Business
China’s Solar Sector Nears Crucial Turning Point: Goldman Sachs and Morgan Stanley Forecast Market Rebalance and Price Stabilization
China's struggling solar industry could be approaching a significant change. Goldman Sachs predicts that the impending shutdown of factories could restore balance in the market, while Morgan Stanley believes that the cost of equipment has reached its lowest point.
Chinese solar producers have recently faced a brutal earnings period, however, there are cautious indications that the substantial surplus troubling the sector might be beginning to diminish.
Longi Green Energy Technology, along with five other top solar companies, accumulated losses totaling $2 billion in the first six months. This was due to an overproduction crisis caused by rapid factory construction in recent years, which led to surplus supply and consequently, all-time low prices. Some minor firms have already had to restructure, and escalating trade disputes with the US and Europe could potentially jeopardize exports.
The financial distress appears to be setting the stage for a recovery, although a significant bounce back is not expected until next year. Goldman Sachs predicts a forthcoming surge of factory shutdowns that could aid in re-stabilizing the market, while Morgan Stanley believes equipment costs may have already reached their lowest point.
Longi expressed its intentions to "steer the industry away from the rut of competing based on low prices" when it elevated the cost of solar wafers last week. TCL Zhonghuan Renewable Energy Technology also announced its plan to boost the prices of three different kinds of wafers, as per a report from Chinese press.
"Cosimo Ries, an analyst at Trivium China based in Shanghai, expressed uncertainty about whether prices could drop any further. He suggested that even the major industry players might find it hard to cope. He also forecasted a tough year ahead, with the possibility of an extended period before excess capacity is eliminated."
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