Chinese solar market on shaky ground

Solar manufacturers around the world are losing money as the industry battles dropping prices and “significant excess capacity.” Even the much vaunted Chinese solar industry, which was promoted heavily by the Chinese government with billions in grants and low-interest loans, is now facing massive layoffs as sales at it’s major solar produces plummet and profits drop.

At the same time, the quality of the solar equipment being made by Chinese companies, even by the biggest companies, is often not export-grade.

While the Chinese government has promised to hugely increase its purchases of solar panels, there is a significant excess capacity in the domestic market that has kept prices low.

China’s big five firms are all reporting disastrous trading and heavily indebted balance sheets. At the end of the first quarter, JA Solar listed debt and liabilities of $1.5 billion, Trina Solar had debts of $1.08 billion, and Yingli had debts of $3.44 billion.

Suntech, once held up as a model company, could have to pay $690m in collateral related to a possible fraud, and it also has a $541m convertible bond payment in early 2013. Its total debts are $3.58 billion.

In the first quarter, LDK lost $185.2m as sales dropped by nearly 75pc. “When they came to remove staff, they simply chose a percentage who would remain,” said another worker outside the Hefei plant, who declined to be named. “The whole industry is doing badly, and LDK also had a strategy problem. There is no point in worrying now. It is simply a matter of time before the factory closes. I give it a maximum of six months,” he said.

As this Telegraph article noted, 4500 workers in one Chinese solar producer were put on “gardening leave” and are being paid 700 yuan (USD $110) per month by the Chinese government to sit at  home and wait, while their “factory has shut down 24 of its 32 production lines.”

Update: This blog has a very similar outlook for the Chinese renewables industry. Short version of the post is that the industry is hemorrhaging money and is holding as much as 35 Solyndras (17.5 billion USD) in debt.

Chinese rare earth minerals processing plants – Source: Daily Mail

Adding to the burgeoning debt load is the fact that the manufacturing process for solar and renewables uses and produces some of the most toxic and damaging chemicals and greenhouse related emissions known to humankind. Apparently the lack of basic environmental controls on the manufacturing processes is heavily impacting the Chinese environment.

31. August 2012 by Jason Hayes
Categories: Energy, Industry Reports, Marketplace Information | Tags: , , | Comments Off on Chinese solar market on shaky ground