Aug 1, 2012 - China's wind and solar equipment industry is facing tough times as the trade war, which started in the US, is now moving its front line to the European Union.
by Tsvetomira Tsanova
The trade war between China and the US, which burst out on the solar power market a couple of months ago, is now expanding to entangle other participants such as Europe, South Korea and even Vietnam.
The events are rolling out quite fast but the logic is simple - companies are looking for ways to survive and protect their businesses amid policy uncertainty in many major markets and severe competition that has been denting the bottom lines of almost all solar and many wind power equipment makers for the past year.
China is also not standing quiet. It has already initiated anti-dumping probes into US solar-grade polysilicon and solar product raw materials from South Korea and more than doubled its solar installation targets to provide additional market opportunities for domestic manufacturers.
US manufacturers raise up in arms, trade war begins
IN MAY 2012 the US Department of Commerce proposed retroactive anti-dumping duties of between 31% and 249.96% on Chinese imports of solar cells and panels. These preliminary duties are seen to further rise by October 2012, when the final tariffs will be issued. The organisation that started it all is the Coalition for American Solar Manufacturing (CASM), which in October 2011 accused China of illegally subsidising solar cell production.
According to recent data from the US Department of Energy, China's government has poured over EUR 25 billion (USD 30.8bn) in subsidising the solar manufacturing sector via low-interest loans, subsidised energy and free land.
IN JUNE, CASM said that imports of China-made solar cells and panels to the US fell by 45% on the year in May 2012, reflecting certain anti-subsidy duties. According to the organisation, the decline in May did not fully reflect the preliminary duties, with further drops yet to come.
China strikes back
ON JULY 20, as many sector firms and analysts projected, China's Ministry of Commerce unveiled anti-dumping and anti-subsidy investigations into US-produced solar-grade polysilicon as well as into solar product raw material imports from South Korea. According to the ministry, unfair US and Korean import prices are seriously affecting the business of Chinese polysilicon makers.
As early as this January, The Brattle Group released a market report that warned that imposing duties on Chinese solar imports would threaten thousands of US jobs. The market research firm then said that if China were to respond with the introduction of tariffs on US polysilicon, as many as 11,000 American jobs would be affected in the first year after the tariff goes into effect.
CASM's contra organisation -- the Coalition for Affordable Solar Energy (CASE) -- commissioned The Brattle Group's study. It showed that a 50% tariff on Chinese imports was to trigger consumer losses of USD 621 million to USD 2.29 billion, which meant that 14,877 to 43,178 jobs might be lost. In the case of a 100% tariff, consumer losses can reach USD 698 million-2.62 billion, with job losses seen at 16,917-49,589. These projections were published in January, long before the 31% to 249.96% preliminary duties were announced.
EU opposition rises, wind equipment makers join the party
ON JULY 27 a group of more than 20 solar equipment manufacturers from Europe formed the EU ProSun group which filed an official trade complaint and urged the European Commission to investigate "unfair trade practices" by Chinese solar manufacturers.
EU ProSun's president Milan Nitzschke warned that Europe would see all solar power manufacturing and research and development jobs disappear if the EU did not take measures. He added that Chinese firms currently hold more than 80% of the solar product market in the European Union (EU), while just a few years ago they got a zero market share.
AT THE END OF JULY, to top it all, the US Department of Commerce also unveiled preliminary anti-dumping duties on utility-scale wind tower imports from China and Vietnam of up to 73% and 60%, respectively. The department said its anti-dumping duty preliminary investigation found that Chinese manufacturers sold towers in the US at dumping margins of between 20.85% and 72.69%, while Vietnamese sector players -- at margins of 52.67% to 59.91%.
The investigation was triggered by a complaint by the Wind Tower Trade Coalition, which groups Broadwind Towers Inc, DMI Industries, Katana Summit LLC and Trinity Structural Towers Inc. The Department of Commerce is set to make a final decision in December 2012. Whether it will issue anti-dumping duty orders will also depend on the final decision of the US International Trade Commission, due in February next year.
The planned wind tower duties are nothing compared to the scope of businesses that will be affected by the solar product tariffs. Yet, the move shows that the companies and organisations dissatisfied with China's practices are not at all limited to the solar power industry.
Domestic market to relieve pressure
Despite all attacks from abroad, Chinese solar equipment makers can at least be sure in the support of their local government, which recently boosted to 21 GW the national solar capacity target by 2015. The initial goal for the 12th five-year plan between 2011 and 2015 was 5 GW, which was later raised to 10 GW and then to 15 GW, before reaching the 21-GW figure.
Furthermore, the Chinese government took another major step for the sector and lifted to 50 GW from 20 GW the solar capacity goal to 2020. "This highly aggressive target could be achieved given the rate of deployment that China has already managed to achieve in the relatively short amount of time since its national [feed-in tariff] was launched," said Frank Xie, senior market analyst at IMS Research. He pointed out that bolstering the target was a clear message that the Asian country would strongly back its solar power industry.
(EUR 1 = USD 1.231)
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