Park Jae-hyuk is a seasoned journalist who has provided comprehensive coverage of South Korea's corporate dynamics, economic policies, industry challenges and the global positioning of Korean companies. Based on the articles he has written since joining The Korea Times in 2016, his investigative approach has helped readers understand corporate governance, economic trends and business strategies shaping South Korea’s economy.
Hanwha, OCI struggle in overseas markets
By Park Jae-hyuk
Hanwha Chemical and OCI, the nation's leading manufacturers of polysilicon used for making solar panels, are facing increasingly unfavorable business conditions in Europe, in addition to lingering difficulties in the U.S. and Chinese markets, industry officials said Sunday.
According to a recent report from Reuters, the European Union is considering scrapping import controls on solar panels and cells from China next month, as a majority of its members support the move.
“The European Commission, which coordinates EU trade policy, proposed dismissing the request for an expiry review and received backing from a majority of the EU's 28 countries,” Reuters reported last week, citing EU sources familiar with the discussions.
Industry officials here expect the deregulation will deal a severe blow to Korean companies which have tried to expand their presences in the European market.
“The influx of low-priced Chinese products will heat up the price competition between Chinese and Korean companies,” an industry official said.
In 2013, EU began imposing anti-dumping and anti-subsidy measures against Chinese solar products, and extended the measures in March 2017 by 18 months. During the period, Chinese manufacturers have been able to sell their solar products in Europe at or above a minimum price that has progressively declined. They have been supposed to face duties up to 64.9 percent, if they sell the products at below the price.
Considering the EU will likely lift the regulation this time, Chinese firms will be able to offer lower prices, weighing on Korean manufacturers that have already struggled to cope with unfavorable factors in the U.S. and China.
In February, the U.S. government decided to impose safeguard duties of up to 30 percent on imports of solar cells and modules. China announced regulatory measures in May, saying it will control construction of new solar power facilities and cut subsidies to solar power generation.
The decisions of the two countries led to a slowdown in the Korean polysilicon industry, as the U.S. accounts for 52 percent of the global solar product market, and China takes up 12 percent.
Hanwha Chemical suffered a 4.2 billion won ($3.8 million) operating loss in the second quarter, and OCI has faced a continuous decline in the operating profit of its solar power business over the past few months.
Brokerages are casting negative outlooks to their future as well.
“As the Chinese government cut subsidies to solar power generation, the market has become sluggish,” HMC Investment Securities analyst Kang Dong-jin said. “The declining polysilicon price will have a negative impact on the business outlook of Hanwha Chemical.”
Against this backdrop, the domestic polysilicon makers' plans to improve their profitability with the expansion in the European market will likely face a setback. Europe accounts for 9 percent of the global solar product market.
Although the Korean firms may slightly benefit from the Moon Jae-in administration's policy supporting renewable energy, the size of the domestic market seems too small to offset the negative impact, according to industry officials. Korea accounts for about 1 percent of the global solar product market.