Global Solar Panel War
Are China Solar Companies Getting Desperate?
The biggest Chinese solar panel producers like Sunech, Trina ,Yingli and Canadian Solar have come out strongly against the recent filing of a complaint of dumping of Chinese solar panels in Europe. Solarworld which is the biggest German solar panel company has led a group of 25 European solar companies in filing a complaint against the dumping of solar modules made in China. Note Solarworld had earlier successfully managed to champion an anti dumping duty on China made solar panels, in the USA. In recent days, the Chinese Government has initiated the process of paying back the USA in the same coin by starting an investigation of US polysilicon imports. While that had led to feeble protests from the Chinese biggies, they had already prepared workarounds for the anti dumping duty.
The Global Solar World War is truly on now, with the Chinese Government starting investigation on the imports of solar polysilicon from Korean and US solar companies. Note, we had already predicted this some time back and listed the solar winners and losers in case the Chinese imposed duties.
The US imposition of duties on Solar panel imports from China has raised the hackles of the Chinese Government which considers the solar industry to be strategic to its future growth. While it will not affect the Chinese exports in a big way considering the easy workarounds, it has the potential of making the Chinese Government react negatively. The biggest losers could be the Polysilicon companies and Solar equipment suppliers based in the USA. Note China imports huge volumes of the polysilicon raw material used in solar panels from USA and South Korea. The reason being the the quality made in these countries is better and the costs are lower. With the polysilicon spot prices crashing to below cost, around as low as $20/kg levels, US and Korean companies are being forced to change their LT contracts which were stuck at higher levels.
The US Government imposed Anti-dumping duties against the Chinese solar panel companies with the total quantum of duties to reach around 35-36% for most of the Tier 1 Chinese solar panel players. This is more than what was expected by the solar industry and has led to a vociferous protest from sections of the Chinese Government. Not surprisingly, a large chunk of the USA Solar Industry too has protested against these duties. Many of the solar companies are in the installation segment where cheaper solar panels from China means more profits and more sales. What is not very well known outside the solar industry is that a major percentage of sales of US polysilicon companies and solar equipment firms go to China.
US Polysilicon Companies like Hemlock as well as factories of European companies like Wacker, REC fear the worst. Chinese polysilicon companies have closed down because of their higher costs due to stiff competition from non-Chinese players. The Chinese Government has a big reason to retaliate against the US solar poly companies now that its solar panel organizations have been hit. The overall effect of the duties on Chinese solar panel companies will not be that big as they already have plans to circumvent the US duties which have been prepared long time ago. All it would do is raise the prices of the solar panels slightly. It would not make the surviving US solar panel companies competitive as the Chinese solar panel prices are far below that of US made solar panels. US Solar equipment companies like Applied Materials and GT Advanced Technologies too might face the ire of the Chinese government and companies who could look at alternatives in Europe.
Chinese Solar Companies like Trina,Yingli and Suntech will use 2 strategies:
1) Set up solar module plants in the US and use cells made in China by their factories. Building a 50 MW solar module plants hardly costs much money. They can also outsource it to plants in Malaysia and Canada.
2) Buy Solar Cells from Taiwanese Solar cell makers which have huge capacities without the competitiveness of the Chinese solar panel makers. Note Taiwan does not have strong low cost integrated solar players like China. They also lack the heft of the South Korean chaebols like Samsung and LG. So they can be easily exploited by the Big Chinese Solar Companies.
Europe to decide in 45 days the fate of the Chinese Solar Panel Industry
However if Europe finds the Chinese solar module manufacturers guilty and imposes special duties to protect the European solar industry, then the struggling Chinese solar panel makers like Suntech, LDK which have huge debt burdens and losses might shut down completely. Already there are rumors that LDK has been taken over unofficially by 3 state owned corporations as it continues to bleed money with no hope for revival anytime soon.
Europe accounts for almost 75% of the world’s demand of solar panels and has been instrumental in the growth of the Chinese solar industry. Note China accounts for less than 10% of the demand, while it supplies almost 60-70% of the global supply of solar panels. While the US was a small market comparatively, Europe is a huge market and the loss of this market will sound the death knell of the biggest Chinese companies.
Already most of the Tier 2 Chinese solar panel makers have shut down along-with the biggest European/US companies like Q-Cells, Solyndra etc. Like the USA, solar installers, developers, financiers and equipment suppliers have opposed this anti-dumping measure. These supply chain players have benefited hugely from cheap Chinese module imports raking in billions of Euros in profits. In fact the massive boom seen in recent years in solar panel installations has been driven mainly by the crash in solar panel prices as Chinese competition decimated pricing power throughout the industry supply chain.
China’s solar firms warned of a trade war on Thursday, calling on the Chinese government to strike back against an anti-dumping complaint filed by rivals in Europe, but the Europeans said they would not be put off by retaliation threats.
Companies led by Germany’s SolarWorld have asked the European Union to investigate claims that Chinese rivals had been selling their products below market value in Europe.
The European Commission, which has declined to comment on the issue, has 45 days to decide if it will start an investigation.
SolarWorld confirmed on Thursday the submission by the so-called EU ProSun group, which comprises 25 members in Germany, Spain, Italy and other EU countries. German solar module maker Sovello is also part of the initiative. Close to 60 percent of China’s solar exports, worth $35.8 billion, were shipped to the EU in 2011, the four Chinese companies said. Europe accounted for 74 percent of global solar installations in 2011, according to industry association EPIA.