The Commerce release said the broader anti-dumping complaint -- to be decided on May 17-- will include Chinese solar modules manufactured outside of China but with cells manufactured in China, however, solar cells produced in a third country but used in modules manufactured in China will not be covered by the trade case.
Solar remains a hot money traders' paradise, and the news of a weaker than expected tariff on Chinese solar panels imported to the U.S. was an obvious trigger to send the triumvirate of Chinese solar module makers higher, as well as buoy all Chinese solar shares, even if all the stocks remain near 52-week low levels, and not likely to go up too much from there.
Though it's just beginning of a longer trade complaint process, the preliminary ruling may signal that the U.S. government is not going to pursue the hardest line.
Aaron Chew, analyst at Maxim Group, cautioned that the broader anti-dumping decision and the CVD prelimary ruling should not be necessarily linked. He also noted that in theory, at least, there is no political context to these decisions. In fact, the Commerce Department uses a formula as the basis for its trade case rulings, specifically to remove any suggestion of political motivation.
In any event, the May 17 tariff decision could far exceed Tuesday's ruling. In fact, CVDs have historically been less punitive than the broader dumping tariffs. Yet even if tariffs were to ultimately double from the reported initial tariffs of less than 5%, for example, it would be a far smaller punishment than backers of the trade case had hoped for.
Hari Chandra, solar analyst at Auriga Securities, said the tariff of less than 5% is "a slap on the wrist," even if it is intended to send a message. The analyst said the big issue for Chinese solar companies is fixing their cost structure to ultimately make money again, with current pricing -- with or without tariffs -- resulting in losses for the sector's cost leaders. "This is not a rally with legs," he added.
Chew said, "It's almost irrelevant." He explained that while the 5% tariff would seem to place a price disadvantage on Chinese solar companies, with the way pricing has eroded in the solar sector, all it does is take Chinese solar companies back to where they were pricing modules in January.
"In the grand scheme of things it is a negative for Chinese solar stocks and they shouldn't be running up this way because they still have a very poor earnings outlook, negative cash flow and losses into the foreseeable future. It's back to basics," Chew said. "It shows that maybe this tariff stuff is blown out of proportion."
CASE, the coalition of solar companies -- primarily installers -- that has opposed the Solarworld trade case, issued a statement claiming victory: "Today's preliminary determination by the Department of Commerce imposing low tariffs on imported crystalline solar cells/modules from China, will, by itself, have a limited negative impact on the U.S. solar industry and its 100,000 employees. It also demonstrates that the Commerce Department did not find the Chinese government engaged in massive subsidization, as SolarWorld and CASM claim. The chaos that this case has caused was unwarranted."
CASE added, "Before we can rest easy, there will be another, and what is likely to be, a much bigger shoe that will drop when the Commerce Department announces anti-dumping duties in May."
-- Written by Eric Rosenbaum from New York.
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