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Latest U.S. Tariff Ruling Impedes Chinese PV Trades but Helps Taiwanese Companies, According to TrendForce

9 July 2015 Energy Angus Kao

United States Department of Commerce on July 8 concluded its final ruling of the review of the anti-dumping and countervailing (AD/CVD) measures on certain Chinese photovoltaic (PV) cell imports and ruled to raise the tariff rates set in 2012. This decision will put pressures on Chinese module exporter while giving competitive advantages to Taiwanese companies.

“In the future, Chinese and Taiwanese PV companies will need to devise suitable business development plans for them to capitalize on the opportunities in the U.S. market,” said Angus Kao, analyst for EnergyTrend, a division of TrendForce

Kao added: “In addition to developing better products with high quality, high efficiency and high margin, PV manufacturers will have to undertake aggressive global expansion such as developing the emerging markets and new export channels. These actions may avoid the problem of relying on a single market and reduce the risks from rising tariffs.”

According to Kao, the U.S. PV market demand this year is about 9.5GW, making up 18.3% of the global PV market demand. The U.S. market demand has not been weakened by the ongoing trade dispute with China, but the latest ruling will create immediate difficulties for the U.S.-bound Chinese PV module exports. With exception of Yingli’s products, the U.S.-bound modules made with Chinese cells will instantly have their costs raised by 10% or more. The prices of PV modules in the U.S. therefore will go up in the short term. The price of the U.S.-bound Chinese PV modules is currently around US$0.61~0.63/W, and only Yingli among the Chinese manufacturers is able to export at this price range after the new tariff rate is implemented. To reduce the impact of the rising tariffs, other Chinese manufacturers will have to export modules made with foreign cells. Moreover, they will accelerate transferring their cell and module production to other countries (excluding China and Taiwan). Cell and module plants in these third countries are expected to be built and in operation in the second half of this year, and then Chinese PV companies will export from these countries to the U.S. as to avoid higher tariffs.

Some Taiwanese companies will be able to benefit from the latest tariff ruling since it affects China-made products. Consequently, the indirect exports of Taiwanese cells to the U.S. will increase in volume. According to EnergyTrend’s estimation, the module production cost in third countries is currently US$0.03~0.04/W higher than in China. With the latest change in tariff rates, modules using Taiwanese manufacturer Motech’s cell will cost lower than their counterparts using Chinese cells. Even if Motech’s cells surpasses US$0.33/W, modules that use them will still have room for price increase so Motech’s cell price can continue to grow up .

Still, the increases in prices of PV products will eventually hinge on the increase of the module prices in the U.S. If the U.S. market saw a 5% jump in their module prices, then Taiwanese cells would have room for a 3~5% price increase. On the other hand, the Chinese companies will accelerate overseas cell and module production in the second half of 2015, and they will be able to export duty-free modules to the U.S. in greater volume. The U.S. demand for the modules that use Taiwanese cell will be limited with the falling import costs for PV products.

Growing demand for domestic polysilicon will drive prices upward along the Chinese PV industry chain

Since the U.S. has made no concession to China during the AD/CVD investigation, Kao believes the Chinese government will retaliate by conducting a review on Europe and U.S. polysilicon imports. Thus, the Chinese custom duties on European and U.S. polysilicon may rise sharply in the near future. China will also close the processing trade loophole in August, making European and U.S. polysilicon much more difficult to get into the country. Chinese PV companies will switch to domestic polysilicon as a result and fuel domestic polysilicon demand. EnergyTrend expects the feedstock prices in the upstream sector of the PV industry to increase gradually.

With the domestic demand getting stronger, the first-tier polysilicon manufacturers are expected to raise their quote prices by 0.5~1%. In addition, the combination of the rising polysilicon prices and the peak season has also lifted the quote prices of Chinese Si-wafer. Their price increase this month is now at 0.5%. There is a chance that this increase will reach 1%, bringing the Si-wafer price to US$0.825 per piece. Some quotes from the first-tier wafer manufacturers have already come to US$0.83 per piece. As for the cell industry, high-efficiency multi-Si cells are benefitting from the manufacturers’ high capacity utilization rates and steady purchase orders. The first-tier cell manufacturers are nearly fully loaded in their capacities, and those without sufficient capacities are outsourcing their production to consume their production loads. Hence, cell prices will continue to rise, with Chinese cells seeing 1% increase to around US$0.303/W. In sum, rising feedstock prices and strong demands will contribute to additional price increases for cells.

The prices of Taiwanese cells will go in a different direction with EnergyTrend anticipating an increase of 2% upward for high-efficiency products. Motech’s cells may go over US$0.33/W as they will have more room for price increase after the AD/CVD review. After the Chinese companies have established additional capacities in foreign countries and start exporting from there to the U.S., the module prices in the U.S. may also drop. This in turn will push down the cell prices in countries besides China and Taiwan.

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