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. (NASDAQ:FSLR) is overpriced regardless in my opinion. I am also long Suntech Power (NYSE:STP)