Canadian solar panel makers could potentially gain from a nasty spat between the United States and China over the dumping of low-cost solar equipment.
The U.S. Department of Commerce ruled late last week that solar panels and cells from China and Taiwan were being sold too cheaply in the U.S. market, and it set new import duties on them. Some of those tariffs are steep – up to 165 per cent.
The duties, which won't become permanent until a final decision in December, were imposed after the U.S. arm of a German panel maker, SolarWorld AG, complained that cheap panels from companies subsidized by governments were being dumped in the United States, making it more difficult for domestic companies to compete.
The Chinese government and China-based solar panel makers reacted negatively to the decision, but SolarWorld was thrilled. Mukesh Dulani, president of its U.S. arm, said: "We should not have to compete with dumped imports or the Chinese government. [The decision] should help the U.S. solar manufacturing industry to expand and innovate."
Companies that make panels in Canada could also benefit from a U.S. market now looking for alternative sources of supply.
"It is certainly going to open more doors for companies in Canada," said Les Lyster, chief executive of Toronto-based solar panel maker Eclipsall Energy Corp. Essentially, he said, the tariffs would "level the playing field with respect to pricing" for anyone competing with Chinese manufacturers. It also comes at a time when "the U.S. is really starting to embrace solar," he added.
The decision could also be a shot in the arm for Ontario-based companies that have, until recently, benefited from provincial legislation that forced solar power developers to buy from local suppliers. Those provisions were dropped after a ruling from the World Trade Organization.
Shyam Mehta, a solar analyst at GTM Research in New York, said that for the biggest Canadian solar panel manufacturers, such as Celestica Inc. and Canadian Solar Inc., "the tariff ruling is likely to result in a meaningful increase in exports to the U.S. in the short term."
Celestica spokeswoman Pam White said the company is still talking to customers and suppliers to determine the impact of the tariff decision. "It is a little to early to make any comments about the implications for Canadian manufacturers or Celestica. … We are evaluating it," she said. Currently, Celestica sells most of its solar panels to customers in Ontario, but it does export some to the United States.
Canadian Solar is based in Canada and has panel-making operations in Ontario, but it does most of its manufacturing in China and will get hit with high tariffs. The company's U.S. general manager Thomas Koerner said in a statement Tuesday it is "deeply disappointed" with the Commerce department's decision. The ruling is protectionist, favours one "non-competitive" manufacturer, and will have a "damaging impact" on the U.S. solar industry, he said.
Still, Canadian Solar chief executive officer Shawn Qu said in an e-mail that "our Ontario manufacturing facilities do give us more alternatives to meet customer demand."
Michael Barker, a senior analyst at solar research firm NPD Solarbuzz, said a key factor for Canadian firms is whether the solar modules they make use solar cells – the building blocks for the modules – from Chinese or Taiwanese sources.
"This anti-dumping order applies to cells, even if they are assembled into modules in countries outside of Taiwan or China," Mr. Barker said. "Canadian module assemblers would still need to [use] non-Chinese or non-Taiwanese cells in order to have their products not be subject to these duties."
Mr. Barker said the anti-dumping tariffs could cause significant disruption in the U.S., because more than half of the U.S. solar market was supplied by Chinese and Taiwanese component manufacturers in 2013.