L R AS Published on Monday 20 September 2021 - n° 374 - Categories:PV Watch
A look at the Sino-American war: the Chinese response
At the moment, there is every reason to believe and hope that the photovoltaic market will return to normal, after the tensions over silicon, after the uncertainties over panel supplies, after the shocks over sea freight prices. Everyone is hoping for a return to normality, and the possibility of installing panels in sufficient quantities to meet demand. But the Chinese have not forgotten the signs at the entrances to the public parks: "No dogs and no Chinese". Their desire for revenge and their nationalism are ardent and constitute the cement around the Communist Party. They have been deeply angered by the willingness of the Americans to mind their own business in Xinjiang. They prepared their retaliation, that of being inescapable to obtain solar panels and to make them pay dearly. Very expensive! The world will pay.
The world believed that PV prices and supplies would normalise by the end of 2021 and 2022
In mid-September, this seems to have become the past, because the Americans have put human rights before the Chinese.
The Chinese reaction: a devastating measure that will further reduce the available silicon! the government has responded by reducing available silicon in the last four months of 2021
Will there be enough silicon to keep prices from rising? Some say so. Most likely, there will be further disruptions to the world's supply
Screaming and complaining will not help: prices will rise againThe world has come under the control of the Chinese, who will make human rights and criticism of them pay. It will be violent.
The world believed in a normalisation of prices and photovoltaic supplies at the end of 2021 - 2022
A few days ago, everything seemed to be in place for a resurgence of photovoltaics: the silicon shortages seemed to be a step forward with the prospect of new production units coming on stream in the coming weeks. The scale of the shortage meant that panel prices would fall to the level of a year ago. At the same time, the various stages of panel production were returning to "normal" profit margins.
After a period of turmoil related to an alleged silicon shortage in 2020-2021, and after the announcement of production restrictions that did not prevent After a period of turmoil over an alleged silicon shortage in 2020-2021, and after the announcement of production restrictions that had not prevented a 36% increase in Chinese panel exports in the first five months, there was hope of a return to normalcy, i.e. to a correct and abundant supply.
Each government was developing plans to increase the share of renewable energy in its country's energy mix. The European Commission proposed 40% by 2030. The US government was drawing up a plan for solar plus wind to provide 70% of the country's consumption by 2035. They were also analysing how to adapt energy supplies from residential installations (i.e. from very different sites) to a grid that is not currently designed for this.
In mid-September, this seems like the past.
The change began in 2020, when a number of prominent Americans became concerned about the fate of the Uighurs in China's Xinjiang region. They denounced their subjection to forced labour. Obviously, the Chinese government did not like this. Then, to show that the United States is concerned about human rights in the world, it banned the import of silicon and its derivatives (cells and panels) from the world's leading silicon metallurgy producer. To demonstrate their conviction, the Americans blocked certain shipments of photovoltaic products suspected of having been produced by forced labour. As if to make a point, some US manufacturers have asked the federal government to extend Trump's Section 201 protection to other Asian countries. They want to protect the domestic market from cheap imports. Finally, the senators voted for an import ban on all products from Xinjiang, i.e. fruit, vegetables, textiles, and also cells or panels, but not related to the silicon under criticism. It remains for the members of the House of Representatives to vote in favour of such a ban...
The Chinese reaction was not long in coming. It resulted in the announcement of a silicon shortage in the first half of the year (despite an increase in panel production!!!). This was the pretext for a tripling or quadrupling of the price of this basic material on the market. It is true that when five or six producers provide the bulk of Chinese production and imports are subject to taxes that dissuade them from entering China, these producers can easily organise prices. We then heard a surfeit of statements confirming the shortage, the difficulties of supply, the scarcity of panel production. Since there was only one sound bite, many journalists took up this fable.
But assuming that some of the shortage was true, the price hike showed that the rest of the world was dependent on Chinese products. Buyers were forced to go through the decisions of the sellers. So it's not clear how much of the shortage is real and how much is political will to make the Americans and Europeans pay for their support of the Uighurs. The Chinese quasi-monopoly in photovoltaics, patiently and silently acquired, forces the world to buy from China because there is no alternative!
The Chinese reaction: a devastating measure that will further reduce the available silicon!
Having made their warning shot with the increase in the price of silicon (multiplied by three or four according to sources) and panels (+25% according to different sources), the Chinese authorities have just taken a measure, as always harmless, but which will have a devastating effect on the supply of panels during the fourth quarter of 2021.
The Americans have virtually banned silicon from Xinjiang, which accounts for 40% of global production. The Chinese responded by citing the drought in Yunnan province this summer. They demanded that the province's water resources be protected. They have imposed that the average production of silicon metal manufacturers from September to December should not exceed 10% of the production in August. This means a 90% reduction in silicon metal production. Yunnan was not chosen at random: this province accounts for 20% of the world's silicon production. So the Americans are freezing 40% of the world's production (from Xinjiang), and China is freezing another 20% (from Yunnan). Environmentalists are caught in their trap: the planet's water must be saved. There is only 40% of the silicon left to be distributed!
Will there be enough silicon to keep prices from rising?
Some commentators say that there will be enough left to supply the needs of Americans. But a shift in trade flows does not happen spontaneously. Chinese manufacturers will argue that there is a shortage of silicon and that the price of panels must rise. True, the fourth quarter is not the busiest time of the year for global demand, but no one will be able to go and see if there is enough silicon or if there is a shortage. Everyone will be satisfied if they get panels at a very high price. The Chinese monopoly means that there is no alternative elsewhere. The few panel producers in Europe depend on Chinese silicon and wafer supply, if not cells. So, if China wants to, there will be no more panels for sale in the world. It certainly won't come to that, because the Chinese like to do a juicy business. Now, after the huge gains of the silicon manufacturers, it will be the turn of the panel assemblers to increase their margin rate.
Screaming and complaining will not help: prices will rise again
We will have to listen to the cries of environmentalists who advocate renewable energy and who cannot install it. We will have to understand the lack of reaction and the embarrassed attitudes of the professional unions that orient political decisions to the benefit of installers, preferring imports rather than European production for many years. It will be necessary to measure the loss of competitiveness of the economies by still needing hydrocarbons while others use renewable energies that are much cheaper. It will also be necessary to calculate the billions of dollars transferred from Western economies to the Chinese.
If the Chinese government plays its cards right, and it knows how to do so, this silicon crisis will be the manifestation of its power over the Americans and Europeans. The latter have failed to see the trap they have entered, that of total dependence on China for photovoltaics. If we have not been able to read the Chinese strategy as it was being put in place, why should we have a better vision of our interests and of the policy to follow in the near future? It's too stupid. This blindness has led us to depend on the Chinese. When will we wake up and have a relevant European strategy to defend our interests?
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