Careful studies needed before outsourcing output
By Richard Fu |
June 1, 2012, Friday
|
Print Edition
Print Edition
A number of Chinese solar companies plan to outsource manufacturing abroad in a bid to circumvent US anti-dumping duties on imports of made-in-China panels, but some industry officials are warning that the strategy could backfire both on consumers in the US and companies in China.
The US has for several times launched anti-dumping and anti-subsidy probes, seeking to determine if Chinese manufacturers were selling solar products, among other goods, at improperly low prices to gain a market edge. The latest major action came on May 17, when the Commerce Department announced anti-dumping tariffs of at least 31 percent on Chinese solar product imports.
China's Suntech Power Holdings Co, the world's largest solar panel maker, said last week its global sourcing channels would allow it avoid the tariffs. The US duties will only "raise prices and make solar less competitive," said Shi Zhengrong, chief executive of the company, which is based in the city of Wuxi in Jiangsu Province.
Higher costs and prices
Another Chinese company, Sunergy Co, also said it's considering building a module assembly plant in the US.
However, setting up new manufacturing hubs outside of China will push up costs and translate to higher prices for solar products, with the biggest victim being the American consumer, said Gao Jifan, chief executive of Trina Solar Ltd, which is based in Changzhou, Jiangsu.
It's understood more Chinese companies are considering outsourcing in places like Malaysia and Taiwan. But Li Junfeng, president of the Chinese Renewable Energy Industries Association, warned that Chinese companies shouldn't rely too much on that strategy because the US may well adjust the conditions of its tariff ruling.
"We shouldn't rely on outsourcing," he said. "There are many conditions in the US ruling, and they could adjust them over time in favor of American producers if they notice the outsourcing trend."
Li said the key task for China is to convince the World Trade Organization that the US ruling is groundless. Li is also an energy official with the National Development and Reform Commission, China's top planning agency.
In its anti-dumping investigation, the Commerce Department used production costs in Thailand, which produced about 0.1 gigawatt of solar panels last year, as a proxy for costs in China, which produced 15GW, according to Li.
China did file a complaint last Friday with the WTO against such US import duties that also targeted steel and paper products.
Chinese officials have said the US action is mainly driven by politics in a presidential election year. The ruling disregards the fact that technology advancements and large-scale production have helped pushed down the cost of solar products.
"I once asked Treasury Secretary (Timothy) Geithner how much money the US has given to its solar companies, and he said he's not in charge of that, Congress is," said Zhang Guobao, the former head of China's National Energy Administration. "Then I said to him, 'You must know the amount because the money comes from your department.' He smiled but didn't reply."
Zhang concluded by telling the US-China Clean Energy Forum in Shanghai last Saturday: "You can see the clear political intention."
Trade deficit
China actually runs a trade deficit with the US in the solar industry because it buys machinery equipment and raw materials, like polysilicon, from abroad to make solar products, he said.
The US action could trigger countermeasures from China. In the polysilicon sector, for example, companies have been filing petitions asking the government to impose anti-dumping tariffs against the US, which is second only to China in polysilicon production.
Rising imports and falling prices of US-sourced polysilicon in recent months will help Chinese solar cell and module producers bolster their case, according to Charles Annis, vice president of research and consulting firm Solarbuzz.
"If China does impose punitive tariffs on imports, it could make US producers less competitive in the largest market for polysilicon," Annis wrote in a note.
The US has for several times launched anti-dumping and anti-subsidy probes, seeking to determine if Chinese manufacturers were selling solar products, among other goods, at improperly low prices to gain a market edge. The latest major action came on May 17, when the Commerce Department announced anti-dumping tariffs of at least 31 percent on Chinese solar product imports.
China's Suntech Power Holdings Co, the world's largest solar panel maker, said last week its global sourcing channels would allow it avoid the tariffs. The US duties will only "raise prices and make solar less competitive," said Shi Zhengrong, chief executive of the company, which is based in the city of Wuxi in Jiangsu Province.
Higher costs and prices
Another Chinese company, Sunergy Co, also said it's considering building a module assembly plant in the US.
However, setting up new manufacturing hubs outside of China will push up costs and translate to higher prices for solar products, with the biggest victim being the American consumer, said Gao Jifan, chief executive of Trina Solar Ltd, which is based in Changzhou, Jiangsu.
It's understood more Chinese companies are considering outsourcing in places like Malaysia and Taiwan. But Li Junfeng, president of the Chinese Renewable Energy Industries Association, warned that Chinese companies shouldn't rely too much on that strategy because the US may well adjust the conditions of its tariff ruling.
"We shouldn't rely on outsourcing," he said. "There are many conditions in the US ruling, and they could adjust them over time in favor of American producers if they notice the outsourcing trend."
Li said the key task for China is to convince the World Trade Organization that the US ruling is groundless. Li is also an energy official with the National Development and Reform Commission, China's top planning agency.
In its anti-dumping investigation, the Commerce Department used production costs in Thailand, which produced about 0.1 gigawatt of solar panels last year, as a proxy for costs in China, which produced 15GW, according to Li.
China did file a complaint last Friday with the WTO against such US import duties that also targeted steel and paper products.
Chinese officials have said the US action is mainly driven by politics in a presidential election year. The ruling disregards the fact that technology advancements and large-scale production have helped pushed down the cost of solar products.
"I once asked Treasury Secretary (Timothy) Geithner how much money the US has given to its solar companies, and he said he's not in charge of that, Congress is," said Zhang Guobao, the former head of China's National Energy Administration. "Then I said to him, 'You must know the amount because the money comes from your department.' He smiled but didn't reply."
Zhang concluded by telling the US-China Clean Energy Forum in Shanghai last Saturday: "You can see the clear political intention."
Trade deficit
China actually runs a trade deficit with the US in the solar industry because it buys machinery equipment and raw materials, like polysilicon, from abroad to make solar products, he said.
The US action could trigger countermeasures from China. In the polysilicon sector, for example, companies have been filing petitions asking the government to impose anti-dumping tariffs against the US, which is second only to China in polysilicon production.
Rising imports and falling prices of US-sourced polysilicon in recent months will help Chinese solar cell and module producers bolster their case, according to Charles Annis, vice president of research and consulting firm Solarbuzz.
"If China does impose punitive tariffs on imports, it could make US producers less competitive in the largest market for polysilicon," Annis wrote in a note.
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