US Solar Makers Fire a Shot in Chinese Trade War (STP, TSL, JASO, YGE, LDK, FSLR, SPWRA, WFR, RSOL)

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The blossoming trade war with China has just been warmed-up a notch. Led by a German solar PV maker with operations in the US, seven US-based companies have filed a trade case with the US Department of Commerce seeking tariffs of more than 100% on solar PV panels imported into the US from China. The only US solar maker willing to put its name on the complaint was SolarWorld, the German company that supports the most solar PV panel manufacturing jobs in the US.The trade case alleges that Chinese solar PV makers, including but not named specifically, Suntech Power Holdings Co. Inc. (NYSE: STP), Trina Solar Ltd. (NYSE: TSL), JA Solar Holdings Co. Inc. (NASDAQ: JASO), Yingli Green Energy Holding Co. Ltd. (NYSE: YGE), and LDK Solar Co. Ltd. (NYSE:LDK).  
 
Chinese bank loans to solar PV makers topped $25 billion last year. US solar PV makers First Solar Inc. (NASDAQ: FSLR), SunPower Corp. (NASDAQ: SPWRA), and MEMC Electronic Materials Inc. (NYSE: WFR) were not named as co-complainants, and a good guess is that the six makers that joined SolarWorld are start-up companies trying to get production going.

It’s not too surprising that First Solar, SunPower, and MEMC are keeping a low profile on this issue. All three own project development and construction companies that focus on large-scale solar projects that are highly likely to use the company’s own solar panels. Pure solar installation companies, like Real Goods Solar Inc. (NASDAQ: RSOL) and privately held Sungevity and SolarCity, have welcomed the lower prices for solar panels because it lowers their system costs and generally helps their business.

As we noted earlier this week, solar panel manufacturing jobs are relatively small beer in the US. The increased availability of financing for residential and commercial rooftop systems is driving the solar installation business in the US, and it is being helped by lower prices for solar panels.

Another twist in this story is that Chinese solar PV makers are currently suffering at least as much, if not more, than their US counterparts. Plummeting prices coupled with manufacturing capacity increases have hurt Suntech and LDK significantly. Some of the Chinese solar makers are also being questioned about their accounting practices, and that has cast a pall over the entire industry.

Unanimity among US solar companies is virtually guaranteed to go missing as this case proceeds. Every company has a different axe to grind, with the large US PV makers/project developers clearly wanting to steer clear of the case, along with US installers who benefit from the lower prices for solar panels. SolarWorld, with about 1,300 US manufacturing employees, and a handful of other small start-up firms are likely to be the only supporters of the trade case.

Politicians from both parties are likely to jump on this case because it has an obvious good guy — the US — and an obvious bad guy — China. Just about any comment from either party can be safely ignored. The lost solar manufacturing jobs would have gone to offshore in any event. Most of First Solar’s manufacturing is done in Malaysia and SunPower’s largest plants are in the Philippines.

The real reason that China supports so much solar manufacturing is not simply labor costs, but the low cost and easy access to capital. That may be changing now, as the country tries to cool off its economy and its inflation rate. The ability of China’s manufacturers to continue driving down costs may be coming to an end regardless of this trade case.

Paul Ausick

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