China probes dumping of Korean polysilicon

China is investigating whether exporters from the U.S. and Korea sold solar-grade polysilicon below cost, a practice known as dumping, as part of a probe following complaints from four domestic companies.

The world’s biggest supplier of solar cells also started a countervailing duty investigation into the commodity from the U.S., China’s Ministry of Commerce said in two separate statements.

The investigation, scheduled to last a year from yesterday with the possibility of an extension to Jan. 20, 2014, will cover the 12 months from July 1, 2011.

The actions escalate a trade dispute between the world’s biggest economies after the U.S. said in May it will impose duties on Chinese solar cells, which are devices made from polysilicon and assembled into panels that convert sunlight into electricity.

China will examine a tax-exemption program for the “advanced-energy manufacturing industry” promoted by the U.S. federal government and 15 state-government sponsored programs in Michigan, Tennessee, Washington and Idaho, the ministry’s statement on the countervailing duty investigation said.

The companies that filed the complaint include GCL-Poly Energy Holdings, LDK Solar, Daqo New Energy and China Silicon. Together, they account for more than 50 percent of the raw material for solar cells in China during the past four years.

The U.S. Commerce Department on May 17 set preliminary tariffs of as much as 250 percent on imports of Chinese solar cells, which companies including the U.S. unit of Germany’s SolarWorld AG said were being sold at a loss in the U.S.

China and Chinese module makers “have more to lose than domestic polysilicon producers have to gain” from this action, Charles Yonts, an analyst at CLSA in Hong Kong, said by e-mail.

OCI’s shares, which fell 3.5 percent on July 17 after media reports said China’s Ministry of Commerce had notified the Korean Embassy that it had begun investigations, are trading at their lowest since early June.

Given the quality gap between Western polysilicon makers, including OCI, and most Chinese producers, customers from China will still have to procure some products from abroad, CLSA’s Yonts said.

Bloomberg