The photovoltaic industry in China has been going through a long and difficult period, often described as "a winter that never ends." However, according to recent interviews, it's still too early to say that the sector is on the verge of a full recovery. Despite some signs of improvement, challenges remain significant.
One potential solution for struggling companies is state-owned enterprises (SOEs) stepping in with financial support. In recent months, there has been a clear trend of SOEs acquiring shares in struggling PV firms to provide much-needed capital—often referred to as a "blood transfusion." For example, Ni Kailu, the controlling shareholder of Chaori Sun, recently announced an agreement with Qinghai Provincial State Capital, which will acquire a 35% stake in the company. This move will also lead to a name change, signaling a shift toward state ownership. For Chaori Sun, which has been facing severe financial difficulties, this partnership could be a lifeline. Similarly, SOEs have taken control of other major players like LDK and Suntech Power, both of which were in deep trouble.
On the positive side, the prices of photovoltaic products have shown signs of recovery. After nearly nine months of continuous decline, prices began to rebound in early 2013. Single-crystal silicon wafers and cells saw significant price increases, while module prices stabilized since December 2012. According to a report by Cinda Securities, this marks the first price increase in components since the second half of 2011. Additionally, the National Energy Administration has raised its target for the 12th Five-Year Plan for PV installations from 21GW to 35GW. This upward adjustment, now the third in a row, signals strong demand and provides a foundation for future growth.
Despite these positive developments, the performance of many PV companies remains bleak. Chaori Sun, for instance, reported a net loss of between 900 million and 1.1 billion yuan in 2012, representing a drop of 1,542.67% to 1,907.71% compared to the previous year. It became one of the worst-performing A-share listed companies in terms of earnings forecasts. Chaori Sun is just one example; most PV companies are still struggling, with only a few—like Zhongli Science and Technology, Topsun New Energy, and Lida Optoelectronics—showing modest profit growth.
Industry experts point out that three key challenges must be addressed before the sector can truly recover. First, the over-reliance on overseas markets remains a critical issue. Over 89% of China’s hundreds of PV companies depend heavily on international markets. With anti-dumping investigations underway in Europe, the U.S., and even India, many firms are finding it increasingly difficult to compete.
Second, local governments have shown excessive enthusiasm for developing new energy industries, leading to an oversupply of PV parks. In places like Haining, Zhejiang, many traditional manufacturers have shifted into PV production, creating a surplus of capacity. This lack of strategic planning has contributed to market instability.
Finally, overcapacity continues to plague the industry. Although global demand is expected to grow, the production capacity far exceeds the actual need. Dongxing Securities estimates that global PV module shipments in 2013 will reach 30GW, up 8% year-on-year. However, total global production capacity has already surpassed 50GW, making it difficult for the industry to find balance.
While there are signs of hope, the road to recovery for the Chinese photovoltaic industry remains long and challenging.
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