13 June 2012
Posted in News - SPVI news
Regardless of the location, the presence of European manufacturing may become soon a necessary factor to conduct business in Europe
Much attention has been paid to the actions of SolarWorld during Intersolar in Munich. Expectations are high that the company will announce action against the Chinese companies, similar to the complaints in the US. Today, two preliminary decisions on countervailing and anti-dumping made by the US, placed on Chinese cells, levy anywhere from 35.5% to above 250% in punitive duties. While they are preliminary, the reality is that a lot of people support such action in the EU, whether rational or not.
While Chinese companies like Suntech (NYSE: STP), Trina (NYSE: TSL) or Yingli (NYSE: YGE) consider themselves global, foremost because of the distribution of their products, most of their manufacturing is done in China. In the sense of financial markets "on the global scale," this statement is more a reflection of the cosmopolitan stance with American stock market listings and access to Chinese financial markets through Hong-Kong and Shanghai. Some, like Suntech Solar and Canadian Solar (NASDAQ: CSIQ), also have manufacturing facilities in Canada and the US, mostly comprising module assembly.
While we do not know any details of the potential action in the EU, it is clear that Chinese companies should start expanding their manufacturing capabilities beyond China and avoid hurdles involving duties altogether. An interesting choice away from the mainstays like Germany or Italy is Spain, with a lot of activity recently concentrating around a single company illustrating the point. Isofoton, one of the largest solar organizations on the peninsula, joined in venture with China`s National Offshore Oil Corp.’s battery unit, Tianjin Lishen Battery, to build 150MW of solar manufacturing, of which Isofoton will own 49%. The initial investment by the Chinese is $300M. While the purpose of the venture is to supply the Asian market, shortly thereafter Isofoton announced plans to expand its own module capacity to 1.5GW and locate plants in Latin America and the Middle East. Isofoton is building 100MW of capacity in Ohio, USA, coming online in September. Isofoton had attracted the interest of Samsung in 2011, when the Korean company put €50M into a selective emitter technology through an investment into a Spanish company. The interest does not stop there; the largest world producer of solar wafers, GCL Poly Energy, signed an agreement in May 2012 with Isofoton to work on 1GW of global solar plant installations, with Isofoton building its modules on the Chinese wafers. This joint venture will result in independent manufacturing for the trackers, while the Chinese company will provide EPC and financing.
Spain, and perhaps Portugal, both members of the EU, are the best suited for the potential expansions. The presence of world-class ports and easy access to shipping lanes would fit the requirements of easy access not only to European markets, but also those of Africa, the Middle East and the US. The raw materials could be accessed in the same fashion as ready goods arriving in Europe, with lead times probably shortened if delivery would be made from Asia. The labor market in both countries, having high employment and lower wages, would contribute benefits.
Regardless of the location, the presence of European manufacturing may become soon a necessary factor to conduct business in Europe. There is very little possibility the Chinese will abandon what is currently the largest global market because of punitive measures, thus new locations and new business ties will be created to keep them in the lead.