China PV makers squeezed by EU duties

BEIJING, June 5 (Xinhua) -- Chinese solar panel firms said Wednesday that the EU's punitive duties on imported photovoltaic products from China will erode their low margins and could even drive them out of a key market.

EU Trade Commissioner Karel De Gucht announced Tuesday that the EU will impose provisional anti-dumping duties on imports of solar panels, cells and wafers from China.

An interim punitive duty of 11.8 percent will apply to all Chinese solar panel imports starting from Thursday. The duty will be raised to an average of 47.6 percent two months later if both sides fail to find a solution.

Over the past four years, prices for solar panels have fallen by nearly three-fourths due to intensive trade divisions and slumping material costs, said Qu Xiaohua, chairman of Canadian Solar Inc.

"Due to weak demand and excess capacity globally, the PV industry has entered a period of low profitability since the beginning of last year. In the first quarter of this year, the industry's average profit margin was only 8 percent," Qu said.

"Given the 11.8-percent tariff rate, Chinese PV producers can't slash prices to maintain their price advantage," he said.

The punitive duties could deal a heavy blow to China's already struggling PV industry, as it relies heavily on the European market, experts said.

With the anti-dumping duties, Chinese PV makers could lose their price advantage to their counterparts in Taiwan and the Republic of Korea, said Wang Shijiang, secretary-general of the China PV Industry Alliance.

"The rate looks better than expected, but it is enough to drive Chinese PV products out of the EU market," said Wang. "Considering that the EU is the largest export destination for Chinese PV products, the restrictions could become the last straw that breaks Chinese solar panel makers."

"The PV industry is still gloomy and has very low profit margins," said Tong Xingxue, president and chief executive officer of LDK Solar. "The duties imposed at the moment mean another blow to a struggling industry and some companies just can't bear it."

Tong urged Chinese authorities to speed up talks with the European Commission to reach a settlement that includes price undertaking in the coming months.

In price undertaking, exporters raise the export cost of a product to avoid the possibility of an anti-dumping duty.

"The initial rate is 11.8 percent and we can pledge a price hike of a similar level," Tong said, adding that a hike of 10 to 20 percent would aid the entire market.

Liang Tian, director of public relations at Yingli Green Energy Holdings Co., said Chinese firms hope to reach agreements with EU clients to share the costs.

Unlike punitive U.S. tariffs, under which Chinese firms can use non-China-made cells to evade duties, many firms feel they are left with few options but to move operations overseas in a bid to avoid the EU duties, Qu said.

Many firms are ready to relocate some capacity overseas to regain access to EU markets, Liang added.

With the punitive duties falling within expectations, some firms have been working to move overseas since last year, Wang said.

Regaining access to the EU market could occur after overseas expansion or contract manufacturing, but the costs will be much higher, said Lian Rui, an analyst with solar market research agency Solarbuzz.

"This could cast a shadow on the development of clean energy in Europe, as solar panel installers and developers there could face higher costs too," Lian said.

Eighteen EU member states, hundreds of European solar companies, 15 European photovoltaic associations and industry experts have voiced objections to the duties.

Davide Cucino, president of the European Union Chamber of Commerce in China, said the two-month period that must pass before the 47.6-percent tariffs can be imposed should be seen as the European Commission reaching out to give China time to come up with a settlement.

"The European Chamber supports this move because, given the importance of the EU-China business relationship, we strongly urge both sides to engage in friendly negotiations to reach an amicable solution that could hopefully supercede the provisional measures," Cucino said.

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