Solar stocks in Chinese companies have been under increased pressure following reports that SolarWorld’s anti-dumping case against Chinese OEMs is progressing to the European Union. Jefferies has predicted that if the anti-dumping verdict is passed, it will be negative towards Chinese cell/module suppliers, positive to Taiwanese cell suppliers, SunPower and First Solar and neutral to poly and wafer suppliers (assuming the scope is largely limited to cells as in the US).
Jefferies is of the opinion that the European Union is likely to find reasons to hear the AD case, although warns that EU penalties will be at least a third lower than the US imposed. It is also likely the US AD case will have a certain level of influence during the complaint phase. Once the EU Commission initiates the investigation, 45 days after filing, there will be an independent assessment of dumping and the US case will not have any direct influence. If there is sufficient evidence and at least 25% of the total production capacity to support the complaint a preliminary determination would be reached between 60 days to 9 months. EU law currently requires that an anti-dumping investigation be completed within 15 months of initiation.
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The report also states that the size of the European PV market would make it hard for Chinese cell suppliers to circumvent any duties using cells made outside China given capacity constraints in Taiwan. The issue of community interest will likely prove the key point.
The Jefferies report highlighted the key differences between the EU and US AD cases:
- Injury margin: Instead of just looking at dumping margin like the US, the EU also calculates an injury margin and any final duty imposed is the lower of dumping margin and injury margin. The US used a supply chain build up to determine the cost of a cell in Thailand which in the EU they look at pricing of competing products outside of China. In the EU, non-market economy prices are generally based on a constructed price in a third country. Of note First Solar may not be part of the discussion if the scope is defined only to cells.
- Community interest: Instead of just looking at the injury to a defined industry like in the US, EU looks beyond the defined industry to see if the decision would be contrary to the community interest as a whole. This allows upstream/downstream companies and consumers to have greater influence in EU than in the US. Of the recent cases that have been dismissed largely the industries were not present in the EU or the EU would not otherwise be able to serve the market.
- Market economy treatment: While the US will treat China as a non-market economy, the EU allows Chinese companies to request market economy treatment (MET) based on five criteria. Between 2005-2010, roughly 20% of the requests successfully received the market economy status. However, in recent years, there has been a tendency to grant MET less frequently.
- Single authority: The US has a bifurcated system with both Department of Commerce (DoC) and International Trade Commission (ITC) in charge. EU has one investigating authority: EU Commission.
- Transparency: Unlike the US, lawyers for participants do not have access to the non-confidential data of the industry and other respondents.
Earlier this week, German environment minister Peter Altmaier offered the government’s support to German solar companies’ efforts to launch AD proceedings in the EU against Chinese PV manufacturers. Jefferies claims that many EU cell producers will join this action and using EU made modules still allows positive return for project owners or home owners.
Suntech offered the following statement to PV-Tech: “Suntech rejects SolarWorld´s allegations that it has received illegal subsidies and is dumping solar products in Europe and will cooperate fully with any investigation. As the market leader with a global presence and customers in 80 countries, Suntech will continue to demonstrate its adherence to fair international trade practices. As a NYSE-listed company, we are transparent with regards to our cost of production and cost of capital. Suntech’s growth is due to its efficient manufacturing operations and long term investments in R&D to create high performance solar products. We hope that the European Commission will recognize that any protectionist measures would harm the entire European solar industry and that a misguided trade war would undermine years of progress,” said Jerry Stokes, president of Suntech Europe.
“Protectionist measures would increase the cost of solar energy in Europe and delay the transition from fossil fuels to renewable energy. Tariffs would also destroy thousands of jobs in the European solar industry,” added Stokes. “The EU solar industry provides employment for around 300,000 people and more than 80% are employed in upstream and downstream industries such as raw material suppliers, equipment manufacturing, system design, installation and project financing, and not in cell production.
“In addition, the global supply chain for solar panels is complex and interconnected. Most solar systems installed in Europe are made up of components and services from manufacturers around the world. Suntech, for instance, sources a significant portion of its manufacturing equipment and raw materials from Europe. In 2010 and 2011 we procured a total of approximately €600 million of equipment and materials from European suppliers. We are concerned that any tariff to support European cell and module manufacturers would damage all other parts of the value chain. Suntech, along with the vast majority of European and global companies in the solar industry stand together in our support for free trade and our determination to see a trade war averted,” concluded Stokes.
Update:
Reuters has reported that Germany's SolarWorld has filed an anti-dumping complaint against Chinese rivals with the European Commission, although the company declined to comment.
