The EU investigation into Chinese solar imports took a new turn on 5 March, with the Union requiring Chinese photovoltaic module and related component imports to be registered with customs authorities with immediate effect. The move underscores a possibility that tariffs, if implemented later this year, could also be collected retroactively. We think that this brings about a lot of near term uncertainty for customers and installers in Europe, potentially impacting the sales of Chinese solar products in the region.
Background To The Case
Following complaints from European panel manufacturers of unfair trade practices by Chinese firms, the European Commission began two separate inquiries last year into whether Chinese manufacturers had been dumping their panels into the European markets at prices that were below their manufacturing costs and also on whether Chinese firms received subsidies from their government. The commission is expected to decide on whether to apply provisional anti-dumping duties on these manufacturers by early-June while the decision on provisional countervailing tariffs (which are levied against the subsides) is expected by August. ((Bloomberg))
China is the world’s largest manufacturer of solar panels accounting for nearly two thirds of overall global shipments. Europe on the other hand has been the primary demand driver in the solar industry. In 2011, Europe imported about $26.5 billion worth of Chinese solar products or 80% of China’s solar exports.  However, imports to Europe have been impacted over the past year by the weak economy and subsidy cutbacks in countries like Germany and Spain.
How It Impacts Firms That We Cover
The requirement to register solar imports is likely to bring about a lot of apprehension among importers like systems installers and distributors as it opens up the possibility that tariffs could be collected retroactively. This could impact shipments in the near term and also removes the possibility of the firms witnessing a spike in shipments in the months prior to the decision on the tariffs since if tariffs were imposed retroactively, those sales would be subject to tariffs as well.
Trina Solar (NYSE:TSL) and Yingli Green Energy (NYSE:YGE), two large solar firms that we cover, derived around half their revenues from the European market and could be impacted significantly. For instance, we estimate that if Trina’s Solar’s sales to Europe were to decline by around 20% going forward, it could reduce the firm’s Trefis price estimate by around 10%.Notes: