China's solar industry: a fine state of affairs
March saw a flurry of news whipping around China's solar sector, with most of the focus on the news of the United States Commerce Department's decision to impose duties on Chinese solar panel imports.
But a report from Digitimes says Chinese customs' figures show that the country's polysilicon imports in February were up 62.6 percent on January and an incredible 129.6 percent over a year. While these figures reflect only one aspect of the wide-ranging, multi-product solar industry, they indicate a degree of disarray and which is also reflected in the financial results of China's manufacturers.
The first official line from China on US import duties, ranging from 2.9 to 4.73 percent, was a surprisingly mild commentary published by the official New China News Agency saying the tariffs were "sensible" and a "result of compromise". It reflects a wait-and-see approach from China’s top echelon who are showing signs of concern over the country’s manufacturing sector.
The shake-out in the global solar industry continues with, most recently, German PV project developer Solarhybrid filing for insolvency quoting liquidity problems in spite of high-profile projects in the US and Israel. While liquidity seems not to be a problem for China, with many of its companies benefiting from quasi-state support in the form of soft loans from state banks, margins are continuing to fall, along with revenues and profits, while debt and liability levels are going stratospheric.
How China's solar business will develop is still something of an open question. Certainly its dominance is indisputable with Photon International’s annual market survey showing that six out of the top ten global solar manufacturers are Chinese. Suntech Power was in first place for the second year running, while for the first time neither European nor Japanese makers made the top ten.
Other figures are also startling. A recent report from NPD Solarbuzz highlighted an incredible 500 percent increase in PV installations in China during 2011 over 2010, while the Asia Pacific region saw demand increase 165 percent year-on-year. This sort of take-up has helped China move from producing 33 percent of the world's solar cells in 2008, to nearly 60 percent today.
Even so, reductions to feed-in-tariffs, in part because of the Eurozone economic disaster, in top solar buyers like Italy and Germany, hit many manufacturers - along with their dramatic increase in supplies.
And the whole US import tariff issue isn't over yet. Their imposition confirmed to China's critics there was jiggery-pokery in the market, but China's lower costs should easily be able to handle the small level of taxes. That, however, is not the end of it.
The US Commerce Department will rule in May on another allegation: this time that Chinese companies are selling products at a loss in order to drive out international competitors. Everyone sees this as potentially a bigger problem and coming with other nations’ criticisms on other aspects of clean and green tech trade – notably over rare earth minerals – China's solar industry may not be out of the woods yet.
This is of growing importance as many solar manufacturers are looking to increased business in the growing solar market of the US, as the Europeans find their wallets empty.
As with most global solar manufacturers, Chinese manufacturers have been suffering from plummeting unit prices. For many, however, the problem has been exacerbated by huge inventories priced and financed at higher levels, while also pursuing aggressive capital expenditure in seeking new manufacturing plants and bigger distribution units.