Taiwan Solar Stocks Fall After U.S. Expands Trade Penalties

Taiwanese solar stocks led by Motech Industries Inc. fell after the U.S. proposed expanded penalties on solar-energy imports in a victory for the U.S. unit of SolarWorld AG, which accused China of shifting production to Taiwan after it lost an earlier case.

Motech, Taiwan’s biggest solar-cell producer, slumped 6.9 percent to close at NT$44.40, the biggest one-day drop since May 21, 2013. Gintech Energy Corp., E-Ton Solar Tech Co. and Neo Solar Power Corp. also tumbled.

The U.S. Commerce Department issued a preliminary finding on July 25 that said overseas producers, including China’s Trina Solar Ltd. and Taiwan’s Gintech, sold goods in the U.S. at unfairly low prices, a practice known as dumping. It called for duties ranging as high as 165 percent for some Chinese manufacturers and 44 percent for those in Taiwan, according to a department fact sheet.

China hopes the U.S. can handle anti-dumping and anti-subsidy probes on Chinese solar products “cautiously,” the nation’s Ministry of Commerce said today in a website statement. The ministry, which called for a quick end to the probes, said an escalation will hurt industries in both countries.

The preliminary duties “will damage Taiwan producers most, as some Chinese producers with lower duties can still sell to the U.S.” Jennifer Liang, a Taipei-based analyst from KGI Securities Co., said today by phone, adding the duties were higher than the market expected. “The U.S accounted for about 30 percent of Taiwanese solar-cell shipments in the past year and a half.”

Other Markets

The duties will prompt Taiwanese producers to rely on Japanese and European markets more, she said.

Top Chinese manufacturers “will choose to pay the 2012 duties averaging about 30 percent” without using solar cells from Taiwan or a third country, Sebastian Liu, director of investor relations at JinkoSolar Holding Co., said today by phone. JinkoSolar will consider the possibility of a solar cell and module plant overseas while a final decision is worked out through negotiations among the two nations, he said.

“We should not have to compete with dumped imports or the Chinese government,” Mukesh Dulani, president of SolarWorld Industries America Inc., based in Hillsboro, Oregon, said July 25 in an e-mail. The Commerce Department’s actions “should help the U.S. solar manufacturing industry to expand and innovate.”

The SolarWorld case has split the U.S. solar-energy industry, with manufacturers seeking protections against being undercut by cheap imports, and installers pressing for low-cost equipment, regardless of origin. It’s also the latest spat between the U.S. and China, the world’s largest economies, which are vying to become the global base for clean-energy manufacturing.

Negotiation Urged

“We strongly urge the U.S. and Chinese governments to ‘freeze the playing field’ and focus all efforts on finding a negotiated solution,” Rhone Resch, president of the Solar Energy Industries Association, said in a statement. “This continued, unnecessary litigation has already done serious damage, with even more likely to result as the investigations proceed.”

A final decision by Commerce Department will be made in mid-December. The independent U.S. International Trade Commission will determine by the end of January whether U.S. makers of the solar-power goods were harmed by the imports. If so, the duties will be permanent.

U.S. imports from the two nations of the crystalline silicon photovoltaic cells, panels and modules used to make electricity from sunlight were valued at $2.2 billion last year, the Commerce Department said.

Officials from China’s Embassy in Washington didn’t respond to requests for comment. Taiwan’s economic office in the U.S. didn’t have a comment because the investigation involved Taiwanese companies, not its government, Frank Wang, a spokesman for the office, said in an e-mail.

‘Negotiated Solution’

Importers of Trina Solar’s goods will have to pay U.S. Customs agents a deposit of 11 percent on the goods, according to the Commerce Department. Those for Wuxi Suntech Power Co. will be subject to a duty of 14 percent. The agency’s fact sheet included a list of more than 40 Chinese companies that will be subject to the penalty tariffs. The department said a “China-wide entity” is subject to a 165 percent rate.

In the Taiwan investigation, the U.S. set penalties of 28 percent on Gintech’s goods and 44 percent on Motech Industries Inc. All other Taiwan producers are subject to a 36 percent rate.

SolarWorld won a similar U.S. case against Chinese producers including Trina Solar Ltd. and Suntech Power Holdings Co. in 2012. SolarWorld officials said that since the decision, China’s manufacturers have exploited a loophole by assembling part of the product in Taiwan to avoid penalty tariffs.

Attorneys for Chinese and Taiwanese producers have said SolarWorld is seeking to exclude from the U.S. market most imports of solar products that include crystalline silicon.

U.S. Review

During the initial U.S. review, SolarWorld’s U.S. affiliates were a target of cyber-espionage by the Chinese military, the U.S. Justice Department said in charges unsealed May 19. The company has asked the Commerce Department to investigate.

Meanwhile, SolarWorld’s challenges to China’s trade practices continue. The Commerce Department in a preliminary finding on June 3 sided with the company by setting duties as high as 35 percent on the solar products from China after finding that the government in Beijing subsidized the goods.

The latest duties would be in addition to those penalties, if they become permanent. They apply to a broader set of goods than the 2012 sanctions.

— With assistance by Brian Wingfield, and Feifei Shen

Before it's here, it's on the Bloomberg Terminal.