Biden takes a hit against China’s massive solar industry. Why is this important.


Thursday afternoon, the White House said four companies key to supplying solar panels from China are said to have restricted access to the US market. Some said the movement was lukewarm.

A closer look suggests two things: China’s solar cell industry now poses a geopolitical risk due to allegations of forced labor. It must be bad for business. Yes, you love the planet. But, you might hate people if the solar panels you import were made with the help of the loving hands of Uyghur Forced Labor in Xinjiang. These are the allegations that led to Thursday’s ban.

South China Morning PostBoon for Xinjiang, US mutual funds invest millions in its companies

Second, the ordinance gives the United States a chance to develop its solar industry, an industry that China squandered until anti-dumping and other tariffs were imposed on Chinese solar multinationals, which has put an end to some of the bloodshed.

What happened?

Internal Security Secretary Alejandro Mayorkas ad By mid-afternoon on Thursday, the U.S. Customs and Border Protection (CBP) issued a non-disclosure order (WRO) against Hoshine Silicon Industry Co. Ltd., a company listed on Shanghai located in Xinjiang, home to the now infamous Uyghur Muslim detention camps. Beijing says these are needed as part of its war on terror, and that all this talk about human rights abuses is just a way to force economic protectionism into the market.

A WRO requires customs officials to detain shipments containing silica products manufactured by Hoshine and its subsidiaries. This means that anything made from this silica is prohibited. This should include solar cells, the transparent squares of glass that make up a solar panel.

“As President Biden made clear at the recent G7 summit, the United States will not tolerate modern slavery in our supply chains,” Mayorkas said.

Beyond Hoshine, a company in which Vanguard owns tens of thousands of shares in three of their emerging market portfolios, three other companies in China’s solar supply chain have been put on the so-called “list of. entities ”of the Department of Commerce. It just makes it harder for US companies to do business with them. One of the three is a subsidiary of Daqo New Energy (DQ) in Xinjiang. Daqo, the parent company, is owned by BlackRock, State Street, Invesco and many other big Wall Street companies.

In May, Daqo invited journalists in their factories in Xinjiang to show that they were as modern as any western factory. And did not use forced labor. This charm offensive has so far failed.

“It’s a headline-grabbing decision, but it’s worth pointing out that, in practical terms, US imports of any solar equipment from China are already minimal,” said Pavel Molchanov, industry analyst for Raymond James. “The practical effect of this narrowly focused, if not essentially symbolic, decision will be irrelevant. “

Obama-era tariffs, compounded by Trump-era Sections 201 and 301 tariffs, reduced China’s market share in the United States. Yet China is an important part of the solar industry here. Most of the rooftop solar panels were almost entirely made by Chinese companies spread across Asia.

The Entity List for Daqo and the WRO List for Hoshine are part of a multi-year strategy to remake the American solar industry. Tariffs, coupled with demand, have made multinationals First Solar invests in a new facility in Ohio.

Jim Cramer made a buy recommendation on First Solar Wednesday.

If America goes green and forgo fossil fuels now that it is a powerhouse that produces natural gas and oil, it would make no sense to give up all of that and put electricity production in the limelight. thank you European and Chinese products. Chinese wind and solar.

It will take around six months to add new capacity here up to 9 months to start new upstream production – these are basically solar cells and modules, better known as panels.

Companies will need this time to invest capital before Xinjiang’s supply chain slows down.

China could even stop doing business with its American partners in order to punish them, depriving them of key components. This is a risk for American solar energy dependent on Chinese components for its panels.

During the trade war with Trump, Beijing imposed tariffs on at least six U.S. polysilicon producers ranging from 53.3% to 57%, leading to layoffs at at least one factory run by Norwegian company REC Solar Grade Silicon in Washington. China has extended these tariffs for five years, and also included South Korea.

This is a great way for China to seize even more of this market, as local importers who do not want to pay the 57% duty on imports will either look to the small number of players in Europe or – more likely – will buy in the domestic market. As a result, Chinese companies are investing more. And then the market is stuck.

US companies are only likely to invest if they knew these restrictions and tariffs were more permanent. It is impossible to compete with China on price, and surely impossible to compete with their working practices.

China is estimated to control about half of the global polysilicon supply chain, of which about 60% is based in Xinjiang. Since China does not allow third-party audits, it is also unclear whether any of the solar cells exported to the United States were made with Hoshine materials.

It might be better to assume that they are.

In the meantime, US solar companies that are not public should consider doing so. Wall Street is everywhere Daqo Solar and other Chinese names. First Solar is the only true American. Large ESG funds are looking for you.

As part of an end-to-end strategy, the US solar industry needs investor interest to survive, just as much as it needs consumer demand.

Brokerages like Raymond James or Morgan Stanley are no different from Macy’s or Target. They need products to sell. At present, the financial product in solar is almost exclusively China. Eight of the biggest solar multinationals are Chinese, and all of them are full of money from BlackRock, Vanguard and others.

“Investing in US-made renewables right now is tough,” says Jeff Ferry, chief economist for the Coalition for a Prosperous America. “Investors need US-based investment opportunities. With the right policies, it will happen. But you need an end-to-end supply chain. When you have more, I think you will see the American solar companies grow and go public. “

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