Victims Of A Trade War

Dow Corning announced in December that it would close a $1.2 billion polysilicon plant it had just built in Clarksville, Tenn., putting hundreds of highly skilled employees out of work permanently and giving up on billions of dollars in future revenues. The company blamed two closely related issues: a global oversupply of polysilicon and a solar energy trade war between the U.S and China.

The U.S. started the trade spat in 2012 by slapping tariffs on Chinese-made solar cells, the polysilicon-based heart of a solar panel. The U.S. claimed Chinese manufacturers were selling their cells below cost in the U.S. China quickly retaliated by imposing its own tariffs on U.S. polysilicon, alleging that U.S. producers benefit from government subsidies.

Hostilities have since festered. In December, the U.S. raised the duties levied on Chinese cells and confirmed that it would extend solar-related sanctions to Taiwan, ruling that Chinese companies were sourcing cells from the island to evade U.S. tariff walls. That last decision convinced Dow Corning that the trade dispute was nowhere close to ending.

If it hadn’t already been crystal clear, closure of the Tennessee plant, part of a Dow Corning unit called Hemlock Semiconductor, is proving how ill-advised the 2012 decision to impose trade sanctions on China was. China’s solar-cell industry depends on materials and components produced elsewhere. As a result, the trade dispute is raising the cost of solar cells and affecting companies that supply the solar industry around the world. A collateral victim is solar energy itself, which is starting to be recognized as economically viable.

Prior to the trade war, leading U.S. chemical and materials producers, including Dow Corning and DuPont, had geared their solar businesses toward supplying fast-growing Chinese companies. The Tennessee plant was built assuming a world in which Chinese demand for polysilicon would be stronger than it is now. DuPont, closely aligned with leading Chinese cell makers such as Yingli Green Energy, opened a $25 million technical center in Shanghai to support its Chinese customers. Among other materials, DuPont supplies the solar industry with a photovoltaic paste branded Solamet.

DuPont tells C&EN that it wants the trade dispute solved and suggests that the sanctions are misguided. “DuPont continues its efforts to educate policy-makers and other key stakeholders about the role of free trade in driving the adoption of renewable energy; its role in the creation of a strong, competitive, and economically sustainable photovoltaics industry; and the negative impact such trade actions have on the industry and the continued growth of solar,” the company says.

The U.S. solar industry is divided in its opinion of the trade sanctions against China and Taiwan. It was a complaint by SolarWorld, a German solar-cell maker with a plant in Oregon, that resulted in the U.S. tariffs on Chinese competitors.

And SunPower, a California solar panel producer, saw the value of its stock surge 13% after the U.S. imposed sanctions on Taiwan in December. SunPower is two-thirds owned by Total, a French oil company.

Most of the U.S. solar energy industry, however, appears to be against the U.S. sanctions. With a membership of 1,000 companies, the Solar Energy Industries Association (SEIA) is opposed to tariffs on Chinese-made products. If not for the trade dispute, the use of solar energy would be far more widespread in the U.S., the group contends, and both U.S. and Chinese companies would benefit.

Another industry group, the Coalition for Affordable Solar Energy, says the trade dispute is harming U.S. companies that have manufacturing operations in both the U.S. and Asia. It notes that Suniva, based in Norcross, Ga., has to pay high U.S. import duties when selling solar modules assembled in China with components that are largely from the U.S.

Legislators had ample warning that the trade dispute might make the Dow Corning plant unviable. As early as 2012, the firm’s chief executive officer, Robert D. Hansen, said trade sanctions would prove counterproductive. “This issue is serious and could impact Hemlock Semiconductor’s ability to sell material to China—its largest market—if the Chinese government assesses duties against U.S.-manufactured polysilicon sold into China,” the company said. Dow Cor­ning also makes other solar materials such as silicone encapsulants.

An additional warning from Dow Corning, more than just words this time, came in January 2013. The company announced that it was laying off 400 employees, 300 in Tennessee and 100 at its production site in Michigan, as a direct result of the solar trade dispute.

In 2011, Dow Corning envisioned investing as much as $3 billion in Tennessee. Instead, the company is closing a plant that it never used and on which it spent more than $1 billion. SEIA, the solar association, argues that a rapid resolution of the trade dispute would lead to a revival of the U.S. polysilicon industry, among other benefits. It is perhaps too late to save the Dow Corning plant, which the company is in the process of selling off. But there is still a chance to reinvigorate the U.S. solar materials industry before companies elsewhere in the world capture most of the market.