President Barack Obama’s administration is expected to throw its weight behind US solar panel producers on Tuesday in their battle against lower-priced imports from China that they say threaten the future of the industry in the United States.
A coalition of seven US manufacturers has asked for duties topping 100 percent on Chinese-made solar cells and panels, which they say are subsidized by the Chinese government and “dumped” in the United States at unfairly low prices.
The case, which was filed last year, has created more friction in the US-China trade relationship, already strained by clashes over Beijing’s currency policies and US duties on a number of other Chinese goods.
China’s biggest solar manufacturers, which include Suntech Power Holdings Co, Trina Solar, and JA Solar Holdings, generate more than 20 percent of their annual sales in the United States, making it the second-largest market for them after Europe. They are already moving to shift some of their production out of China to dodge additional US tariffs.
“We’re already dependent on the Middle East for our oil. We cannot become dependent on the Far East for our renewable energy,” said Gordon Brinser, president of SolarWorld Industries America, which heads the coalition and the US arm of one of Germany’s largest solar manufacturers, SolarWorld AG.
The group appears to have found a sympathetic ear in Obama.
“I don’t want to see wind turbines and solar panels and high-tech batteries made in other countries by other workers. I want to make them here,” Obama said last week.
The US Commerce Department will announce preliminary countervailing or anti-subsidy duties on Tuesday and preliminary anti-dumping duties in mid-May. A final decision on both is expected in the third or fourth quarter of the year.
Analysts expect 20 to 30 percent anti-subsidy duties on the imports, which soared to an estimated $2.8 billion in 2011 from about $1.2 billion in 2010. The punitive tariff, if it comes, is expected to take effect immediately. Chinese companies will be reimbursed if the decision is reversed later this year.
Cell tolling US producers say the Chinese companies receive a long list of subsidies, including below-market loans from China’s state-owned banks and subsidized raw materials, such as polysilicon, that greatly reduce their operating costs and helped Chinese firms grow their share of the US market to nearly 40 percent from 11 percent in 2009.
But efforts to whittle down China’s presence in the US market could hurt the fast-growing American solar market, where the industry is racing to cut costs and reduce its dependence on government incentives for renewable energy.
“The resulting uptick in pricing might be temporary good news for module vendors who have struggled to compete with Chinese firms, but we think the most substantive result is more likely to be lower US demand,” Bank of America Merrill Lynch analyst Joe Osha said in recent note to investors.
And China’s solar makers appear to be already moving to shift their production outside the mainland, ordering key supplies from Taiwanese companies to avoid likely US tariffs. Suntech moved some of its operations to Arizona as early as 2010, and other Chinese companies are likely to follow.
“Chinese module makers will not give up the US market,” said chief financial officer Terry Wang at Trina Solar, which is also planning to add plants outside China.
Chinese solar companies may also be able to take advantage of spare production capacity in countries such as Taiwan. “The likely response would be doing ‘cell tolling’ in Taiwan in order to avoid the US import tariff,” said Xavier Chollet, co-manager of Pictet’s Clean Energy Fund.
Under such deals, Chinese companies provide products to Taiwan companies, which then process them to be packaged at solar panel plants elsewhere. That trend has not gone unnoticed by SolarWorld and its partners, who also are asking the Commerce Department to structure punitive tariffs in a way that will reduce the opportunity for Chinese companies to skirt the duties.
“The scope of the case that we’ve proposed would cover Chinese cells that are made into modules (panels) somewhere else, or Chinese modules that are made from cells, whether from China or somewhere else,” said Timothy Brightbill, an attorney with Wiley & Rein. “We will be quick to act if there are any signs of improper activity.”
