Solar Stocks Rally on Sunset of EU Punitive Measures

Shares of Chinese solar-panel makers rallied on Monday after reports that the European Union was preparing to cancel anti-dumping measures first imposed five years ago.

Both the EU and U.S. have imposed punitive tariffs on Chinese solar panels for years, following separate probes that determined producers received unfair government support in the form of policies such as low-interest bank loans and cheap government-supplied land for factories. Beijing and local governments often provide such assistance for industries targeted for development, and the country now supplies over half of the world’s solar panels.

While the U.S. has imposed more traditional anti-dumping tariffs following its probe, the EU has rolled out a system that allows suppliers to avoid similar tariffs if they agree to sell at prices set by the EU.

The EU is set to scrap those protective measures completely when the current system expires next month, meaning Chinese suppliers can resume selling panels at their own prices, Reuters reported on Friday, citing unnamed EU sources familiar with the situation.

That news helped to lift major panel and component makers during Monday trade in Hong Kong and mainland China stock markets. Leading the gainers were Longi Green Energy Technology Co. Ltd. and Tongwei Co. Ltd., which closed up 5.5% and 4.8%, respectively. GCL New Energy Holdings Ltd. rose 3.4%, while CECEP Solar Energy Co. Ltd. rose 2.7%.

Executives at many solar-panel makers were also saying the EU measures would not be renewed after their expiry next month, and a formal decision is expected around Sept. 3, said UBS analyst Alex Liu. He said that the current pricing system has forced Chinese panel makers to sell their products in the EU at prices about 30% above what they charge on the spot market.

“This could be very positive for Chinese solar manufacturers,” he said. “It can help Chinese solar manufacturers to increase their shipments to the European market. They will be able to sell their products in Europe at very low prices because there is no restriction.”

He said Europe accounted for 6% to 7% of global demand for solar panels last year, and the amount could rise to as much as 10% this year. He added the cancelation of current protective measures could also help the EU move more quickly to the point where solar power is competitive with other forms of power without the aid of government subsidies. UBS had previously predicted such a watershed would come in 2021, but Liu said that could now happen as early as the end of 2020.

“Using cheap modules from China can reduce the costs of solar parity,” he said.

Contact reporter Yang Ge (geyang@caixin.com)