Business
China’s Solar Sector Nearing a Turning Point: Predictions of Market Rebalance Amid Factory Closures and Bottomed-Out Equipment Prices
China's struggling solar industry could be approaching a significant change. Goldman Sachs predicts that upcoming factory shutdowns will restore balance to the market, whereas Morgan Stanley believes that equipment prices have reached their lowest point.
Chinese solar producers have recently faced a brutal financial quarter, however, there are slight indications that the overwhelming surplus burdening the sector might begin to lessen.
Longi Green Energy Technology, along with five other prominent solar businesses, incurred combined losses of around US$2 billion in the first six months due to overproduction in recent years leading to a surplus and subsequently, record low prices. Some of the smaller firms have had to undergo restructuring, and escalating trading conflicts with the US and Europe could jeopardize exports.
The economic distress appears to be paving the way for a recovery, though a significant bounce back is not expected until the coming year. Goldman Sachs predicts a forthcoming surge of manufacturing shutdowns that could help stabilize the market, while Morgan Stanley believes machinery costs have already reached their lowest point.
Longi expressed its intention to "stimulate the industry to rise above the mire of low-cost rivalry" as it increased the prices of solar wafers last week. According to a Chinese media report, TCL Zhonghuan Renewable Energy Technology also announced a price hike for three different wafer types.
"Cosimo Ries, an analyst with Trivium China in Shanghai, expressed uncertainty about whether prices could drop any further, stating it could be too overwhelming even for the major market participants. He also predicted a tough year ahead and possibly an extended period before the excess supply is absorbed."
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