China Investigates Polysilicon Dumping

Accuses U.S., Korea of Manipulating Raw Materials


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By Swagato Chakravorty
Monday, July 23rd, 2012

When China begins an investigation, it usually is a sign of major things afoot. In this case, the burning question is whether U.S. and South Korean exporters dumped solar-grade polysilicon—in other words, sold it below what it ought to command on the fair market.

The investigation follows a complaint made jointly by GCL-Poly Energy Holdings Ltd. (HKG: 3800), LDK Solar Co. (NYSE: LDK), Daqo New Energy Corp. (NYSE: DQ), and China Silicon Corp., which collectively are responsible for more than half of the raw material used in solar cell manufacture within China over the past half decade.

Back in May, if you recall, the U.S. imposed high duties and tariffs on Chinese-manufactured solar cells in order to combat the excessively low prices they set that caused, and still causes, the domestic market to suffer.

China, which is currently the world’s largest supplier of solar panels, has retaliated in this case by proposing a tit-for-tat investigation into U.S.-made solar panels, slated to last at least a year.

From Bloomberg:

“It’s negative” for foreign suppliers such as MEMC Electronic Materials Inc. (WFR) (WFR) and Hemlock Semiconductor Corp., which sell products to China, Keith Li, an analyst at CIMB Securities HK Ltd., said by phone. “The investigation may have little impact on prices of polysilicon, which has suffered from a supply glut and weak demand.”

Regarding the proposed U.S. investigation, China’s statement from the Ministry of Commerce indicated that they would look into a particular clause for tax-exemption that affects the “advanced-energy manufacturing industry.”

In general, the world’s solar industry is suffering from a common problem amid low demand in these hard economic times—oversupply.

Recently, almost 14 companies across the U.S. and Europe have filed for bankruptcy. The most famous instance was Solyndra LLC., which had received more than $500 million in government funding.

It looks like an emerging trade war, as this Chinese response directly counteracts the U.S. Commerce Department’s declaration back in May that Chinese solar cell imports would be subject to as much as 250 percent in import duties.

South Korea hasn’t said much, other than to state that their government is aware of the ongoing developments. OCI Co. (KRX: 010060), their biggest polysilicon manufacturer, reacted to the news of the investigation, sliding 3.5 percent last week.

The oversupply is so excessive that China tried to counter it by expanding its domestic plans of solar energy power capacity four times to a total of 21 gigawatts by 2015.


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