First Solar Vulnerable to a Tellurium Shortage?
First Solar Inc. (FSLR) is a solar panel manufacturer. Its sole business is production of CdTe based solar panels. Its stock price has rallied about 10 fold since the IPO about a year ago.
I believe FSLR stock is overpriced. Moreover, this company has weak future prospects if you understand the fundamentals of its business. That's because it relies on cadmium telluride as its raw material. Cadmium is extremely toxic, but the mildly toxic tellurium is lethal to FSLR. FSLR is extremely vulnerable due to a possible shortage and price run on tellurium. It could find itself in trouble in a few years due to competing demands on tellurium.
Tellurium, the 52nd element, is extremely rare on earth, rarer even than platinum, the 78th element, according to Web Elements. Tellurium's crust abundance is 1 pbb versus 37 ppb for platinum (pbb is "parts per billion"). Tellurium is mainly produced as a byproduct from the anode slime accumulated during copper refining. But not all copper mines contain significant amounts of tellurium. Chile produces 1/3 of the world's copper but virtually nothing in tellurium. According to USGS and Arizona State Geologist Lee Allison, the world produces anywhere from 160 to 215 metric tons of tellurium a year.
Tellurium was traditionally used in metal alloys and other uses. Demand from emerging new applications, like DVD discs, digital camera, computer flash memory and CPU thermoelectric cooling, among other things, has caused a severe shortage in recent years, and drove the price from below $4 a pound to over $100 in 2006, according to Lee Allison. Jack Lifton on Resource Investor suggested that investors could sense the shortage and start to hoard physical tellurium, adding fuel to the fire and causing a huge tellurium price run.
How much tellurium does FSLR use? They use about 7 grams of cadmium and about 8 grams of tellurium in each of the 2 feet x 4 feet CdTe solar panel. That's roughly 135 metric tons per each 1 giga watt (GW) of products. They have signed a bunch of sales contracts with per watt price fixed and mandated to go down 6.5% yearly, and they are aggressively building new factories and expanding production capacity. After finishing a new factory in Germany, they are building four brand-new factories in Malaysia.
Alright, they have plenty of customers, plenty of sales contracts to keep them busy for five or six years, and Malaysia has plenty of land for them to build new factories. The growth potential looks unlimited. That's why investors bid up FSLR stock price like crazy.
But, where are they going to obtain all the new tellurium supplies needed for future expansion, at a price cheap enough to ensure profitability, and a quantity large enough to keep the new factories running? On Nov. 8, 2007, the CFO publicly commented that "we [FSLR] have identified terawatts levels of tellurium availability." He seemed to have no idea what he was talking about. One terrawatt is 1000 GW. Nowhere on earth does this amount of tellurium even exist underground, let alone available in a secret vault somewhere.
FSLR has a very dark future ahead for itself if a tellurium rush occurs as expected.
Full disclosure: I am short FSLR and I plan to invest in physical tellurium metal ingots.
This article has 102 comments:
Or search the whole internet. Do a yahoo search of FSLR, you get a quarter million hits. Search FSLR + tellurium, you get only 142. And the bulk of this 142 were related to my own writting about tellurium and FSLR. So the whole earth populace has almost perfectly zero knowledge of FSLR + tellurium.
Please visit my blog to read some of my other writtings on stock fundamentals:
stockology.blogspot.co.../
Corleoni
Also, SWC down 4.7% today.
Also, SWC down 4.7% today.
Lee Allison -- the Arizona geologist whose comments you totally misunderstood in order to launch this sky-is-falling scam -- has himself put the final nail in the coffin:
...Allison said last week his posting should not be construed to suggest there is a shortage that threatens First Solar. "World production is only a couple hundred tons, but there is a lot more sitting in the copper being produced. It is just that nobody is recovering it," Allison said.
-----
Are there other, real challenges facing FSLR? There sure are. But this tellurium supply thing... time to let it go.
It's a shameful fabrication on your part. You could not cite any source where Allison said those words. He made those comment "LAST WEEK"? Thank good God this Seeking Alpha article is only out on Monday this week, Nov. 19, today is Nov. 24. He coud not have saw my article last week and could not have said anything regarding my article last week.
What a shame!
www.azcentral.com/ariz...
The journal probably meantioned "last week" by accident. In any case, Lee Allison did not back off from his basic facts on his May 21 blog post. So I stand by on these facts provided by Lee Allison, i.e., tellurium annual production 215 tons, and tellurium price went up from $4 to $100. Beyond that Lee Allison can have his own opinion, notwithstanding the facts.
Your apology is as worthless as everything else you've posted, whether you call it "fact" or not.
short
I hope it works out for ya. Either way, your articles and blog have good insight on a little covered area of the alternative energy space.
The author of this article, who goes by multiple IDs has been widely known as a MAJOR SPAMMER especially for the stock SWC. Just go see the Yahoo Stock message boards for SWC.
He uses the IDs of ii2000426, tellurium_investor, jj2007pd46,
silverbutter, and a few others on Yahoo. His main ID was jj2000426 which he deleted once it was clear other posters were exposing his horrific results by referencing his old posts there. He is known by JJ on the boards and from his blog.
He uses multiple IDs to make posts, reply to himself, and rate his own posts.
So one basic question has to be asked before listening to a poster like this.
What legitimate person finds the need to delete old IDs?
Further, what legitimate person has the need to maintain multiple IDs to actually reply a further pump up threads?? (And yes, I actually have proof of threads where he talks to himself but forgets what ID hs is on.) Here's one:
messages.finance.yahoo...
He has pumped and SPAMMED numerous boards, blogs, and even a church blog for SWC for the past year. The stock has gone nowhere.
He got in to NEW (mortgage company) early this year and incessantly pumped it. Every other day, he was "laoding up" on the stock or "backing up the truck." Needless to say, NEW went BANKRUPT (see NEWP).
Now he finds himself stuck in FSLR. He has been short on this stock since about $100 and currently FSLR trades over $200.
According to his own admissions, almost 100% of his portfolio is invested in 2 stocks in a small niche sector (PAL, SWC). Would any one of a sound investment mind, put all their money into just one sector??
When FSLR announced int's earnings, JJ started screaming all over the FSLR boards about how the earnings were a "scam" and a "fraud" and then how there were "accounting errors" and how he was "calling the SEC." Well, that did not work so now he has a new tactic as you can see above.
Look, all I am saying is BUYER BEWARE. This is a post by an investor, and I use that term loosely, who is unethical and most his positions (SWC, PAL, FSLR) have moved over 60% against him. He also bought into at least one stock that I know of, which went bankrupt.
I have been monitoring him on the many Yahoo boards he posts, to warn unsuspecting readers.
If you want more information, contact me on one of the above mentioned boards; unlike JJ I use the same ID as I use here.
er
"Bipolar_Trader&q...
Supposing they can outbid others to say $1k a pound (appropriate for the rarest element on earth I think), they might get 75% of the market (a stretch) and then max out a little over 1 GW. That is about $2.5 billion in revenue. I'd guess that would result in around $300-500mill profit. That means say 3-5 years from now, growth grinds to a halt, and, with no share price appreciation from today, they'd be at a P/E of 35-50, mighty steep for a Co. with no growth prospects.
I'd be inclined to wait another quarter or two for them to continue their explosive growth, catch it at maybe $300, and then re-mortgage the house and short it to the hilt.
Where can you buy Te ingots?
www.micronmetals.com/t...
Make sure you buy metal ingot, NOT powder. You need to hurry. If too many people contact them first you are out of luck.
It is wrong to assume FSLR can outbit others just because tellurium is still affordable to them right now. The point is tellurium is still very affordable to EVERY tellurium user at current price. FSLR has NOT outbid any one and it will NOT outbid any one. There has been no demand destruction yet. But demand destruction MUST happen at some price point. I expect that price point to be much higher than current price, and FSLR will be the first to be kicked out because it uses waymuch more than any one else, per unit of product.
For that reason tellurium investment is a very good idea. I am not willing to disclose where to buy tellurium yet. But I found it on the web. If you are determined enough you can find out, too.
Furthermore, your statement that "First Solar could be forced to go out of business" does not follow from your premise that tellurium production could reach a ceiling; it merely could limit First Solar's production at a given cost. Currently polysilicon, the analogous ingredient in most other company's solar panels, *is* in limited supply - and yet the largest silicon-based companies are growing their production rapidly.
I agree with other responders here who are disappointed in SeekingAlpha's fact-checking. Clearly they have reached a limit with respect to availability of good-quality content.
ind
A necessary step in your proposed reasoning is just how high the price of tellurium has to go -- how extreme the "expected" rush needs to be -- before it could dent First Solar's growth, let alone put the company out of business. Tellurium, a key part of FSLR's production, is nonetheless a tiny input.
According to a paper by U-C Berkeley researchers (lo and behold, you're not the only member of the "earth populace" to look at solar companies through the lens of materials scarcity), tellurium would have to shoot up another 20-fold before destroying FSLR's current cost advantage over competitors -- and that's even assuming, ambitiously, that competitors' costs don't also rise. socrates.berkeley.edu/...
To illustrate, inversely, if the worth of your writing as investment guidance were rise to 20-fold, only then might it be competitive with, say, laying out pages of the WSJ in the local dog park.
ind
A necessary step in your proposed reasoning is just how high the price of tellurium has to go -- how extreme the "expected" rush needs to be -- before it could dent First Solar's growth, let alone put the company out of business. Tellurium, a key part of FSLR's production, is nonetheless a tiny input.
According to a paper by U-C Berkeley researchers (lo and behold, you're not the only member of the "earth populace" to look at solar companies through the lens of materials scarcity), tellurium would have to shoot up another 20-fold before destroying FSLR's current cost advantage over competitors -- and that's even assuming, ambitiously, that competitors' costs don't also rise. socrates.berkeley.edu/...
To illustrate, inversely, if the worth of your writing as investment guidance were rise to 20-fold, only then might it be competitive with, say, laying out pages of the WSJ in the local dog park.
- Berkeley qoute "Current production targets for CdTe still represent a small portion of the total solar production by 2010. If CdTe took over even a small portion of the market, we would then likely see resource constraints and the kind of material cost increases discussed previously. Therefore, the market will most likely be set by a mix of other technologies." pg31.
While not as alarmist as the OP here, the Berkeley conclusion is similar- that Te will limit CdTe panel growth - and at this point, with a PE close to 200, FSLR is pricing in massive long term growth that may not happen.
It is also an interesting idea to consider that for only $4M a competitor or say Chinese solar player could easily grab 200 tons of Te a year and provide just the type of price shock that that is imagined here.
Any alternate sources would be far too late to prevent the effects of a demand spike.
The current price for Platinum is over $23,000/lb it is not too hard to imagine Te at $2,000/lb or even higher than 20X in a short time period.
ind
You say that it "is not too hard to imagine" skyrocketing tellurium prices. But on the flip side, it's not too hard to imagine plummeting prices as well. Human beings can imagine all kinds of scenarios. Smart investors, however, look for fact and coherent logic in order to harness their imagination. I haven't found either in the arguments of Mark Anthony (or of his alleged aliases).
"If CdTe took over even a small portion of the market, we would then likely see resource constraints and the kind of material cost increases discussed previously." [20x]
- How is it ambitious to anticipate solar silicon costs are likely headed down?
"For emerging thin film technologies such as CdTe and CIGS
we derived cost data based on conversations with suppliers (First Solar), public disclosures, and projections from various industry analysts."
- would like more details about costs!
ind
On your second point, I remain unconvinced that the silicon shortage will ease significantly in the next few years, and therefore contend that it's a heckuva lot more ambitious to expect higher silicon costs than it is to predict that FSLR's business is doomed, which, let us not forget, is the extreme position which the OP has taken, and probably, based on his position, took that opinion first before looking for evidence to support it.
You mean less ambitious? I am glad you think polysilicon stays strong, I have some LDK (no FSLR either way) and hope there is no lemming like rush to overproduction
whatever the OP motivation the technical details of the debate have turned out to be intriguing
One thing you don't understand is that you presure that since global tellurium production is limited, it merely put a cap on how much FSLR can produce. So you think FSLR will be capped in growth but does not go out of business.
But you completely forget that they are NOT the only tellurium users. There are other emerging new tellurium applications, in DVD discs, in new flash memory chips, in electric-cooling CPU chips, etc. Those new application alow can drive tellurium price to a level inaccessible by FSLR, without FSLR buying a single pound of tellurium. They will kick FSLR ot of the club.
In another word, tellurium price will go up so high that FSLR can not afford to buy even one pound at that price, because they will not be able to produce anything at any profit margin at that price. They will have to simply give up the business at that point.
A company CFO can go to jail for misrepresenting his company's fundamentals to investors at a public conference. Or we can listen to you, a Johnny-come-lately amateur writer and investor with a short position.
By the way, for anyone who's interested, the conference audio can be heard here:
www.corporate-ir.net/i...
tinyurl.com/2gv27b
A Terrawatt is 1000 GW. Terrawatts must be at least 2000 GW - let's assume that the CEO equated 2 TW as "Terrawatts"...
1 GW of power requires about 135 tonnes of Te. So, 1000 GW should require about 135,000 tonnes, and 2000 GW (2 TW) requires about 270,000 tonnes of Te.
So, the CFO indirectly stated that there is 270,000 tonnes of Te available, presumably for FSLR's exclusive use.
According to the USGS, the GLOBAL reserve base is only 21,000 tonnes.
minerals.usgs.gov/mine...
Seems like the CFO has some connections from another planet.
Please correct me if I'm wrong - otherwise, would you still invest in FSLR knowing this?
Do you understand the concept of Demand Destruction? See wikipedia entry:
en.wikipedia.org/wiki/...
Currently Te only costs FSLR 3 censt per watt. You think a price raise of 10 folds or 20 folds is not possible? Think again. The price does not raise on its own. The price already went up from $4 to $100, because there is a shortage. When there is a shortage, price will have to keep raising, until either supply is increased, which is not quite possible if you understand how tellurium is produced, or, there MUST be demand destruction to bring demand down to match the level of supply.
As FSLR is the largest tellurium consumer per unit of product, it will be the first victim of demand destruction. I ahree that demand destruction will happen at price way much higher than current price. But it MUST happen, that's economic 101. So invest in tellurium right now is a pretty good idea because you know demand destruction is way much higher from current level.
A tellurium rush will speed up FSLR's demise for sure!
The fact of the matter is despite of rapid price raise in recent years, there is no indication that tellurium supply has increased. So the market fact does not agree with your analysis in 1999. WHY?
I think your analysis of the tellurium supply potential was frauded. You assume all copper world wide contain the same high concentration of tellurium. Chile produces 1/3 of the world's copper but nothing in tellurium, why? You also assume there will be no emerging new technology that uses tellurium. You never heared about burnable DVD in 1999, or flash memory, or a CPU that's coole electronically. All those things use tellurium.
Last but not the least, although you are now a competitor of FSLR, you have a huge vested interest to defend your 1999 analysis of potential tellurium supply. You have spent 30 of your best years doing scientific research at NREL. I respect that. To admit that tellurium supply can not increase significantly from 200 ton level, is to admit that you have wasted 30 years of your best time and your best energy research something that does not have a future. That, is as bad as some one take half of your life away. You absolutely can not accept it, emotionally. So you have a vested interest which will bias your view point. I do have a bias due to my short position on FSLR, but it was a totally insignificant stake compare with your 30 year academy life.
Mind go to my blog and continue the debate? Seeking Alpha seems to be slow in posting comments.
Also, what about substitutes? Maybe the company is run by idiots, but if they know they are dealing with a very rare substance which could potentially soar in price, perhaps they are investing R&D in a solution? This goes for the chip manufacturers and everyone else.
Finally, you assume that because FSLR uses the most tellurium, they will suffer demand destruction first. But the question is a) how critical is tellurium to the manufacturing process and can it be substituted and b) what is the profit margin. Again, across all industries.
For instance, movies are already downloaded. If tellurium became too expensive, DVD prodution could fall without affecting sales as consumers transition to digital.
If there is an investor tellurium rush, it takes only a few months to knock FSLR out of business. Without an investor rush, it takes longer but FSLR wil be out of business in a few years nevertheless.
FSLR's sole business is entirely based on CdTe. Replacement? They can replace with regular Si solar panels. They might as well demolish the factories and start over to build silicon factories, which gives them no competitive advantage.
Other applications use far less tellurium, per unit of product, than FSLR. When tellurium price is so high that FSLR is no longer profitable, to DVD vendors probably that just add one or two cents per disc and they can afford it. It probably cost intel half a cent per CPU which sold for $300. So Intel can afford it. But FSLR will have no profitable margin at that kind of price. So they will be the first victim of demand destruction. First to be kicked out of tellurium club.
minerals.usgs.gov/mine...
...In 2006, the prices for selenium and tellurium decreased as consumption for the metals decreased and global production increased. Domestic production of primary selenium and tellurium increased in 2006...
...World demand for tellurium is thought to have decreased slightly in 2006... With the historical high prices, many metal companies have cut back consumption or replaced tellurium. Consumption in many of the other uses has increased but not enough to offset this reduction....
...Consumption of tellurium in electronics applications was estimated to have increased in 2006. High-purity tellurium is used in electronics applications, such as thermoelectric and photoelectric devices...
...The United Kingdom price for lump and powder, 99.95% tellurium, as published in Mining Journal, started the year at $100 to $120 per kilogram. After the average tellurium price reached an alltime high of $155 per kilogram on June 13, the price fell throughout the year and ended the year at a range of $50 to $70 per kilogram...
Outlook:
The supply of selenium and tellurium are directly affected by the production of the principal product from which it is derived, copper, and to a lesser extent, by the production of lead, nickel, or zinc, produced from a sulfide ore. Since global production of selenium and tellurium-bearing copper ore was expected to rise in 2007, global selenium and tellurium production will probably also increase. Recycling of obsolete copiers and other electronic waste material has been increasing during the last couple of years. Increased environmental regulation and prices have encouraged the recycling of electronic scrap and have increased secondary production of selenium and tellurium...
Also note that 2006 USGS paper rarely talked about CdTe. FSLR had only one production line during the most part of 2006 so the demand wasn't significant yet. Now it has 7, and each one producing at almost twice the speed. So it's 12 to 14 times higher demand than 2006.
Well! I was about to post a question -- namely, why sell immediately avoid a total loss? It doesn't seem warranted from the article itself, and for someone like myself (expecting a serious correction or bear market) it makes a lot of difference whether it is real soon, a few months,, or a few years.
I decided to check the comments first. Glad I did! Here are a few comments not made yet.
1. If Mr Anthony is the maldoer (I just coined that) suggested here, that would explain it. And the 2-3 mos. he mentions in a preceding comment might be enough to cover his shorts (altho isn't it now 60 days' max?). But please note that he is forthright about his short position.
2. I thought his article seemed knowledgeable and plausible right up until that last paragraph. Why is Seeking Alpha negligent for not being aware of a problem (assuming there is one)? Seems unfair to them. Do they do peer reviews? I assume not, since these articles are turned out very fast. (In fact, I've also assumed that's the reason for lots of grammar-and-so-forth errors in these fin. articles, many made by clearly articulate and literate writers.)
3. If he's all he's supposed to be, Seeking Alpha should be informed -- in particular, of the accusations made by User 123811. Please do tell them; ingenues like myself need protection from that sort of thing.
4. At one point it seems as if the order of postings was reversed. Mr. Anthony first tells us where to buy Tellurium, and then states he won't tell us. Sounded really out of it until I noted that the order of the posts had been reversed. That's also worth mentioning to Seeking Alpha, although it might well just be a one-time glitch.
I do hope you all keep the rest of the comments on this site. Moving it elsewhere would be a disservice to most of us.
BTW: As a woman, I can easily understand using more than one pseudonym, and/or changing them. (On the other hand, I thought that talking back and forth to yourself by using different names was only done as a joke, on stage -- or at press conferences.)
I don't have more time for this, but will try to check back later to see if there are responses to my comments and the implied associated questions . . .
Equally telling: a couple of posters have been calling outright for seekingalpha to censor/delete the article since it was "fraudulent" or "misrepresenting facts". incidentally none of them has even bothered to show the slightest "misrepresentatio... lie or whatsoever. Except for one poster citing a Berkely study 8which rather supports Mark Anthony, btw) the negative commentators have induldged only in personal attacks with a remarkable and complete lack of any substance, facts, proofs etc.
I urge seekingalpha to keep this article and not to succumb to people making hell of a noise with hardly anyone of them even knowing, obviously, what they are talking about
My Question is: Is there somewhere a futures market for Tellurium that FSLR has managed to guarantee their supply, or a reasonable price ?
P.S I am not going to buy Tellurium, but probably will be shorting some solar stocks such as FSLR with a P/e > 200 in the future.
P.P.S There is nothing wrong with the ordering of the posts ... The issue is to do with whether the post was a reply to an earlier post, or a reply to the original article. This determines the order.
The global tellurium market is extremely narrow. There is no future contracts traded on this commodity. There doesn't even exist an international exchange where this commodity is traded. All trades are direct cash transactions between producers and consumers. One place I inquire about tellurium this morning, The MicroMetals. They do not have any inventory, and will have to call me back regarding future availability and price. I do have secured tellurium from another source I am not willing to reveal, but is still waiting for shipment. People ask the CFO of FSLR where to buy, if he had identified terawatts level of tellurium availability.
It's an absolute insane and nonsensical statement by the CFO and the people laughing over the Tellurium issue better listened and asked themselves just one little question: Regardless of the future demand of Te, how trustworthy is a management, its statements and financial figures if they tell this kind of absurd nonsense right at a conference call?
just think about it. I would not be surprised at all if somewhere down the road there will be accounting and balance sheet issues popping up at FSLR. No prediction, just mho.
It's an absolute insane and nonsensical statement by the CFO and the people laughing over the Tellurium issue better listened and asked themselves just one little question: Regardless of the future demand of Te, how trustworthy is a management, its statements and financial figures if they tell this kind of absurd nonsense right at a conference call?
just think about it. I would not be surprised at all if somewhere down the road there will be accounting and balance sheet issues popping up at FSLR. No prediction, just mho.
www.thinkequity.com/ba...
And yes, there is a section addressing the risks of CdTe. As with investing in any company, there are risks to be considered.
There are currently 40 companies listed in ThomasNet relating to "Tellurium." Not all of them may be major suppliers but then again, not all companies who are, are listed.
See for yourself: www.thomasnet.com/prod...
I'm not a huge fan of First Solar to be honest and feel it may be overhyped but that won't stop people from investing if they're still bringing in the money. And lastly and most importantly... it is just as ridicululous for anyone to "need to hurry" and buy the metal as it is to hurry and sell the stock.
When you go through the list of the tellurium "suppliers", do you realize that most of them are NOT tellurium producers, but merely processors. i.e., they receive low grade tellurium and process into high grade tellurium products. You can have a list one hundred of such company, or one million, it does not make a difference in the tellurium supply.
Only ONE company out of the list, PD, is a tellurium producer, every one else is merely a secondary processor. Tellurium is rarer than platinum, that is an earthly truth no matter how many companies exist on earth.
It was in response to a question at the Pacific Growth clean tech conference.
He could have dodged the question. He could have said they'd identified an "ample" supply. He could have just said "that's a business secret."
But instead he said they see plenty of the stuff in the pipeline.
Now... why would he set himself up that way? He didn't need to pump up the stock -- it had just jumped dozens of points overnight.
There was no upside to him saying that if it was a "lie," as you've claimed. Only enormous downside.
So why do it? A reasonable person would conclude that FSLR knows Te is important to its business and has taken steps to ensure a supply.
You, on the other hand... descended deeper into your fantasy-world scenario in which you extract revenge on a company that has so cruelly wronged you. By the simple fact that its share price has gone up, while you want it to go down.
How sad.
You asked the wrong question. The CFO did make that terawatts comment. So what you need to do is check the FACTs on the science book to see if what he said was correct or incorrect, not look for his motives. The fact says it is not correct. All know tellurium mineral resource in the whole world put together would not be enough to produce even just 1/7 of a terawatt of solar panels, let alone terawatts. He made a false statement to the public, which has the consequence of misleading investors in judging the company's future. Why and how he made that false statement, is this something punisheable under the law, that's up to the authority to decide. But the jury is out there that his statement was false.
Is it because you yourself are a liar? The statistics you've cherry-picked do not tell the full story, as you are well aware by now. But still you persist.
Your declaring a statement "false" doesn't automatically make it so, no matter how shrill you get. As for asking the "wrong questions"...
You really should do some further reading, if you haven't already, on the notion of "conversion efficiency improvements." Just for starters.
You put it lightly at "a potential problem with a scarce resource". Tellurium is a vital raw material to FSLR. Without it they simply have to shut down business. In comparison the oil issue is moot.
1) Does FSLR actually directly purchase Te and process it? I was under the impression that they don't. As per my other posting, I believe that they purchase CdTe from at least two other sources that I know Redlen Technologies and 5NPlus (they might have other sources that I am unaware of).
2) Secondly, is anyone aware, or care, about the processing cost of CdTe? I believe, and I hope to corrected if I am wrong, that the processing cost is a bigger component than the input material cost. CdTe is not an easy compound to produce, especially in higher qualities - 5NPlus, for an example, is in the business of providing high quality material (thus the five+ 9s), and so is Redlen. However, in both cases, there is a big capital cost in doing so to get the yields required.
So all of this discussion about the rarity of the input materials might even be moot... I might not be exactly right about my information, but I look forward to someone tell me that I am incorrect or clarify where I might be wrong.
1) Does FSLR actually directly purchase Te and process it? I was under the impression that they don't. As per my other posting, I believe that they purchase CdTe from at least two other sources that I know Redlen Technologies and 5NPlus (they might have other sources that I am unaware of).
2) Secondly, is anyone aware, or care, about the processing cost of CdTe? I believe, and I hope to corrected if I am wrong, that the processing cost is a bigger component than the input material cost. CdTe is not an easy compound to produce, especially in higher qualities - 5NPlus, for an example, is in the business of providing high quality material (thus the five+ 9s), and so is Redlen. However, in both cases, there is a big capital cost in doing so to get the yields required.
So all of this discussion about the rarity of the input materials might even be moot... I might not be exactly right about my information, but I look forward to someone tell me that I am incorrect or clarify where I might be wrong.
You are right. FSLR does not purchase Te. They purchase CdTe compound. I did not know which companies they purchase from. But then if the supplier can not get tellurium, they can not provide CdTe to FSLR. It makes the matter much worse because the suppliers engages in multiple chemical business and they don't care a bit if they could not find tellurium to produce CdTe. It probably doesn't even affect their bottom line. But it's a life or death issue for FSLR.
They do havve a supply contract with one of the CdTe supplier. But you need to read the SEC filing again, the price is NOT fixed, but adjusted quarterly. No one is foolish enough to fix CdTe sale price when Te price is so volatile. The contract probably doesn't even guarantee sales quantity, but merely spell out intent to sell. So I really don't think the supply contract mean much if it guarantees neither price nor availability.
Currently the Te portion of the cost is small, only 3 cents per watt. But the problem is availability, not price. Competing non-solar demand will bid up price in order to ensure supply. The price will keep raising until some of the tellurium users be forced to give up. It's called Demand Destruction. FSLR is the most vulnerable in demand destruction. They can not even raise end product price.
i am somewhat convinced by mark's arguments about Te's importance to FSLR, and nobody has made a argument which negates his position.
but i am not convinced that the scientific community cannot be wrong about rarity of Te ( i think its possible that they may be wrong, and if we look hard enough we can find Te in abundance for the right cost)
so if mark is right, First solar is going to have cost overruns pretty soon, and i think that may be a time to establish short position, since its quite possible that they will continue running higher making my job easy.
the worst thing maybe mark is right, whole world comes to know about Te and FSLR nexus and Te price goes to moon, everyone sells FSLR and i miss the opportunity.
i hope i can take some time out to do some research (since i dont want to miss the opportunity)
Both shorting FSLR and buying and hoarding tellurium will be very good money making ideas. Shorting is a bit more risky with quicker reward, since if they continue to jack up price you will be under some pressure before you see profit. Buying tellurium on cash will be more relaxing, but you have to wait a few years to rip the full profit.
I suggest you start by utilizing the list some one just posted, call up the tellurium vendors to ask for price and availability, and check again in one or two weeks. I called and asked for price but did not place order immediately. When I called again the price is up quite a bit already and I paid more. Please note: Buy metal ingots, do NOT buy powder. Powder is harder to handle and if inhaled will be harmful.
www.thomasnet.com/prod...
Due diligence of any investor leads one to check claims against ones assumptions even by those who are alleged to be quacks. ANYONE can do what I have done.
If you assume the Marks numbers of Te used per panel is correct (I am currently checking that out) and you accept the USGS as a valid source, then FSLR will peak production at well under 1GW/yr.
The math does not lie.
The number quoted by the CFO seem wildly out sync with the USGS number of simple existence of the critical material to make the panels.
Factors that can mitigate:
1- Te is not essential and other materials can be substituted (If so why choose Te? and why make the analyst statements?)
2 - They have stockpile from earlier years to boost annual usage
3 - They figured out how to use much less than 8gms/watt
4 - The USGS number are wildly inacurate or refer only to super purified Te.
Your 1 GW/year figure assumes that the bulk of the world's telurium supply will be available to FSLR. But you forget that other industry users also uses tellurium, and they can afford a higher price than FSLR can afford. For example the DVD industry and computer memory chip industry. Te price went from $4 to $100 BEFORE FSLR even had much production yet. So other industry demand already exceeded the global supply without FSLR's own demand. If the world has 215 tons a years, and DVDs and memory chips and metal alloys uses 200 tons, they will pay high prices to make sure they get all the 200 tons they want, and FSLR will only get the leftover 15 tons, for example.
1. Now tellurium is essential. CdTe is the whole basis of their technology. There is no replacement, period.
2. They could not have stockpiled. They don't even purchase tellurium. They purchase CdTe compound from third party supplier. The supplier had no reason to stockpile Te just to satisfy FSLR's future CdTe needs. The supplier must be a chemical company in a lot of businesses besides CdTe.
3. I never said 8 grams per watt. They would have already deplete the world's tellurium if they use 8 grams per watt. I said 8 grams per panel. That corresponds to a CdTe layer of about 3 microns. The layer can not get any thinner. Too thin and the electric current leaks, and the layer becomes transparent when too thin, unable to catch sunlight. So you really can not push it lower than 8g/panel
4.USGS is official and authoritative source and they deal with geology and global mineral production. If you do not believe the authority, I can not force you to accept the authority.
i am somewhat convinced by mark's arguments about Te's importance to FSLR, and nobody has made a argument which negates his position.
but i am not convinced that the scientific community cannot be wrong about rarity of Te ( i think its possible that they may be wrong, and if we look hard enough we can find Te in abundance for the right cost)
so if mark is right, First solar is going to have cost overruns pretty soon, and i think that may be a time to establish short position, since its quite possible that they will continue running higher making my job easy.
the worst thing maybe mark is right, whole world comes to know about Te and FSLR nexus and Te price goes to moon, everyone sells FSLR and i miss the opportunity.
i hope i can take some time out to do some research (since i dont want to miss the opportunity)
Progress in Photovoltaics: Research and Applications
Volume 14, Issue 8 , Pages 743 - 751
"Improved Estimates for Te and Se Availability from Cu Anode
Slimes and Recent Price Trends"
The article says that with an estimated 12 million tonnes of Cu anode processed, there is the theoretical possibility of 1300 tonnes Te per year. At historically prevailing extraction efficiencies of 33%, this corresponds to Te availability as 430 tonnes. Efficiency can be improved to possibly 60%, or 781 tonnes/yr. Actual Te production in 2003 is estimated as 304 tonnes, 50% higher than USGS.
FSLR is be doubling capacity every 15 months (440 MW end of 2007, 790 MW end of 2008). That's 4.6 GWp by end of 2011. If current world production of Te doubles by then and they acquire 75% of all Te, that's 450 tonnes. Please note that this is a very FSLR-friendly view. At the expected (internal and external estimates) 0.09 g Te/Wp (at best), that's 5 GWp. So it's possible they can have enough Te until end of 2011. It's a theoretical impossibility for them to keep the current trend past 2012 because there is only 100 ppm (new estimate) Te in copper, and all other sources are insignificant. My Te numbers come from a peer-reviewed source that seems more accurate than the numbers of the USGS.
FSLR charges $2.48/Wp and contracts call for decreasing price 6.5% per year, or $1.9/Wp in 1Q 2012. Production cost is $1.15 and expected to reach $0.63 by 2012. That's $1.3/Wp profit now, and $1.3/Wp in 2012.
If current trends hold and Te is not a factor, that's 1 GWp and $1.3B for 1Q 2012. At today's market cap of $16.5B, that's a P/E of 13. So today's price is entirely justified for those looking at 4 to 5 year time frame, and confident that we'll somehow get all the Te we can out of an 10% per year increasing supply of copper, and FSLR by itself outbids everyone else and the price does not increase more than the 2000% increase of the past five years ($5 to $100/kg). So a P/E of 13 at today's price in late 2011 is not impossible, but it requires faith. $200 a share is not insane for 2011.
Now to examine the effect of Te price increase. If Te increases from $200/kg to $2000/kg, FSLR will lose $0.19/Wp. So Te could cost them $0.19 of the $1.3/Wp profit (15%) out of the 1GWp poduced in 1Q 2012, giving a profit of $1.1B and a PE of 15 in 1Q 2012 at today's $16.5B market cap. But increasing production after 2012 at current trend is impossible due to Te its relative non-existence on planet earth. A more reasonable estimate is that serious Te problems will manifest in 2011 if not 2010.
Te going from $100/kg to $3000/kg is possible for FSLR to support and remain competitive and profitable and to beat out competitors looking for Te.
My prices are for the standard 99.95%, not semiconductor grade which someone says FSLR does not require. Adjusting for the extra $500/kg needed to purify to semi-conductor grade, if necessary, does not overly