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MEMC Electronic Materials Inc
LDK Solar Co Ltd
Daqo New Energy Corp
China is investigating whether exporters from the U.S. and South Korea sold solar-grade polysilicon below cost, a practice known as dumping, as part of a probe following complaints from four domestic companies.
The world’s biggest supplier of solar panels also started a countervailing duty investigation into the commodity from the U.S., China’s Ministry of Commerce said in two separate statements. The investigation, scheduled to last a year from today with the possibility of an extension to Jan. 20, 2014, will cover the 12 months from July 1, 2011.
The actions escalate a trade dispute between the world’s biggest economies after the U.S. said in May it will impose duties on Chinese solar cells, which are devices made from polysilicon and assembled into panels that convert sunlight into electricity.
“It’s negative” for foreign suppliers such as MEMC Electronic Materials Inc. (WFR) and Hemlock Semiconductor Corp., which sell products to China, Keith Li, an analyst at CIMB Securities HK Ltd., said by phone. “The investigation may have little impact on prices of polysilicon, which has suffered from a supply glut and weak demand.”
The average spot price of polysilicon tumbled to a decade low of $21.92 a kilogram as of July 9, a 56 percent decline from a year ago, according to Bloomberg New Energy Finance.
“This review is part of a broader trade conflict extending far beyond polysilicon,” said Robert D. Hansen, president and chief executive officer of Dow Corning Corp., the majority shareholder of Hemlock. “The issue is serious and could impact Hemlock Semiconductor’s ability to sell material to China, its largest market.”
China will examine a tax-exemption program for the “advanced-energy manufacturing industry” promoted by the U.S. federal government and 15 state-government sponsored programs in Michigan, Tennessee, Washington and Idaho, the ministry’s statement on the countervailing duty investigation said.
Companies that filed the complaint include GCL-Poly Energy Holdings Ltd. (3800), LDK Solar Co. (LDK), Daqo New Energy Corp. (DQ) and China Silicon Corp. They account for more than 50 percent of the raw material for solar cells in China during the past four years.
“We believe the industry is harmed” by dumping and subsidies and “hope to return to a fair market competition environment,” Kevin He, Daqo’s investor relation’s manager, said by phone.
Two calls to Li Longji, LDK Solar’s spokesman, were unanswered during regular business hours. A call to China Silicon’s media relations department wasn’t answered.
Solar manufactures globally are under pressure from an oversupply in all parts of the supply chain. At least 14 U.S. and European solar companies have filed for bankruptcy, including Solyndra LLC, which was backed by a $535 million U.S. government loan guarantee.
“The products are unfairly subsidized by the U.S. and South Korean governments, which allow them to dump into the Chinese market,” Jessy Fang, a spokeswoman at GCL-Poly said by e-mail. “There’s enough evidence showing that the dumping action has already harmed the Chinese solar industry. Even though any anti-subsidy tariff is imposed by the Chinese government, it will not have much effect on polysilicon prices and we see this complaint as a correction for the polysilicon industry.
The U.S. Commerce Department on May 17 set preliminary tariffs of as much as 250 percent on imports of Chinese solar cells, which companies including the U.S. unit of Germany’s SolarWorld AG (SWV) said were being sold at a loss in the U.S. In March, President Barack Obama’s administration imposed preliminary duties of as much as 4.73 percent on the imports to make up for subsidies they received from China’s government.
The Washington-based Coalition for Affordable Solar Energy, which opposes the U.S. tariffs, called for talks between China and the U.S. ‘‘to prevent this destructive trade war,” according to an e-mailed statement. “We urge all countries to avoid unilateral actions that impede trade and resolve conflicts in a bilateral or multilateral context.”
China in November began a probe into U.S. state support for renewable power.
The South Korean government is aware its Chinese counterpart is conducting a preliminary probe into the sale of Korean products, an official at the South Korean Ministry of Foreign Affairs and Trade said on July 17.
The shares of OCI Co. (010060), South Korea’s biggest maker of polysilicon, fell 1 percent to close at 199,000 won in Seoul. OCI’s shares, which fell 3.5 percent on July 17 after media reports said China’s Ministry of Commerce had notified the South Korean Embassy that it had begun investigations, are trading at their lowest since early June.
China and Chinese module makers “have more to lose than domestic polysilicon producers have to gain” from this action, Charles Yonts, an analyst at CLSA Ltd. in Hong Kong, said by e- mail. Given the quality gap between Western polysilicon makers, including OCI, and most Chinese producers, customers from China will still have to procure some products from abroad, CLSA’s Yonts said.
China this year quadrupled a domestic installation goal for sun-derived energy projects to 21 gigawatts by 2015 to support prices and help absorb excess supply of panels.
Hong Kong-based GCL-Poly, the biggest maker of polysilicon, was down 0.7 percent at HK$1.37 as of 2:39 p.m. in Hong Kong trading.
To contact Bloomberg News staff for this story: Feifei Shen in Beijing at firstname.lastname@example.org
To contact the editor responsible for this story: Reed Landberg at email@example.com