An interesting thing happened after the US Department Commerce said earlier this month that it planned to impose tariffs of as much as 35% on Chinese solar panels – the stocks of Chinese solar panel makers continued to rally as if nothing happened at all.
To be fair, in the week following the June 3, decision, the stocks of US-based solar component makers also were up big. But many analysts considered it unusual to see Canadian Solar, for example, rise 16% in a week, while JinkoSolar climbed 12% and Trina Solar increased 11%.
Many investors had been looking to ETFs for opportunities to invest in solar. An alternative to ETF investments to consider, the Chinese Solar motif, has gained 9.4% in the past month. During that same time period, the S&P 500 is up 2.2%. So far in 2014, the motif has decreased 19.6%; the S&P 500 has risen 7.5%.
A report in Investor’s Business Daily noted that the tariffs are likely to hoist the average prices of solar modules made in China by 14%, according to a report by GTM Research.1 The hikes are likely to begin taking effect in July, narrowing what has been, on average, a 25% differential in China vs. US panel prices, IBD said.
Because prices were low, solar panels made in China were one-third of all panels installed in the US, the report said. They constituted more than half the panels used in residential installations. In Europe, Chinese companies are reported to control 80% of the market.
The US had imposed tariffs in 2012, but Chinese solar avoided them by assembling their panels from components made outside of China, IBD said in its report. The current ruling aims to close that loophole.
But investors bidding up the prices of Chinese solar stocks may have reason to believe the tariffs, even if finalized, won’t have much impact. As the Wall Street Journal noted earlier this month, the Chinese manufacturers are already pivoting away from the US, where demand is slowing, to feed a growing appetite for solar panels back home.2
US imports of Chinese-made solar products last year fell to $1.49 billion, less than half the $3.12 billion imported in 2011, according to the U.S. Commerce Department, which cited US census data, the Journal said.
Meanwhile, China recently set an ambitious target of boosting its solar-panel capacity to 35 gigawatts by 2015, up from around 18 gigawatts now, which would put it on par with Germany, the current world leader.
China has pushed to build a homegrown solar industry as part of an effort to grow beyond its reputation as a low-cost maker of simple goods, according to the Journal, and it also wants to help address the country’s energy needs and severe pollution problems.
At this point, it’s possible that Chinese solar manufacturers see growth from the US as desirable but no longer absolutely necessary.
1Alan R. Elliott, “Three China-Based Solar Plays Surge, Despite Tariffs,” investors.com, June 20, 2014, http://news.investors.com/investing-international-leaders/062014-705626-china-solar-plays-rise-despite-tariffs.htm, (accessed June 25, 2014).
2Liyan Qi and Wayne Ma, “US-China Solar-Products Dispute Heats Up,” wsj.com, June 4, 2014.