As Europe slaps duties on $15 billion of solar panels, their Chinese producers are preparing to counterattack with devices assembled from South Africa to Istanbul that will avoid the import taxes.
Trina Solar Ltd., JinkoSolar Holding Co. (JKS:US) and Canadian Solar Inc. (CSIQ:US) are among Chinese companies preparing to shift manufacturing abroad, dodging penalties imposed by the European Union in the bloc’s biggest ever anti-dumping action.
China is pivoting as the EU this month set provisional tariffs on solar goods of 11.8 percent, a rate set to quintuple in August. At stake are imports from Yingli Green Energy Holding (YGE:US), the world’s largest panel maker, and more than 100 other Chinese makers of silicon-based panels, cells and wafers.
Jinko’s yet-to-be-completed factories in South Africa and Europe could be used as “back-up solutions” depending on how high the EU raises its duties, Dany Qian, the company’s global branding director, said in an interview in Munich.
As Chinese and EU officials held talks in Beijing last week to head off the planned jump in duties, its companies are preparing for the worst -- a years’ long battle over whether Chinese suppliers unfairly benefit from state subsidies and by dumping, or selling below cost, in the biggest solar market.
Growing trade tensions between China, the largest solar products maker, and the EU undermine a relationship that generated 434 billion euros ($569 billion) of exports and imports last year, according to European Commission statistics.
Jinko is setting up plants in South Africa and Portugal that could export to Europe duty-free. Canadian Solar Inc., which has most of its operations in China, may open factories in Taiwan, Malaysia or Thailand, Chief Commercial Officer Yan Zhuang said.
China and the European Union share the will to solve the solar trade spat in talks, Chinese Commerce Minister Gao Hucheng said June 21 in Beijing at a joint press conference with EU Trade Commissioner Karel De Gucht.
“Technical-level discussions,” began in Brussels at the start of last week and are continuing in Beijing, De Gucht told reporters. “But it is early days in the negotiation process. This kind of thing is rarely solved overnight.”
The trade spat adds to China’s struggles to increase output. Manufacturing is shrinking at a faster pace this month, a trend that threatens to stem an economic recovery in the euro area from the currency bloc’s longest-ever recession.
Chinese solar manufacturers have begun setting up overseas to avoid duties in the EU and the U.S., as well as to satisfy rules in countries like India that demand local content in products, said Zhuang of Canadian Solar.
Saudi Arabia as Alternative
“Overseas manufacturing is a trend,” Zhuang said in an interview at a solar conference in Munich. The Canadian-based company that produces in China is also looking at manufacturing in South Africa, Saudi Arabia or Turkey, he said.
Suntech Power Holdings (STP:US) Co. Ltd., the Wuxi-based panel-maker that was once the world’s biggest and whose main unit now is in bankruptcy proceedings, said last week said it will provide “tariff-free” versions of all its standard modules for European customers. The panel components will be made “outside of mainland China,” to avoid the EU penalties, it said in a June 17 statement.
“As Suntech is a global company with global operations, we intend to make use of our global supply chain to provide modules for customers which will not be subject to the duties in Europe,” Ryan Ulrich, a spokesman for Suntech, said by email.
China Sunergy Co. this month said it started shipping modules from its plant in Istanbul and will deliver about 6.4 megawatts of product from mid-June to August 2013 to “a well-known” French customer.
Scaled Duty Increase
Levies will jump on Aug. 6 to a range of 37.2 percent to 67.9 percent unless an accord is reached. EU governments have until Dec. 6 to decide whether to turn the provisional duties into “definitive” five-year measures.
The levies will increase prices for European solar-plant builders and homeowners who install them on rooftops. They were expecting to benefit fully from solar-module prices that declined last year because of a supply glut and weaker demand.
Jinko’s factories, which haven’t started producing, have a capacity of 200 megawatts to 300 megawatts of annual product each, the company official said last week in Munich.
Trina Solar Ltd. (TSL:US), the world’s second-biggest module maker, based in Changzhou, also has the option to set up shop elsewhere, Benjamin Hill, the president of Trina Europe, said in a separate interview. About 48 percent of Trina’s shipments last year were to Europe, according to a Feb. 26 presentation posted on the company website. Trina said last week the EU tariffs may close access to some European markets.
When it comes to overseas production, maintaining quality levels is key, said Canadian Solar’s Zhuang said.
“The cost of labor is not everything that matters,” he said. “People are used to a certain quality for our panels that are made in China.”
Chinese panel-makers may benefit from surging demand at home, where Jinko sees installations reaching 8 gigawatts this year and 10 gigawatts in 2014, Qian said. Phono Solar Technology Co., a Chinese state-owned module maker and project developer, expects 10 gigawatts this year and 12 gigawatts next year, Vice President Rui Chunbao said last week in an interview in Munich.
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