Doug Young
Bottom line: A deal designed to avoid
punitive tariffs on Chinese solar panels exported to Europe is
rapidly collapsing, with new anti-dumping tariffs likely to be
imposed by the end of the year.
A looming clampdown on Chinese solar panels in Europe is rapidly
accelerating, with word that the EU will review part of a landmark
2013 agreement that initially helped to prevent a trade war but is
showing rapid signs of unraveling. The case centers on the prices
of Chinese solar panels, which are typically much lower than their
western counterparts due to a wide array of Beijing policies to
support the sector.
The US levied punitive tariffs on Chinese panels to address the
situation. The EU was set to do the same when several top
politicians stepped in and pushed both sides to reach a compromise
deal to avoid such action. That deal saw the Chinese manufacturers
agree to raise their prices to levels comparable to products from
the west. But no sooner did the deal take effect, then the Chinese
companies began undermining the agreement by finding ways to
secretly refund money to their European customers.
The European manufacturers saw what was happening, and have been
complaining loudly to the European Commission to take action. The
case now appears to be accelerating, and it looks likely that some
kind of corrective action will be relaunched against the Chinese
manufacturers in a matter of months.
The latest action looks a bit technical, and applies to a
benchmark price for solar panels that is a key part of the
agreement reached between the Chinese manufacturers and EU as part
of their agreement to avoid punitive tariffs in 2013. Under that
deal, the Chinese agreed to set their prices based on a benchmark
that included panel prices from both Chinese and non-Chinese
manufacturers.
But now the European panel makers are arguing that Chinese panel
prices should be excluded from the benchmark calculation, because
the Chinese products depress the benchmark to artificially low
levels. (English article) The European Commission has
agreed to review the case, meaning it could ultimately decide to
exclude Chinese panel prices from the benchmark. That would almost
certainly raise the benchmark, forcing Chinese panel makers to
sell their products for higher prices.
This particular development is just the latest wrinkle in the
protests from European manufacturers, who would really just prefer
to see implementation of the originally proposed anti-dumping
tariffs rather than this attempt to modify the earlier agreement.
In a move in that direction, German panel maker Solarworld
(SRWRF)
last week filed a formal request for a probe into its Chinese
rivals, saying they were violating the earlier agreement. (previous post)
I’ve personally heard and read about a number of methods the
Chinese are using to undermine the agreement. Many involve finding
ways to secretly rebate money to their customers, using vehicles
like consulting fees to make such payments. This kind of behavior
is relatively typical of Chinese companies, which often enter into
agreements and then look for ways to undermine those same
agreements in ways that will benefit themselves.
A changing of the benchmarking process won’t really address this
central problem, namely that many of the Chinese companies will
continue to look for ways to sell their panels at very low prices
using tricks like backdoor rebates. When the EU comes to that
realization, the result will almost certainly be a scrapping of
the 2013 compromise deal, and I do expect we’ll see the original
plan for punitive tariffs imposed by the end of this year.
http://www.altenergystocks.com/archives/2015/05/chinese_solar_companies_underminin g_eu_deal.html
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