Chinese solar stocks continue to rally amid reports the European Union and China are close to striking a deal to cap the annual volume of its solar panel exports.
According to a Reuters report, the European Union and China are moving towards a deal to defuse a conflict over alleged dumping of solar panels in Europe.
Maximum Exports Capped At 10GW
According to the Reuters report, China will export a maximum of 10GW of PV modules to the European Union a year at a minimum price of €0.5/W.
The European Union will, in return, levy no or low taxes on Chinese solar panels. However, in case the exports breach the threshold limit, punitive taxes may be imposed.
Deutsche Bank’s research team, headed by Vishal Shah, feels this recent announcement is quite significant and would remove one of the key overhangs impacting Chinese solar stocks.
The analysts anticipate any potential volume quota of up to 10 GW to have minimal impact on Chinese solar fundamentals, as the European end market is expected to experience a decline over the next few years, due to subsidy reduction announcements in key markets such as Germany and Italy.
The Deutsche analysts feel the price floor of €0.50/W should help alleviate industry pricing pressure due to aggressive pricing actions from tier 2 and 3 Chinese suppliers. The analysts also feel this would have a positive impact on long term industry profitability.
In view of an impending 27 percent tariff from August, the analysts anticipate some risk to European pricing accentuating increase in order flow.
Vishal Shah and team feel pricing to remain robust from an overall perspective, aided by strong growth from other markets such as the U.S. and India. The analysts anticipate the potential deal between the EU and China would be replicated with the U.S. as well during the next 6 to 12 months.
Trina Solar and Yingli Green Energy To Benefit The Most
Considering the positive impact from the proposed deal with the European Union, the analysts feel Trina Solar Limited (NYSE:TSL) and Yingli would be the major beneficiaries.
Aided by the positive news, major Chinese solar stocks such as Yingli Green Energy Hold. Co. Ltd. (NYSE:YGE), JA Solar Holdings Co., Ltd. (NASDAQ:JASO), ReneSola Ltd. (NYSE:SOL) have posted strong gains between 5 and 7 percent.
Earlier, Goldman Sachs upgraded U.S. solar stocks such as First Solar, Inc. (NASDAQ:FSLR), SunPower Corporation (NASDAQ:SPWR), and MEMC Electronic Materials, Inc, amid evolution of business models towards solar projects rather than components.