47% Duty to be imposed by EC

Europe and China are playing a high stake poker game with stake value of $27 billion as the European Commission is about to impose a 47% duty on imports of solar modules. The European market has been the biggest market for solar energy in the last few years as German and Italy have seen huge solar booms driven by government subsidies. The whole Chinese solar industry has developed by exporting billions of solar panels to these markets. In the process, the solar manufacturers in Europe have been decimated and even the last few remaining ones like Solarworld are surviving on life support. The massive investment in the solar panel industry has driven solar module prices to crazy lows. These prices are below the costs of even the lowest cost Chinese companies. Now even the big Chinese companies like Suntech and LDK are technically bankrupt, while others are struggling to pay their bills.

Chinese take action against the EU duties

The EU duties would be a death knell for the remaining solar players since they cannot afford to lose a $27 billion market. As it is the financial condition of these companies remain precarious due to 2 years of massive losses. The Chinese government has raised the issue at the highest level  (Merkel) but the problem festers. With the June deadline nearing, the countries are raising the stakes by accusing each other of intransigence in the media.

Recently China Daily accused Europe of not wanting to negotiate a solution in which Chinese companies would voluntarily raise the prices of their solar panel exports to Europe. This would save some of the European manufacturers who do not have a snowball’s chance in hell of surviving against the Chinese giants. However, the European Commission has denied this and said that negotiations can only begin if a case is found against solar panel dumping by China.

China cannot allow the duties as it would impair 7% of its total exports to Europe and could lead to retaliation in other industry segments. This could be the start of a major trade war as China is already suffering from a big industry slowdown with the recent HSBC PMI survey going below 50 this month. A reading below 50 indicates a decline which is a big problem for China which depends on industry for most of its growth and employment.

Read on GWI China Solar Booming – Chinese Solar Panels Prices, Cost, Review, Types, Best Manufacturers.

 Dispute between Europe and China

The European Commission denied Chinese trade association statements that talk about finding a solution over allegations of dumping of solar panels, while the Chinese comments indicate that risks of dispute could escalate. An offer during a visit to Brussels was rebuffed by the European Commission. The Chamber of Commerce for Import and Export of Machinery and Electronic Products (CCCME) reported that  “because the European side did not show sincerity to solve the problem through negotiations, this first round of negotiations ended in no result and broke down”. The EU has said that “These technical preparatory talks have nothing to do with a proper negotiation.”