Price undertaking to maintain solar panels in EU

BEIJING - The price undertaking reached on Saturday to set a minimum price for imports from China will allow Chinese solar panel exporters to hold onto their sizeable market share in the European Union, rather than incur a costly anti-dumping tariff.

The China Chamber of Commerce for Import and Export of Machinery and Electronic Products (CCCME)and the European Commission have reached a deal to resolve a dispute involving solar panels.

"I am satisfied with the offer of a price undertaking submitted by China's solar panel exporters," EU Trade Commissioner Karel De Gucht said in a statement. "We found an amicable solution...that will lead to a new market equilibrium at sustainable prices."

The minimum price of over 0.57 euro ($0.76) per watt of produced power is reportedly to remain for the next two years, though this has not yet been confirmed by EU or China.

Meanwhile, the Chinese Ministry of Commerce (MOC) also announced on Saturday that China welcomes the price settlement as an appropriate solution for easing China-EU bilateral trade frictions.

Chen Huiqing, director of CCCME, said most Chinese enterprises are content with the deal in which exporters are likely to maintain a reasonable quota in the EU market.

"Under the terms of the deal, about 60 percent of the market share in the EU could be guaranteed for Chinese solar panel exporters," said Chen.

But further details on the legalities of the undertaking arrangement can only be released following their adoption by the European Commission, according to Chen, adding that is not yet known how the quota will be arranged.

The deal came after weeks of intensive talks following the EU imposition of provisional anti-dumping duties on solar panel imports from China in June.

Chinese solar panel production quadrupled between 2009 and 2011 to surpass the entire global demand, and the European Commission accused China of dumping its solar panels in Europe at prices below production costs.

On June 4, the commission decided to impose provisional anti-dumping duties on imports of solar panels, cells and wafers from China, which were to be imposed in two steps, starting at 11.8 percent on June 6 and 47.6 percent, on average, on August 6.

In response to the EU's move to impose duties, China launched an anti-dumping inquiry into European wine sales, which may have led to exporters in France, as well as Spain and Italy, being hit with retaliatory duties.

Trade frictions between China and the EU intensified sharply earlier this year, sparking fears of a trade war between the two major trading powers. As a result, China's trade volume with the EU shed 1.9 percent during the first quarter this year to 124.4 billion US dollars.

Europe is China's most important trading partner. For the EU, China is second only to the United States. Chinese exports of goods to the bloc totalled 290 billion euros in 2012, with 144 billion euros in European exports going to China.

The State Council, China's cabinet, unleashed a raft of measures on June 14 to open up the domestic photovoltaic (PV) market to help domestic solar panel producers amid the increasing trade tensions abroad.

Chinese Premier Li Keqiang said the development of the domestic PV sector is also in line with China's initiatives to upgrade its industrial operations.

Some have expressed concerns that the limit on PV exports may result in furious competition among domestic players.

Analysts say that China's solar industry is bracing for a major reshuffle after years of trade rows with the EU and the US as well as growing pressures from overcapacity.

Ren Haoning, an energy industry researcher with CIC Consulting Company, said the future industrial landscape will witness fewer upstream polysilicon producers, but more downstream PV power stations, to cut excess production capacity.

"The domestic demand is lagging far from digesting the nation's solar panel capacity," Ren said. "In the next decade or two, overall production capacity will shrink to maintain a relative balance."