Business
China’s Solar Sector Nearing a Turning Point: Goldman Sachs Predicts Market Rebalance and Morgan Stanley Sees Bottomed Out Equipment Prices Amidst Industry Losses
China's struggling solar industry might be approaching a pivotal moment. Goldman Sachs anticipates upcoming factory shutdowns to restore equilibrium in the market, while Morgan Stanley believes equipment costs have reached their lowest point.
Chinese solar manufacturers have recently faced a brutal earnings season, yet there are subtle indications that the overwhelming oversupply troubling the sector may begin to lessen.
Longi Green Energy Technology, along with five other top solar companies, suffered a total loss of $2 billion in the first six months due to a surplus of production capacity from a rush of factory construction in recent years, which has caused prices to plummet to an all-time low. A number of smaller firms have already had to restructure as a result, and escalating trade conflicts with the US and Europe could jeopardize exports.
The economic hardship appears to be setting the stage for a recovery, though any significant bounce back probably won't happen until next year. Goldman Sachs predicts a forthcoming surge of manufacturing shutdowns that could help stabilize the market, while Morgan Stanley believes equipment costs may have already reached their lowest point.
Longi expressed its aspiration to steer the industry away from the stagnation caused by cutthroat pricing competition, as it hiked the prices of solar wafers last week. Similarly, TCL Zhonghuan Renewable Energy Technology announced its plan to boost the costs of three types of wafers, as reported by the Chinese press.
"Even the largest players may not be able to withstand further drops in prices," stated Cosimo Ries, a market researcher at Trivium China based in Shanghai. "We're looking at a tough year ahead, and possibly even more time before supply matches demand."
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