Jefferies report: Solar dumping trends spell bad news for US manufacturers

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Higher module prices and lower demand will ensue for US-based cell and module manufacturers if countervailing duties are imposed in March 2012, according to a report by investment bank, Jefferies. US companies, already undergoing financial difficulties given the market slowdown, will be greatly affected by the action, which could spell good times ahead for Taiwanese cell suppliers as Chinese module manufacturers attempt to dodge the stipulations of the countervailing duties by making their modules in other countries.

Ed Lebow, head of the international trade practice at Haynes and Boone LLP and previously, principal author of the ITC’s regulations implementing the anti-dumping and countervailing duty laws, was quizzed on the possible repercussions of a conference call organised by Jefferies for investors in the sector. Mr. Lebow has had several years of experience serving as Assistant General Counsel of the US International Trade Commission, representing both foreign and domestic companies over the years.

According to Lebow, it looks likely that Taiwanese cell suppliers and companies such as First Solar – a major competitor of Chinese moduling companies – will benefit from the action. Although thin-film companies have been excluded from the “industry definition”, the Jeffries investor note from the call concluded that: “the ITC is more likely to include thin film in its analysis than any upstream or downstream businesses.”

The research note states, based on Lebow’s projections, that: “[a]ny non-Chinese OEMs like SunPower and Suniva would benefit, but to a lesser degree because FSLR remains the cost leader. SolarWorld may see backlash as US developers and installers are hurt by this scorched Earth approach.”

Chinese manufacturers will also feel the heat: although some companies will be given duty rates on a case-by-case basis, those smaller-scale manufacturers will be given a weighted average duty of those companies under investigation.

The Commerce Department will likely issue preliminary countervailing duty deposit rates to imports five months after the initial petition was filed – probably in March 2012. The ensuing timescale will see a preliminary dumping decision being made in May – at this juncture, those most culpable for the importing actions will be required to post cash deposits based on estimated duty. Final rulings on the issue will be made around November/December 2012.

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