NEW ENERGY: Solar Panel Makers Face New Storm From India

Bottom line:  India is unlikely to levy anti-dumping tariffs on Chinese solar panel makers, despite the likelihood that it will launch an investigation.

India set to launch anti-dumping probe on Chinese panels

The news just seems to be getting worse and worse for China’s embattled solar panel makers. First the group was hit a few years back by anti-dumping tariffs from the US and Europe, and more recently the highly cyclical industry has gone into a downturn that has pushed a growing number of players into the red. As if that wasn’t bad enough, media are reporting that India may be getting set to launch an anti-dumping investigation against the group.

The news has been spooking investors somewhat, but not as much as you might expect. In fact, most of the solar shares have been on a rally for the last month, and have pulled back a little in light of this news from India. Perhaps that’s because some are saying an anti-dumping probe will take at least a few months to complete, and also that it’s far from clear that India will actually rule against the Chinese companies.

All that said, let’s zoom in on the latest news that quotes a Chinese industry association official saying an anti-dumping probe by India is likely to be announced in the next few days. (English article) The main impetus for such a probe appears to be a sudden spike in Chinese exports to the market, which could now account for nearly a third of all panels shipped from China in the first five months of the year.

The reports say Chinese solar panel exports to India jumped 82 percent in the first five months, presumably as manufacturers got increasingly shut out of the traditionally strong US and European markets due to trade restrictions. In the meantime, India has embarked on an ambitious plan to build up its own solar power generation, in a bid to avoid the kind of air pollution that now frequently chokes China.

The combination certainly looks good on paper. India wants to quickly build up solar power, and China is more than happy to supply cheap, low-end panels to do that, thanks in no small part to generous subsidies from Beijing and local governments in China. The hitch appears to be coming from a handful of India’s own homegrown solar panel makers, who, like producers in the US and Europe, are objecting to government largess enjoyed by the Chinese companies.

Counterproductive

One analyst says that this likely probe is unlikely to result in new punitive tariffs, because it would sharply drive up panel prices and make it difficult for India to reach its clean power installation goals. That does seem like a reasonable argument, especially because the country doesn’t really have a notable domestic panel-making industry to protect, at least not at this point. But it may want to try to build up such capacity, especially if solar is going to be a major power source going forward, which looks likely.

As I said at the outset, investors don’t seem too worried just yet about the development, though clearly there is some concern. Canadian Solar (Nasdaq: CSIQ) shares are down about 5 percent over the last few days, while ReneSola (Nasdaq: SOL) is down by about half that amount. JinkoSolar took an 8 percent hit in the latest trading session, though the stock had run up 40 percent before that over the previous two weeks, so it looks like there was probably some speculation going on behind the scenes.

At the end of the day, the analyst who argues India is unlikely to levy punitive tariffs could quite possibly be right, even though an anti-dumping probe does seem likely. But that still doesn’t change the fact that these Chinese panel makers are brimming with product that nobody seems to want these days, and thus are likely to face a difficult time over the next year or two. India may absorb some of that, but it does appear that much of those sales are being heavily discounted and are hardly likely to help the bottom line of the Chinese manufacturers.

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