Chinese Solar Firms Consider Moving Capacity Overseas As Higher E.U. Tariffs Loom

by Trefis Team
Trina Solar
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Chinese solar manufacturers such as Trina Solar (NYSE:TSL) and Suntech Power (NYSE:STP) are considering outsourcing their components from abroad or even moving manufacturing capacity overseas in order to avoid the potentially hefty anti-dumping duties that they face in the European market. [1] Earlier this month, the E.U. began imposing an initial tariff of 11.8% on all Chinese panels and the rate is set to increase further (to 51.5% for Trina and 48.6% for Suntech) beginning August if the officials from the E.U. and China are unable to negotiate and come to a solution. Since China is one of the E.U.’s largest trading partners (trade touched around $569 billion last year), there is a possibility that the dispute could be resolved. However, Chinese manufacturers seem to be taking no chances and are charting out alternatives.

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Europe accounted for around 48% of Trina Solar’s shipments last year. The firm said that even at the current level of tariffs (around 11.8%), its products remain uncompetitive in some European markets. If the higher tariffs were to come into effect, it could have a significant impact on the company’s sales in Europe. The president of the company’s European operations mentioned that the it had the option to set up manufacturing operations elsewhere. [1] While the firm didn’t mention where the manufacturing operations could be moved, other Chinese manufacturers have been considering countries such as Taiwan, Malaysia and Thailand.  Although the shifting of capacity abroad could drive up costs since labor and logistics costs are likely to rise, this would still be favorable compared to paying higher E.U. tariffs.

Suntech Power mentioned that it has been able to outsource module components from outside China to avoid the duties. Although the company didn’t provide additional details, it said that tariff-free versions of all its standard modules including Wd mono, Wd poly and Ve poly will be available in the European markets. Europe was the company’s single largest market in 2011, accounting for around 45% of revenues. The move to outsource components could hit Suntech’s already weak manufacturing capacity utilization and potentially drive up costs.

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  1. Bloomberg [] []
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