[Ferro-alloys.com]Deutsche Solar last week answered Hemlock Semiconductor's complaint in a federal court in Michigan that it is owed at least $83,971,500 by Deutsche Solar under a failed take-or-pay polysilicon supply contract (Ryan's Notes, Mar. 11, p3). While Deutsche Solar concedded that it entered into the two supply agreements, the solar company denied that it agreed to take delivery of the product that it could not use or could only take in violation of applicable law. The alternative was to pay a ruinous penalty.

 

Deutsche Solar also said Hemlock agreed to change the prices under the original contract to market-based pricing and made other modifications to the quantity and scheduling of the polysilicon.

 

The German company denied that it does not have the financial means to meet the terms of the supply agreement but added that fundamental illegal disruptions in the market, including illegal product dumping, that were not and could not be anticipated by Hemlock or Deutsche Solar at the time the contracts were signed, resulted in a pricing collapse that adversely impacted many, if not all, the market participants.

 

“It looks like Deutsche Solar is planning to say that the EU and US dumping cases on solar panels changed the market and that it shouldn't be forced to abide by the contracts,” one competitor said. “However, if that is the case, all the take-pay-contracts in the EU and the US would be void.”

 

Meanwhile, the EU blinked last week after saying it would stay firm on its plans to impose penalty duties averaging 47.6% on imports of solar panels from China and instead will impose temporary duties of 11.8%.

 

The provisional tariffs are to be implemented in a phased approach with the duty set at 11.8% until Aug. 6, 2013, after which the duty will increase to 47.6%. In total, the provisional duties are in place for a maximum of six months, and the EU will have to decide on the definitive antidumping measures no later than Dec. 5, 2013.

Many countries, led by German and the UK, were against the stiff penalty duties saying they would lead to a trade war with China that they would lose.

 

At the new level, the temporary duties are not expected to have much, if any impact on the Chinese solar panel makers. The EU now hopes to negotiate an agreement with the Chinese to limit exports/and or impose an minimum floor on exports over the next few months. However, analysts believe the pressure is off China to negotiate knowing that the EU doesn't have the resolve to impose the higher duties.