Rebalancing on the Horizon: China’s Troubled Solar Sector May See Turnaround Amidst Factory Closures and Stabilizing Equipment Prices

China's struggling solar industry could be approaching a pivotal moment. Goldman Sachs anticipates that forthcoming factory shutdowns will stabilize the market, while Morgan Stanley believes that equipment costs have hit their lowest point.

Chinese solar producers have recently experienced a brutal earnings period, yet there are subtle indications that the industry's extensive oversupply issues may begin to lessen.

Longi Green Energy Technology, along with five other top solar companies, collectively suffered losses amounting to US$2 billion in the first half, due to an overproduction crisis resulting from rampant factory construction in recent years. This surplus has caused prices to plummet to unprecedented levels. Some minor businesses have already had to reorganize as a result, while escalating trade conflicts with the US and Europe could jeopardize export activities.

The economic hardship seems to be paving the way for a revival, but a significant recovery is not expected until the coming year. Goldman Sachs anticipates an impending surge of factory shutdowns that could stabilize the market, while Morgan Stanley believes that equipment costs have reached their lowest point.

Longi expressed its intentions to "steer the industry away from the mire of cheap price wars" as it elevated the cost of solar wafers last week. TCL Zhonghuan Renewable Energy Technology also announced its plan to hike the prices of three wafer variants, as reported by the Chinese press.

"Cosimo Ries, an analyst at Trivium China in Shanghai, expressed uncertainty about whether prices could decrease any further, suggesting that it is overwhelming even for the most significant stakeholders. He predicted that the year ahead could be challenging, and it might take even longer before the surplus is resolved."