Solar Trade War Continues With China, India Gets Into the Act

Ever since the US imposed duties on solar panels from China, the industry has been waiting for retaliation, and now it’s here. India may also get into the act.

China announced it will impose tariffs on polysilicon imports from the US (up to 57%) and South Korea (up to 48.7%). 

Although Europe too has imposed duties, they are being negotiated with China, which may be why China has not also set tariffs for EU imports. Currently, solar panels made in China cost 45% less than those made in Europe.  

The move counters the 2012 US decision to impose duties of up to 250% on Chinese solar panels for "dumping solar panels below cost," making it impossible for US manufacturers to compete, including young startups like Solyndra.

The US division of Renewable Energy Corp., which recently decided to split its silicon and solar units, is among the companies that will pay the highest duties. "This is a further development and an unfortunate escalation of the solar trade war going on between the U.S., the EU and China," Francine Sullivan, vice president and general counsel for REC Silicon, told The Wall Street Journal.

It’s a "difficult blow" for solar manufacturers, Michael Parker, a Hong Kong-based analyst told Bloomberg. “There’s no way that module manufacturers can tolerate a 57% increase in polysilicon price.”

South Korea’s OCI Co. will be subjected to the lowest tariffs at 2.4%, according to the Chinese trade ministry.

China’s domestic polysilicon industry, including suppliers such as GCL-Poly Energy Holdings Ltd. and Daqo New Energy Corp. have been under tremendous pressure because of steep price cuts.

More than 43 companies have closed plants and manufacturers are operating at only about 30% of capacity, according to the China Nonferrous Metals Industry Association.

In the past year, the average price of polysilicon has fallen 40%, says Bloomberg, and solar modules fell 20%. The Chinese ministry estimates that dumped polysilicon accounted for 36% of its imports during the first half of 2012.

Chinese polysilicon manufacturers want the duties to cut supplies from outside the country, allowing their prices to rise.

China launched the polysilicon investigation in late 2011 in direct response to the US investigation of solar panel imports.

With the fate of EU imports up in the air – the biggest market for Chinese solar suppliers – China confirmed that it will focus on expanding its domestic market. It announced that it will stick with its target of expanding solar capacity fivefold to over 35 gigawatts (GW) by 2015, adding an eye-popping 10 GW a year.  It also clarified that current subsidies will be valid for 20 years and that solar companies that merge or re-organize will get tax breaks.

India Next?

India may also get into the act.  

Indian solar companies including Indosolar, Jupiter Solar and Websol Energy System have complained that US, Chinese, Malaysian and Taiwan manufacturers are dumping their products below cost there. And they are adding imports from the EU and Japan as also problematic. 

The companies want retroactive and new duties, including tariffs on thin-film solar modules.

The government is expected to decide on whether it will impose tariffs by the end of August.

Local solar developers oppose tariffs because the cost of their materials would increase, putting a damper on India’s fast-growing market. They argue that domestic solar makers produce the level of quality they need.

Meanwhile, the US also has issues with India’s law that requires solar plants to have domestic components. India’s Solar Mission has a target of 20 GW of solar by 2020 – 10% of its electricity. So far, it’s been missing milestones, but it’s ramping up again.

The world’s biggest economies are increasingly duking it out to protect their domestic solar companies in the face of a continuing global glut that has crashed prices, putting many leading manufacturers out of business.

Between 2009-2011, Chinese solar-makers quadrupled production, flooding the world market with way more panels than there was demand. They now supply 80% of EU’s market and over 50% of the US market, from practically nothing a few years earlier. Most Chinese manufacturers are suffering too now, such as Suntech, because of the oversupply they created.

Since import duties apply only to solar panels (not components), many Chinese suppliers are buying solar cells in Taiwan and moving production to places like Portugal and Africa.

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