Europe's solar panel spat with China gets serious

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7 June 2013, Nuclear, Solar, Wind

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Chinese solar panel imports to Europe will have an average levy of 11.8% imposed for a 60-day window from June 6, 2013, rising to 47.6% if the trade dispute is not resolved in this period.

The compromise over the temporary level of import tariffs comes after opposition by some EU member states, including Germany, and fears of escalating a trade war in an EU-China trade partnership worth E500bn annually. China's Prime Minister, Premier Li, said that there would be "no winners" in a trade war and restated his willingness to "negotiate an amicable solution," but time is running out as the solar panel industry prepares for a shakeup.

China supplies around 65% of global solar panels, exporting 80% of its production to Europe in a trade partnership worth E21bn annually. Massive overcapacity, capable of supplying 1.5 times the global annual demand, has led to bankruptcy for many European manufactures and the need for a fair rebalancing of the solar manufacturing industry.

Although China is inevitably angry at the tariffs, they are legal under World Trade Organization rules. The 60-day window looks like a negotiating tactic, and challenges China to address the issue of systematically dumping solar panels in the European market at prices up to 88% lower than the costs of production, according to European Commission calculations.

The logical next step would be to agree on a minimum price for Chinese solar panel imports, but the country's launch of an anti-dumping and anti-subsidy probe into European wines the day after the announcement of the solar panel tariffs is indicative of the wider-reaching implications of protecting European solar panel manufacturers.

Other European export industries will inevitably suffer as China retaliates, while there will be a limited number of solar panel manufacturers who will benefit from the tariffs. The resultant rising average price of solar panels will likely force installers to cut their margins to maintain investor interest under inflexible levels of government support, but these cuts alone will not be able to counterbalance a likely rise of nearly 50% in the average cost of solar panels over the next three months and an inevitable slowdown of European solar markets. / / @DatamonitorEN

Source: MarketLine

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