U.S. Ban to Have Only Limited Impact on China’s Solar Industry
(Bloomberg) -- A U.S. ban on some solar materials made in the Xinjiang region is unlikely to have a major impact on Chinese polysilicon manufacturers, analysts said, although that could change if other countries follow Washington.
The Biden administration imposed a “withhold release order” on Thursday for products made by Hoshine Silicon Industry Co. and ports were instructed to detain shipments of its silica-based products. Another four Chinese entities were also added to Washington’s export blacklist on concerns over allegations of human-rights abuses against the ethnic Uyghur Muslim minority in Xinjiang.
The action falls short of the broad regional ban that some activists were pressing for and appears designed to confront alleged abuses without stifling the fast-growing use of renewable energy in the U.S. China makes most of the world’s polysilicon -- a key material in solar panels -- and also supplies three-quarters of all panels.
The likely impact on the Chinese industry will be “mild,” as the U.S. only buys a small portion of China’s solar module output, Citigroup Inc. analysts including Pierre Lau said in a note. The prohibition could actually end up hampering the U.S.’s ability to make solar capacity additions, the analysts said.
There won’t be much impact on Daqo New Energy Corp., a polysilicon manufacturer that had one of its units added to the U.S. blacklist, said Daiwa Capital Markets analyst Dennis Ip, citing a conference call with executives from the company. Daqo is still on track to triple its capacity and even in the worst-case scenario where Washington bans all solar products containing Xinjiang-made polysilicon, capacity in Inner Mongolia and Sichuan would be able to fully cover American demand, the executives said, according to Ip.
Hoshine shares, which plunged 7.2% Thursday, clawed back most of those losses on Friday, while Daqo dropped almost 3% in New York Thursday. LONGi Green Energy Technology Co., China’s biggest solar producer, which isn’t embroiled in the U.S. action, is up 14% this week.
The main risk for China’s solar industry is if other major buyers choose to follow the U.S.’s ban as a European Union prohibition would affect around 30% of global polysilicon demand, said Tony Fei, an analyst at BOCI Research Ltd. .
“Investors need to brace for further uncertainties,” he said. “If other markets follow suit, as vowed by the G7 heads earlier this month, the impact on the PV industry could be amplified by several times.”
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