On behalf of a comprehensive list of 66 Chinese PV companies, the China Chamber of Commerce for Import and Export of Machinery and Electronics (CCCME) is to soon start a new round of negotiation with related EU government bodies in the hope of arriving at a mutually beneficial and acceptable unit price and annual import capacity volume of Chinese PV products, as well as avoiding a wide-ranging tic-for-tat trade war between the two economic powerhouses that would inevitably harm both sides.
It is hoped that if both sides can agree upon a minimum price tag and an annual capacity volume cap for Chinese PV import within an agreed-upon timeframe, the EU would in turn withdraw its planned punitive anti-dumping and anti-subsidy tariffs on Chinese PV products supplied to the European market.
Before the negotiation officially commences, which is expected be soon, the involved Chinese PV companies have submitted to CCCME, an industry representative body with links to the Chinese government, their expectations of per-unit (watts) price, which ranges from 0.5 to 0.54 Euros per watt, and an annual quota assigned to Chinese PV imports of around 10 GW.
Proposed Price Guarantee
For the Chinese PV companies, the proposed price of 0.5 to 0.54 Euros/W represents the current market price plus an export tariff of 11.8%, which is equivalent to the EU’s first stage of punitive tariff against all Chinese PV makers from June to August. It is widely believed by Chinese industry insiders that such a price would still leave profits for the Chinese PV makers while almost matching the price of European-made PV products, whose per-watt price in the market currently stands at 0.6 to 0.7 Euros/W.
It is a generally shared opinion among Chinese PV makers that only the comparatively lower prices of Chinese-made PV products can contribute to cutting down costs of solar projects installed in Europe, which otherwise would be running at cost.
According to She Haifeng, CEO of ET Solar Group Corp, considering the decreasing FIT rates across the European market, lower-cost Chinese-made PV modules remain an ideal choice to maximize profits while maintaining a high quality standard for European downstream PV projects. “For countries such as Germany, government subsidies for large-scale [PV] power plants are fast dwindling to zero. Without the supply of low-cost Chinese PV modules, their profits would surely be in the negative,” said She Haifeng. “PV modules from suppliers in other regions, such as Taiwan and Southeast Asia, are either too high in price or insufficient in volume, rendering them unfit as replacements for Chinese imports.”
In addition, the Chinese PV makers wish to introduce annual price review and adjustment procedures into the terms of the negotiation, wherein negotiated prices of Chinese PV imports in Europe would be reviewed annually in relation to the price of silicon material and FIT rates of the European countries of that year and adjusted accordingly.
Cap on Annual Installed Capacity from China
The Chinese PV makers have proposed to the EU an import quota, wherein Chinese PV imports can contribute to a maximum of 10 GW of installed capacity in the EU market annually.
This expectation, however, runs against the EU’s own projection of installed capacity for the year 2013 - 2014, which is estimated to be 9 GW per year.
Industry observers from China, however, have largely disputed such estimation. Citing the EU’s installed PV capacity in 2012 at 16.9 GW, of which Chinese-imported PV modules accounted for 12 GW, they argue that a dramatic drop of 7.9 GW to 9 GW within one year is simply inconceivable in light of the market situation and energy need within the EU.
According to analysis by Li Xianshou, CEO of ReneSola Ltd. (ADR) (NYSE:SOL), he predicts the EU market’s installed capacity to be approximately 15 GW in 2013, of which 60% - 70% would be supported by modules from China should negotiation prove successful.
Opportunities and Challenges
While actively seeking a mutually beneficial way out for the impending punitive duties, many Chinese PV makers have long been restructuring their growth models and diversifying markets across the globe in anticipation of the potentially devastating impact of sanctions from the EU. In addition, U.S. Downstream PV power plant development and emerging markets such as South Africa and Japan are fast becoming new growth engines for Chinese PV companies, which still lead the global market in terms of production and, increasingly, in related technologies.
In 2012, Chinese export value of PV products to the EU dropped 45.1% year-on-year to 11.19 USD billion. As of now, the EU accounts for only 25% of the global PV market, a significant decrease from 50% only a year ago.
The EU, however, remains a significant PV market for China. If the EU insists upon the 9 GW estimated installed capacity in 2013, China’s quota will be as small as 3 GW, which would exact huge losses upon the entire Chinese PV industry.
In retaliation, China has immediately launched its anti-dumping and anti-subsidy probe into import wines from France, which has been a staunch supporter of punitive tariffs upon Chinese PV products. Rumor is circulating that further probes into export of luxury automobiles and other products from Europe are expected to take place as well.
Canadian Solar Inc. (NASDAQ:CSIQ)’s Zhang Hanbing suggests Sino-EU negotiations across a wide range of industries instead close in on one single industry, so that healthy competition can be introduced.
