Chinese Solar Companies Claim Polysilicon Shortage is Easing Up

An article by Notable Calls tells us that according to Think Equity’s David Edwards, who visited with several public and private Chinese solar module manufacturers, silicon shortage is waning and that availability is increasing.

Several producers have reported greater than 10% declines in feedstock prices - both at the wafer and silicon level - in the past six months. Additionally many Chinese producers have optimistic outlooks on the silicon supply moving forward with the bottleneck relaxing significantly by late 2007 vs. previously anticipated 2008.

However, the firm also added that any softening of the situation is perceived more favorably in China than it actually is for the market more broadly.

There is also some news from the Polysilicon and Solar industry conference in Munich. Hemlock and M.Setek, Polysilicon producers, announced they were increasing capacity. However, Piper Jaffray analyst Jesse Pichel also noted that competitors’ capacity plans may not come to fruition as quickly as they hope.

Once again we are uncertain about when the supply of polysilicon will start easing up. This is what prompted me to write this article about Polysilicon shortage a few weeks ago. MEMC electronics (WFR) got hit yesterday on this news but recovered pretty strongly by the end of the day.

I am still betting that shortage eases up by end of this year or 2008 rather than 2010. My reasoning behind shorting FSLR and WFR has a lot to do with the supply of polysilicon. First Solar Inc. (FSLR) is overpriced regardless in my opinion. I am also long Suntech Power (STP)

Comments

[alpha24seven:]

There is another component that's not being introduced to the equation. The US housing market. A large majority of domestic solar assets go on top of US homeowners roofs. With the US housing industry slumping there will be an accordion effect for residential solar. The irony is that places like Sand Diego with tremendous solar opportunity are also some of the hardest hit and will not absorb the projected amount of MWs.

We should see the "housing effect" within six months if not sooner. This alone will open the Si market and will in fact warehouse complete modules and panels until we work our way out. If the current housing market leads the US into a recession then the over supply issue will only be magnified by a magnitude of order.

2007 Apr 04 03:16 PM