Trade War Adds to Suntech’s Woes But Outlook Solid
Suntech Power (NYSE:STP) saw its stock wobble over the last week as the boost it received from increased sales in Q3 2011 was offset by the announcement by the U.S. Commerce Department that it would investigate dumping charges on Chinese solar cell manufacturers. [1] The move comes on the back of a complaint by a group of American solar manufacturers led by SolarWorld that Chinese firms such as Suntech Power and Trina Solar (NYSE:TSL) received undue advantages because of subsidies provided by the Chinese Government.
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Suntech reaffirmed its forecast for 2011 even as other major players such as First Solar (NASDAQ:FSLR) and SunPower (NASDAQ:SPWRA) cut their guidance estimates. [2] Sales in Q3 were expected to increase by 15% over Q2 levels. Gross margins were expected to remain around 13%. However the outlook for Q4 remained uncertain as conditions in the solar sector have not shown much progress.
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The Commerce Department investigation could be a significant issue for Suntech should these dumping charges be upheld. The price advantages enjoyed by Chinese manufacturers could be erased by steep tariffs. The Chinese government reacted sharply to the announcement by saying that it was greatly concerned by the development and stated that it reserved the right to adopt countermeasures under the WTO framework. [3]
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