Sino-EU solar panel deal to remake industry in China

Mainland solar panel makers, whose total output capacity last year exceeded global demand, are facing a shake-out after last month's Sino-European deal to restrict mainland exports to the euro zone.

Analysts say producers with the strongest brand recognition and financial muscle will survive, sharing much-reduced tariff-free access to the European Union - the world's largest market for solar panels until last year.

The sale of Chinese solar panels in Europe will be subject to a minimum price, which will effectively rule out price competition. Weaker producers will be forced to find other markets, including the domestic market, which is growing rapidly on the back of state subsidies.

Beijing and Brussels struck an agreement on July 27 to avert a trade war, after Brussels threatened to slap an average tariff of 47 per cent on mainland-made solar panels and components known as wafers and cells.

The European Commission has yet to make public the minimum price, but wire service Bloomberg quoted an unnamed EU trade official as saying that some seven gigawatts (GW) of panels would be allowed to be sold to the EU at not less than 70 US cents per watt, similar to current prices. Further exports will be subject to an import tariff averaging 47 per cent. EU Trade Commissioner Karel De Gucht said on July 30 the deal would expire at the end of 2015.

Branding, quality, and reliability would be the main factors determining market share in the shrunken EU market, as price competition was eliminated, said analysts.

"Why buy a no-name brand or the product of a company in bankruptcy when you can buy from a tier-one manufacturer at the same price?" wrote Michael Parker, senior analyst at American brokerage Sanford C Bernstein.