China, US and EU all launch action over pricing of solar panel raw materials

China, the US and the EU have squared off over alleged anti-competitive practices in the pricing of raw materials for making solar panels

PUBLISHED : Saturday, 18 August, 2012, 12:00am
UPDATED : Saturday, 18 August, 2012, 4:40am

The Ministry of Commerce in Beijing has been asked to investigate European Union makers of solar panel raw materials for allegedly selling products at below-cost prices and benefiting from banned state subsidies.

The request came from four companies, Jiangsu Zhongneng Polysilicon Technology Development, LDK Silicon & Chemical Technology, China Silicon and Daqo New Energy, which account for 80 per cent of mainland polysilicon output. The development is seen as a "tit-for-tat" reaction to a call by European firms led by the German solar panel parts maker Solarworld for the EU to investigate their Chinese rivals over similar allegations.

Analysts said the issue was likely to be brought up by Chinese leaders when German Chancellor Dr Angela Merkel visited Beijing late this month or early next month.

The EU will decide by mid-September whether to launch an investigation.

The recent developments come after the United States' decision in May to slap preliminary anti-dumping duties of between 31 per cent and 250 per cent on China's export of a component called a solar cell, and Beijing's retaliatory decision last month to start an investigation into US polysilicon exports.

The solar panel industry is highly internationalised, with firms in developed nations focusing on the technology-intensive manufacturing of polysilicon and the machinery used to make downstream materials including ingots, wafers, modules and cells.

This means a full-blown trade war would hurt not only the manufacturers, but also consumers of solar power, through higher equipment and product prices.

However, analysts said a trade war would speed up industry consolidation and the rationalisation of excess production capacity.

Mainland firms are more competitive on the processing of the downstream materials to make solar panels, as the final product is more labour-intensive.

But after a capacity expansion binge in the solar power equipment industry in recent years, particularly in China, and weakened demand growth because of cutbacks in subsidies for solar panel installation in the EU, the world's largest market, the global solar industry sank into massive losses caused by excess supply and falling product prices.

Many manufacturers in the US and EU have filed for bankruptcy, and a turnaround in fortunes is not in sight. Sam Wilkinson, a senior analyst at the London-based IMS Research, said: "Although the industry has seen a number of significant exits from the market in recent months, supply of [solar] modules still far exceeds demand, and suppliers are continuing to engage in fierce price competition."

Ray Lian Rui, a Shanghai-based analyst at the industry consultancy Solarbuzz, said the EU was likely to agree to Solarworld's request to start an investigation against Chinese firms, because of increasing political pressure from job losses in the industry and the fact that the US had already imposed duties on Chinese firms. The EU has 45 days to decide on whether to open an investigation, which typically lasts a year.

He estimated duties imposed by the US would result in US$300 million of annual revenue loss for Chinese producers. However, Lian said, duties from the EU would have a much greater impact since the EU, which buys 60 per cent of total Chinese solar panel parts exports, worth US$35.8 billion a year, is a much bigger market than the US.