China’s Solar Sector Nears Potential Revival: Market Rebalance Expected Amid Factory Closures and Bottomed-Out Equipment Prices

China's struggling solar industry might be approaching a pivotal moment. Goldman Sachs anticipates upcoming plant shutdowns could stabilize the market, whereas Morgan Stanley believes equipment costs have hit their lowest point.

Chinese solar producers have recently experienced a brutal earnings period, however, there are subtle indications that the significant oversupply troubling the sector might be beginning to lessen.

Longi Green Energy Technology, along with five other prominent solar companies, suffered a combined loss of US$2 billion in the first half due to a surge in factory construction in recent years. The resulting oversupply has caused prices to plunge to an all-time low. Some smaller firms have already begun restructuring, and escalating trade conflicts with the US and Europe could potentially jeopardize exports.

It appears that the current financial strain is setting the groundwork for a recovery, although a significant improvement isn't expected until next year. Goldman Sachs anticipates an upcoming surge of factory shutdowns that could help stabilize the market, while Morgan Stanley believes that equipment prices have already reached their lowest point.

Longi expressed its intentions to "lift the industry from the mire of low-cost competition" as it increased prices for solar wafers last week. Similarly, TCL Zhonghuan Renewable Energy Technology has announced plans to hike prices for three wafer categories, as reported by Chinese news outlets.

"Cosimo Ries, an analyst from Trivium China in Shanghai, expressed uncertainty about whether prices could drop any further, considering it to be an overwhelming situation even for the major market participants. He also predicted that the upcoming year could be quite challenging, with the possibility of it taking even more time for the market capacity to stabilize."