In a new and similar development from Europe, a major local trade group is blasting a compromise agreement reached between China and the EU last year that averted a similar trade war. I’ll admit I don’t completely understand the logic in the new sounds of dissatisfaction coming from EUProSun, a group that represents about 40 percent of EU solar panel makers, including Germany’s outspoken SolarWorld (Frankfurt: SWVKk).
But the bottom line is that the European manufacturers believe that last year’s landmark compromise agreement isn’t working. These latest protests come just over a month after the European panel makers previously complained that their Chinese rivals were finding loopholes to evade terms of the same compromise agreement.
If there’s any truth to the European complaints, which seems likely, it could soon become difficult for the European Trade Commission to ignore the situation as more local companies struggle and even go bankrupt. Europe’s trade commissioner previously wanted to impose anti-dumping tariffs on the Chinese panel makers similar to those from the US, and was only prevented from doing so after several major EU leaders intervened to seek a compromise solution. Thus if the compromise really isn’t working, the EU could easily reopen its investigation into unfair state support for the Chinese panel makers and impose punitive tariffs as soon as by the end of this year.
Meantime, let’s look quickly at the latest news bits from LDK and Suntech, two former sector leaders that both went bankrupt and are just now starting to regroup and resume business after major reorganizations. The most worrisome of the news bits says that LDK is planning to restart a long-idled plant making polysilicon, the main ingredient used to make solar panels. The massive 10 billion yuan ($1.6 billion) plant had been idled for two years, and its return to the market will inevitably put pressure on global polysilicon and panel prices.
Suntech’s news looks a bit more benign, and will see the company open a subsidiary to serve South Africa. The move is one of the first major ones by Suntech since its primary assets were acquired last year by Hong Kong-listed Shunefeng (HKEx: 1165), which is now trying to move ahead with the well-known Suntech name. An aggressive new Suntech in the solar market could also undermine the sector’s recent stabilization, hinting at turbulent times ahead for the sector for the rest of this year and into 2015.
Bottom line: The EU is likely to reopen an anti-dumping probe into Chinese solar panel makers and impose punitive tariffs, while new moves by Suntech and LDK will further undermine the sector’s recovery.
This article was originally published on Young's China Business Blog and was republished with permission.
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