Business
China’s Solar Sector Seeks Rebound Amid Market Rebalancing and Price Bottoming: Insights from Goldman Sachs and Morgan Stanley
China's struggling solar industry could be approaching a significant shift. Goldman Sachs anticipates the expected shutdown of factories will restore balance in the market, while Morgan Stanley believes that equipment costs have reached their lowest point.
Chinese solar producers have recently endured a brutal earnings period, yet there are tentative indications that the industry's severe oversupply issue might be beginning to lessen.
Longi Green Energy Technology, along with five other prominent solar companies, have collectively suffered a loss of US$2 billion in the initial six months due to an overproduction crisis caused by excessive factory construction in recent years, which has led to unprecedentedly low prices. Some minor firms have already been compelled to reorganize, while escalating trade disputes with the US and Europe could potentially jeopardize exports.
The current financial distress seems to be laying the groundwork for a recovery, although any significant bounce back may not happen until next year. Goldman Sachs predicts a forthcoming surge of manufacturing shutdowns that could potentially reestablish market equilibrium, while Morgan Stanley believes that equipment costs have likely reached their lowest point.
Longi expressed its intention to "steer the sector away from the rut of cutthroat pricing competition" as it elevated the prices of solar wafers last week. Additionally, TCL Zhonghuan Renewable Energy Technology announced its plan to boost the prices of three wafer varieties, based on a report from Chinese press.
"Cosimo Ries, an analyst at Trivium China in Shanghai, is uncertain whether prices have the potential to decrease any further. He believes this level is overwhelming even for the largest participants. He anticipates a challenging year ahead, or possibly even longer, until the capacity issue is resolved."
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