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US imposes 31% anti-dumping tariff on Chinese PV imports

The US Department of Commerce (DOC) would impose anti-dumping tariffs of just over 31% on crystalline silicon PV cells and modules from major Chinese producers, after determining that exporters sold product in the US at "less than fair value".

If the preliminary determination stands, major players Suntech and Trina Solar would receive dumping rates of 31.22% and 31.14%, respectively, with 59 other exporters getting a similar rate of 31.18%, according to the DOC.

All other Chinese producers will face a dumping margin of 249.96%, the DOC says, effectively pricing them out of the US market.

Combined with countervailing duties of 2.9-4.73% announced in March, the tariffs would add an estimated $0.27-0.28 per watt to the delivered cost of Chinese PV equipment, pushing it up to or above that of panels from some US makers, says Shyam Mehta, analyst at GTM Research.

China's PV sector immediately hit back at the tariff levels as "unfair" and based on a "distorted" assessment of its market.

Already operating at thin or negative margins, Chinese producers cannot afford to absorb the full impact of the tariffs themselves and will have to pass on some of the increases to customers.

Anti-dumping tariffs would be collected retroactively to mid-February, 90 days prior to the official publication of the preliminary determination, because the DOC found a flood of imports ahead of the possible imposition of tariffs.

With Chinese manufacturers holding a US market share of roughly 50%, this will likely increase the price of solar in the US for the short-term, potentially slowing market growth, though Mehta notes that the relationship between solar end-market demand and pricing does not follow the Economics 101 formula because so many overlapping government incentives influence markets.

Downstream reaction

Still, the prospect of price increases to benefit a handful of US manufacturers has downstream market participants, represented by the Coalition for Affordable Solar Energy (CASE), howling.

"This decision will increase solar electricity prices in the US precisely at the moment solar power is becoming competitive with fossil fuel generated electricity," CASE president Jigar Shah says. “At the same time, CASE recognizes that today’s decision is ‘preliminary.’ Between now and a final decision before the end of the year, there are many issues that will be addressed and whose resolution would lead to a significantly lower tariff."

Suntech chief commercial officer Andrew Beebe says the duties "do not reflect the reality of a highly-competitive global solar industry", and "are not justified by fact".

Even as they seek relief from the DOC, Chinese manufacturers are likely putting in motion plans to get around the tariffs. Mehta says they have a couple of options: Since the tariffs don't apply to PV cells made elsewhere but assembled into modules in China, manufacturers could source their cells from Taiwan, at an added cost of 6-12%, an increase he calls "meaningful, but manageable".

They could also set up manufacturing outside of China, in the US, Canada or Mexico. That's an approach some are already pursuing, Mehta says.

Indeed, Beebe notes Suntech's "global supply chains and manufacturing facilities in three countries, including the United States... providing our US customers with hundreds of megawatts of quality solar products that are not subject to these tariffs".

Today's closely-watched announcement [ PDF] comes seven months after the US unit of SolarWorld and six other US c-Si PV manufacturers petitioned the government for action to stem the flood of Chinese-made solar equipment that has causing dramatic price declines -- up to 75% in the last three years according to new Bloomberg New Energy Finance research. US companies have struggled to keep pace, contributing to bankruptcies and layoffs at a dozen companies over the last two years.

As Chinese companies have come to dominate the global PV manufacturing industry, their imports to the US have increased 387% from $639.5m in 2009 to more than $3.1bn last year, although that total includes PV products beyond the scope of this case.

"Commerce today put importers and purchasers on notice about the consequences of importing illegally subsidized and dumped products from China," says Gordon Brinser, president of SolarWorld Industries America, a unit of the German PV maker.

Stocks move

Public markets reacted to the news Thursday pushing shares of US-based manufacturers up, and Chinese producers down. First Solar shares gained 6.7% to close at $14.92. SunPower was up 10% to $5.59 a share. Suntech took 5.75% hit, finishing at $2.13. Trina closed down 7.9% to finish at $6.08.

International, industry tensions

The solar battle unfolds against a backdrop of tense relations between the global economic superpowers over trade and human rights, and as the US prepares for national elections in the autumn and China undertakes a fraught leadership transition.

It has also caused an increasingly nasty schism in the US solar industry, with module manufacturers and their allies siding with SolarWorld under the CASM, and downstream players such as project developers and system installers – as well as major Chinese module manufacturers – represented by the CASE arguing against tariffs. US polysilicon manufacturers, who sell to Chinese producers, have also generally opposed the trade action, fearing retaliatory tariffs from China.

Solar Energy Industries Association chief executive Rhone Resch, seeking a middle ground, calls for immediate negotiation between the US and China "towards a mutually-satisfactory resolution of the growing trade conflict within the solar industry".

"The US solar manufacturing base goes well beyond solar cell and module production and includes billions of dollars of recent investments into the production of polysilicon, polymers, and solar manufacturing equipment, products which are largely destined for export," Resch adds. "If the US-China solar trade disputes continue to escalate, it will jeopardize these US investments."

The DOC intends to make a final determination in early October. A final determination from the US International Trade Commission, which found in its parallel investigation that government-subsidized and dumped Chinese PV equipment has harmed the US industry, is due by 19 November.

Photo via Flickr.