Chinese Customs have issued a report on import and export of solar-grade silicon in China for October. According to this report, imported quantities as well as prices have continued to drop. The report is interesting, because it shows market trends after the Chinese government installed anti-dumping and anti-subsidy measures.
The imported quantity of solar-grade silicon stopped at 5328T in October, while the average price was 18.27 US dollars per kilogram. The total share of solar-grade silicon imported through direct trade was 24.2%, or 1289T, while the share imported as material to be processed was at 4039T, or 75% of the total imported quantity. Although the share is still high, solar-grade silicon imported as material for processing also saw a drop of 32.3% compared to last year.
What is interesting, among all these red numbers, is that one was green. That is solar-grade silicon imported from Taiwan. Its share increased to 11.7%.
According to Solar Star Consulting, the drop in imports and prices was not a result of anti-dumping and anti-subsidy tariffs imposed by the Chinese government on American and South Korean producers in July of this year, but was more a logical consequence of the low season in the solar industry.
Analysts at Solar Star Consulting added that the increase in imports from Taiwan might be the sign of future trends. That is, Taiwan might become a bypass for imposed tariffs and penalties for American and Korean exporters, and also from European manufacturers if China decides to impose tariffs on them, too.
Despite this interesting conclusion about Taiwan, analysts have primarily focused on solar-grade silicon as material imported for processing, which they see as a new way for foreign companies to bypass Chinese customs. In their analysis, naturally, they have focused on three major exporters: USA, South Korea and Germany, from which exports to China, according to Customs’ data, amount to 84.81% – Germany with 37.3%, South Korea with 25.8% and USA with 21.7%.
The biggest drop in exports in the Chinese market was recorded in Korea, at 45.5%. But analysts are convinced that this decrease in exports was primarily due to a horrible accident in one of Korea’s main solar-grade producers, OCI, in July of this year. Due to a water tank explosion in one OCI’s factories, three people lost their lives and ten more were injured. Nevertheless, the true reason may be found in OCI’s announcement that it will hold production expansion until global prices of solar-grade silicon get a bit higher.
At the same time, with export slowing down, prices from these exporters also decreased. Americans were selling solar-grade silicon at 13.49 US dollars, South Korea at 17.41 US dollars and Germany at 20.32 US dollars, which is a decrease of 7.7%.
The Office of Silicon Producers, which initiated these measures with the Ministry of Commerce at the end of 2011, is not happy with recent government measures and says that the price decrease was due to weak anti-dumping and anti-subsidy measures imposed by the Chinese in July of this year, and also the lack of the same measures against European manufacturers.
Members of the Office explain that despite recently imposed measures – duties ranging from 53.3% - 57% for American exporters and 2.4% - 48.7% for Korean exporters – even the highest price from these manufacturers was still lower than the global production cost of solar-grade silicon, which means that their price is still cheaper than the one found among local producers and that it is still heavily subsidized.
This makes a tremendous pressure on local producers as well as the market, according to the analysis in the Solar Star bulletin, which added that these data only show how trade protection measures did not improve the situation among Chinese producers. In fact, it only made processing materials more attractive for foreign exporters as a method to evade imposed tariffs.
As for processing materials, insiders say that there are two lines of trade in the Chinese market. First, there are manufacturers that produce products with the client’s materials and parts, and then there are those that import materials and parts from foreign markets. It seems that companies that use imported materials and parts are far better off when it comes to profits.
That is, companies that deal with imported parts and materials only assemble products and sell finished products on the market, which means that their profit relies on the product market. On the other hand, producers that manufacture for a client depend on labor price, and have no means to evade tariffs and penalties imposed on this material. So it is no wonder that the above manufacturers have much bigger profits than the latter ones. This kind of situation made analysts at Solar Star conclude that this part of the industry should be a new target for tariffs and penalties by the Chinese government.
These conclusions are confirmed by the high share of processing materials in exports to China by three major country exporters. Korean exports of processing materials and parts amount to 63%, German to 70% and Americans seem to only use this way to export, as their total share is 90.6%
But, analysts warn, even if the government imposed sanctions on this part of the market, they would probably have to deal with the Taiwan issue. In other words, as we mentioned before, more and more exporters use Taiwan as a back door to the Chinese market. Taiwan’s share in exports is already at a record high. Just in October it rose 1.7% compared to the previous month.
Based on this, analysts seek more active anti-dumping and anti-subsidy measures, because, as they concluded, as soon as the Chinese government imposes one measure, another hole opens. In other words, the Chinese government should be more active and flexible in implementing trade protection measures for its market.
