Final Ruling for Second Review of US-China Solar Trade Dispute Unveiled, Duty Rates to Drive down Solar Product Prices in US

published: 2016-06-24 18:36 | category: Analysis

Result of the second review of the US-China solar trade dispute has finally been announced and the tariff rates of Chinese vendors has not changed significantly

The final ruling of the second review of U.S.’s 2012 PV products anti-dumping duties (AD) on China has has finally been announced. Results for countervailing duties will be announced in July. EnergyTrend, a division of the market intelligence firm TrendForce, observes that the results of anti-dumping duties of the final ruling are nearly the same as those that were implemented after the preliminary ruling. Trina Solar is still the biggest winner. By comparison, Motech Industries lost its tariff advantage compared to the verdict of the preliminary ruling at the end of last year. Motech’s quantity of indirect orders to the USA and its price have steadily weakened in this half year. 

Chinese vendors have many supply channels; it is hard for Motech to obtain a good yield rate from its duty advantage

EnergyTrend analyst Corrine Lin pointed out that compared to the result of last year’s preliminary ruling, following the new verdict, most vendors that export to the US have seen tariffs on their products fall about 2-3%. Only tariffs on Yingli increased significantly. The first-tier vendors like Trina Solar, JinkoSolar, Canadian Solar and JA Solar not only can export tariff-free products manufactured in third-party countries to the US, but can retain a 6% margin by exporting locally-sourced shipments. Trina Solar’s margin on the other hand has stayed at around 9%. The trade war’s impact on the industry is gradually growing smaller and the final result is having a minimal impact on Chinese vendors.

As for Taiwan, before the new verdict on tariffs on Taiwanese solar products is announced, only Motech is subject to the low rate for indirect shipments to the US. However, Motech has to keep its prices close to cell spot prices to win orders from Chinese customers because of the new tariffs on their-one Chinese vendors are lower while their third-party countries production capacity is maturing. Otherwise, Chinese customers may choose local Chinese suppliers or third-party country cells instead of Motech’s cells. As a result, it is difficult for Motech’s yield to be much higher than the spot price, and the company is gradually losing its competitive advantages. The price fluctuations of Motech’s solar exports to the U.S. is also putting pressure on Taiwanese vendors to move their factories in third-party countries. 

The U.S. market is still profitable; spot prices will keep dropping

In the future, Chinese tier-one vendors will still have three ways to export to the U.S.: (1) Source from local Chinese producers and a pay 25.74~28.14% tariff; (2); Buy from the Taiwanese vendor Motech to take advantage of Motech’s 11.45% tariff rate, the lowest in the non-China region, and assembling PV modules outside China and Taiwan; (3) Purchase from third-party cell manufacturer andassemble modulesin third-party countries; in this case, there is no need to pay a tariff.

Because it is still profitable for Chinese vendors to export Chinese-made solar products to the U.S., EnergyTrend estimates that in the first half of the year, there will still be about 2GW of Chinese shipments to the U.S., accounting for about 30% of overall American demand during this period. Trina Solar, Canadian Solar, JinkoSolar and BYD will comprise more than 85% of the total exports.

Production capacities of China-owned PV cell and module manufacturing facilities in third-party countries go mature, and it is more profitable for Chinese vendors to ship from their products manufactured in third-party countries. Consequently, more Chinese vendors will directly ship PV products for U.S. orders from their facilities in third-party countries in the future. According to the final ruling on the AD duties, the tariff rate is 19.62%. Regardless of how the tariff rate is calculated, there is no big difference in shipping cost, so Chinese vendors can adjust their strategies as necessary.

Because the demand in China for the third quarter is expected to be weak, it is likely that Chinese vendors will continue to partially use local production to fill U.S. orders. Given that spot prices continue to fall, the U.S. is seen as a higher margin market. Still, it is likely that prices will be gradually squeezed in the future. Prices will fall from US$0.58-0.6/W to US$0.55/W by the end of 2016.

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