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.