[Click eStock] "EU Bans Imports of Forced Labor Products... Positive News for Korean Solar Companies"

OCI, ESG Will Overcome Oversupply Concerns

[Asia Economy Reporter Ji Yeon-jin] There is a forecast that Korean solar companies will benefit from the European Union (EU)'s proposed legislation banning the import of products produced through forced labor.

On the 16th, Hyundai Motor Securities predicted that energy security and ESG (environment, social, governance) issues will outweigh concerns about oversupply for OCI. Researcher Kang Dong-jin said, "The current stock price largely reflects the sharp decline in polysilicon prices, but there are sufficient premium factors compared to Chinese companies," adding, "the logic should be approached not as buying cells and modules and selling polysilicon, but as selling Chinese solar products and buying Korean and American solar products."

Earlier in June, the EU Parliament reportedly demanded related legislation while emphasizing concerns about human rights in Xinjiang, China. At that meeting, German Vice Chancellor and Minister of Economic Affairs Habeck stated that measures to reduce dependence on China for raw materials, batteries, and semiconductors are under consideration.

The EU is pushing legislation to ban the use of products produced through forced labor. Authorities can initiate investigations into suspected products, request information from companies, and conduct verification and inspections. If forced labor is found, authorities can order the withdrawal of products already on the market and prohibit their market release and export.

In February, the EU also proposed the Corporate Sustainability Due Diligence Directive, which establishes due diligence obligations for large companies to identify, prevent, mitigate, and account for actual and potential adverse impacts on human rights, including labor rights and the environment.

Researcher Kang said, "The United States and Europe, the largest markets outside China, are gradually trying to reduce the proportion of Chinese products used. Therefore, even if Chinese companies massively expand polysilicon production, if they do not absorb it domestically, exports will become increasingly difficult," adding, "Concerns about oversupply are expected to be significantly alleviated."