China Solars Jump on Tiny U.S. Duty; Street Spins Outcomes

Solar energy stocks responded in mixed fashion today to news that the United States decided to impose import duties of less than 5% on wares coming from Chinese manufacturers of modules and panels, versus expectations for duties of as much as 30%, as reported by Reuters‘s Doug Palmer and Matt Daily.

Shares of China-based vendors were up sharply, including Trina Solar (TSL), up 61 cents, almost 8%, at $8.38; JinkoSolar Holding Co. Ltd. (JKS), up 37 cents, almost 6%, at $6.94; Suntech Power Holdings (STP), up 44 cents, over 14%, at $3.57; JA Solar Holdings (JASO), up 8 cents, or 4.4%, at $1.90; and Yingli Green Energy(YGE), up 46 cents, over 12%, at $4.27.

Shares of U.S.-based First Solar (FSLR), by contrast, fell $1.21, or 4%, to $27.46, while SunPower (SPWR) shares were down 59 cents, or 7.5%, at $7.31.

Cantor Fitzgerald‘s Dale Pfau, who maintains a Sell rating on shares of First Solar, writes this afternoon that the import duty, being far less than expected, ends up being “irrelevant.”

“At these levels, we expect the tariffs to have virtually no effect on the fundamentals of the solar industry,” writes Pfau.

“Massive overcapacity remains in place, and we expect panel prices to continue to fall modestly over the course of the next couple of years. We believe that most panel manufacturers will struggle to show profits.”

Jefferies & Co.‘s Jesse Pichel writes that it’s “premature to call the decision a victory” for Trina, Suntech and the other Chinese names.

1) The more significant duty imposed for anti-dumping will be May 17th, and 2) regardless of the duty the effect is the same, that Chinese firms will incur a higher cost manufacturing outside China to avoid the duty, and that the US market will have higher panel costs � thus lower industry growth.

Pichel maintains an Underperform rating on Suntech shares and a Hold rating on Trina.

And Citigroup‘s Timothy Arcuri wrote that the global impact on module pricing of the new imposition will be “only ~$0.05 per watt [...] assuming no impact from other work-arounds currently being employed by Chinese companies.”

Arcuri ponders what the effect might be further out, beyond today’s obvious win for the Chinese vendors:

The larger issue may be some brand damage for Chinese product in the US, but this remains to be seen as Chinese companies have generally protected buyers from any duty. A potential outcome from here is that the Chinese government increases rhetoric about levying tariffs on imported polysilicon, which we believe could fundamentally hurt companies like WFR and Wacker (covered by Andrew Benson), although this remains to be seen.

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