Trade Case Against China’s Solar Industry: What’s Next for American Manufacturers?

Trade Case Against China’s Solar Industry: What’s Next for American Manufacturers?

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Seven American solar panel-makers are filing a trade case on Wednesday against top competitor China. High price competition undercuts American solar's profit margins and has already led several large companies including Solyndra and Evergreen Solar to file for bankruptcy.

The trade complaint, filed at the Commerce Department, accuses the Chinese industry of profiting from heavy government subsidies and "dumping" its products in the United States at prices that undercut American producers.

According to the trade complaint, Chinese state-owned banks have extended nearly $41 billion in loans and lines of credit to the country’s solar panel manufacturers. The complaint asks the government to impose tariffs of over 100 percent. (via New York Times)

New York Times likens the case to Detroit Automakers taking on Japanese producers in the 1970's and 1980's, but like in that case an American win may not translate into business success. Like the Japanese automakers who circumvented legislation and tariffs by simply building factories on US soil, Chinese solar companies have already begun to do the same.

Setting up solar panel factories is a relatively quick process, taking anywhere from six months to a year depending on the steps of assembly it is designed for. For example, many Chinese solar power manufacturers may find the initial steps, including the production of a polysilicon wafer, cheaper to do in China before shipping to the US for final production.

Industry analysts warn the consequences of the trade complaint will only accelerate the Chinese manufacturers expansion into the United States.  It can also lead to Chinese retaliation. According to New York Times, "the country might, for example, shift more of its hefty annual purchases of solar panel manufacturing equipment to German suppliers instead of American ones."

These shipments to China total nearly $2 billion in raw materials and equipment every year. Tom Zarrella, a former chief executive of GT Solar said the loss "would be a travesty for the solar industry."

A significant Chinese solar presence in the United States could be good news for American solar consumers who will find themselves with a more diversified solar panel market. And according to the New York Times, such demand "could benefit American consumers of solar power if it helps propel the technology beyond its current niche status."

In all, American solar companies will have more difficult times ahead of them despite what many believe is a sure win in the case against Chinese producers.

Interested in following the trend? Here is a list of the 2 largest US solar companies trading on the stock market to keep an eye on, as well as China's three biggest solar power companies.

 

1. First Solar, Inc. (FSLR, Earnings, Analysts, Financials): Market cap of $4.51B. Manufactures and sells solar modules using a thin-film semiconductor technology. Country of Origin: USA. Share price as of 10/21 at $53.19. The stock is trading -11.82% below its 20-day MA, -33.03% below its 50-day MA, and -56.54% below its 200-day MA. The stock is a short squeeze candidate, with a short float at 34.58% (equivalent to 7.31 days of average volume). It's been a rough couple of days for the stock, losing 7.99% over the last week.

 

2. SunPower Corporation (SPWRA, Earnings, Analysts, Financials): Market cap of $906.54M. Designs, manufactures, and delivers solar electric systems for residential, commercial, and utility-scale power plant customers worldwide. Country of Origin: USA. Share price as of 10/21 at $9.18. The stock is trading 7.21% below its 20-day MA, -18.8% below its 50-day MA, and -43.27% below its 200-day MA. This is a risky stock that is significantly more volatile than the overall market (beta = 2.15). The stock is a short squeeze candidate, with a short float at 6.79% (equivalent to 10.02 days of average volume). The stock has had a couple of great days, gaining 9.17% over the last week.

 

3. LDK Solar Co., Ltd. (LDK, Earnings, Analysts, Financials): Market cap of $468.81M. Engages in the design, development, manufacture, and marketing of photovoltaic (PV) products; and development of power plant projects. Country of Origin: China. Share price as of 10/21 at $3.07. The stock is trading -6.17% below its 20-day MA, -33.13% below its 50-day MA, and -64.39% below its 200-day MA. This is a risky stock that is significantly more volatile than the overall market (beta = 2.78). The stock is a short squeeze candidate, with a short float at 18.53% (equivalent to 7.69 days of average volume). It's been a rough couple of days for the stock, losing 6.57% over the last week.

 

4. Suntech Power Holdings Co. Ltd. (STP, Earnings, Analysts, Financials): Market cap of $385.54M. Engages in the design, development, manufacture, and marketing of photovoltaic (PV) products. Country of Origin: China. Share price as of 10/21 at $2.09. The stock is trading -11.25% below its 20-day MA, -45.13% below its 50-day MA, and -71.22% below its 200-day MA. This is a risky stock that is significantly more volatile than the overall market (beta = 3.06). It's been a rough couple of days for the stock, losing 10.08% over the last week.

 

5. Trina Solar Ltd. (TSL, Earnings, Analysts, Financials): Market cap of $510.50M. Designs, develops, manufactures, and sells photovoltaic (PV) modules worldwide. Country of Origin: China. Share price as of 10/21 at $7.26. The stock is trading 4.83% above its 20-day MA, -30.13% below its 50-day MA, and -65.23% below its 200-day MA. This is a risky stock that is significantly more volatile than the overall market (beta = 3.2). The stock has lost 71.99% over the last year.

 

 

(By Rebecca Lipman. Author owns shares in FSLR)

 

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One Response to “Trade Case Against China’s Solar Industry: What’s Next for American Manufacturers?”

  1. FSLR has the lowest cost and will be able to survive the dumping. TSL is the next best company: U.S.-listed SEC-watched balance sheet but operates with a low cost structure in China.

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