CASM: U.S. Solar Ran a Trade Deficit with China for 2011

Hemlock PolySi Ingot (HSC photo)
Hemlock PolySi Ingot (HSC photo)

The Coalition for American Solar Manufacturing (CASM) last week released a report estimating that the U.S. solar industry ran a $1.6 billion trade deficit with China for calendar year 2011, compared to a trade surplus for 2010 somewhere between $250 million and $540 million.

The release said, in part,

“This new data, drawn from official government sources, finally buries the Chinese importers’ tired, shop-worn and factually incorrect talking point that the U.S. solar industry has a trade surplus with China,” said Gordon Brinser, president of SolarWorld Industries America Inc., the largest U.S. manufacturer of solar cells and panels. “Chinese importers often claim that the modest U.S. trade surplus in 2010 proved that China is not threatening the U.S. solar industry and economy. But it is no longer 2010, and any trade surplus is history. Illegal dumping by massively subsidized Chinese solar producers, combined with curbed exports of polysilicon and manufacturing equipment, are decimating U.S. solar manufacturers, the supply chain and their export business.”

That statement deserves some analysis.

In December, China idled about a third of its module factories to clear out excess inventory, and the timing was right to dump much of that excess into the U.S. market – because American developers were eager to pay for modules before the Dec. 31 expiration of 1603 grants. The rush spiked Chinese imports dramatically.

In the other direction, American factories don’t sell a lot of modules to China. They do sell a lot of polysilicon ingots (the raw material from which a factory slices silicon wafers to be made into solar cells). And they used to sell manufacturing equipment to start-up Chinese factories.

The world’s largest polysilicon foundry is Hemlock Semiconductor, with factories in Michigan and Tennessee. The opening of the new Tennessee plant boosted capacity to about 34,000 tons annually. Together, the top five factories – Hemlock, Wacker (Germany), OCI (South Korea), REC (Norway) and GCL Poly (China) probably can make about 131,000 tons annually.

Last year, industry sources estimate that Chinese factories used nearly 100,000 tons of that, and imported roughly half of it at historically low prices approaching $30 per kilogram – China claims that foreign factories “dumped” 47,500 tons of polySi into their market, putting most of its 35 small polySi factories out of business. Now, to meet a five-year plan to build 15 gigawatts of PV farms at home, the Chinese government has asked its surviving polySi plants, led by GCL Poly, to ramp up to 50,000 tons each. The goal will be to slash imports of polySi dramatically. Hemlock’s future profitability – and America’s solar export volume —  depends on the extent to which China needs to supplement domestic supply going forward.

Meanwhile, those start-up solar factories have, for the duration of the inventory glut, quit expanding. One result is that solar machine-tool companies had no market in 2011. Applied Materials, which makes equipment to build twin-junction amorphous silicon modules, quit opening new accounts back in July, 2010.

That 15 gW goal looms large in production planning, though, at least for Tokyo Electron Ltd. The Japanese company last week bought Oerlikon’s solar machine-tool business. Presumably they expect China to resume importing production machinery.

What it comes down to is Chinese domestic solar deployment. If the country ramps up its solar farm capacity quickly, trade should rebalance. Western companies will sell polySi and machine tools to China. The glut of module inventory may ease. Wholesale pricing may stabilize. Or not.

Either way, it may be too late to save Western module factories.

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