China Lowers Export Rebate Rate, Involving PV Modules and Solar Cells [SMM Interpretation]

SMM, Nov 18: On November 15, 2024, the Ministry of Finance and the State Administration of Taxation issued Announcement No. 15 of 2024, "Announcement on Adjusting Export Rebate Policies." The announcement states:
1. The export rebate for aluminum semis, copper semis, and chemically modified animal, vegetable, or microbial oils and fats is canceled.
2. The export rebate rate for some refined oil products, PV, batteries, and some non-metallic mineral products is reduced from 13% to 9%.
3. This announcement will be implemented from December 1, 2024. The applicable export rebate rate for the products listed in this announcement is determined by the export date indicated on the export goods declaration form.

In the list of products with reduced export rebate rates, PV products include: commodity code 85414200 (solar cells not mounted in modules or assembled into panels) and commodity code 85414300 (solar cells mounted in modules or assembled into panels).

China has an absolute competitive advantage in the cost and price of PV modules and solar cells, which has significantly stimulated overseas demand for Chinese PV products. The dependence of overseas markets on Chinese PV products continues to increase. Currently, both Chinese PV modules and solar cells are transitioning from domestic circulation to overseas markets, with overseas sales accounting for almost half of the total sales of PV enterprises, and over 80% of global PV product demand. However, since last year, the PV sector has entered a temporary stage of supply-demand imbalance, and export prices have continued to decline. In most markets, the price of PV modules has already reached $0.08-0.09 per watt, significantly impacting the profitability of Chinese PV enterprises.

SMM believes that although the reduction in the export rebate rate will increase the export costs of PV producers, after the policy takes effect in December, the increased costs may be more likely to be passed on to overseas consumers. Therefore, the impact on the production of Chinese PV enterprises is relatively small, and it is beneficial for the overseas selling prices of PV products, supporting a price rebound. However, whether prices can actually rise still depends on the supply and demand situation in those regions. Currently, markets in Europe and the US have highly saturated PV module inventories and are strongly supporting the construction of local PV supply chains, gradually reducing their dependence on imported PV products. In the short term, the import demand in these markets may decrease to digest current inventories or primarily import products from other countries. For other markets that lack supply, are in a demand explosion phase, and still have to rely on imported Chinese modules, overseas prices have the potential to rise. The construction cycle of overseas PV capacity is relatively long, so the decline in demand for Chinese PV products is relatively slow. Even if overseas consumers find it difficult to accept the adjusted PV products and bear the increased construction costs, finding substitutes with better prices and power generation efficiency in the short to medium term is also challenging.

In the second half of November, the tax rate adjustment may stimulate some Chinese solar cell and module factories to increase overseas sales orders, using volume discounts to promote shipments. Since the news of the export rebate rate adjustment has been anticipated by most PV enterprises, preparations for exports have been made gradually since mid-year. Therefore, although the export volume in November may increase, most overseas markets already have high inventory levels, and year-end demand is weakening, making it difficult for export volumes to see explosive growth within half a month.