Korean Peninsula tensions having little impact on solar relations with China, says analyst

Although Pyongyang’s saber-rattling has entered a worrying new dimension over the past few days following the underground testing of a nuclear weapon in North Korea on Sunday, reports that China is retaliating to South Korea’s defensive maneuvrings by putting up further import barriers against Korean polysilicon and solar exports are wide of the mark, says independent solar analyst Corrine Lin.

Specifically, it has been reported in the South Korean press that China is opposed to the deployment on the peninsula of Terminal High Altitude Area Defense (THAAD) systems that have been supplied by the U.S. As expected, these THAAD systems have been primed over the past few days, causing concern in Beijing.

However, the news that exports of polysilicon from South Korea to China have slid 25.5% over the space of a year, partly due to China’s opposition to the THAAD system, is inaccurate, Lin told pv magazine. “Looking at official polysilicon import data from South Korea to China, it shows that in the second quarter of this year, import volumes are actually 32% higher than in Q2 2016.”

The data shows that China imported $263.4 million worth of Korean polysilicon in Q2 this year, up from 200.2 million over the same period in 2016. “Even though there has been global oversupply of polysilicon, in China there are still shortages,” Lin said. The chief reason for this is existing anti-dumping duties placed on polysilicon from the EU, U.S. and South Korea.

“Polysilicon makers in these regions face high tariffs when they export to China, which is why companies such as Hemlock and REC Silicon have almost no export volume to China.” So despite China’s evident discomfort at its neighbor’s deployment of the THAAD system, it is still hungry for Korean polysilicon. “Especially that provided by OCI,” added Lin. “Many mono wafer manufacturers in China like to use OCI polysilicon.”

Don’t get THAAD, get even
If China really did want to retaliate against South Korea’s military defensive maneuvers, its best strategy would be to increase antidumping tariffs on polysilicon in Q4, when the duties are due to be reviewed. “This would have a big impact on Korean suppliers, because China is 90% of their export market, and there is a limit to Korean companies’ strategy to diversify into new export markets,” explained Lin.

Despite China’s H1 solar installations surpassing expectation, module imports from Korea have fallen in the past year – but again, Lin believes this has little to do with China and more to do with the fact that Korean suppliers like to target the higher ASP markets of the U.S., Europe and domestically. “This is the reason behind the fall in exports to China; not the concern over THAAD.”