Will China stop calling "double-reverse" on imported polysilicon?

Because of the approach of the Lunar New Year, February 2013 made people look forward to it. For the Chinese PV industry that has fallen to the bottom, this expectation comes from another level. It is reported that the Ministry of Commerce's preliminary results of the "double-reverse" polysilicon production from the United States, South Korea and the European Union will be officially released on February 20, and the preliminary tax rate may be 20%-50%. But overseas institutions don't think so. A research report from the Maxim Group asserts that China is likely to not impose heavy taxes on imported polysilicon classes; because the impact of this move on domestic PV module manufacturers may be higher than the gains from polysilicon manufacturers.

In all fairness, there is no winner in the trade war; especially in the photovoltaic industry, which has already achieved a globalized layout, it is even more important. Regardless of Europe and the United States or China, where all the trade sanctions are great, it is inevitable that "there will be a thousand injuries and eight hundred losses." Nowadays, the "double-reverse" boots in the United States have already landed, and the EU is also waiting to be sent. It is clear from their perspective that although there are gains and losses, sanctions against China may be a cost-effective economic account. Then, before we scream for China’s late counter-attacks, we may also take a serious look at the suspicions from overseas and calmly analyze the pros and cons of “double-reverse”. As Sun Tzu’s Art of War says, “The soldiers, the great things of the country, the land of death, the way of survival, can’t be ignored”, the real war of live ammunition is the same, in the trade war of invisible smoke.

20%-50% is a reasonable "double-reverse" tax rate

Let's look at a set of data first. In 2011, China imported a total of 64,600 tons of polysilicon, a year-on-year increase of 36%, and imports exceeded 2 billion US dollars. In January-November 2012, China imported a total of 76,000 tons of polysilicon from Germany, the United States and South Korea, accounting for 88.6% of the total imports; the total price of imported polysilicon from the three places was 1.96 billion US dollars, close to the 2011 full year of polysilicon Total value of imports. Although the annual data has not yet been released, the industry believes that the breakthrough of 80,000 tons is no doubt a record high.

The “double-reverse” complaints against the US, Europe and South Korea were jointly initiated by Jiangsu Zhongneng Silicon Industry, Jiangxi Saiwei LDK, Luoyang Zhongwa High-Tech and Chongqing Daxin Energy. According to the opinions submitted by these enterprises, the Chinese PV industry expects that in the final ruling, the Ministry of Commerce can impose a punitive tariff of 40%-50% on the above three polysilicon manufacturers.

The author believes that compared with the United States, China's photovoltaic battery manufacturers levy up to 249.96% of punitive tariffs, if based on the elimination of low-cost dumping considerations, 40%-50% of the amount should be in a reasonable range. In the fourth quarter of last year, China's imported polysilicon spot price was about 16-16.5 US dollars / kg; according to this calculation, once the "double reverse" officially filed, the price of imported polysilicon will rise to between 20-24 US dollars / kg. For domestic counterparts, this means about 25% of the profit space. If the final tax rate is set at a low level of around 20%-30%, domestic manufacturers are also expected to maintain a guaranteed situation without losing money.

Huge overseas long-term orders or take the opportunity to "unpack"

Compared with the polysilicon industry, domestic PV downstream enterprises may be more eager to anticipate the early stage of polysilicon “double anti-return”. More than $20 billion in overseas long-term orders on these vendors will be lifted overnight.

Over the past two years, overseas long-term orders have become a pain that Chinese PV module manufacturers cannot say. In the early years of the barbaric growth stage of the staking, the companies rushed to purchase polysilicon raw materials in order to scale up and increase production. Many companies signed long-term supply contracts with overseas raw materials at a price of 40-50 US dollars per kilogram. These contracts were several years old and more than ten years old.

It is impermanent, polysilicon prices have been falling since 2008, even if the market price has been as low as 17-18 US dollars / kg, Chinese companies have to bluntly perform these polysilicon overseas long orders at the agreed high price. After all, if the unilateral breach of contract, the loss of credit does not say, the large penalties to be paid are also the "unbearable weight" of these enterprises. In the next 10 years, the total overseas long-term orders of Chinese PV companies will still be as high as 20-30 billion US dollars.

China's polysilicon "double opposition" to the United States and Europe undoubtedly provides these companies with a logical "solution". According to the "force majeure" clause in the international trade commercial contract, the "double anti-" trade sanctions usually apply to this clause, and the Chinese company can use this as a basis for "slope downhill" and smoothly cancel the contract with the upstream overseas polysilicon company. Remove this bag.

China can say no to imported polysilicon

The report from Maxim Group is very "advised" to China. The report said that if China's tax on imported polysilicon will increase the manufacturing costs of downstream companies, further reduce the profit margin of component manufacturers. Since component manufacturers are far more important to China's economy and the job market than polysilicon companies, China may vote for the "double-reverse" against Europe and the United States.

The logic of the report is this: assuming China imposes a 50% punitive tariff on imported polysilicon, the price of imported polysilicon will rise to over US$30/kg, which will increase the minimum manufacturing cost of PV modules in China to about US$0.65/W. This will be higher or the average selling price of the flat component. The report also warns that it will not only impact the competitiveness of Chinese component manufacturers, but also affect China's “12th Five-Year Plan” PV installation targets and global solar demand.

If the assumptions in this report are to come true, there must be two factors at the same time: the dependence of the Chinese market on imported polysilicon cannot be replaced, and the overall price of polysilicon in China has risen sharply. Is this really the case?

According to data released by supporters, only 6 of the world's top ten polysilicon manufacturers are still under construction, and only the US REC production operating rate is still 100%, including Germany Wacker, China Poly GCL, South Korea. OCI and so on are only 50%-80% of the operating rate, and other domestic manufacturers such as Saiwei are in the semi-discontinued stage. The recovery of China's photovoltaic industry is inseparable from the import of polysilicon.

But don't forget, this situation is caused by the domestic polysilicon industry suffering from overseas low-cost dumping. According to the cost of China's polysilicon enterprises, if the US and Europe "double reverse" is introduced, when the market price of polysilicon returns to 20 US dollars / kg, China's four top ten global polysilicon enterprises will have sufficient power to start full-load, full year supply 9-10 million tons; if it recovers to 25 US dollars, some SMEs and upstream and downstream supporting polysilicon enterprises, such as Qinghai Asia Silicon, Sichuan Ruineng, Tianwei Silicon, Yichang CSG, etc. A supply of about 3-4 million tons is available. At present, China's downstream enterprises do not consume more than 150,000 tons of polysilicon per year. That is to say, even if China completely closes the door to overseas polysilicon, the domestic production capacity is sufficient to guarantee the supply of raw materials at reasonable prices.

What's more, as a whole of the same gas, the domestic polysilicon enterprises are also convinced that "one loss, one glory, one glory". In the current difficult situation of domestic downstream enterprises, even if China's "double-reverse" of European and American polysilicon is released, upstream enterprises will consciously control the increase and continue to maintain low-price strategy. The management personnel of related companies have made it clear that they do not want the domestic polysilicon market price to rise too fast and maintain a slightly higher cost. Conversely, if polysilicon rises too fast, it will stimulate the company's short-term shipments to increase, but instead Will once again drag the industry's profit level.

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