Washington has once again punched new import duties on solar
panels and other related products from China. While the new duties
would further escalate tensions between the two countries, the U.S.
believes that the Chinese manufacturers have hitherto benefited
from unfair subsidies offered by their government.
The news of new import duties to be leveled on Chinese solar
products have pushed the stock price of U.S. solar companies
First Solar Inc.
) higher by 3.9%, 7.0% and 6.1%, respectively, yesterday.
As they say, one man's gain is another man's loss. Many Chinese
solar companies suffered in yesterday's trading session.
JinkoSolar Holding Co., Ltd.
Yingli Green Energy
Trina Solar Inc.
) were down by 7.5%, 4.1% and 4.5%, respectively.
The preliminary duties, as determined the U.S. Department of
Commerce, will range from 18.56% to 35.21% on Chinese solar panel
imports. The aim is to safeguard the U.S. solar market from the
dumping of cheap Chinese products.
The decision addresses one of the main charges in a petition
brought by SolarWorld Industries America, a German solar
manufacturer with major operations in the U.S. A complaint lodged
by SolarWorld brought to the fore a loophole that the Chinese solar
product makers were exploiting to evade duties imposed by the
Department of Justice in 2012.
In 2012, the commerce department implemented anti-dumping duties of
effectively 25.96% and countervailing duties of 15.24%. Tariffs
were only applied to the cells used to make the panels. Many
Chinese solar manufacturers were able to dodge the hefty levies by
assembling panels from cells produced elsewhere, especially in
Taiwan. Yet those cells were derived from components -- ingots and
wafers -- from China.
The latest move therefore marks an escalation of the U.S.-China
trade conflict that has been simmering since 2012. Extra duties
will now be imposed on both the cells and the final solar panel
products. On top of that, the preliminary decision on the
anti-dumping section of the complaint is due by July 25.
The department will initially impose duties of 35.21% on imports of
panels and other products made by Wuxi Suntech Power as well as
five other affiliated companies, 18.56% on imports of Trina Solar
and 26.89% on imports from other Chinese producers. This would be
applied to products that are not already affected by the first
round of duties. Hence, panels assembled from cells made in Taiwan
will also come under the gambit.
The Chinese Response
China, the world's prime manufacturer of solar panels, expressed
strong displeasure with the U.S. decision. Although anti-dumping
duties from the EU and the U.S. have dented the industry, it hasn't
changed the actuality that China still rules the solar roost.
China's Ministry of Commerce pointedly said that the U.S. had
"ignored the facts" and further added that such use of trade
measures "would not solve the development problems of the U.S.
China had earlier hit back by imposing anti-subsidy duties of 53.3%
to 57% on U.S. polysilicon and claimed that the imports were being
sold below market value.
In an ironic volte-face, solar trade relations have heated up
lately with every country in this arena trying their level best to
protect homegrown interests. The U.S. has been appealing to the
World Trade Organization to look over the local content
requirements for India's solar program.
The U.S. has argued that the Indian government has violated
global trade rules. In response, India on its part has decided to
impose anti-dumping duties on solar modules imported from the U.S.,
China, Malaysia and Taiwan.
Solar Companies to Look For
As the unseemly battle for solar dominance rages, which will not be
in the best interest of this emerging industry, it seems for now
some U.S. solar stocks are making the most of the conflict.
Below we have picked two stocks poised to benefit from this
impasse. Overall, the tariffs imposed on Chinese solar producers
will give the following U.S. companies a competitive edge.
Though First Solar is subject to intense competition, it is poised
to develop economically sustainable businesses as it has an
established expertise and meaningful PV generation solutions in
other areas of the solar value chain, such as, project development,
EPC or Engineering, Procurement, and Construction capabilities, and
Operations & Maintenance (O&M) services.
Recently, First Solar reached an agreement to buy
skytron-energy, a subsidiary of AEG Power Solutions. This
acquisition is a strategic step by the company to capitalize on the
growing opportunities in the European solar market and will expand
its global O&M portfolio by over two-fold.
First Solar has recently extended its technical collaboration with
General Electric Company
) to develop state-of-the-art utility-scale PV (photovoltaic) power
plant design. The recent collaboration is a logical extension of
the partnership forged in Aug 2013, when General Electric had
traded its thin-film solar panel technology to First Solar for a
minority stake in the latter. The technological collaboration was a
win-win deal for both the participating companies through cost
reduction from operational synergies.
This Zacks Rank #3 (Hold) company comfortably beat the Zacks
Consensus Estimate by 120.0% in the first quarter 2014. It has also
lifted its 2014 financial guidance on the back of strong earnings
delivered in the first quarter.
Founded in 1986, SunPower designs, manufactures, and installs solar
panels based on a silicone design invented at Stanford University.
U.S solar demand was up 32% in 2013 and the Energy Industries
Association estimates demand will grow by another 35% in 2014.
Backed by its strong quarterly earnings and recent partnership with
), the company is all set to scale new highs and poised to grab
most of the demand.
This Zacks Rank #3 (Hold) company has beat the Zacks Consensus
Estimate in each of the last four quarters, and saw a 68.33%
positive earnings surprise on an average.
Will the Haggle on Duties Hurt the Solar Industry?
As per the research firm GTM, U.S. solar installations were worth
$13.7 billion last year. Of these, about 50% of the solar equipment
installed in the U.S. was made in China while, in the rooftop solar
sector, another booming area, the Chinese share was 71%.
As per the solar Investment Tax Credit, the value of imports of
solar products from China dropped by almost a third from 2012 to
2013 and imports from Taiwan increased over 40%.
The ruling will unfortunately put a hold on the entire U.S. solar
industry as it will immediately boost the price of solar power.
Again, except major solar cell suppliers in Taiwan, U.S.-based
downstream PV companies such as
) and SunEdison are major importers of modules fabricated in China
but use non-Chinese solar cells for rooftop, commercial and
utility-scale PV projects in the US. These companies will be also
hit by this imposition.
So, if we are to expand renewable manufacturing infrastructure
worldwide to fight the climate crisis, SolarWorld and the Chinese
manufacturers should try to settle their dispute before the
industry is hurt at large.
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