Solar ETFs Fall as China Mulls Fighting U.S. Anti-Dumping Measures
February 5th, 2014 at 11:56am by Todd Shriber
Shares of the Guggenheim Solar ETF (NYSEArca: TAN) are off nearly 3% in midday trading Wednesday on news Chinese makers of photovoltaic products are mulling retaliation against anti-dumping measures recently enacted by the U.S. Commerce Department.
The Commerce Department recently enacted anti-dumping and anti-subsidy investigations on Chinese and Taiwanese imports of silicon solar photovoltaic products. This is not the first time U.S. regulators have targeted Chinese solar firms, which have been accused of flooding the market with inexpensive supply at times of tepid demand for solar power.
“In November 2011, the US levied an anti-dumping tax of between 18.32% and 249.96% on PV products imported from China, and an anti-subsidy tax of between 14.78％ and 15.97％,” according to Want China Times.
TAN’s rival, the Market Vectors Solar Energy ETF (NYSEArca: KWT), is also off almost 3% Wednesday. Both ETFs feature heavy China exposure. The world’s second-largest economy is the largest country in TAN, occupying almost 37% of that ETF’s weight. Hong Kong accounts for another 10.2% of TAN’s weight. China and Taiwan combine for 45.5% of KWT’s weight. [Clouds for Solar ETFs?]
Several of TAN’s top-10 holdings are Chinese companies, including Yingli Green Energy (NYSE: YGE), which said the Commerce Department probe “will expand its scope from that in 2011. In November 2011, the US levied an anti-dumping tax of between 18.32% and 249.96% on PV products imported from China, and an anti-subsidy tax of between 14.78％ and 15.97％,” according to Want China Times. The U.S. is the second-largest export market for Yingli.
Several years of lost subsidies, slack demand and plunging prices hampered TAN and KWT, highlighting the ETFs’ vulnerabilities to weakness in China’s solar market. The two ETFs fell on such hard times that both had to be reverse split in 2012.
That script flipped in 2013 as TAN ad KWT were the two best non-leveraged ETFs of any type with TAN more than doubling. China stepping up to help its financially ailing solar firms was an important catalyst in the stellar returns delivered by KWT and TAN last year. [10 of the Best ETFs in 2013]
Solar companies are solving one of the industry’s long-standing problems: Driving costs low enough to compel end users to make the switch from traditional fuel sources. [This Year's Best Energy ETF]
That implies U.S. companies are becoming competitive with Chinese rivals on price, a scenario that force the Chinese companies that dot TAN and KWT’s lineups to find new export markets.
Guggenheim Solar ETF