AN, imports from Russia in the RIP amounted to [0 – 50 000] metric tonnes, that is to say a market share of less than 0,5 % of the Union market.

The average import prices of AN imported from Russia decreased during the period considered, during which gas prices also decreased, with gas as the main cost item in the production of AN.

In accordance with Article 3(5) of the basic Regulation, the Commission examined all economic factors and indices having a bearing on the state of the Union industry during the period considered.

For the purpose of the injury analysis, the economic situation of the Union industry is assessed on the basis of macroeconomic indicators (production, production capacity, capacity utilisation, sales volume, market share, growth, employment and productivity) and microeconomic indicators (average unit prices, unit cost, labour costs, inventories, profitability, cash flow, investments, return on investments, and ability to raise capital). The former are based on data provided in submissions from interested parties and on statistics; they relate with a few exceptions to all known Union producers. The latter are based on data contained in the questionnaire replies from the sampled Union producers and verified during the investigation.

In the last expiry review, as well as in the 2008 review, the injury indicators were overall positive and the Union industry was not injured. As this investigation is based on a different sample, no trend can be inferred directly from comparing the data in this RIP and this period considered with the last expiry review on some elements.

In the last expiry review, a spare capacity of around 1 million tonnes was found (for a total production capacity of 9,6 million tonnes).

Based on Fertecon data, production of AN in Russia has increased by 7 % since 2013 and is set to increase further by 2030. Russian domestic consumption has increased significantly as indicated in section 2.4. Capacity utilisation exceeds 95 % and is expected to stay at this level in the next years.

As the Commission found in the last expiry review, Russian exporting producers tend to report installed capacity based on the nameplate theoretical capacity. In this investigation as well, the Commission disregarded the nameplate capacity quoted by Russian cooperating companies as they in fact produced more than their theoretical capacity. The estimated capacity utilization for the two cooperating exporting producers was above 94 %.

Following the disclosure, the Russian association RFPA claimed that this spare capacity would not be directed to the Union in view of the future development of Russian domestic consumption (see section 3.3). The Commission rejected this claim. While Russian consumption is expected to slightly increase it cannot be concluded that the existing spare capacity would be fully used to satisfy the domestic demand. In any event, RFPA's claim does not take into consideration any future additional Russian AN capacity.

Furthermore, the Applicant submitted that, even if the industry lost 7,7 % of the market, the Union industry market share would remain higher than in the 2002 review. The Commission noted that comparing the market shares of the Union industry in 1999-2000 and 2016-2017 must take into account the broader context. In 2002, the Union industry consisted mainly of Western European companies which faced imports not only from Russia, but also from Eastern European States which have since then become members of the Union. Accordingly, the enlargement of the Union increased the market share of the Union industry significantly. Therefore, the situation in 2002 is not directly comparable with the situation in this review.

Sales prices from the cooperating companies show a mixed picture: prices in some third countries are less attractive than Union prices, although for some countries the opposite is true. The Commission therefore concluded that some Russian volumes may be redirected from less attractive third markets to the Union market if measures lapse.

The risk of redirection is also reinforced by the expected future development of nitrogen fertilizers capacities in the US, as set out in section 3.3.

Following the disclosure, the Applicant and the Russian association RFPA claimed that redirection was unlikely as in particular one Union producer purchased considerable volumes of AN from Russia for sales globally, and would be unlikely to shift sales to the Union. The Commission noted that this phenomenon concerns some producers only, and that if the measures were terminated the behaviour of Russian exporting producers selling AN would likely change.

Moreover, the Russian association RFPA claimed that the investments in Brazil by various Russian exporting producers showed the attractiveness of Brazil by contrast to the Union. The Commission noted that these investments confirm the willingness of Russian producers to export to third countries. These investments were made while measures have been in place in the Union. They do not give an indication as to whether the Union market would be attractive or not should the measures be terminated (see section 6.4).

As set out in section 5.3.2, the Commission could not make a decisive finding on undercutting.

As set out in section 5.3.1, the sales of PJSC KuibyshevAzot were not representative due to the volume and specific customer relationship at stake.

For its prospective analysis on the likelihood of recurrence of injury, the Commission accordingly took into consideration the overall Union sales of Uralchem, including the sales of dirty AN by the Kirovo branch of Uralchem. It recalled that dirty AN is part of the product concerned in this investigation and constitutes the vast majority of the exports to the Union from Russia.

Following the disclosure, the Russian association RFPA argued on behalf of Uralchem that the Commission had incorrectly made adjustments related to transport and unloading costs. The Commission found this claim to be warranted in respect of some company specific delivery terms to a few Member States.

In addition, RFPA claimed that no Article 2(9) adjustment was warranted as the Uralchem Trading SIA in Latvia did not import AN in the Union. The Commission recalled that this company was related to one exporting producer. Therefore, it was entitled to construct the export price under Article 2(9) of the basic Regulation.

For the sales by the Kirovo branch of Uralchem of dirty AN, the Commission compared the price at which Uralchem sold the dirty and the normal AN in a large third country market where the Commission found that the volumes sold of both dirty and normal AN were representative. A conclusive trend could be found that Uralchem sold the dirty AN at a higher price than the normal AN. Therefore an adjustment downwards (in the range of [8 % to 10 %]) was made to establish a price at which normal AN would likely enter the Union market.

Following the disclosure, the Russian association RFPA claimed that the data used for the adjustment was incorrect. The Commission noted that using alternative data following RFPA's claim would be less relevant due to the lesser quantity for comparison purposes, but would in any event result in a similar adjustment, with a difference of less than one percentage point, thereby confirming the relevance of the trend found as a reasonable basis for the adjustment.

Moreover, the Commission considered it appropriate to take account of the fact that a future export price would concern all potential Russian exports to the Union, catering for the variety of sales channels and delivery terms likely to be used by all Russian exporting producers. Therefore, the Commission took that element into account in the determination of the future export price.

On that basis the Commission established a prospective and likely price of AN from Russia to the first independent customer in the Union, established on a cost, insurance, freight (‘CIF’) basis, with appropriate adjustments upwards for conventional duty (6,5 %) and importation costs (in the range of [1 % to 3 %]). The Commission found that the product concerned would be likely be sold on the Union market at a price below the weighted average sales price of the Union producers charged to unrelated customers on the Union market.

By contrast, the Applicant and the Russian association RFPA argued that the Commission should use statistical data instead of actual verified sales of Uralchem, to establish the injury margin. RFPA argued that the Commission has used statistical data in various investigations on AN or other products.

The Commission rejected this claim as it considered that the verified data used was more reliable than unverified statistical data. In this respect the Commission recalled that the verified information accounted for significant volumes of Russian AN reaching the Union market taking into account also the dirty AN sold by the Kirovo branch of Uralchem. By contrast, in the 2002 review the sole cooperating exporting producer had no exports of the product concerned to the Community. Moreover, in the last expiry review price undertakings were in place.

In view of its size, geographic proximity and prices, the Union market is hence considered attractive for Russian producers.

The Commission conducted a simulation to consider what would happen to the Union industry's profitability in a scenario where the Union industry would have to match the Russian average price established in section 6.3 to maintain its volumes. Based on this simulation, the profitability of the Union industry would turn negative.

Following the disclosure, the UK farmers association submitted that due to the strong economic performance of the Union industry, the recurrence of injury was unlikely to recur. In view notably of the results of the simulation, the Commission dismissed this claim.

Moreover, the Applicant stressed the Russian association RFPA's claim that Russian volumes would not enter the Union market because of, among others, the lack of infrastructure from Russian companies in the Union. However, the same submission from the Applicant assumed that, if the measures were terminated, Russian companies would have an incentive to invest in facilities.

In addition, the Russian association RFPA and the Applicant stated that the decreasing volumes from dirty AN to the Union in the period concerned proved the lack of attractiveness of the Union market. RFPA also argued that the CAN imports from Russia to the Union had dropped. The Commission recalled that it did not investigate the CAN market. While decreasing volumes of dirty AN were observed recently, no long term trend has been observed that could demonstrate that the European market is no longer attractive to Russian producers of AN as a whole should the measures be terminated.

There is a likelihood that Russian producers could use their still available albeit limited spare capacity to export to the Union should the measures be terminated. It is also likely that some volumes that are currently exported to third countries would be re-directed given the relative attractiveness of the Union market and its proximity to Russia. As the Union industry is in a less prosperous state compared to the last expiry review (section 5), such increased volumes could likely cause injury to recur. The likely future evolution of Russian export prices is also a clear indication that injury could recur quickly.

On this basis, it is concluded there is a likelihood of recurrence of injury should the measures be removed.

In line with Article 11(9) of the basic Regulation, the Commission followed to the extent possible the methodology used when setting the measures. It established the amount of duty necessary to avoid recurrence of injury to the Union industry.

For the injury margin calculation, in the 2002 review, the non-injurious price has been obtained by adding to the full unit cost of production a profit margin that may reasonably be reached in the absence of injurious dumping. The profit margin used for this calculation was 8 %. The Commission followed the logic set out in section 6.3, and used the same profit margin in line with the previous investigations concerning AN.

Following the disclosure, two Union producers reiterated the same claim, requesting a target profit of 36 % ROS. In the alternative they submitted that the Union industry had in past years achieved two-digit profitability which would justify a higher target profit than 8 %. The Commission noted that the profitability of the Union industry has fluctuated during the period considered as well as in previous years when measures have been in place both above and below the target profit. The Commission therefore considered that the target profit of 8 % in the absence of dumping, as established in previous investigations was still valid.

Moreover, two Union producers claimed that the cost of production of Union producers should be changed to take into account developments following the RIP relating to gas price and CO₂ emissions. The Commission rejected this claim and recalled that under Article 6 of the basic Regulation, information relating to a period subsequent to the investigation should normally not be taken into consideration.

The level found is EUR 32,71 for normal AN. This is below the level of EUR 47,07 set in the 2002 review. The Commission then established the level of measures for various product types (see section 9) in line with the methodology used in previous investigations.