For the global solar industry, 2012 has been about trade wars. The US and Europe both started anti-dumping and anti-subsidy investigations against the world's largest solar supply chain, China. In addition, oversupply continues to plague the global industry causing severe damage to solar firms. Nevertheless, trends in China's supply chain will continue to affect the global solar market.
US, EU vs. China
In 2011, the US began an anti-dumping and anti-subsidy investigation against China-base firms and at the end of November 2012, a final verdict was announced. The US will impose anti-dumping punitive tariff rates between 18.32-249.96% and anti-subsidy tariff rates around 14.78-15.97% for five years.
China-based Suntech has been levied an anti-dumping tax rate of 31.73% and anti-subsidy tax rate of 14.78%, a total of 46.51% in customs duty. Trina Solar's total punitive tax rate is 34.29%. In addition, 59 China-based solar firms are to pay 25.96% in anti-dumping punitive tariffs.
The US market imported about US$3.1 billion worth of solar cells and panels from China in 2011.
In 2012, the EU also began conducting an anti-dumping and anti-subsidy investigation against China-based solar firms and this investigation is likely to hurt China's solar supply chain even more. According to Dinghuan Shi, Counselor of China's State Council, the trade war with the EU will hurt China by causing unemployment and financial problems. A more peaceful way to handle this issue is preferred, said Shi.
If the EU levies punitive tariffs against China-based solar firms, it would hurt China's solar supply chain "to the bones". In fact, just the expectation of tariffs from the EU along with persistent oversupply have already been causing severe damage to China's solar supply chain.
No brakes
The aforementioned factors have been affecting China's solar supply chain. In 2011, many small-size solar cell and module firms in China halted production because integrated solar firms already had enough capacity to meet demand, causing order visibility to decline.
In addition, the trade war has been causing investors to hold off until conditions become clear. China-based solar firms now face net losses and lack funding for solar PV system projects.
The EU investigation has yet to announce a retroactive period or demand importers pay caution money, hence China-based solar firms have been dumping inventory on the market. The dumping has further pushed solar firms into larger net loss. Yingli Solar reported a net loss of CNY959 million (US$153 million) for the third quarter of 2012, a large sum compared to the net loss of CNY573 million in the second quarter of 2012 and the net loss of CNY181 million in third-quarter 2011.
Due to falling demand and pricing, more than 85% of polysilicon firms in China halted production from the end of 2011. By the end of 2012, the spot price of polysilicon had fallen to US$15/kg, meaning firms with production costs at US$30/kg are likely continue their production suspensions.
Innocent bystanders
Taiwan-based firms have not been benefiting much from the trade war. Taiwan-based firms have been affected by limited demand growth in the US and falling OEM orders from China. In addition, China-based firms have been dumping solar modules in Europe causing prices to fall further.
Taiwan-based solar firms have been facing continuous net losses and because of low quotes, many solar cell firms have been selective in choosing orders and lowering capacity utilization rates since the third quarter of 2012.