EU-China PV trade agreement – is anyone happy?

The EU Trade Commissioner Karel De Gucht announced in the last few days that he has come to an agreement with the Chinese Chamber of Commerce around anti-dumping duties, which will be imposed on Chinese made solar modules. But it seems that apart from the Commissioner and perhaps some of Europe’s Winemakers, few are happy.

The agreement effectively places a price undertaking (or “floor price”) on solar module imports from approximately 90 Chinese companies, covering around 7 gigawatts (GW) of shipments in a market projected at up to 12 GW this year.

The floor price has been set at 56 euro cents per watt (c/W), which is equivalent to roughly US $0.75 c/W. For those companies who participated in the agreement, they will only need to adhere to the floor price and by doing so will avoid the  duties which were proposed as two steps, starting with 11.8 per cent on 6 June and 47.6 per cent on average on 6 August 2013. 

Europe’s winemakers bubbled to the surface in the dispute when China announced a coincidental investigation into wine imports from Europe into China which some claim was a retaliatory maneuver. However, with the agreement on solar module tariffs, China has frozen the wine import price investigations.

The ramifications of this dispute are significant and highlight the complexity of support mechanisms used in different trade zones. On the one hand, the EU Prosun group (who were arguing for an 80c/W floor price) argue that tens of thousands of jobs have already been lost and claim that the agreement is “contrary to European Law”.

On the contrary, another trade association representing installers and project developers in Europe, the Alliance for Affordable Solar Energy (AFASE), has criticised the floor price as being too high and warns that it risks damaging the industry by forcing installed prices up.

Whether it is too high or too low is a matter of perspective but two things are certain. One, it creates an artificial market price (and the track record of artificially set market prices is not good) and two, it provides an incentive for Chinese companies to divert products to countries where they can still compete on price without such barriers; like Australia.

We are of course small fry in the global demand balance, and the increased profitability attainable in Europe must represent a hugely enticing chance to reverse the losses that have been accrued in recent times.

Nonetheless, according to discussions I had with several PV manufacturers at the recent Clean Energy Week and Intersolar conferences, it was suggested that Australia does look appealing to at least some.

But how significant is the price impact really?

We track global price indexes from a huge range of sources and have been converting for currency exchange on a weekly basis since 2012. The graph below demonstrates two key things that are relevant.

Firstly, since January 2013, prices have been generally rising in European markets. The rise and fall in US$ and AUD$ has varied (both up and down) as our currencies have shifted. Secondly, according to our calculations, it shows that the market price in July (Euro c/W) has stabilised and is currently at 57c/W on average. Secondly, it also shows that when converted to US$, the price is already at US$ 0.74c/W; not very far from the 56c/W/75cW floor prices.

EU pv price

So is this a deal to simply maintain the status quo in a market that has already found something of a price equilibrium? Perhaps.

Certainly, these average price points imply there will be some selling below and some above these levels and it is these fringes that must be watched carefully. In Australia most Tier 1 & 2 suppliers are also close to this level (if corrected for exchange rates) but in the last week I have seen multiple offers for Tier 3 and some Tier 2 products as low as AUD$0.55c/W. Clearly, this is dumping below cost and a low end product.

The good news? There is some.

Low prices are helping to keep our battered market stimulated and in a potentially tough year, that’s good news.

More importantly, according to recent analysis we have conducted for our just released report “Australian PV – Technology and Brands” we have measured a trend away from Tier 3 volume in our market. Consumers and solar dealers alike seem to recognise that there is a price to pay for buying at the bottom end.

This post first appeared at Solar Business Services

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