How The EU’s Move To Extend Trade Protections Could Impact Chinese Solar Companies

The European Commission recently announced that it will extend trade protections, including anti subsidy and anti-dumping measures, on Chinese solar panels. The protections were originally set to expire on Monday, December 7, but the Commission ruled that it would launch a review into the existing measures, implying that they could remain in place for up to another 15 months. Additionally, the minimum import price (MIP) regulation – which allows companies that export solar panels above a certain price level to be exempted from the tariffs – is also expected to remain in place. In this note, we take a look at how the move is likely to impact tier-1 Chinese solar companies such as Trina Solar (NYSE:TSL).

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Trefis has a $12 price estimate for Trina Solar, which is about 15% ahead of the current market price. We estimate that the European business accounts for just 8% of the firm’s value.

Chinese Solar Companies Have Reduced Exposure To Europe 

While Europe was the source of much of the global solar demand through 2012, the market has contracted considerably over the last few years amid incentive reductions in countries such as Germany. Data from SolarPower Europe indicates that installations fell 36% year-over-year to about 7 GW in 2014, accounting for just about 20% of global installations, compared to roughly 55% of global installations in 2012. ^[1] The exposure of tier-1 Chinese solar manufacturers to Europe has also diminished significantly.

China’s largest manufacturer, Trina Solar, expects just about 8% of its shipments for 2015 to be directed to the European market, while the United States and China account for over 60% of its targeted shipment mix. That said, Europe does offer a long-term upside. GTM Research expects the market to bottom out this year and begin to grow from next year onwards, accounting for over 30% of the global market by 2020, driven by the evolution of grid parity. ^[2]

Tariff Extension Could Increase Focus On High-End Panels

Most Chinese panel manufacturers have competed primarily based on price, with low-end polycrystalline panels accounting for a bulk of their shipment mix. However, average prices in the European market for mainstream and low-end panels stand at €0.51 and €0.38 per watt, respectively, according to the pvXchange module price index, which tracks monthly panel prices. This price is below the current minimum import price for Chinese panels, which stands and €0.56 per watt (or about $0.61), drastically limiting the sales of Chinese panels in Europe. With the extension of the trade protections, Chinese players are likely to increasingly focus on delivering high-end panels such as monocrystalline panels, which can still command a sale price above the MIP. ^[3]

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1. Europe’s solar market declined 36% in 2014, says EPIA, PV Magazine, March 2015 [↩]
2. 55GW of Solar PV Will Be Installed Globally in 2015, Up 36% Over 2014, GTM, June 2015 [↩]
3. pvXchange module price index, PV Magazine [↩]