China and the European Union have resolved their dispute over the alleged dumping of Chinese solar panels into the European market. The deal will involve setting a minimum price which is close to spot market prices for Chinese solar panels instead of imposing the prohibitively high punitive tariffs. We believe that the deal will benefit Chinese solar companies since it would allow them to continue business in Europe without increasing the landed cost of their panels. The agreement is also likely to be beneficial to downstream solar companies and installers in Europe.
Details Of the Deal
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Chinese solar panels began attracting preliminary anti-dumping tariffs of around 11.8% in June after the European Commission said that it had found evidence that Chinese manufacturers were selling their panels at below cost in the E.U. This rate was slated to increase to punitive levels averaging 47% from August 6. However, with the deal, according to an E.U. diplomatic source, Chinese exporters have agreed to a minimum price of around 0.56 euro (US $0.74) per watt for their panels, which is close to the spot price for solar panels in Europe. This price is likely to be applicable for a maximum of 7 GW of panel imports, after which tariffs could possibly be imposed.  However, the deal has met with some opposition. The trade group EU ProSun, which filed the initial complaint against Chinese manufacturers last year, called the agreement unacceptable and has vowed to challenge it in court. Apart from the dumping investigation, Chinese solar firms are also subject to a second investigation on whether they received unfair subsidies from their government. The deadline for introducing the provisional anti-subsidy duties is August 8. 
Deal Is Positive, But Europe Looks Less Promising For Chinese Solar Firms In The Long Run
While the E.U. remains the world’s largest solar market, we believe that the European market as a whole is becoming less attractive to Chinese companies for two reasons. Firstly, the overall market size has been declining. New solar grid connections in Europe fell from around 22.4 GW in 2011 to around 17.2 GW last year and installations are projected to decline or show very modest growth over the next few years.  This has been due to the recent economic crisis as well as due to a cutback in government subsidies which powered the market. For instance, Spain has been cutting tariffs and has even introduced retroactive cuts, which are likely to hamper new installations. Germany, which is Europe’s single largest solar market, is also witnessing a slowdown after the government began cutting its generous feed-in-tariffs last year.
Secondly, Chinese panel manufacturers have been competing primarily based on price and pricing is becoming a less important factor in the panel purchase decision. The cost of the solar panel now accounts for less than 40% of the total solar power systems cost and customers in Europe are likely to choose higher-end European and American panels over the slightly cheaper Chinese counterparts.Notes: