Trade ruling hits Chinese solar stocks

Shares of Chinese solar companies suffered a poor if not devastating week, after learning of the US Commerce Department’s preliminary ruling that they should face countervailing duties even if their cells come from Taiwan.

Share price declines among Chinese solar companies this week ranged from nearly 20% to less than 4%, suggesting that at least in some cases investors may have already baked their negative assumptions about the duties into the shares.

Most US-listed Chinese companies had already seen their share prices pull back significantly in 2014, after a spectacularly good 2013.

Underscoring the complexity of the global PV supply-chain and the rapidly shifting market dynamics, the worst-hit major stock for the week was Trina Solar – ironically, the one Chinese company singled out for a milder tariff in the US.

Shares of Trina were down 18.8% for the week, exactly mirroring the 18.8% they have fallen since the beginning of the year.

Shares of Yingli, China’s largest module supplier, took a 15.1% hit – not even the company’s worst five-day performance in 2014.

Among US-listed Chinese solar companies, Yingli shares have fared the worst since the beginning of the year, plunging 43% so far in 2014. Unlike many of its closest rivals, and in spite of its size, Yingli has not yet returned to profitability.

Trina and Yingli, with their globally respected brands, took in a relatively high percentage of their revenues from the US market last year – with the US accounting for 17% and 22% of their turnovers, respectively.

The shares of most other big Chinese module suppliers had a relatively easier week, with JinkoSolar down 12.7%, Canadian Solar down 6.6%, and JA Solar down just 3.4%.

Many of China's largest module suppliers intend to derive a much larger percentage of their revenues from project development and EPC work in the future.

On Thursday, SolarCity, the largest installer of rooftop PV systems in the US, which has in the past bought modules from the likes of Yingli, Trina and Canadian Solar, announced a new supply deal with Singapore-based REC Solar, which it noted is “US-trade compliant”.

While clearly weighing on some Chinese companies, the ruling did not have the opposite effect of lighting a fire under the shares of non-Chinese module suppliers.

Shares of SunPower and First Solar, both based in the US, were up a mild 1.3% and 1.8%, respectively. Both companies do a significant amount of their manufacturing abroad, though not in China.

If investors in SolarWorld, the German company which spearheaded the solar trade cases in both the EU and the US, expected to see an immediate gain from the news, they would have been disappointed.

Shares in SolarWorld, which claims to operate the largest module factory in North America, fell 15% in the past week.