Solar Industry Will Be Hurt By China’s Anti-Dumping Tariff: RBC

Solar Industry Will Be Hurt By China’s Anti-Dumping Tariff: RBC

RBC Capital Markets analyst Mahesh Sanganeria highlights China’s announcement of an anti-dumping tariff on solar-grade polysilicon imported from the US and South Korea as he provides an analysis on US and Korean solar companies and the effect the tariff will have on the industry as a whole.

Solar Industry Will Be Hurt By China's Anti-Dumping Tariff: RBC

What happened:

Monday morning, China Ministry of Commerce (MoC) announced the final investigation results in the anti-dumping case against solar grade polysilicon imported from the US and South Korea. According to the announcement, MoC concluded that China solar grade polysilicon industry has suffered from dumping by competitors in the US and South Korea and will impose an anti-dumping tariff against solar grade polysilicon imported from US and Korea. The anti-dumping tariff will be effective for five years starting from January 20, 2014. We listed the detailed tariff rate on each company below:

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US Companies:

1) REC Solar Grades Silicon: 57%

2) REC Advanced Silicon Materials: 57%

3) Hemlock Semiconductor: 53.3%

4) MEMC Pasadena: 53.6%

5) AE Polysilicon Corp: 57%

6) All other US companies: 57%

Korean Companies:

1) Woongjin Polysilicon: 12.3%

2) OCI Company: 2.4%

3) Hankook Silicon Co: 2.8%

4) KCC Corp and Korean Advanced Materials (KAM Corp): 48.7%

5) Innovation Silicon: 48.7%

6) All other Korean companies: 12.3%

The final decision and tariff are consistent with the preliminary investigation results announced on July 18, 2013. In 1H13, 33% of China solar grade polysilicon imports came from the US and 29% from South Korea. To avoid the impact of a potential anti-dumping tariff, China solar grade polysilicon import has surged in 2H13 after the preliminary results announcement. According to estimates from Silicon Industry of China Nonferrous Metals Industry Association, China solar grade polysilicon import may reach 80k MT in 2013.

Implications for solar industry

Earlier in the day, the US Department of Commerce announced that it will decide on Wednesday whether to expand anti-dumping and countervailing duties on solar panel imports from China. In the Chinese MoC decision, the tariffs against US poly companies are significantly higher than for South Korea competitors. We believe the China MoC decision can be viewed as retaliation for the US anti-dumping tariff on China solar products.

In the near term, the tariff is a negative for all US and South Korea poly companies and should have positive impact on China poly companies including GCL-Poly Energy Holdings Limited. (HKG:3800) (GCL-Poly Energy), ReneSola Ltd. (ADR) (NYSE:SOL), Daqo New Energy Corp (NYSE:DQ), TBEA Co., Ltd (SHA:600089), Asia Silicon, and LDK Solar Co., Ltd (ADR) (NYSE:LDK). However, we believe the market has priced in the possible tariff after last year’s preliminary results and the impact should be limited. In the long term, we think a potential solar trade war would be negative for the whole industry overall. We expect polysilicon price to decline slightly due to over-supply as the policy may encourage China domestic poly capacity expansion. We don’t expect any significant impact on solar module makers.

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