For years, REC Silicon has worried about being caught in the cross hairs of a global trade dispute over solar panels. Now, the worry is only getting worse — and for good reason.
The United States last year imposed tariffs on Chinese solar panels after finding that they had been sold at unfairly low prices.
In a move widely seen as payback, China last month put in place preliminary duties on polysilicon imports from the U.S. and South Korea, making its own price dumping claims.
REC received the steepest tariff rate, 57 percent, followed by Dow Corning-owned Hemlock, at 53 percent. Tariffs for South Korean polysilicon were set at 2.4 percent to 48.7 percent.
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One reason for the disparity between American and South Korean duties is that U.S. polysilicon prices were much lower during China’s yearlong probe, drawing stiffer penalties, according to business information provider IHS.
But another possible explanation is political: South Korean President Park Geun-hye made a diplomatic visit to China in June, accompanied by senior executives from the country’s top polysilicon supplier, OCI.
“Not coincidentally, OCI was given the lowest tariff rate, at 2.4 percent — the smallest penalty of all companies affected by the antidumping action,” IHS wrote in a recent report.
A new trade accord between China and the European Union also seems to have isolated U.S. polysilicon makers.
China had been looking into anti-dumping duties on European polysilicon after the EU put in place preliminary tariffs of 11.8 percent on Chinese panels. But both sides reached a settlement late last month.
In the United States, meanwhile, prices for Chinese panels have increased only about 5 to 10 percent since the tariffs took effect, said Brian Bonlender, director of the Washington state Department of Commerce.
“The tariffs have had some effect, but they’ve not prevented all of the unfair trade practices from China,” said Timothy Brightbill, a Washington, D.C., lawyer who brought the U.S. trade case on behalf of SolarWorld and other solar companies.
Brightbill noted that the U.S. ruling left a major loophole that allows Chinese companies to enter the market duty-free. Because it applies only to panels made from Chinese solar cells, many manufacturers can skirt the U.S. tariffs by buying their parts elsewhere, such as Taiwan.
Brightbill believes the loophole makes China less likely to work out a solution with the U.S. But Bonlender is a bit more optimistic.
He points out that China’s manufacturers now suffer from global oversupply of the panels — and the workaround, which carries some costs, adds to their financial troubles.
“There’s motivation on their side to try to reach a resolution,” Bonlender said.
Still, his optimism is qualified by the reality that global trade disputes are complex, with many variables outside a single company’s control.
Stefan de Haan, principal analyst of solar research at IHS, noted REC’s Chinese customers likely are bound by multiyear contracts that predate the tariffs, perhaps giving them a financial incentive to push for a trade accord.
John Smirnow, vice president of trade and competitiveness at the Solar Energy Industries Association, also mentioned a provision in China’s preliminary ruling that allows domestic buyers of U.S. polysilicon to be refunded their tariff payments if the final product is sold overseas.
Although helpful to REC, he said, “it does create some uncertainties. It’s an added layer of complexity. And any time your sales are more complicated than your competitors’, it’s a disadvantage.”
REC general counsel Francine Sullivan declined to discuss in detail the company’s dealings with Chinese panel producers, saying only that they’re less likely “to choose our product with a 57 percent premium.”
China requires domestic panel producers to post bonds equal to 57 percent of the price of polysilicon imports from REC, with a final ruling to come in February. Sullivan said REC can’t wait that long for a resolution.
“This is a huge drama that we’re trying to work a path through,” she said. “We need the U.S. government to get involved and broker a government-to-government solution with China.”
Amy Martinez: 206-464-2923 or firstname.lastname@example.org. On Twitter: @amyemartinez