China's Solar Wafer Production Seems Out of Control

For Renesola (SOL) and LDK Solar (LDK) investors, the worst is yet to come. China's poly-silicon production increased dramatically in the last 12 months and two new companies just started to produce poly-silicon last month.

U.S.-listed solar wafer makers Renesola and LDK Solar are facing tougher and tougher competition, their futures have now dimmed further since two more companies in China announced plans to produce poly-silicon wafers: Puhong new energy Corp and Shengte new energy Corp. Puhong is expected to produce 1500 tons of poly-silicon by 2010 (a capacity compatible with Renesola's). Puhong won the bid in China's first 10MW solar project according to the China's official renewable energy website.

The two new poly-silicon companies sit just beside Renesola in the same industrial park in Zhejiang province. The amazing thing is that Renesola didn't win the contract to provide the wafer to the 10MW project, but a new company did. This is another example that indicates poly-silicon prices will tumble further if China's production goes out of control.

Renesola and LDK Solar did sign some solar projects, but the funding for those projects is yet to be established. Moreover, the future of these projects is still uncertain because the Chinese central government is slowing down the loan programs due to over lending in the first half of 2009. Also, the solar projects announced in the past few months in China will still depend upon feasibility studies, which will take a long time.

Solar investors may hope solar wafer prices will stablize, but the reality may disappoint. The good news is for PV module makers, such as Yingli Green (YGE) and Suntech power (STP) as costs go down with the declining price of poly-silicon, making them compatible with First Solar (FSLR).


Disclosure: Author is long YGE

Comments

[Dave Marsh:]

I thought Renesola bought a module maker so they could supply poly internally, moving it more towards a Trina vertically integrated model. Kelvin: Was I misinformed? Why sell poly at a loss when you can supply your other (module) half with your own cheap supply, then sell the modules with some kind of positive margin.

Sep 07 09:41 AM

[boisterousbob:]

Because if you are anything like LDK solar, who can produce polysilicon for about $.9/kg, it is cheaper to buy it (at $.5/kg or less) than make it.

In other words "your own cheap supply" can be damn expensive!


On Sep 07 09:41 AM Dave Marsh wrote:

> I thought Renesola bought a module maker so they could supply poly
> internally, moving it more towards a Trina vertically integrated
> model. Kelvin: Was I misinformed? Why sell poly at a loss when
> you can supply your other (module) half with your own cheap supply,
> then sell the modules with some kind of positive margin.

Sep 07 10:01 AM

[spuddle:]

Dave, you are quite right.

Unfortunately, the author of this article clearly has no logic, and, as a Yingli stockholder, no moral fibre as he attempts to spread misinformation.

If poly prices fall, both Yingli and Renesola benefit. If poly prices rise, which they are, Renesola benefits from it's in-house supply whereas Yingli will need to buy the higher priced poly. Currently, spot poly prices are around $63/kg, Renesola is producing poly internally at $50/kg falling to $35/kg next year (500MW worth).

Yingli does not produce poly and is therefore not fully integrated and at a cost disadvantage. Renesola produces poly and also produces cells/modules/systems with the acquisition of JC Solar. They plan module capacity expansion to just under 400MW by the end of next year.

Perhaps the author, being long YGE, fears competition, since Renesola's lower cost structure and hefty module production, will enable them to undercut Yingli and pressure their markets too.

I am not sure that Renesola will wish to be 'compatible' with FSLR as the author states YGE will be. Renesola already has a far better product in terms of reliability, durability and efficiency than FSLR. It is now aiming to include comprehensively beating them on price....

On Sep 07 09:41 AM Dave Marsh wrote:

> I thought Renesola bought a module maker so they could supply poly
> internally, moving it more towards a Trina vertically integrated
> model. Kelvin: Was I misinformed? Why sell poly at a loss when
> you can supply your other (module) half with your own cheap supply,
> then sell the modules with some kind of positive margin.

Sep 07 02:43 PM

[rooferguy:]

spuddle - I think you're mis-informed about Yingli. I read somewhere that they are pretty far along in building their own poly plant. Once that plant is on line then they will be much more vertically integrated than Renesola -- who is just now getting into the module biz (which will take a big sales and marketing push to get going).


On Sep 07 02:43 PM spuddle wrote:

> Dave, you are quite right.
>
> Unfortunately, the author of this article clearly has no logic, and,
> as a Yingli stockholder, no moral fibre as he attempts to spread
> misinformation.
>
> If poly prices fall, both Yingli and Renesola benefit. If poly prices
> rise, which they are, Renesola benefits from it's in-house supply
> whereas Yingli will need to buy the higher priced poly. Currently,
> spot poly prices are around $63/kg, Renesola is producing poly internally
> at $50/kg falling to $35/kg next year (500MW worth).
>
> Yingli does not produce poly and is therefore not fully integrated
> and at a cost disadvantage. Renesola produces poly and also produces
> cells/modules/systems with the acquisition of JC Solar. They plan
> module capacity expansion to just under 400MW by the end of next
> year.
>
> Perhaps the author, being long YGE, fears competition, since Renesola's
> lower cost structure and hefty module production, will enable them
> to undercut Yingli and pressure their markets too.
>
> I am not sure that Renesola will wish to be 'compatible' with FSLR
> as the author states YGE will be. Renesola already has a far better
> product in terms of reliability, durability and efficiency than FSLR.
> It is now aiming to include comprehensively beating them on price....
>
>
> On Sep 07 09:41 AM Dave Marsh wrote:

Sep 07 03:32 PM

[User 383300:]

more serious competition will come from Suntech power (STP) for Renesola, who has more efficient R&D and deserve a number of contracts in the coming chinese solar resolution. Even though It seems China overproduces right now, we should remember how chinese goverment policies would influence a market.

Sep 08 09:25 AM

[roytuh:]

long or short TAN?

Sep 08 09:40 AM

[Mad Hedge F...:]

potym. The solar industry is suffering some 19th century Darwinian style competition, with Chinese manufacturers Suntech (STP) and Yingli Green Energy Holding (YGE) clearly dumping panels below cost to gain market share. You may laugh, but I watched the Japanese pursue the same strategy in the seventies and eighties to devastating success. They now control half the US automobile market, and the most profitable half at that. As a solar consumer I shouldn’t care, as the 50% price drop has, with Obama’s generous tax subsidies, made new installations cheaper than obtaining electricity from my local power company (PGE) at 12 cents a kilowatt. It’s just a matter of booking the profit in China instead of Phoenix. But the predatory pricing has also kicked my beloved First Solar (FSLR) in the shins, which has dropped from 44% from $205 to $115 since May. Use the move to pick up FSLR on the cheap. The company is using advanced cadmium telluride based thin film semiconductor technology, which has enabled it to match the Chinese price cuts dollar for dollar, and the engineering will allow them to continue to do so. The Chinese, wedded to an older polysilicon product, can’t keep playing this game, unless they want to hemorrhage cash, or face US anti-dumping enforcement. To see more on the current fundamentals of solar, please click her

Sep 08 10:40 AM

[Kelvin Schulle:]

SOL will still rally under pressure due to its new biz model, I just learned this morning that China is expanding solar farm aggressively, much more than the west thinks. so prepare for a bottom fishing in solar space.

Sep 08 01:27 PM

[31October:]

More like Mad Hedge Spammer.

On Sep 08 10:40 AM Mad Hedge Fund Trader wrote:
> potym. The solar industry is suffering some 19th century Darwinian
> style competition, with Chinese manufacturers ...
Babelfish translation:
.... ramble ...Oldsmobile, GM, greatest generation... is anybody out there... drunken ramble... this is Robert Neville... ramble, spam ... Cetin, come upstairs, boy... incoherent ramble, spam...

Sep 08 04:24 PM

[softwaresod...:]

The problem need a solution now.

Sep 08 11:17 PM