Solar tariffs in the US will increase prices and reduce profit margins for Southeast Asia

Analysts said that a new round of U.S. import tariffs against Southeast Asian solar panel producers will likely increase consumer prices while reducing producer profits. However, the industry had anticipated this move.

The Commerce Department announced new duties on Friday that extend the United States anti-dumping regime to solar cells in Southeast Asia, instead of just finished modules.

Citi analyst Pierre Lau wrote in a report that the tariff increase was in line with what had been expected. He added that, in the long run, the duties will encourage the production of goods in the United States and replace imports.

He added that "PRC module manufacturers generally believe the impact is limited in the near term. They assume much of the incremental costs would be passed on to U.S. clients without alternatives."

This is the second determination in a case brought by several companies, including Hanwha Qcells of South Korea and First Solar of the United States, who accused Chinese companies of selling solar components at below cost to the U.S.

Yana Hryshko is the head of global research for WoodMackenzie's solar supply chain. She said that affected producers could source their cells from Laos or Indonesia instead, and take a cut in their margins.

Hryshko said, "They want the U.S. Market to remain competitive." "The manufacturing costs in Southeast Asia are not as high compared with the prices they sell to the United States."

Solar plants owned by Chinese companies have already appeared in Indonesia and Laos. These are the two key manufacturing bases of Southeast Asia that do not yet fall under tariffs. However, industry experts believe they will be added as export volumes increase.

Hryshko said that in the case of Indonesian tariffs, the new capacity would be redirected to the domestic market which is booming, but with local content requirements.

In 2023, 80% of America’s solar imports, who reached a record-breaking $15 billion in 2015, will come from Cambodia, Malaysia Thailand and Vietnam.

The Commerce Department has calculated anti-dumping tariffs of 271.28% on imports from Vietnam.

Citi reports that the United States accounts for just 4%-10% of sales volume of major Chinese module manufacturers, but is responsible for a larger share of their profits.

The final order of the Commerce Department will be published on April 18th, when proposed duties can be revised.

(source: Reuters)