Chinese solar panel makers Yingli Green Energy Holding Co and JA Solar Holdings Co Ltd cut their shipment forecasts on fears that Europe will soon impose anti-dumping tariffs, following similar action from the U.S. government earlier this year.
Shares of both companies fell dragging down other stocks in the sector, which has been battling a near two-year slump in prices that eroded margins and forced some companies to shut shop.
The United States earlier this year set tariffs on shipments for most top Chinese exporters, including Yingli and JA Solar, at about 31 percent.
The companies may face similar actions from regulators in Europe, their largest market, after a group of solar companies led by Germany's SolarWorld filed an anti-dumping complaint with the European Commission in July.
"We are well prepared to aggressively defend ourselves if the Commission decides to initiate an investigation," Darren Thompson, managing director of Yingli Europe, said on a post-earnings conference call.
China's top solar companies have warned that any punitive action against Chinese cells and modules in Europe would hurt the industry as a whole and keep companies from lowering costs.
"European import tariffs could in theory have a much more substantial effect than Washington's policy, but of course it will depend on how steep the European tariffs are," Raymond James Pavel Molchanov wrote in an e-mail to Reuters.
Europe is more important for global demand than the United States, with about half of global solar installations coming from the continent in 2012, Molchanov noted.
Chinese producers have gained from the boom in installation of solar panels in Europe over the last two years as the European Union targets to increase the share of renewable energy, such as solar and wind, to 20 percent.
JA Solar's stock fell 11 percent to 95 cents on Wednesday, while Yingli shares dipped about 4 percent.
Rival First Solar Inc's shares fell 7 percent and Trina Solar Ltd was down 3 percent. The broader MAC Global Energy Index <.SUNIDX> was down 2 percent.
Yingli said it expects full-year module shipments to grow by up to 37.2 percent, down from its earlier forecast of a more-than 50 percent growth.
JA Solar also slashed its total cell and module shipments for the year.
The warnings on shipments come a week after Trina Solar Ltd cut its full-year forecast for solar panel shipments.
JA Solar's second-quarter net loss doubled. Adjusted loss of 22 cents per American Depositary Share (ADS) was bigger than analysts' average estimate of 14 cents per ADS, according to Thomson Reuters I/B/E/S.
Yingli reported is fourth straight quarterly loss of 58 cents per ADS, much larger than the 33 cents loss analysts expected.
Shares of JA Solar have fallen 20 percent this year, while those of Yingli have slumped nearly 50 percent.
(Editing by Supriya Kurane and Joyjeet Das and Saumyadeb Chakrabarty)