IHS: Hiked module prices could result in more Chinese bankruptcies

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Preliminary antidumping duties could increase PV module prices by 45% in June further dampening an already demoralised European solar industry says a new report from market analysts at IHS.

Chinese modules carried an average price of US$0.66 per watt in March, and were expected to increase to US$0.67/W in June, based on previous predictions from IHS’ Solar Module Price Index. However, with EU commissioners planning to impose import duties on solar modules from China, average pricing could surge to US$0.97 per watt in June.

PV-Tech reported last week that the European Commission intends to levy import duties on solar modules from China ranging from 37.2% to 67.9%, with a meeting expected to take place today that would see EU member states vote on the proposals to come into force on 6 June.

“In recent months, prices of Chinese modules have crept upwards in key European markets as a result of the additional overhead incurred from the mandatory registration of imported modules from China,” said Ash Sharma, senior director of solar research for IHS.

“However, when the duties go into effect, prices for Chinese modules will rise dramatically as they cannot absorb these additional costs due to the poor state of their balance sheets. This likely will force many Chinese PV module suppliers out of the European market and could spur rising costs for installations.”

IHS expects EPCs to absorb some of the additional costs and sacrifice their margins to limit the price increases they pass on to customers, while looking to reduce costs elsewhere. This will place additional pressure on inverter and balance-of-system component suppliers to reduce their prices more aggressively, IHS said.

A spokeswoman for Trina Solar told PV-Tech: “The negative effect of duties would exceed by far their small positive impact on European manufacturers. The reason being that the majority of the jobs in the European solar industry are situated before or after the manufacturing of solar wafers, cells or modules.

“What is more, their production capacity is very small and far from being capable of meeting demand as currently forecast, with or without the imposition of duties.”

The spokeswoman cited the Working Group for Photovoltaic Equipment of the German Engineering Federation’s assessment of anti-dumping and anti-subsidy duties, which maintains that their imposition would “increase PV cost in general and could thus hurt the entire industry, i.e., all players along the value chain, worldwide”.

IHS said tariffs would also impact on the wider PV supplier base, which has already suffered substantial price declines in the past two years. An unintended consequence of the EU’s decision may be that in an attempt to protect European solar module producers, they harm European inverter suppliers, predicts IHS.

Large installations that tend to favour low-priced modules will be most impacted, while smaller rooftop installations that gravitate to German, Korean and Japanese modules will be less affected.

However Milan Nitzsche, president of EU ProSun, which has been arguing for tariffs on Chinese solar products, told PV-Tech that imports of Malaysian, Taiwanese, South Korean and Indian origin for installations will help to prop up the European solar industry.

Their products would offer a “competitive market” said Nitzsche. Chinese state funding allows domestic module manufacturers to undercut Europeans because they can offer their products “far below product cost”, whereas imports from countries such as South Korea would help rejuvenate the industry and create a level playing field, said Nitzsche.

However the Trina spokeswoman said: “The scenario that Chinese PV modules are displaced by modules from other producing countries such as Korea, Japan, Taiwan or the USA at prices that continue to maintain sufficient demand is not likely – the reason being that these producers do not offer the same benefit of cost rationalisations and economies of scale compared to Chinese producers. Also, these producers are increasingly attracted by growing demand in their neighbouring markets that is significantly stronger than in the EU.”

IHS said that duties would force Chinese suppliers to move to other regions such as Japan or contribute to the Chinese market. However, given the low prices and the long delays in receiving payments for installation projects in China, this may prove to be challenging, said IHS.

In order to circumvent duties, IHS suggested module production could be outsourced to original equipment manufacturers outside of China. One possible winner may be module producers located in other low-cost regions outside of China, including Taiwan. However, total module production capacity in these regions was just 3.4GW at the end of the first quarter of 2013, less than one-tenth of China’s 35GW. Because of that, the short-term upside is limited for these regions.

On an optimistic note, Stefan de Haan, principal analyst at IHS told PV-Tech that he did not expect duties to be imposed once the final decision is announced in December.

“I think there is a lot of room for negotiation, so there’s a really good chance that a much softer decision will be made this year,” he said.

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