Doug Young
Bottom line: Chinese solar panel makers who can set up profitable offshore factories could be poised for good long-term growth, demonstrating they can survive without support from Beijing.
Two new moves on the solar front show that leading Chinese panel makers continue to march offshore in a bid to avoid anti-dumping sanctions in the US and possibly in Europe. One move has ReneSola (NYSE: SOL), one of the most advanced in the offshore migration, announcing a new joint venture in the US. The other has JinkoSolar (NYSE: JKS) landing new financing for a panel manufacturing plant in Malaysia.
Both news items look relatively encouraging, showing the Chinese panel makers want to demonstrate they can manufacture profitably in these overseas locations without financial support from Beijing. But JinkoSolar’s announcement is also showing just how tough that transformation could be, since most of the funding for its new Malaysia plant is coming from a major Chinese policy lender.
The trade wars that have rocked the solar sector for much of the last 2 years have mostly settled by now, following an acrimonious period that saw the US, Europe and even India accuse China of unfairly subsidizing its panel makers. The ruckus ended with the US slapping punitive sanctions on most imported Chinese panels. The EU negotiated a deal that saw the Chinese panel makers voluntarily raise their prices, though that deal now looks set to collapse and could be followed by formal anti-dumping sanctions later this year. (previous post)
Worried over the loss of 2 of their biggest markets, the Chinese panel makers have begun to build offshore factories whose panels are exempt from the anti-dumping tariffs. In the latest move related to that migration, ReneSola has just announced it will form a joint venture with Pristine Sun, an independent power producer based in the US. (company announcement)
This particular announcement doesn’t involve panel production, but is part of the offshore move because it presumably would see the venture import ReneSola’s panels manufactured outside of China to build new solar plants in the US. ReneSola has been one of the most aggressive of China’s panel makers in the offshore migration, with overseas plants planned or already producing in Poland, Turkey, South Korea, Malaysia and Indonesia.
The new joint venture with Pristine Sun would be majority-owned by ReneSola, and aims to build new solar power plants with 300 megawatts of capacity in the US. It aims to have half of that built by the end of next year, indicating it will move ahead quickly with new construction. Investors seemed to like the plan, bidding up ReneSola’s shares 7.1 percent, though they still trade near lows not seen since late 2012.
Jinko Gets Backing From Policy Lender
Investors were also excited about JinkoSolar’s announcement that it has received financing for its planned Malaysia plant, with its shares rising 6 percent in the latest session amid a broader rally for solar stocks. The company announced plans for the $100 million plant earlier this year, and said it has now received $70 million in financing for the project from the Export-Import Bank of China. (English article)
JinkoSolar has completed much of the construction of the plant, which is already manufacturing and can produce 500 megawatts of solar cells each year and 450 megawatts of panels. The fact that JinkoSolar had to turn to a Chinese policy lender to finance the project isn’t the most encouraging sign, since such a move represents the kinds of government support that sparked the trade war in the first place.
But in this case the bigger picture seems more important, namely that the Chinese panel makers are trying to show they can survive and thrive independently without strong state support. I’m not completely convinced that this migration will work for everyone, since many of these panel makers aren’t very healthy financially. But the ones that can make the move successfully could be poised for strong growth in the future when the industry finally settles into a longer-term recovery mode.
Doug Young has lived and worked in China for 16 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.
