Jun 28, 2021 (Baystreet.ca via COMTEX) -- A few days ago, Bloomberg reported that the Biden administration was mulling banning imports of polysilicon from Xinjiang, China, a region responsible for supplying ~45% of the world's solar-grade polysilicon.
Just before leaving office, the Trump administration announced an import ban on agricultural products from Xinjiang over allegations of forced labor from detained Uighur Muslims employed in their production.
Since then, a group of bipartisan lawmakers has been pushing President Biden to move a step further and impose import restrictions on polysilicon, allowing Customs and Border Protection to seize any imports that it suspects were made with forced labor. Banning products from companies based in Xinjiang comes with considerable risk, with the likes of Nike Inc. /zigman2/quotes/203439053/composite NKE +0.40% , H&M and Burberry recently facing huge backlash from Chinese consumers threatening to boycott their products over statements they made regarding forced labor practices in the region.
But it appears that Biden is not about to let that deter him.
Politico has now reported that the Biden administration will go ahead and ban imports of solar materials from Xinjiang-based Hoshine Silicon Industry Co. Ltd, a major manufacturer of raw materials used in the polysilicon used in most solar panels.
Hoshine has been the subject of a report earlier this year on forced labor from Uyghur's Muslims in the global supply chain of the material in Xinjiang.
The Hoshine trade ban stops short of establishing a region-wide WRO to block imports of polysilicon from all entities in Xinjiang. However, that does not mean that more is not about to come. The CBP's usual modus operandi involves blocking imports from individual companies as it gradually builds a legal case for broader action.
Here are the key winners and losers as the Chinese situation unfolds.
Winners: U.S. Solar Manufacturers
U.S. solar panel manufacturers are the biggest winners of the latest ban, and also for another key reason we will discuss shortly.
FSLR">First Solar is the largest solar manufacturer in America and the Western Hemisphere and also the third-largest in the world with revenue (TTM) of $2.7 billion. First Solar manufactures solar panels, photovoltaic power plants, and related services, including construction, maintenance, and recycling of solar products. The Tempe, Arizona-based company employs thin film semiconductor technology to achieve enhanced efficiency and sustainability in its solar modules.
FSLR (3.98%) jumped 8% on Thursday trading on news of the ban, thanks to the company recently committing to building more solar panels in the United States.
Cowen analyst Jeff Osborne says the latest development is "a positive for First Solar" given the company does not use polysilicon and could lead to accelerating orders from utility-scale developers looking to avoid traceability issues in the future.
But that's just part of what makes this solar stock attractive right now.
Two weeks ago, First Solar committed to building a new 3GW per year panel factory in Ohio at a cost of $680M. The company says it seeks to "reshore" manufacturing that has moved outside the United States, bolstered by President Biden's ambitious clean energy goals. CEO Mark Widmar says the company's three Ohio plants combined would produce panels that could generate 6 GW of power annually by 2025, more than half of all solar panels the company estimates will be produced annually in the U.S.
But here's another big reason why American solar stocks like First Solar are soaring: Solar tax credits.
While the Biden administration has not named solar yet as a manufacturing priority, it supports extending tax credits for solar panel purchases or to require federal contractors to purchase more solar panels from U.S. suppliers.
U.S. solar manufacturers are fully supporting the proposed tax credits, saying they could boost domestic production of solar panels while also creating tens of thousands of new jobs.
First Solar has backed the tariffs saying they are essential to fight low-priced goods from abroad. However, industry specialists say tax credits are not enough, and hefty subsidies via tax breaks would be needed in addition to the tariffs, to get the sector really going.