Chinese solar companies may take a big hit in the coming year if the U.S. International Trade Commission decides to place import tariffs on their panels. The ITC voted unanimously on a petition from German player SolarWorld that calls for tariffs to be placed on Chinese solar imports because the companies benefited from unfair government subsidies.  The growing U.S. solar sector is an extremely important market for PV manufacturers such as Trina Solar (NYSE:TSL) and Suntech Power (NYSE:STP) with demand from Europe slowing down. Additional tariffs could erode the cost advantage enjoyed by these companies hitting sales as well as margins. We have a $10 $10 price estimate for Trina Solar and a $4.50 price estimate for Suntech, which are both significant premiums to the current market prices.
Tariffs could cut into cost advantages
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The petition from SolarWorld and 6 other unnamed U.S. players calls for tariffs of about 100% to be slapped on Chinese solar manufacturers in the form of anti-dumping and countervailing duties.  The Chinese government is accused of unfairly aiding firms with loans, subsidized raw materials and currency manipulation. Analysts expect that module prices may rise by 10% if these additional duties are imposed. Chinese companies have argued that imposing the tariffs would lead to higher prices for end customers. They also point out that they have paid higher interest rates than European and American competitors. In 2010, China exported $3.5 billion worth of solar equipment to North America. The U.S. market has expanded over the past year and is expected to continue growing in the future because of the increasing cost competitiveness of PV technology. The U.S. ITC could implement remedial measures as early as Jan 12th if its investigation reveals that U.S. firms have been harmed by the actions of the Chinese government.
Price increases from added tariffs could hit the sales of Chinese PV modules in the U.S. as it would reduce their cost advantage.
Chinese firms may look to shift production to countries outside of China to escape these tariff costs, according to some sources. China’s Ministry of Commerce has come out strongly against the initial vote and said that it was deeply concerned about the inclination towards trade protectionism in the U.S.Notes: