Doug Young
Bottom line: The EU will impose anti-dumping tariffs on all Chinese solar panel makers by year end, and will refuse to negotiate any new agreements to mediate the issue unless Beijing becomes directly involved.
A crackdown has officially begun on Chinese solar panel makers who skirted a deal to avoid anti-dumping tariffs in Europe, with word that the EU has taken formal action to punish 3 violators. The action will see anti-dumping tariffs imposed on Canadian Solar (Nasdaq: CSIQ), ReneSola (NYSE: SOL) and ET Solar, reviving a threat they previously avoided by agreeing to voluntarily raise their prices as part of a breakthrough deal in late 2013.
Western solar panel makers in the US and Europe had long complained that they were at an unfair disadvantage to their Chinese peers, which received a wide array of state subsidies through policies like cheap government loans and tax rebates for their exports. Washington responded by levying anti-dumping tariffs on the Chinese companies, while the EU took a more conciliatory approach by signing a deal that saw the Chinese agree to voluntarily raise their prices to levels comparable with their western rivals.
That deal began to unravel earlier this year, when some European panel makers complained that the Chinese manufacturers were using tricks to avoid their earlier promise to raise prices. Such tricks included secretly rebating money to customers through fake consulting deals, and setting up fake factories in other countries to make their panels appear like they weren’t being exported from China.
Now the European Commission, which oversees trade issues for the EU, has determined that Canadian Solar, ReneSola and ET Solar violated the deal, and has reapplied tariffs that were previously threatened. (English article) Canadian Solar issued a statement saying it believes it was in compliance with the deal, and added the action won’t affect its guidance for the second quarter and for all of 2015. (company announcement)
Under the European Commission’s decision, all 3 companies will be subject to an anti-dumping duty of 43.1 percent. Canadian Solar and ET Solar will also be subject to an anti-subsidy duty of 6.4 percent, while ReneSola will be subject to anti-subsidy duties of 4.6 percent. Canadian Solar’s and ReneSola’s New York-listed shares both actually rose by 5.2 percent and 7.7, respectively, after the announcement. But each is still down about 15 percent since mid-May amid growing concerns about the EU spat.
Canadian Solar’s reaffirmation of its 2015 revenue guidance indicates it’s confident that this newest action will take at least half a year to implement, meaning there’s still potentially time to avert the new tariffs. But frankly speaking, the EU’s patience is rapidly running out towards these Chinese solar companies, and I suspect a finalization of punitive tariffs against this trio and other Chinese panel makers is inevitable by year end.
This latest action comes just a week after the European Commission launched a broader probe into whether Chinese companies were violating the earlier agreement, following complaints by a group of local producers led by Germany’s Solarworld. (previous post) The move to separately impose punitive tariffs on the 3 Chinese companies indicates the EU wants to act quickly on the matter, and is probably in no mood to listen to excuses or negotiate any new agreements on the issue. That’s certainly not good news for the solar panel sector in general, but isn’t too surprising either due to the apparent lack of goodwill by the Chinese panel makers.
More broadly speaking, this outcome really does show that Beijing’s participation is needed to make any similar deals in the future. This particular deal was reached directly between the Chinese panel makers and the EU as Beijing stood aside. The Chinese panel makers probably believe they did nothing wrong, since they may have technically honored the agreement even though they violated it in spirit. Getting Beijing involved could avoid this kind of problem in the future, since the companies would be less likely to engage in this kind of mischief if it might mean upsetting the main supplier of their many forms of government subsidies.
Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.
