Solar Duties and its effect on Solar Panel Manufacturing

The US recently imposed CVD and AD duties on imports of Chinese made solar cells on a complaint filed by a group of small US solar panel producers ironically led by a European solar panel company Solarworld. The duties on solar product imports was confirmed by ITC leading to an angry reaction by the Chinese who are threatening to retaliate by putting duties on imports for polysilicon from USA. This solar dispute had already led to bankruptcies of a large number of small solar businesses which were dependent on imports of cheap Chinese imports. A large number of companies were importing Chinese made solar cells and using them to sell custom solar products. These were hit by large penalties as the retroactive duties came into effect.

China-US Solar War

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.

Now even solar panel manufacturing in the US is getting hurt due to these duties. Suntech which is one of the top 3 solar panel manufacturers in the world has drastically slashed production at its Arizona plant which used to produce solar modules. Note Suntech had opened the plant in US to comply with made in USA rules. The plant used to import solar cells from Suntech factories in China to assemble solar panels in the USA. However with duties, the demand for these US made solar panels has fallen sharply. It is much cheaper to import solar panels made in Taiwan and Korea which don’t face these duties. This shows how solar trade wars is hurting the global solar industry with solar panel manufacturing in the US getting hit due to the duties which were meant for its benefit.

Suntech Fires 50 Solar Workers in Arizona

China-based solar panel-manufacturer Suntech Power Holdings Co. Ltd. announced late Thursday it would lay off 50 employees at its Goodyear plant, a move that will cut the firm’s workforce at the facility by half. The Goodyear plant is Suntech’s only U.S. factory. The job cuts were triggered by a slowdown in plant production. There is a global oversupply of solar panels, and recent tariffs on Chinese imports imposed by the U.S. government have led to higher production costs, the company said. Suntech will provide laid-off workers with severance benefits and job counseling. The news left local economic development officials and elected leaders fuming over the tariffs’ impact.“Unfortunately, the federal government appears to be hell-bent on taking a protectionist route when it comes to trade policy with China,” said arry Broome, Greater Phoenix Economic Council president and CEO, in a statement. There already are 116 tariffs on Chinese imports, not including the one that led Suntech to lay off its workers, Broome said. Suntech also has been struggling financially as prices for solar panels declined and subsidies have been cut overseas.

Suntech is bleeding badly and surviving due to Chinese govt/ bank support

The travails of China’s top solar panel manufacturer do not seem to stop with its credibility being hit by a new problem each day. Suntech has made massive management blunders in the past for which it is paying heavily today. The company which is reeling under billions of dollars of debt has restructured its management and reduced the size of its operations. However that does not seem to have helped as top managers continue to flee the sinking Suntech ship. The hiring of top investment bank UBS to restructure its debt has not helped the stock or the company’s operations. The problems at Suntech Solar Panels have become so massive that only an outright bankruptcy or sale can solve it. This conclusion seems to have been reached by the interim CFO Anlin Ting-Mason as well. Suntech received a delisting notice from NASDAQ after it became a penny solar stock . Note other Chinese solar companies like Hanwha, JA Solar and LDK have also joined that infamous club. China Sunenergy is set to join this club again despite a reverse spit done a few months ago.

Europe is a much bigger problem for China

The European Chinese solar trade war has also been heating up with China going to the WTO to complain about the domestic content rules of solar panel installation in Greece and Italy. Note almost 6% of China’s exports to the EU comprise of solar modules which were valued at more than $25 billion. This is almost 5x higher than the exports to US. If Europe imposes duties on imports of Chinese solar products, then hundreds of thousands of Chinese jobs would be in peril.

Europe’s biggest anti dumping case against China

The worst fears of the Chinese solar panel producers have come true with Europe starting the history’s biggest anti dumping case against their products. A trade group called ProSun led by German solar panel maker Solarworld, complained against super cheap imports of solar modules from China to the EU 45 days ago. The EU has found there is a case to be heard and has started the anti-dumping measures against 21 billion euros of Chinese solar panel imports and the case will be completed in 15 months time. If found to be true, Chinese solar panels could be levied with heavy duties for a period of 5 years. Unlike the US – China solar panel spat, EU is a much bigger fight as China imports most of its production to Europe particularly countries like Germany and Italy. In fact, the Chinese solar growth has been largely driven by the solar subsidy policies in the European countries. Until last year, almost 95% of the Chinese solar panel production was exported to Europe. 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.