The new Chinese tariffs will inflict particularly severe damage on companies such as REC Silicon, which has a state-of-the-art plant in Moses Lake, Wash., that employs more than 500 people and exports 80 percent of its polysilicon to China. It also has a plant in Butte, Mont., that employs 300 people and exports almost half of its product to China.
REC’s general counsel, Francine Sullivan, met with Sen. Jon Tester (D-Mont.) and aides to three other senators Tuesday and will meet with Obama administration officials Wednesday in an effort to speed a resolution to the widening trade dispute.
“Because of the highly political nature of these tariffs, we need a government-to-government solution,” Sullivan said in an interview. She added that Chinese customers were already cancelling orders.
Andrea Mead, a spokeswoman for the Office of the U.S. Trade Representative, said the department was “disappointed at China’s announcement of duties to be imposed on U.S. exports of polysilicon.” She said that “this step did not move the ball forward, but we will continue to engage.”
The polysilicon market is dominated by a half-dozen large firms, including Germany’s Wacker, South Korea’s OCI, China’s GCL and U.S.-based Hemlock Semiconductor Group, a joint venture of Dow Corning, Shin-Etsu Handotai and Mitsubishi Materials.
In 2012, U.S. production climbed to 24 percent of the global market, according to Sullivan. REC alone supplied 9 percent of the global market. She said that in the first half of this year, REC exports filled about 20 percent of Chinese industry’s polysilicon needs.
Prices for polysilicon have gyrated over the past decade, hitting a high of $475 a kilogram in 2008 before slumping to a low of $15.83 in 2012 as companies added too much capacity while slashing production costs.
Sullivan said that REC Silicon, which had spent about $2 billion to install highly energy-efficient manufacturing equipment, was operating at full capacity while others shut down production.
Now, however, the new tariffs will boost the market share of the other major manufacturers, the U.S. firms say. Shares of Daqo New Energy, a Chinese polysilicon maker, jumped 7.5 percent on Tuesday.
U.S. manufacturers of solar industry equipment, such as New Hampshire-based GT Advanced Technologies, are also closely tracking the trade battle.
“Fortunately for GT, our largest polysilicon customer, Korea-based OCI, will have to pay only a very small 2.4 percent tariff on their polysilicon exported to China,” said Jeff Nestel-Patt, spokesman for GT Advanced Technologies. “Though it is too early to tell, reduced levels of imported polysilicon from U.S. suppliers as a result of the tariffs could benefit producers from other countries such as OCI in Korea, who have the capacity to supply high-quality material.”
Meanwhile, shares of REC have slumped. Citigroup analysts Jason Channell and Phuc Nguyen on Tuesday downgraded their rating on the stock and advised investors to sell REC shares because China’s action “materially impairs” the company’s ability to sell to China, where the largest photovoltaic-panel makers are based.
On Thursday, shares of REC had jumped 20 percent on news of a restructuring that would divide the company’s U.S. polysilicon operations from its Singapore-based solar wafer and cells business. But hours after the company’s announcement, the Chinese government tariff announcement pushed the share price down again.
The Citigroup analysts now believe that bondholders may block REC’s restructuring plan and that the company “may miss” credit facility payments. “Given current net debt levels, REC may struggle to raise new financing to repay debt maturing in 2014,” they said.
Hemlock is also keeping close track of the trade dispute.
“Dow Corning and Hemlock Semiconductor remain engaged in efforts to encourage a settlement on these issues,” said Jarrod Erpelding, a spokesman for both Dow Corning and Hemlock Semiconductor. “As we’ve said in the past, no country or industry ‘wins’ when trade disputes escalate.”
In two reports issued this month, IHS, a Colorado-based provider of global business information, said the international trade war had enabled solar panel makers to increase their dismal profit margins. In a report on Europe, IHS declared “the end of a period when available inexpensive photovoltaic (PV) devices enabled fast growth of installations.”
After declining for 48 months since the first quarter of 2009, with a seasonal uptick in February 2013, average pricing for Chinese crystal polysilicon modules in Europe rose by 4 percent in June, according to the IHS report.
Henning Wicht, senior director of solar research for IHS, said that “the era of low-cost Chinese modules is now over, as prices have risen due to the EU Commission’s implementation of preliminary antidumping tariffs. This will have a negative impact on solar installations, and is likely to cause many companies engaged in the engineering, procurement and construction (EPC) of solar systems to go out of business this year.”