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China’s Solar Sector Crisis: Goldman Sachs Predicts Factory Closures as Morgan Stanley Declares Equipment Price Bottom
China's struggling solar industry could be approaching a pivotal moment. Goldman Sachs anticipates that upcoming factory shutdowns could stabilize the market, while Morgan Stanley believes that equipment costs have reached their lowest point.
Chinese solar producers have recently experienced a brutal earnings period, however, there are slight indications that the enormous surplus troubling the sector might be beginning to alleviate.
Longi Green Energy Technology, along with five other prominent solar companies, incurred a cumulative loss of US$2 billion in the first six months. This was a result of overproduction due to an upsurge in factory construction over the past few years, which led to an oversupply and subsequent plummeting of prices to an all-time low. This has already compelled some minor firms to restructure, and the escalating trade conflicts with the US and Europe could potentially jeopardize exports.
It appears that the monetary distress is setting the stage for a recovery, though a significant bounce back probably won't happen until the following year. Goldman Sachs anticipates a forthcoming surge of factory shutdowns that would assist in restoring market equilibrium, whereas Morgan Stanley believes equipment costs have already reached their lowest point.
Longi expressed its aspirations to "steer the sector away from a rut of cutthroat pricing competition" as it hiked the prices of solar wafers last week. TCL Zhonghuan Renewable Energy Technology echoed similar sentiments when it announced its plans to mark up the prices for three kinds of wafers, as reported in Chinese press.
"Cosimo Ries, an analyst at Trivium China in Shanghai, expressed his doubts about whether prices could drop further, stating it would be overwhelming even for the major players. He predicted that the year ahead would still be quite challenging and it could take even more time for the situation to stabilize."
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