Are your solar stocks safe?

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A few days ago, Bloomberg reported that the Biden administration was reflection banning polysilicon imports from Xinjiang, China, a region responsible for supplying approximately 45% of the world’s solar-grade polysilicon.

Just before stepping down, the Trump administration announced an import ban on agricultural products from Xinjiang over allegations of forced labor by detained Uyghur Muslims employed in their production.

Since then, a group of bipartisan lawmakers have pushed President Biden to go further and impose restrictions on the import of polysilicon, allow customs and border protection to seize any imports it suspects have been made with forced labor. Banning products from Xinjiang-based companies carries considerable risks, with Nike Inc.(NYSE: NKE), H&M and Burberry recently faced huge backlash from Chinese consumers threatening to boycott their products over statements they made regarding forced labor practices in the region.

But it looks like Biden isn’t about to be put off.

Politico has now announced that the Biden administration will go ahead and ban imports of solar materials from Xinjiang Hoshine Silicon Industry Co. Ltd, a major manufacturer of raw materials used in polysilicon used in most solar panels.

Hoshine has been the subject of a report earlier this year on the forced labor of Uyghur Muslims in the global material supply chain in Xinjiang.

Hoshine’s trade ban failed to establish a region-wide WRO to block polysilicon imports from all entities in Xinjiang. However, that doesn’t mean more isn’t about to come. The usual of CBP operating mode involves blocking imports from individual companies as it gradually builds a legal case for broader action.

Here are the main winners and losers as the Chinese situation evolves.

Winners: American solar manufacturers

US solar panel makers are the biggest winners from the latest ban, and also for another key reason we’ll discuss shortly.

FSLR“> First Solar is the largest solar energy maker in America and the Western Hemisphere and also the third largest in the world with revenue (TTM) of $ 2.7 billion. First Solar manufactures solar panels, photovoltaic power plants and related services, including construction, maintenance and recycling of solar products. The Tempe, Arizona-based company uses thin-film semiconductor technology to improve the efficiency and durability of its solar modules.

FSLR jumped 8% on Thursday when the ban was announced, thanks to the company’s recent pledge to build more solar panels in the United States.

Cowen analyst Jeff Osborne says the latest development is “a positive point for First Solar“given that the company does not use polysilicon and could lead to an acceleration of orders from large-scale developers seeking to avoid traceability issues in the future.

But that’s only part of what makes this solar stock attractive right now.

Related: US Agrees to Lift Iranian Oil Sanctions Two weeks ago, First Solar made a commitment to build a new 3 GW per year panel plant in Ohio at a cost of $ 680 million. The company says it is looking to “relocate” manufacturing that has moved out of the United States, bolstered by President Biden’s ambitious clean energy goals. CEO Mark Widmar said the three Ohio factories combined would produce panels that could generate 6 GW of electricity per year by 2025, more than half of all solar panels the company estimates are produced each year. in the USA

But here’s another big reason why U.S. solar stocks like First Solar are soaring: solar tax credits.

While the Biden administration has yet to name solar as a manufacturing priority, it supports extending tax credits for solar panel purchases or forcing federal contractors to purchase more solar panels from US suppliers. .

US solar manufacturers fully support the proposed tax credits, saying they could boost domestic production of solar panels while creating tens of thousands of new jobs.

First Solar has backed the tariffs saying they are essential in combating cheap products from overseas. However, industry experts say tax credits are not enough and that significant subsidies via tax breaks would be needed in addition to tariffs to kick-start the industry.

Widmar is skeptical of whether even this will work: “China heavily subsidizes any strategic industry it chooses to focus on. How can an American company compete? “ he posed.

The San Jose, California-based company is also on the move. Sunpower Corp., with SPWR shares rising nearly 10% in the past five trading days. SunPower manufactures crystalline silicon photovoltaic cells and solar panels based on back contact solar cell technology.

SunPower is really an old head in the solar industry and has tried many aspects of the business. However, the company’s latest act is to become a more specialized player in solar technology, having sold its microinverter business to Enphase in 2018 and finalized the acquisition of Maxéon (NASDAQ: MAXN) in 2019.

A key benefit of this strategy has been a reduction in SunPower’s cost of capital and a healthier balance sheet. It’s too early to tell if SunPower’s streamlining efforts will pay off in the long run, but if you like a good turnaround story, this company could be a good buy.

Losers: Chinese manufacturers

The ban by customs and border protection comes days after the Commerce Department’s Bureau of Industry and Security banned four other companies located in Xinjiang from its “entity list”: Xinjiang Daqo New Energy Company., Xinjiang East Hope Nonferrous Metals Co., Xinjiang GCL New Energy Materials Technology Co., and the Xinjiang Production and Construction Corps.

Related: Solar Has An Unlikely New Enemy

The four companies are all involved in the manufacture or use of polysilicon products, with Xinjiang Production and Construction Corps being the target of a precedent. import ban by the Trump administration.

Daqo New Energy Corp., another polysilicon maker with a factory in Xinjiang, plunged 7% after the news. Daqo is a Chinese company that manufactures solar photovoltaic systems in monocrystalline silicon and polysilicon.

The addition of Daqo to the list of entities came despite the company having recently gone out of its way and welcome a visit to its main manufacturing plant in Xinjiang in an extraordinary effort of transparency.

And the ban certainly won’t make life easier for one of the biggest names in solar in China, Solar jinko.

One of the main trends driving the phenomenal growth in the renewable energy sector is falling costs. And nowhere has this been more evident than in the solar sector. Indeed, solar photovoltaic (PV) has experienced the largest cost drop of any electrical technology over the past decade, with the International Renewable Energy Agency (IRENA) finding that between 2010 and 2019 , the cost of solar photovoltaic energy has fallen by 82% overall.

But this bullish thesis is now in great danger.

A quadrupling in the cost of polysilicon has pushed solar module prices up 20% since the start of the year and threatens to spoil years of gains.

Polysilicon makers have struggled to keep up with demand, pushing prices up to $ 25.88 / kg, from $ 6.19 / kg less than a year ago.

Jinko has been in remediation mode for most of the year due to these supply chain issues. Since January, stocks have lost nearly 40%.

Overall, Biden’s latest move is expected to be sharply bullish for US solar equipment makers in the long run.

Just months after President Biden joined the Paris climate agreement, global energy market navelist IHS Markit ranked the The United States, the most attractive market for investments in renewable energies in the world.

The United States claimed first place in the last IHS Markit Attractiveness rankings of global renewable energy markets mainly on healthy market fundamentals and the availability of an attractive, albeit gradual, support regime. The poll

monitors the attractiveness of investments for non-hydroelectric renewable energies such as solar photovoltaic, offshore wind and onshore wind. The ranking rates each country based on seven sub-categories which include market fundamentals, current policy framework, infrastructure readiness, investor friendliness, income risks and return expectations, ease of competing and the overall size of the opportunities for each market.

By Alex Kimani for Oil Octobers

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