July 18, 2013 1:14 pm

China imposes tariffs on polysilicon exports from US and S Korea

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China has issued harsh anti-dumping duties for imports of polysilicon, a solar panel ingredient, from the US and South Korea, further escalating trade tensions that have fissured the global solar panel industry.

The ruling raises fears in Europe that Beijing could impose similar duties on European polysilicon makers, which have been under investigation by Chinese authorities since last autumn.

Beijing and Brussels are locked in difficult trade negotiations over Chinese exports of solar panels to Europe, and are racing to reach an agreement on Chinese solar imports before a looming August 6 deadline. The trade case, which is the European Commission’s largest, imposed duties of 11 per cent on Chinese solar panels, which will rise to an average of 47 per cent if a deal is not reached by the August deadline.

China’s Ministry of Commerce said on Thursday that a year-long investigation had concluded that polysilicon was being dumped into China by US and South Korean companies, and that this was causing “substantial damage” to Chinese polysilicon producers.

The Chinese investigation into the US and South Korea was started last July, shortly after the US imposed anti-dumping and countervailing duties on Chinese solar panels. It was widely seen by industry executives as retaliation for the duties imposed by the US.

The duties imposed on US polysilicon companies, including subsidiaries of Dow Corning and SunEdison, range from 53.3 to 57 per cent, and apply only to solar-grade polysilicon. The duties imposed on South Korean manufacturers are lower, ranging from 2.4 to 48.7 per cent.

A senior official at the South Korean trade ministry said China’s imposition of punitive tariffs was “expected” and would not have a big impact on South Korea’s trade with China.

“We are somewhat relieved that the tariffs are rather lower than in the case of the US,” the official said.

The ruling raises the prospects that China will take similar measures against polysilicon makers in the EU, who count China among their biggest markets. China imported $870m of European polysilicon in 2011, according to customs data.

The Chinese Ministry of Commerce has not shied away from apparent retaliatory measures to European duties on Chinese panels, such as announcing a dumping investigation into European wines on the day after the European Commission announced provisional duties on Chinese panels.

Earlier this month, the German government said China and EU had basically reached agreement over solar panel exports, and that Beijing would not impose duties on European polysilicon exports.

However, more recently the talks reached an impasse, and Thursday’s announcement from Beijing, with the implicit possibility of similar sanctions extended to Europe, further raises the stakes.

European polysilicon makers, such as Wacker Chemie of Germany, have been lobbying against the solar panel tariffs, due to fear of retaliation in their China sales.

Lin Ruhai, head of silicon at the China Nonferrous Metals Industry Association, a government-linked think tank, said the duties could drive up polysilicon prices by as much as 10 per cent.

However, he said this was unlikely to provide much relief to China’s struggling polysilicon companies. “The domestic polysilicon industry is in a difficult situation and this will last for quite a while,” Mr Lin said. “Mofcom’s decision will alleviate the situation for some better-off companies, but won’t do much for most companies.”

China is the world’s largest producer of solar panels, and the rapid expansion of solar panel manufacturing in China during the past five years has created a glut of solar panels worldwide and caused solar panel prices to fall steeply. At the same time, China is a big importer of many solar panel ingredients, such as polysilicon and specialised manufacturing machinery, from the US and from Europe.

Additional reporting by Kang Buseong in Seoul and Li Wan in Beijing

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