Europe is looking to introduce "Forced Labor Act", how will this impact the export of Chinese PV modules?

Recent upheaval in the European photovoltaic market has left many Chinese PV modules stranded at ports and prices dropping, worrying local manufacturers. The debate is ongoing over whether it is necessary to impose restrictions on imports of Chinese PV modules. The ESMC has requested EU legislation against forced labor in the PV industry and prevent products produced through forced labor from entering the European market, yet no new evidence suggests its use in Xinjiang's PV industry.

On October 16, 2023, the European Parliament's Internal Market and International Trade Committee approved a revised proposal for EU's 'Regulation Banning Forced Labor Products'. This ban aims to cover all stages of manufacturing production and is not specifically targeted at specific companies or industries, mirrors the U.S.'s UFLPA, requiring businesses in high-risk areas to ensure no forced labor in their supply chains. Products suspected of forced labor involvement already in the EU market will be "donated", "recycled", or "destroyed".

The European Parliament's proposed regulation, seemingly addressing forced labor, may target imports of Chinese PV module. Still unapproved, it could take 18 months to implement. If enacted, this could significantly impact Chinese PV products' market share in Europe, introducing risk and uncertainty for PV module exports.

The Forced Labor Act could restrict Chinese PV module exports, affecting both markets. When the U.S. introduced the UFLPA, companies on the "Entity List" like Hoshine, Daquan, GCL-Poly, and East Hope expanded polysilicon production outside Xinjiang. Hence, Chinese PV module companies can still export if they adjust supply chains, establish traceability for raw materials, and manage export restriction risks.

China dominates over 80% of global PV module capacity. Europe, highly reliant on Chinese PV products, accounts for nearly 60% of China's annual PV module exports, making it the largest and fastest-growing export market of Chinese PV modules. Disruptions to Chinese PV product exports could cause supply shortages, increase prices, slow renewable energy transition, and risk another European energy crisis. The Forced Labor Act might raise PV product costs and export cycles, but due to Chinese PV products' competitiveness, export volume impact may be limited.