The chief executive of the biggest Chinese solar panel maker on Wednesday reversed a statement that his company was selling below marginal cost in the United States, while a leading solar company in Germany has begun calling for a “Buy European” rule.
Shi Zhengrong, the chief executive and founder of Suntech Power Holdings, said in a telephone call Wednesday that he had misunderstood the question when he said twice in a recent interview that his company was selling panels in the United States below the marginal cost of producing each additional unit.
Dr. Shi’s revised comments came a day after Frank H. Asbeck, chief executive of SolarWorld in Germany, said that Europe should institute a “Buy European” policy for solar panels used in public projects. Mr. Asbeck pointed to the “Buy American” provision for construction projects in the United States supported by money from the stimulus legislation.
The actions of the two companies highlighted the increasing tension over a crucial energy industry. Western governments are mandating the use of more renewable energy but face a dilemma over whether to encourage the purchase of low-cost imports from China or often higher-cost products made at home.
Chinese alternative energy companies have been expanding so rapidly that the country’s State Council, or cabinet, announced on Wednesday night that it would limit emerging overcapacity in the output of polysilicon — the costly main material for solar panels — as well as wind turbine manufacturing. The council said that limits would include tough controls on market access, reinforced environmental supervision and stricter controls over land use, as well as guidance to the state-controlled banking industry not to bend lending standards for these industries.
So many polysilicon and wind turbine factories are already well along in construction across China that the new rules limiting new entrants to the industry still may not prevent further sharp increases in capacity over the coming year — with further downward pressure on prices.
Dr. Shi, who speaks fluent English and conducts interviews in that language, said on Wednesday that Suntech’s operations in the United States had been losing money since they started in 2005, but he attributed losses to operating expenses at the 54-employee American subsidiary.
He said the price that Suntech charged for each solar panel more than covered the production costs and therefore was above the marginal cost. But the administrative costs of running the subsidiary are fairly high on a per-module basis because the company is still building sales. The marginal cost of selling manufactured goods is the cost of producing one additional unit — typically the incremental cost of materials, assembly and shipping — excluding virtually all administrative costs.
Asked twice in a recent interview in Wuxi, China, whether Suntech was selling below “marginal cost” in the United States, Dr. Shi replied that the company was doing so to build market share. Those comments were reported in The New York Times on Tuesday and prompted Dr. Shi’s call, in which he said, “I misunderstood your question.”
Dr. Shi predicted that Suntech’s American operations might become profitable in 2010 if sales increased fast enough to spread the administrative costs across more modules.
His revised remarks underlined the attentiveness of Chinese solar panel makers to complaints from Western manufacturers about China’s lower prices and rising market share.
German solar panel makers have been outspoken in the last week in criticizing the low prices of Chinese imports and questioning whether imported panels should be eligible for subsidies.
Suntech had a gross profit margin on worldwide sales — sales minus the cost of goods sold — of 18.6 percent in the second quarter, he added.
Selling below marginal cost can be a sign of dumping, or selling goods in a foreign market for less than the cost of production. But it is not the only indicator, and it is hard to prove a case unless imports are rising rapidly and domestic companies are losing money. Chinese shipments of solar panels to the United States are rising, but American companies are also benefiting from renewed interest in their products.
A leading international trade lawyer in Washington, Alan Wm. Wolff of Dewey & LeBoeuf, wrote in an e-mail message that winning an antidumping case on solar panels would be a challenge.
“Antidumping cases against products from China have to date largely covered traditional, basic products such as chemicals and steel,” Mr. Wolff wrote. “A case against solar panels from China would be a landmark case.”
Dr. Shi said that Suntech had not engaged in dumping, adding that he believed other Chinese companies in various industries had been wrongly accused of dumping in Europe. He also said that Suntech had bought more than 500 million euros ($712 million) worth of manufacturing equipment from Germany in the last five or six years and had more than 150 employees there.