The Chinese government's retaliation over the THAAD system has been aggravating a slump in the Korean solar power industry. Although the installation of photovoltaic power generation facilities in China is expected to increase 40% compared to last year, exports by Korean solar power generation-related companies are going downhill.
According to the Institute of Foreign Economic Research of the Export-Import Bank of Korea, exports of polysilicon in the second quarter were US$276 million, down 25.5 percent from the same period last year. The exports in the first quarter slid 5.7% compared to the same period last year.
The same went for solar modules. Solar module exports in the second quarter were US$416 million, down 19 percent from the same period of last year. Korea recorded a double-digit decline for the second consecutive quarter after going down 19.5 percent to $355 million in the first quarter from the same quarter of a year ago.
Unlike the decrease in exports by Korean companies, installed facilities of photovoltaic power generation in China with the largest demand for such facilities are on a steady upward spiral. China is expected to have solar power generation facilities with a capacity of 42 GW (gigawatts) this year, a 40% increase from last year. China originally intended to build a 100 GW solar power plant by 2020, but already reached its target in the first half of this year.
Accordingly, the Chinese government announced a new plan to build another 86.5GW solar power plant over the next three years. Analysis says that expectations for a rise in China's demand drove up polysilicon, a basic material for solar power generation, upwards of 15% recently.
Despite this situation, Korean solar power companies have a grim outlook on their business in China. In particular, even though Korean polysilicon exports depend heavily on China to such an extent that 90% of polysilicon produced in Korea is expected to China, Korean polysilicon producers will hardly enjoy benefits of the increase in demand, industry experts forecast.
While OCI and Hanwha Chemical of Korea faltered in exporting their products to China due to China’s pressure on Korean companies over the deployment of the THAAD system, Wacker and Hemlock polysilicon sales in the US are stealing the show from the Korean players. In addition, as polysilicon’s largest consumer in the world is China, there is a limit to Korean companies’ strategy to diversify their export markets.
"In the case of modules, Korean companies can offset a decline in China's demand by diversifying its sales channels to the US and emerging markets. But this way does not effectively work with polysilicon as demand is concentrated on China," said Kang Jung-hwa, a senior researcher at the Institute of Foreign Economic Research of the Export-Import Bank of Korea.