China Considers Its Own Case Against U.S. Polysilicon Exports Following Dumping Complaint

In less than a week from now, commissioners with the U.S. International Trade Commission will be one step closer to making a decision on SolarWorld Industries America's trade dispute against Chinese dumping of solar cells.

Industry stakeholders won't know which way the trade dispute will go until Dec. 2, when commissioners vote on the matter after its investigators submit their preliminary report Nov. 28.

The trade dispute has been divisive. China's commerce ministry has been openly critical of the trade complaint, and though some Chinese companies announced Monday their solar components will be sold away from the U.S. market to alleviate tensions, Bloomberg reported Tuesday a Chinese solar trade group is asking for its own trade investigation into U.S. exports of polysilicon -- the raw material used to manufacture solar cells -- in China.

Here at home, the number of companies joining in on the debate has mushroomed five weeks after SolarWorld filed its complaint in October.

At face value, it looks like a lopsided conflict. The Coalition for American Solar Manufacturing, led by Hillsboro, Oregon-based SolarWorld and six other U.S. firms, is supported by 140 U.S. companies. Its opposition, The Coalition for Affordable Solar Energy, is made up of 52.

It's a classic example of one house divided, but who will stand come December?

SolarWorld's Oct. 19 dumping complaint with the ITC alleges the sheer volume of Chinese solar components coming into the country is hurting U.S. businesses. It contends the illegal trade practices have cost thousands of U.S. jobs from California to New York, and that Chinese solar exports are responsible for a 40 percent decline in solar panel prices over the last year, according to its website.

However, Gordon Johnson, managing director and senior analyst for alternative energy companies at Axiom Capital Management, said SolarWorld's argument holds no weight, and that those who understand the industry can tell China is not dumping solar cells into the U.S. market.

The Global Trade Atlas assessed the value of Chinese solar components entering the U.S. at $1.5 billion in 2010, that's up from roughly $510 million two years ago. Imports totaled roughly 46 million components last year, up from 27.5 million in 2008.

Trade data compiled by the ITC shows Chinese imports of solar products either assembled into modules or made up into panels have risen by 170.7 percent since January alone. Representing $1.9 billion this year, Chinese imports constitute 41.6 percent of assembled U.S. solar cell imports, and have increased by more than 700 percent since 2008.

But to blame falling solar component prices on one specific country like China is ridiculous, said Johnson, who added the solar industry in general is in the midst of a bursting solar supply bubble, and the price of solar components is naturally coming down.

There is simply more supply than there is demand, Johnson said. It's very simple economics.

And it's not the Chinese's fault, Johnson said. Intermittent blips of high demand for solar components in Europe caused companies to increase their production of solar cells worldwide for several years. In China, companies rode this wave by switching their production to solar cells. Now that demand has tapered off, companies find themselves faced with falling prices.

You can't complain because a guy is beating you, Johnson said.

He said Chinese solar companies are not dumping their solar components - they can simply make them cheaper and more attractive to investors.

But that goes to the heart of SolarWorld's complaint. Ben Santarris, head of communications with SolarWorld, said the Chinese government is subsidizing their manufacturing, giving Chinese companies an unfair advantage, and that though prices are naturally falling because of oversupply, it is the Chinese who are fueling the drop.

We really think we have a strong case, Santarris said. It's a regrettable situation to defend our industry from a predatory attack, Santarris said.

So, have solar prices fallen because of oversupply, low demand and advancements in manufacturing techniques, or are the Chinese bringing the U.S. market down?

It is really impossible to gauge what is going to happen, said John Smirnow, vice president of Trade and Competitiveness with the Solar Energy Industries Association. Smirnow said the ITC will have to answer that question and determine if the falling price of polysilicon and modules are following simple market trends, or if they are spurred by foreign dumping.

Opponents of SolarWorld's dispute say any tariffs placed on solar components will hurt the solar industry in the United States, which relies on low prices to remain a viable industry.

Ken Button, president of Verengo Solar, whose company opposes the trade dispute, said depending on the size of the tariff, if one is imposed on Chinese solar imports, up to 100,000 jobs are at risk.

I think it's counterproductive as an industry, Button said.

Johnson said he does not expect to see an uptick in demand for solar soon. Especially in this economy. Faced with too many industry players and an oversupply, Johnson said prices will continue to drop to below companies' cash costs. When that happens, solar companies everywhere in the world will be dumping their excess supply.

It's pretty ugly, he said.

The dispute could also extend to Europe, where SolarWorld's German headquarters is reportedly also looking to file a trade case against China.