First Solar Vulnerable to a Tellurium Shortage? 90 comments
an article to
-
Font Size:
-
Print
- TweetThis
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.
Related Articles
|
-
The Seeking Alpha 100
See allThe top 100 stock
market authors
selected for publication in the last week
Seeking Alpha 100 » -
Fastest Climbers
Those with the largestSee all
increase in followers
in the last week
Fastest Climbers » -
Top Commenters
Top commenters,
as ranked by their peers-
1
User 353732
-
2
Moon Kil Woong
-
3
doubleguns
-
4
optionsgirl
-
5
Mayascribe
Top Commenters » -
1
-
Top Instabloggers
The 100 most activeSee all
Instabloggers.
Top Instabloggers » -
Top StockTalkers
TopSee all
StockTalkers.
Top StockTalkers »
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.../
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.
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.
"Bipolar_Trader"
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.