EU-China deal continues to irk industry

20. August 2013 | Global PV markets, Markets & Trends, Trade cases, Industry & Suppliers | By:  Hans-Christoph Neidlein, Edgar Meza

Details of the EU-China trade settlement are slowly emerging, but much of the industry remains critical of the lack of transparency and clear answers. China's leading firms look likely to come out on top.

EU, China flags

The opacity surrounding the EU-China trade has made business difficult for both EU and Chinese companies.

Three weeks have passed since the European Commission and the Chinese Ministry of Commerce hammered out a settlement to the solar sector trade dispute that was remarkably short on details and transparency.

While pv magazine has managed to uncover further details of the agreement, many questions remain unanswered. As for the deal, much of the industry continues to give it a thumbs down.

The EU has declined to release specific details on prices and quantity limits, but according to pv magazine information, the minimum net import price for modules is €0.56 per watt, with an annual import limit of 7 GW; the net import price for cells is €0 29 per watt, with an import limit of 2.3 GW; and the net import price for wafers is €0.66 a piece, with an import limit of 1 GW.

Deal has proves intolerable for both sides of great divide

Although the SolarWorld-backed lobby group EU ProSun worked hard for the European Commission to take action against Chinese companies that were dumping their products in Europe, the organization remains discontent with the end result.

"The current illegal deal upholds China's anti-dumping practices and jobs in the European solar industry continue to be seriously endangered," said Milan Nitschke, SolarWorld vice president and EU ProSun spokesman. The agreed minimum import prices are, in Nitschke's opinion, far below the actual production costs in China and Asia. The actual retail prices for modules range between €0.65 and €0.75 per watt, while the stipulated minimum import price for cells of €0.29 per watt are likewise far below actual costs, he added.

The agreed tariff-free import quantities make up about 70% of the EU market share and thus provide "guaranteed sales for China and a carte blanche to sell at dumping prices." EU ProSun has said it will take legal action against the EC's Aug. 2 decision.

Meanwhile, the Alliance for Affordable Solar Energy (AFASE) argues that the agreed minimum prices are too high, weaken European market growth and are destroying larger PV projects.

The association said the agreed-to price price floor of €0.56 per watt for 7 GW a year "will substantially jeopardize commercial rooftop installations in some member state markets and prevent large ground-mounted installations in many markets, particularly for those with a decreasing feed-in tariff in 2013-2015."

Philipp Matter, vice president of JA Solar's German subsidiary, said the company could live with the minimum price of €0.56 per watt, but added that many Chinese players were considering cell imports to Europe and building modules here, either themselves, with OEM partners or by acquiring companies. However, cell production in Europe would be out of the question for most companies due to the high manufacturing costs, he said.

Industry insiders like Karl-Heinz Remmers, CEO of Solarpraxis AG, pv magazine's parent company, is overwhelmingly critical of the compromise: "This is a blow for the whole industry and the whole trade dispute is the biggest nonsense of all time."

The minimum import price is far higher than the global market price, he said, adding that many European PV projects that were budgeted for modules with wholesale prices "in the 40s" will now be stalled. According to Remmers, the minimum import price for cells is six to seven cents above the global market price, so demanding module prices in the range of €0.65 to €0.75 per watt is "completely unrealistic."

In addition, Remmers argues that major Chinese manufacturers can now sell their products in Europe more expensively through a kind of price cartel. The lack of transparency also rankles Remmers: "The EU has undermined democracy behind closed doors."

Indeed, some market watchers believe the lack of transparency is intentional on the part of the Chinese, who are eager to speed up consolidation in the country.

In the view of former Sunways CEO Roland Burkhardt, it's counterproductive to set artificially high fixed import prices that hinder the necessary cost degression and weaken the competitiveness of solar power over fossil competition, he commented.

Martin Schachinger of pvXchange sees a gap for low-price modules, especially in the project sector. At the beginning of the year Chinese modules were offered on the spot market at €0.37 to to €0.42 per watt, he said. He expects Taiwanese manufacturers to now lower their prices and Indian manufacturers to also attempt to fill that gap.

Stefan de Haan of IHS sees the European distributors under increasing pressure as many Chinese manufacturers are now beginning to sell their products directly to installers or project developers in order to be able to supply cost-efficiently. De Haan now expects the European PV market to shrink further this year by 1 to 1.5 GW. For Chinese modules he sees a decline in imports from 12.8 GW in 2012 to 8.5 GW this year, mainly brought on by the general collapse of the European market.

"The European PV market is already faltering for various reasons, and so the impact of the trade dispute should not be overstated," said de Haan. But it is clear, he stated, that protectionism on the part of the remaining European industry and the solar market will not help.

With the agreement now firmly in place, de Haan does not foresee any major changes to the deal come December. However, he does see the need for downward price flexibility in order to adapt to cost degression. How this will happen, however, remains unclear, yet fixed minimum prices without the possibility of degresssion would be absurd, making innovation impossible and photovoltaics uncompetitive, he added.

Industry players have also expressed discontent with the lack of clear information and bureaucracy.

Andrea Bodenhagen, EMEA marketing director at China Sunergy Europe, said it remained unclear how the agreement treats Chinese manufacturers' OEM production in Europe. "Will it qualify as a European product only when it's an independent European subsidiary? How are modules categorized that are produced outside of China but use Chinese cells? This affects European and German manufacturers as well as some in Turkey."

One executive at a leading Chinese manufacturer complained that clear and comprehensive information had yet to be released by the China Chamber of Commerce for Import and Export of Machinery and Electronic Products, which is overseeing implementation of the ruling, making the export of goods to Europe difficult.

Florian Abel of German wholesaler Franken Solar said low-priced Chinese products were disappearing, forcing the market to reorient itself. The EC documents relating to the ruling were not easy to understand, he added, pointing out that even the German Solar Industry Association lacked necessary information.

Among the many remaining questions are:

  • How will modules containing Chinese cells or wafers and produced by non-Chinese manufacturers outside of China be classified?
  • How will modules produced by Chinese manufacturers (or made to order) outside of China be classified?
  • As of when is the annual maximum import cap for modules, cells and wafers valid? From August or retroactively as of March 2013, when the mandatory registration for imports was introduced?
  • Will the import duties for crystalline PV imports from those Chinese firms that did not sign the price agreement have to be paid retroactively from March 2013?
  • Does the same apply to those companies that contravene the regulations?
  • Will the EC ever make the negotiated minimum import prices and import cap public?

Read more about the impact of the EU-China agreement in the upcoming September issue of pv magazine global edition.


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