Global solar trade tensions escalated on Friday as the Ministry of Commerce of the People’s Republic of China announced it would launch both anti-dumping and countervailing investigations on imports of solar-grade polysilicon from the U.S. and an anti-dumping probe on South Korean polysilicon imports. Germany on Friday, meanwhile, said it would support its solar industry in anti-dumping action against China.

Polysilicon (also called polycrystalline silicon) is a key component of solar panel construction. China’s Ministry of Commerce said the investigations were prompted by complaints from several Chinese polysilicon suppliers, including LDK Solar, Daqo New Energy, and GCL Poly-Energy Holdings, which is the country’s largest supplier.

"As prescribed in both the Regulations of the People’s Republic of China on Anti-dumping and the Regulations of the People’s Republic of China on Countervailing, Ministry of Commerce will start the investigations on dumping and subsidy of the imports from the U.S. and South Korea, as well as the injury to solar-grade polysilicon industry in China, then make an adjudication under state law," the Chinese ministry said in a July 20 press release. The probe is expected to be completed by July 20, 2013.

Chinese customs data reportedly shows that China increased imports of polysilicon products from the U.S. and South Korea by 432% between 2008 and 2011, but the average price has dropped from $300/kilogram (kg) to $30/kg, reported Chinese state-owned newspaper the People’s Daily. China’s polysilicon companies claim that massive subsidies to domestic polysilicon enterprises from the U.S. federal and state governments led to the large number of low-priced exports to China, the newspaper said.

About 60% of China’s total polysilicon imports last year were from the U.S. and South Korea, buoyed by lower foreign prices for polysilicon products than domestically produced ones, according to Chinese news agency Xinhua. China’s Photovoltaic Industry Alliance suggests that the country’s total imports will exceed 80,000 metric tons in 2012, compared with 64,600 metric tons last year. About 45% will come from the U.S.

Meanwhile, trade group China Nonferrous Metals Industry Association has reportedly said that 80% of 43 Chinese polysilicon producers have been driven out of business. Only eight producers remain, and they are "struggling for survival," reported the People’s Daily.

Germany to Back Anti-Dumping Proceedings

China’s announcement came on the heels of a statement by Germany’s environment ministry that said it would back efforts by German solar firms to bring anti-dumping proceedings against China with the European Commission. A ministry spokesperson told reporters on Friday that "in order to introduce such proceedings, there must be a quorum of industry representatives who bring a suit to the European Commission," though that had not yet taken place, she noted. At least 25% of the manufacturers of a product in the European Union must file the proceedings for the suit to proceed, according to commission regulations.

German solar panel maker SolarWorld may lead the petition that is expected to call for duties against Chinese companies. SolarWorld, and six other companies that make up the Coalition of American Solar Manufacturing (CASM), last October filed a similar dumping case against China with the U.S. Commerce Department.

In March, the Commerce Department announced preliminary countervailing duties of up to 4.73% against Chinese solar panel makers, and this May it issued a preliminary determination that crystalline silicon photovoltaic (PV) cells were being sold in the U.S. at below-market prices that harm domestic manufacturers, and it slapped a 31% tariff on 61 Chinese PV producers and exporters, with slight variations in tariff by company.

CASM said in a statement on Friday that China’s announced probe "proves once and for all that China is intent on unfairly and illegally allowing its manufacturers to dominate the global solar industry."

"While it was not unexpected, the announcement of retaliatory investigations into U.S. polysilicon production is harmful to the international trade system. The Chinese government has been telegraphing this move since last October," said Gordon Brinser, president of Oregon-based SolarWorld Industries America Inc., a subsidiary of the German firm SolarWorld. "It is a common Chinese tactic and an abuse of international trade rules. It represents yet another cynical attempt by the Chinese government to bully the U.S. government by injecting politics into a judicial investigation that is sanctioned under international trade rules, as [Friday’s] announcement tacitly confirms."

“A Destructive Trade War”?

Industry group the Coalition of Affordable Solar Energy (CASE), an entity whose membership includes nearly 200 U.S. solar companies, decried what it called the "destructive trade war" and urged the U.S. and China to rise above SolarWorld’s "selfish action and engage in productive dialogue."

"There’s no place in the global solar industry for companies who utilize unilateral trade remedies instead of competitive business strategies. Tariffs at any point in the global solar value chain are counterproductive and make solar energy less competitive against fossil fuels. Looking at the preliminary tariffs set in the U.S. it’s clear that the free flow of solar goods is already disrupted, prices are increasing, jobs are being eliminated, and businesses are adversely impacted at every level of the global solar industry," said CASE President Jigar Shah. "We urge all countries to avoid unilateral actions that impede trade and resolve conflicts in a bilateral or multilateral context."

That sentiment was echoed by Robert Hansen, president and CEO of the Dow Corning Corp., a majority shareholder of Hemlock Semiconductor Group—one of the world’s largest polysilicon suppliers and a company that is neither a member of CASE nor CASM. "I am disappointed that the United States and China have yet to negotiate a sustainable, mutually beneficial settlement to the global trade issues that have arisen in the solar industry. This review is part of a broader trade conflict extending far beyond the polysilicon and solar industries, as an escalating number of trade disputes have been initiated throughout the globe in the last 12 months," Hansen said.

The "serious" issue could impact Hemlock Semiconductor’s ability to sell material to China, its largest market. China would also suffer, because its cell and module producers would be deprived of access to the critical technical collaboration and material supply from the U.S. and elsewhere, he added. "This case proves that no country or industry wins when trade disputes escalate."

Sources: POWERnews, China Ministry of Commerce, People’s Daily, Xinhua, CASE, CASM, Dow Corning

—Sonal Patel, Senior Writer (@POWERmagazine)