Chinese solar panel producers are watching as their stock prices plummet even while demand for their products is high. Margins are slipping as oversupply is driving down prices on panels. Bloomberg reports:
In many ways the solar power industry has never been better, as the race to slow the pace of global warming drives demand for panels to a record high.
Try telling that to investors in the world’s biggest solar equipment makers.
Shares have slumped as falling prices compress margins and factory expansions raise fears of overcapacity, while investors are drawn to new sectors like artificial intelligence. The combined market capitalization of the four largest panel producers, all based in China, has dropped by more than 40% since August.
“It’s an industry where it should be doing fantastic, but instead a growing number of firms are increasingly struggling,” said Cosimo Ries, an analyst with consultancy Trivium China.
The slump follows a stunning rise that saw Longi Green Energy Technology Co., the world’s largest solar equipment maker, increase its share price more than fivefold from the start of 2020 to late 2021.
Demand for panels has surged, driven by government climate targets and concerns over energy security, while supply-chain improvements have sped up installations. The world is on track to have a total of 5,300 gigawatts of capacity by 2030 — about the volume of solar that is required in scenarios under which global net zero targets are met, BloombergNEF said last month.
But that hasn’t been enough to keep momentum going for solar companies. Longi Green is down 54% from the end of July 2022, and fell as much as 2% on Wednesday in Shanghai. Trina Solar Co. has lost 49% over that same period, while JA Solar Technology Co. and Jinko Solar Co. are at least 22% lower.
Things began to turn in the second half of last year. New factories came online to clear up a bottleneck in the production of polysilicon, the key material out of which panels are made, triggering a decline in prices across the supply chain. Citigroup Inc. recently downgraded Longi to “sell” on concerns its margins could be cut as supply grows faster than demand.
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