China admits its solar industry is hoarding materials

China conceded that its solar manufacturers are hoarding materials, exacerbating the problems facing installers and utilities in the U.S.

The Chinese Industrial Ministry called out hoarding, saying in a notice issued Wednesday that the practice is “strictly prohibited” and that there is an “urgent need to deepen industry management” in what is the world's largest solar manufacturing market.

This appears to confirm the suspicions of the utility NextEra, whose chief financial officer Kirk Crews said on an earnings call in April that Chinese multinational companies in Southeast Asia were withholding shipments of both solar modules and the cells that comprise them. The reason: a Commerce Department probe into solar suppliers in the region that's ongoing.

That probe, which has inspired the ire of both the public and the private sector, is examining whether solar companies operating out of Cambodia, Malaysia, Thailand and Vietnam are evading long-standing U.S. tariffs by building panels in Southeast Asia using Chinese materials. These four countries supply roughly 80% of the panels in the U.S., and the uncertainty has placed utilities in a bind.

The hoarding may have had the desired effect. In June, the Biden administration agreed to wave tariffs on solar panels from the four countries caught up in the probe for two years, a major win for the Chinese industry. While the warning from Beijing may lead to some blowback, it's unclear what the consequences might be.

In its statement, the ministry encouraged solar companies to establish backup reserves of polysilicon and other materials. Doing so could help balance the supply chain and smooth out fluctuations in panel prices, which have seen wild swings recently.

Eight of the 10 largest solar companies in the world are Chinese, and the country controls much of the industry’s supply of raw materials. The Biden administration is trying to bolster the American solar industry, including invoking the Defense Production Act for panels manufactured in the U.S. earlier this year. American solar developers have also agreed to pony up $6 billion for panels made in the U.S. For now, though, China still holds most of the cards.