China to launch dumping probe into US, Korean polysilicon

China will launch anti-dumping and anti-subsidy investigations into US-produced polysilicon, it says today, in a move set to inflame growing tensions between global solar companies.

China’s Ministry of Commerce (Mofcom) says in a statement on its website that it will also begin anti-dumping investigations into polysilicon made in South Korea.

The move had been widely expected after South Korea’s ambassador to China revealed earlier this week he had received notification from Mofcom that it was starting preliminary research on Korea’s polysilicon exports to China.

Mofcom says it received an application on 2 July from four companies – Jiangsu Zhongneng Polysilicon, LDK Solar, Luoyang-based Sino-Silicon and Daqo New Energy – requesting an anti-dumping investigation into US and South Korean polysilicon imports, and a countervailing duty investigation on imports from the United States.

Jiangsu Zhongneng was acquired in 2009 by GCL, China's largest player.

Mofcom says it issued a consultation request to the US on 17 July and has formally decided to proceed with the investigation today.

Beijing will investigate alleged dumping and unfair subsidies from 1 July 2011 to 30 June 2012 and will investigate damage to its industry during the period of 1 January 2008 to 30 June 2012.

Among the subsidies to be investigated are a federal manufacturing tax credit and a number of state incentives, including several offered by Michigan, Tennessee, Idaho and Washington state.

Chinese anti-dumping tariffs on polysilicon imports would have a major impact on most of the world’s leading polysilicon producers as well as the largest users, China’s top solar panel manufacturers.

Korea’s OCI made 47.8% of its total 2011 revenues from China last year, or 957bn won ($839m), and this figure is likely to have increased, say analysts, given how other buyers such as Taiwanese or Korean wafer makers have struggled this year.

US companies Hemlock, the world’s biggest maker of polysilicon, and MEMC also supply Chinese solar panel makers. Norway’s REC and Germany’s Wacker produce polysilicon at US facilities.

Several of China’s panel makers could not be immediately reached.

Trina chief financial officer Terry Wang declined to comment, saying the issue is highly sensitive.

Trina buys polysilicon from OCI, Hemlock and GCL.

Chinese solar panel makers have already been hit this year by import duties on their US exports although most say that they can work around the tariffs by producing cells in other countries.

Tariffs on imports of polysilicon, the key raw material in the bulk of solar panels made in China, would raise costs at a time when solar companies are struggling with rock-bottom prices owing to global overcapacity.

Charles Yonts, analyst at CLSA, says a move by China to investigate alleged dumping by US polysilicon makers had been expected and “pretty well telegraphed” in Beijing’s response to the US decision to impose anti-dumping tariffs on Chinese solar cells.

However the investigation into Korean polysilicon came as a surprise.

“I would be willing to bet it’s going to be a net negative for China,” he says, pointing to the large amounts of imported polysilicon used by the country’s top panel makers.

“I’m surprised they didn’t have more political clout,” he adds.

The price of polysilicon has crashed this year after demand for solar panels slowed at the same time as several tonnes of new supply of polysilicon came online.

IHS iSuppli has predicted global polysilicon capacity will grow 15% this year to 328,000 tonnes while demand will be only 196,000 tonnes.

It is currently selling on the spot market for as low as $19 per kg, down from around $60 per kg at the start of the year.

Few manufacturers in China are able to produce polysilicon at less than $30 per kg, forcing the majority of producers to shutter their plants, with only a handful thought to be still in operation.

GCL reported production costs of around $18.5-19 per kg in its latest results, suggesting it is making very slim margins on its sales.

Industry watchers say even if the company gained more market share from imposition of tariffs on overseas competitors, larger sales volumes would not necessarily boost profits.

Meanwhile imports of polysilicon are growing. In May, imports rose by 50% on the previous year’s same month to 7,896 tons, and increased by 28% compared with April. About 3,269 tons came from the US and 1,753 tons were from South Korea.

Chinese anti-dumping and anti-subsidy investigations can take a year before a final determination is made and they can be extended a further six months in special circumstances.

Mofcom says its anti-dumping and anti-subsidy investigations will be concluded by 20 July 2013 but can be extended a further six months in special circumstances.

Note: Update adds additional detail