TrendForce Anticipates U.S. PV Demand for 2018 to be Cut in Half

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The U.S. International Commission (ITC) announced on September 22 (local time) that it has accepted Suniva’s petition to seek relief against all solar imports under Section 201 of the 1974 Trade Act. Following the affirmation of Suniva’s claim, ITC will develop recommendations to safeguard the U.S. solar market against imports from Asia. EnergyTrend, TrendForce’s green energy research division, states that ITC’s ruling is expected to raise the solar trade barrier significantly and may slash the U.S. photovoltaic (PV) demand for the whole 2018 by half.

The U.S.-based PV cell maker Suniva filed the Section 201 petition to ITC this April soon after the company declared bankruptcy. According to the petition, Suniva wants the U.S. government to severely restrict cell and module imports, regardless of where they are from, over a four-year period. In the first year, Suniva wants a tariff of US$0.40/W per cell with a minimum import price of US$0.78 per module. ITC formally received Suniva’s petition on May 17 and began to investigate on effects of cell imports have on the domestic solar industry.

According to ITC, module imports has constituted serious injury on the domestic solar industry, so a policy remedy need to be developed in line with Section 201 of the 1974 Trade Act. After announcing the go-ahead with the trade safeguard, ITC has scheduled a remedy hearing on October 3 to determine what concrete actions should be taken against solar imports. Following that, the ITC will deliver its recommendation report to President Trump no later than November 13. The White House will announce whether to carry out ITC’s recommendations within 60 days (before January 12, 2018).

With ITC finding that imported modules as causing serious injury, EnergyTrend analyst Jason Tsai pointed out that the follow-up trade barrier (e.g. tariff rates) will be based on the price differences between domestic modules and foreign modules. Another possibility the establishment of minimum import prices for cells and modules that takes account of the average production costs of U.S. cell and module makers.

“U.S. domestic solar companies make numerous high-efficiency products,” noted Tsai. “If ITC chooses not to differentiate tariff rates or import prices based on product types, then there is a strong likelihood that the trade barrier it recommends will be closer to the demands in Suniva’s petition.”

ITC has also specifically investigate module exporting countries that have signed free trade agreements with the U.S. (e.g. Canada, Mexico, South Korea and Singapore). Among these countries, only South Korea and Mexico are deemed to have caused injuries to the domestic industry. NAFTA members (with the exception of Mexico), CAFTA-DR members and other countries that have agreements with the U.S. (e.g. Singapore, Columbia, Jordan, Panama and Peru) are exempted from the global safeguard. Still, South Korea and Mexico may receive a milder form of trade barrier because their special trade relationships with the U.S. The degrees of restriction that respective module exporting countries will face will be further revealed during the October 3, when the ITC clarifies its remedy policy.

While ITC has decided to enact the Section 201 safeguard, there still no news about mandated deposits for solar imports. Some U.S. solar companies with the help of their overseas suppliers will stock up aggressively during this immediate period. However, most U.S. solar companies will wait until after the October 3 remedy hearing before stepping up their stock-up efforts.

“The deposit policy will probably be announced after the ITC has sent its recommendation report to the Trump administration,” said Tsai. “Until then, module makers still have limited time to make shipments to the U.S. and help local companies there build up their inventories. This is especially true for module makers that are highly dependent on exporting to the U.S., such as those based in South Korea and Southeast Asia.”

EnergyTrend’s analysis on customs data has found that U.S. imported around 5GW of PV modules from the start of this May to the end of this August. Currently, it would take about six months (two quarterly periods) to exhaust the total module inventory in the U.S for the entire 2017. Furthermore, module makers will not see tangible trade barrier related to the Section 201 safeguard from September 23 to November 13. This period presents an opportunity for them to export to the U.S. Taking all these factors into consideration, EnergyTrend projects the overall module inventory in U.S. will finally be exhausted in the second quarter of 2018. Only by then will the next large wave of demand for module imports start to emerge.

Because much of the solar imports into the U.S. consists of low-price modules for utility-scale ground-mounted PV plants, the high trade barrier indicated by the latest ITC ruling will sharply reduce the demand for these products. If the trade barrier related to the Section 201 safeguard is extremely high, then the costs of modules in the U.S. will soar. In such a scenario, the U.S. PV demand for the entire 2018 is forecast to plummet to 5.5GW. The chance of recovery will have to wait until 2019.

By that time, the government may adjust the measures related to the Section 201 safeguard, or the domestic production capacity for cells and modules may have expanded during this period of import relief.