Wednesday, September 13, 2023

"Impact of overcapacity on solar stocks" (FSLR; SEDG; CSIQ; SPWR)

Most of the U.S.-traded names are down 3% to 5% today.

From PV Magazine, September 12:

BloombergNEF Senior Analyst Jenny Chase and Aurora Energy Research Renewables Lead Rebecca McManus speak with pv magazine about financial market trends for solar companies and the role of overcapacity as a driver of turbulence in the industry.

Most solar module producers and inverter manufacturers have taken a significant beating on stock exchanges over the last few months, well before module capacity expansion announcements. Jenny Chase, solar analyst at BloombergNEF, said that there is an oversupply across the entire value chain.

“Module and polysilicon prices crashed,” Chase told pv magazine. “There is a lot of inventory of modules in different markets. That means that, although installations are still booming and there is no sign of slowing down, the prospects for individual companies are not generally good, as they are selling more at a lower profit.”

Polysilicon prices spiked to more than $30/kg throughout most of 2022. Since the start of this year, they have fallen from $30.50 to just around $9 today.

Chase said that supply has finally caught up with demand. She said polysilicon prices have had a significant impact on polysilicon makers.

“New Chinese factories have come online and produce a lot of material. There is just enough of that,” she said. “It also has knock-on effects because it lowers the barriers to entry across the value chain, with additional competition from new entrants. It also means that any company with inventory, which is basically all of them, sees a reduced value of what they have in stock.”

Chase said that module prices were expected to decrease, but not to this extent. Module prices dropped from $0.22 to $0.24 at the beginning of the year to $0.15 today.

Rebecca McManus, renewables lead at Aurora Energy Research, agrees on the significant role played by the decline in polysilicon prices. She noted ongoing manufacturing capacity expansion in China, and plans to expand manufacturing capacity in Europe and North America.

“The rapid expansion of production capacity by Chinese manufacturers has outpaced the growth in demand,” McManus told pv magazine. “This is particularly relevant as prices there are normally two-thirds of the production prices in Europe.”

Similar European announcements are broadening the gap between supply and demand.

“There has been a big push for a more European-led manufacturing of the solar modules. Instead of importing from China, European countries want to produce 30 GW by 2025,” said McManus, noting that EU subsidy reforms are a crucial pillar of this EU strategy.

However, there is potentially another element to the EU plans.

“The new European policies could penalize developers not sourcing from Europe, but from China,” said McManus. “There is a geopolitical risk connected to that.”....


Very related at, Sept 11:

Solar sector calls for €100M EU bailout as China pushes it to the brink  

HT: Izabella Kaminska at The Blind Spot