No more a "Kodak Moment" for Kodak
March 5, 2013Need of Financial Education and Investor Protection
March 6, 2013China has been bristling against the hostility in solar trade from major partners such as US and Europe. The dominance of the Chinese solar panel industry with almost 60% of the global demand has made other countries see red. Thousands of Western solar companies have closed, even as China keeps on adding solar capacity. The Chinese over-investment model means that companies keep on running despite being bankrupt (LDK and Suntech). The reason is the quasi capitalism in China, where the major banks are owned by the government. The local governments also have a huge interest in the industry either through direct equity stakes or due to employments of thousands of citizens in these factories. This has made it impossible for the solar supply demand to come into balance. This has resulted in all companies selling solar panels at a loss (even the lowest cost solar panel maker).
Read on GWI China Solar Booming – Chinese Solar Panels Prices, Cost, Review, Types, Best Manufacturers.
USA has imposed a ~30% duty on Chinese solar cell imports and Europe is seriously examining whether to follow the US example. Chinese solar panel exports to Europe are not a trivial issue with more than 20 billion dollars of panels shipped in 2011 alone (I think it would be the same level in 2012 as well). This forms one of the biggest exports by China accounting for 7% of the total EU imports by China. If Europe imposes a 60% duty, then thousands of Chinese will be without a job as the already loss making factories shut down. China recognizes this issue, but the country has failed to give carrots to its trading partners. Instead China is thinking of imposing duties on imports of polysilicon from big European makers such as Wacker and Hemlock. Note the whole poly industry is worth only $5 billion. China is not in a strong position and has thankfully refrained from a trade war in which it will be a big loser. It will be interesting to see how things work out as European solar installers want cheap below cost solar panels from Europe. A compromise between these two blocs will benefit everyone, while duties will lead to massive losses.
Anti-dumping duties
The US Government recently 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.
According to Digitimes, the way it is being done is by these polysilicon companies selling additional quantities at $10/kg which is less than 50% of the cost. This gives the Chinese trade authorities concrete evidence if they decide to impose anti dumping duties on polysilicon imports. Not only 5-6 polysilicon companies in China continue to operate due to the price crash. These companies like Renesola, LDK , GCL, Daqo New Energy will benefit massively if the government imposes duties. These companies will see their selling prices go up by 30-50% and also their volumes go up by a large amount, which will allow them to utilize their full capacity.
According to international material providers, some firms received investigation-related documents in February with the deadline for the documents set for the end of February. Therefore, it is unlikely the government will announce its preliminary results on schedule. International material providers believe the announcement will likely be made in April or May.
China-based solar firms noted that the assessment process has begun.
Meanwhile, China’s Ministry of Commerce spokesperson Danyang Shen noted on February 20 that the anti-dumping and anti-subsidy investigations on polysilicon imports are still ongoing and the preliminary and final verdicts will be announced at the right time, according to China-based media.
The Ministry of Commerce began the investigations in November 2012 and according to Shen, the government has one year to complete the investigations.
China’s polysilicon probe has caused the domestic spot price of polysilicon to increase to US$16-17/kg from US$15/kg. China-based tier-one players hope to increase the price to US$20/kg after the Lunar New Year holidays.
Due to careful inventory controls by international polysilicon firms, the international price of polysilicon returned to US$20/kg in January 2013.