A month after the anti-dumping ruling, module prices in the U.S. are falling. What is the cause?
Almost a month ago the Department of Commerce imposed 31% anti-dumping duties on cells made in mainland China. Although considered a preliminary, the judgment it is expected to stay in the final ruling slotted for the announcement later this year. The decision has been celebrated by some of the U.S. manufacturers as a major victory, since they are holding a belief they will receive a relief from the brutal price wars waging elsewhere in the world.
Despite the heavy levies, since the ruling module prices have actually decreased.
The short answer may be a temporary inventory build-up before the ruling, as the top Chinese module manufactures raced to ship modules to the U.S. since late last year. More importantly, the Chinese made modules from tier one companies will not be stopped from reaching the US; therefore prices may go up only slightly, if at all.
Four Chinese PV companies, Suntech (NYSE: STP), Yingli (NYSE: YGE), Trina Solar (NYSE: TSL) and Canadian Solar (NASDAQ: CSIQ) are the primary exporters of Chinese-made modules. During the first quarter, they shipped a combined 500-600 MW of modules to American market. Adding shipments made by Jinko Solar (NYSE: JKS) and Hanwha SolarOne (NASDAQ: HSOL), the total amount of imported modules should exceed 600 MW in Q1-2012. Of course, other module manufacturers are not standing still. The US based First Solar (FSLR) and SunPower (SPWR), Japanese Solar Frontier, as well as Germany’s SolarWorld and Q-Cells also shipped to the U.S. during the same quarter. A rough estimate of the output from non-Chinese makers estimates no less than 600 MW of shipments in the period, for the overall total in area of 1.2GW. In the recently published report, SEIA described total of 506MW solar installations completed during Q1, leaving well over 700MW in the inventories, unused.
Before the ruling, there was a pervasive optimism on the anti-dumping ruling among the top Chinese PV makers. There were voices of support from CASE, SEIA as well as DuPont, Applied Materials and GT Solar as they lobbied against the anti-dumping duty. In the expectation fueled by this optimism duties were seen to be below 10%. With exception of Hanwha SolarOne, no company slowed down nearing the ruling date, despite the well-known retrospective 90-day clause. The provisions, which were calculated to soften the impact, were made with minimal percentage in mind. During the first half of second quarter, the pace of imports might have slowed down somewhat, still the inventory is likely to continue to build up in the U.S.
Earlier this week, research firm GTM updated its target for 2012 PV installations in the U.S. It raised the estimate from 2.8 GW issued a few months back to 3.3 GW, reflecting the strong activity so far in the year. This would put an average of 930 MW installations for each of the last three quarters of the year. If one takes into account the fact that FSLR will use 1GW of own modules in the US installations, there should be more than one-quarter worth of crystalline silicon modules in inventory at the moment. Therefore, the pressure is up on the developers to move accumulated modules. In result quoted pricing went down more than 10 cents per watt from Q1’s average selling price.
Earlier this week, at the Intersolar industry exhibition in Munich, officials from Jinko Solar and Suntech commented on the U.S. anti-dumping ruling and said that module pricing in the U.S. was likely to rise or decline at a slower pace short-term due to the ruling. Yesterday, Suntech issued a press release which appeared to retract comments made at the Intersolar by its Chief Commerce Office, Andrew Beebe. It stated that Suntech has no intention to raise its module price in the U.S. It also said there is no official price set by the company, instead the price will be negotiated between the buyers and sellers. So it is safe to say market forces will outplay companies’ wishes.
Longer term, the price dip is likely to stabilize once inventory is whittled down and the ruling indeed creates a hiccup in the Chinese shipments. Latest DOC number showed the import from mainland China dropped 66% a month after the ruling. The ruling also added to the costs from the imports – a good estimate is by 6 cents/w, on top of the 3-4% or so anti-subsidy duty. Therefore the total extra costs run about 8 to 9 cents/w. If the Europe module price stabilizes at 70 cents/w going forward, it is expected the module price at the U.S. should be in the upper 70s. So indeed, the module price may rise a bit from current level.