Tariffs on Chinese photovoltaic modules into Europe appear all but certain to come into effect next week at least for the following six months. While the average duty of 47% is the figure most widely quoted, many Chinese producers will face duties of 68%. Given such steep duties, the profound effect on both the European photovoltaic market and Chinese manufacturers is becoming clear.
"First of all, if these tariffs go through and are finalized, the European market will get significantly smaller and consolidation amongst the Chinese manufacturers will be accelerated, probably through bankruptcy," summarized Bloomberg New Energy Finances (BNEF) senior solar analyst Jenny Chase. The strategies for dealing with that are likely to be moving manufacturing capacity outside of China."
IHS Solars Stefan de Haan estimates that demand for modules from Europe in the second half of 2013 is likely to be 5 GW. Assuming that the majority of Chinese suppliers turn away from the European market or source wafers and cells from outside of China, there still spears sufficient cell capacity outside of China to supply this. IHS figures reveal that there is almost 8 GW of cell capacity outside of China available for the second half of the year – in terms of real operational manufacturing capacity.
Looking to wafer production, manufacturing capacity outside of China looks tighter. IHS Solar figures show that 4.5 GW of wafer capacity is available for the latter half of the year. "Wafer capacity that would be available for the second half of the year outside of China is pretty close to the actual European demand numbers that we expect," said de Haan.
However, de Haan notes that not all of the 20 Chinese suppliers currently active in Europe would drop out, with some qualifying for tariffs lower than the maximum 68% rate. The IHS Solar principal solar analyst also notes that thin film producers will also supply some of the approximately 5 GW of European demand, further revealing the potential wafer bottleneck. "The result is there will not be a massive bottleneck probably, but there can be some shortages."
Moving production overseas
The strategy of moving some production outside of China is another one available to Chinese suppliers and there was some evidence of measures already being taken by manufacturers at this year's SNEC trade show.
China Sunergy (CSUN) is the obvious example of a Chinese manufacturer with significant capacity outside of China, albeit it should be noted this is more through fortuitous coincidence than a strategic decision, in terms of supplying the EU. CSUN tooled its new Turkey fab with equipment from its existing Chinese operations, a pattern that BNEFs Chase says may occur if other Chinese manufacturers look to move some operations outside of China. "Why buy new line when youve got lots of old ones, some of which are not old at all," asked Chase rhetorically.
This pattern could be replicated, suggested Chase, with Chinese suppliers equipping factories in Taiwan with existing tools. IHS Solars de Haan is a little more skeptical of this strategy, saying that the individual economics would have to stack up for such a move. He added that an increased focused on emerging markets, China and Japan would be a more likely response from Chinese manufacturers. BNEFs Chase was in concert with de Haan on this latter point, "we all know that Europe is a declining market, so in any case there is huge pressure on solar manufacturers to be looking to new markets".
On the upside
Whether European photovoltaic manufacturing will benefit from the tariffs remains unclear. Certainly wafer capacity in the EU is insufficient to meet potential shortfalls. "I dont see that there is so much capacity available that has been idled that would now be worthwhile being ramped again," said de Haan.
The fact that the initial tariffs will be reviewed again at the end of the year is also likely to prevent new investment being made in ramping currently idled capacity, even if that did make economic sense.
Some manufacturers do look well positioned to gain from the anti-dumping duties. (Note SdH: The companies mentioned are not all wafer manufacturers, so it has to be kept general) de Haan told pv magazine that these include Hanwha SolarOne, with its Q.Cells operations, REC with its Singapore plant and OEM manufacturer Jabil, with manufacturing in Poland. Leading Taiwanese and Korean suppliers like Neo Solar Power and Nexolon are also well-situated producers to serve EU markets.
Knock on effects and price pressure
Photovoltaic prices look set to increase under the duties. This will slow the deployment of solar in the European Union however the exact extent to which is as yet unclear. Stefan de Haan said that there will be knock-on effects across the supply chain. "Inverter manufacturers will be hurt as installers will push more heavily on prices than before and then there are counteractions to be expected from the Chinese government," said de Haan. "So a few module manufacturers will benefit but many other solar companies will get in trouble as result of such a decision."
Edited by Vera von Kreutzbruck.
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