Solar Wafer Prices On the Rise Again? 12 comments
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When considering solar stocks, the conversation always turns to the cost of silicon and solar wafers, the raw materials that go into solar cells and photovoltaic solar panels.
For some time now, the industry has suffered a shortage in silicon. This has driven up prices and led to PV panel manufacturers implementing long-term contracts to assure adequate supply in the future.
Many have thought that with new silicon suppliers coming online the shortage would soon ease and prices would begin to come down.
An article today in Digitimes suggests that the price optimists are a little ahead of themselves. To quote the article:
"Solar silicon wafer suppliers Sino-American Silicon Products and Green Energy Technology are considering raising their contract manufacturing quotes soon because of rising production costs..."
What is driving the rise in prices? The increased prices "reflect the rising costs of materials - such as steel wire -and electricity which has been driven up by the hikes in oil prices."
The article goes on to say that prices will increase 5%-10% and further suggests that the silicon shortage is still with us.
This might be a time to reevaluate LDK Solar (LDK). As many solar investors know, LDK has been building a polysilicon plant. It is intended to provide an in-house source of wafers as well as a revenue stream based on selling directly to solar end-product manufacturers. There has been spirited debate as to whether this strategy made sense given the significant investment required to bring the plant online and the risk that silicon prices might crash just as the plant began to ramp up production.
In a recent statement released on July 2, LDK Chairman Xiaofeng Peng said the company expected to produce between 100 and 350 tons of polysilicon this year.
So it looks like silicon prices will remain stable and may even move somewhat higher this year. LDK's gamble on building a polysilicon wafer capability seems to be on the verge of paying off. Investors should be able to expect an increase in revenue and fatter margins as the plant begins to produce meaningful quantities of silicon. As for increased costs, LDK Solar has secured a subsidized capped electric rate from the local government for wafer production and polysilicon production.
Analyst consensus is that LDK earnings will be flat for the next couple of quarters at $0.42, slightly less than the previous two quarters. Given a favorable pricing environment and the new plant coming on line, LDK could surprise to the upside. With the stock now down to $32.38, LDK is worth a look.
Disclosure: Author is long LDK.
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This article has 12 comments:
Makes one question TSL's (Trina solar) decision not to build their own poly plant.
Long LDK.
Short TSL.
shareholdersunite.com/...
While the spot price has peaked recently at $500/kg, right now contract prices are decreasing.
This could also be deduced from Trina's latest conference call which Dr. Yetiv has shared with us.
High spot prices have been a bit of a blessing in disguise, as every Joe Schmoo can make solar cells (not my words) it keeps new entrants away while simultaneously driving R&D effort into alternative poly-si production methods.
The capital-intensive Siemens process is a remnant of the semi-conductor era and the silicon solar sector needs a divorce, never a happy marriage in the first place (forced marriages never are).
Of course future trends can also reverse themselves and maybe contract prices for 2010 and 2011 will start going up while the spot price is bottoming. Such would be good for el Decay.
Succes in the R&D efforts would cause both spot and contract prices for solar grade silicon to tumble, and by then the Joe Schmoos of this world would have a hard time catching up with high growth integrators such as Trina (TSL) and Canadian solar (CSIQ).
siliconpriceindex.com
We stand by our earlier reading at the end of what we wrote in reaction:
shareholdersunite.com/...
It's not a moot point, to be honest. You are trying to make a point from the EETimes article that the expectations of rising silicon (whether poly or mono cristaline) are not materializing (at least not this year), but that article is not at all about silicon prices, it's about waver prices (and the reason for that is rising energy and steel wire).
First quarter they shipped about 41.8mw module has earning per share
of $0.61.
Now they raised the guldens to 230mw to 260mw, plus the newly
announced 14.9mw, with total
of 244.9mw to 274.9mw for this year 2008.
Simple math tells me that their P/E is with about 9 this year or even
8.
41.8mw/$0.61=244.9mw/X
X=$3.57 for ESP this year.
Email: solar@polysilicon.in
I'm somewhat bearish on PV industry based on delivery of $0.22/kWhr elec. I've associated alot of that price barrier with the nature of the Siemens process that I had a chance to tour and speak with the plant engineering manager. What do you suggest is the alternative for manufacturing polychrystaline and what is the marginal benefit to Siemens.
My limited experience with Siemens/poly-si leads to thoughts somewhat similar to Shareholders Unite.
MEMC and Tainergy Announce $3 Billion+ Solar Wafer Supply Contract
8:02a ET July 10, 2008 (PR NewsWire)
MEMC Electronic Materials, Inc. (NYSE: WFR) and Tainergy Tech Co., Ltd. of Taiwan announced today that they have executed a definitive agreement for MEMC to supply solar wafers to Tainergy.
Discussing alternative poly- and monocrystalline silicon production methods would be a bit lengthy here and out of place. But since all are beyond the R&D stage and ramping up production i will publish a few articles on Seeking Alpha, starting this weekend.