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China Solar: US Anti-Dumping Heavier Than 2012, Don’t Panic

By Shuli Ren

The U.S. Commerce Department issued a preliminary ruling on anti-dumping duties that Chinese and Taiwanese solar companies will have to pay when they sell crystalline silicon (c-Si) solar photovoltaic (PV) products in the U.S.

This round of anti-dumping duties is heavier than what we saw in 2012. Trina Solar (TSL), which received 17% of its revenue from the US in 2013, will have to pay 26.3%. It was paying 16% in 2012. Yingli Green Energy (YGE), Canadian Solar (CSIQ), and Hanwha SolarOne (HSOL) will have to pay 42.3%. They paid 14.8% in 2012. Renesola (SOL) and JinkoSolar (JKS) will be paying 58.9%, versus 15.2% in 2012. All the other Chinese companies will pay 165% anti-dumping duties.

Taiwan manufacturers are also imposed an anti-dumping duty this time. Chinese solar companies have been using Taiwan as a manufacturing base to import to the US so as to circumvent the tariffs they face. Motech Industries (6244-ROCO) got a 28% tariff and all others are subject to a 36% rate. Shares of Motech slumped 6.9% today. Gintech Energy (3514.TW) also lost 6.9%.

What should we make of this news clip? Panic?

The preliminary ruling is not as a big deal as you might expect. Market is already priced in, according to Deutsche Bank analysts Eric Cheng and Michael Tong:

We believe such ruling is negative to market sentiment, though market should have already anticipated an affirmative preliminary determination from the DOC.

Plus, this is just a preliminary round. Back in 2012, the U.S. Department of Commerce lowered their final tariffs. For instance, Trina was at first asked to pay 18.3%, and the final result was 16%. Yingli and JinkoSolar, from 26% to 15.2%. So we may reasonably expect a discount this time too, according to J.P. Morgan analysts Boris Kan and Elaine Wu, who urged us to buy on dip:

There might be room for a reduction, as seen in the 2012 case where the finalized AD duties in Oct 2012 (19-32%) were lower than the preliminary AD duties in May 2012 (~31%).

While the market has been anticipating the DOC determinations, the news will still be taken as a NT negative conceivably. That said, any NT correction would represent good buying opportunities from a 6-12 months’ horizon as a major sector overhang is now removed. Any reduction in AD duties in the DOC’s final determination (as in 2012) would be a +ve surprise to the market.

http://blogs.barrons.com/emergingmarketsdaily/2014/07/28/china-solar-us-anti-dumping-heavier-than-2012-dont-panic/?mod=yahoobarrons&ru=yahoo