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Hanwha Q CELLS sees solar stockpiling continuing as uncertainty grips US market

Hanwha Q CELLS Co. Ltd., a leading South Korean solar equipment manufacturer, is zeroing in on the U.S. market as demand and prices rise under the cloud of a looming trade case. Domestic companies have been amassing reserves of solar cells and modules for months to guard against the threat that import tariffs and price controls will drive up prices later this year. The frenzy is already pushing up prices, and a decision in the case is still months away.

"We expect the stockpiling and the consequent increase in [average selling prices], hopefully," to continue into the fall, a Hanwha Q CELLS executive said on an Aug. 10 earnings conference call. The uncertainty roiling the market "will only continue to build" until the U.S. International Trade Commission recommends a course of action to President Donald Trump, he said.

In April, bankrupt U.S. solar panel maker Suniva Inc. asked the Trade Commission to recommend that Trump set tariffs and minimum prices on imported solar cells and modules made from crystalline silicon in order to protect the domestic market from what the company describes as an unexpected and harmful flood of foreign products. Suniva, which is majority owned by Hong Kong-based Shunfeng International Clean Energy Ltd., was joined about a month later by SolarWorld Americas Inc. after that company's corporate parent, German manufacturer SolarWorld AG, filed for insolvency.

SNL Image

Stockpiles and prices are rising as the solar industry awaits a decision from the U.S. International Trade Commission.

Source: AP Photo/Susan Montoya Bryan, File

The case has sparked sharp disagreement within the solar industry. Opponents warn that Suniva and SolarWorld are threatening tens of thousands of domestic jobs, which are concentrated in companies that install imported solar panels. Suniva and SolarWorld claim the measures they are requesting would actually boost employment in the U.S. solar industry.

The Trade Commission is scheduled to hold an initial public hearing Aug. 15. The Solar Energy Industries Association, which opposes Suniva and SolarWorld in the case, expects solar workers from seven states to attend the hearing in Washington, D.C., a spokeswoman said. If the Trade Commission finds that imported solar cells and modules were a substantial cause of "serious" injury to domestic manufacturers, it will have until Nov. 13 to recommend remedies to the president.

Opportunity ahead of threat

"[We] are increasing our shipments to the U.S. in order to meet market demand and capitalize on this business opportunity," Seung Deok Park, head of corporate planning at Hanwha Q CELLS and a director on the company's board, said on the earnings call.

Hanwha Q CELLS, which was the top producer of solar cells globally in 2016 and among the leading panel manufacturers, has a big stake in the outcome of the trade case. Last year, its largest customers included two U.S. companies — NextEra Energy Resources LLC, a subsidiary of the Florida-based utility NextEra Energy Inc., and SolarCity Corp., which was bought by Tesla Inc. in 2016 — and just over half of Hanwha Q CELLS' revenue came from the U.S. The country accounted for about 40% of sales during the second quarter, according to Park. Europe and China accounted for approximately 15% and 25% of sales, respectively.

Analysts at Height Securities LLC on Aug. 10 said they think the outcome of the trade case will be "less impactful than the market currently expects," noting that the measures Suniva and SolarWorld requested are harsher than those the commission has historically supported.

"Trump has fewer reasons to act than investors might expect, despite his pro-coal rhetoric and tough talk around China and the US trade deficit," analysts Peter Cohn and Katie Bays wrote to clients. "For instance, it is not clear that solar panel tariffs or quotas would help him politically, and traditional competitors including coal-fired utilities are opposed to the ... petition."

Hanwha Q CELLS reported net income attributable to ordinary shareholders of $18.7 million in the second quarter, down from $76.8 million in the year-earlier period. Revenues fell by about 9.5% to $577.7 million, and the cost of goods sold rose by 5% to $510.5 million.

The company left its guidance for 2017 module shipments unchanged at between 5,500 MW and 5,700 MW. Panel shipments totaled 4,583 MW in 2016. As of 3:27 p.m. ET on Aug. 10, the company's share price was down 6.3% for the day at $7.93.