What’s new: China’s solar manufacturers are eking out ever slimmer profits as ballooning capacity in the industry has kept photovoltaic (PV) module prices in a protracted decline, according to the head of solar-equipment maker Longi Green Energy Technology Co. Ltd. (601012.SH).
“Recent ‘irrational’ prices of PV modules have been hovering at near cost levels of 1 yuan (14 U.S. cents) per watt. At this current price, it is hard for anybody on the industry chain to make profit. Most companies are barely surviving,” Longi President Li Zhenguo said on a third-quarter earnings call Tuesday.
The solar manufacturer reported a 44% year-on-year plunge in profit for the three-month period.
Declining profits may lead companies to kill plans for a large number of new production capacities, which could mean prices may correct soon, said Li. “But if manufacturers are still determined to launch new production capacity even under such circumstances, the price correction will have to wait,” he added.
The background: Chinese solar-panel makers have been doubling down on their investment in the booming industry, but with capacity already exceeding demand, analysts and investors are worried whether companies have been too aggressive in an already saturated market.
Total capacity in China’s PV industry could reach nearly 1,000 gigawatts by the end of 2023, more than twice as much as the world can consume, according to estimates by several research institutions and industry experts.
Many PV manufacturers are expecting tough days ahead. In fact, more than half of China’s solar-equipment makers could be forced out in the next two to three years because of excess capacity, Li told Bloomberg in an interview in May.
Related: Cover Story: Are Chinese Solar Giants Flying Too Close to the Sun?
Denise Jia contributed to reporting.
Contact reporter Kelsey Cheng (kelseycheng@caixin.com) and editor Jonathan Breen (jonathanbreen@caixin.com)
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