December 30, 2010 | 0 Comments
China's domestic photovoltaics firms have achieved remarkable performances in 2010, boosted by surging demand in domestic and overseas markets. But the boom is hard to continue in 2011 upon oversupply in domestic market and no further growth in international demand, says analyst group Wind Info.
(December 30, 2010 - Asia Pulse) -- China's domestic photovoltaics firms have achieved remarkable performances in 2010, boosted by surging demand in domestic and overseas markets. But the boom is hard to continue in 2011 upon oversupply in domestic market and no further growth in international demand, says analyst group Wind Info.
According to statistics from Wind Info, 58 solar companies listed on China's A-share market achieved combined net profits of 12.1 billion yuan (US$1.82 billion) in the first three quarters of 2010, up 46% year-on-year from 8.29 billion yuan.
However, high expectations on the outlook for the PV industry have attracted a good number of companies to take up the production of PV products, which will likely result in oversupply in 2011.
Besides, international PV demand is unlikely to grow further in 2011. China's PV industry boom in 2010 is unlikely to carry on into 2011.
Since the beginning of 2010, international demand for PV products surged, growing threefold in Germany. Emerging PV markets such as Italy, the Czech Republic, and the US also stepped up construction of PV power plants. Also read: Strong demand in 2009, 2010...and 2011?
This directly drove demand for PV products, and led to a relatively long duration of short supply of PV products, including silicon wafers and solar cell modules, which greatly benefit domestic PV giants.
Among the 58 domestically-listed PV companies, 20 reported their net profits doubled in the first three quarters, and their sales margins increased by 5 percentage points year on year.
Besides this, 23 companies have forecast increasing net profits for the whole year of 2010, and 16 of them expected over 50% growth in net profits.
PV producers turned in sound performances, and domestic PV equipment manufacturers benefited from the surging demand. Zhejiang Jinggong Science and Technology (002006.SZ), a manufacturer of polycrystalline silicon ingot production furnaces, expects net profits of 60 to 65 million yuan for 2010, up 150 to 180% year on year.
China is very likely to face overcapacity and oversupply of PV products on diminishing international demand and continuous enthusiasm of domestic PV producers for capacity expansion.
Zhou Yanwu, chief analyst with Research In China, said that more than 90% of China's domestic PV companies are heavily reliant on exports, and the export destinations are mainly concentrated in Europe.
However, several European countries, the world's largest PV solar market, recently announced they are to cut back subsidies to PV projects.
Germany has trimmed total subsidies to PV projects by 3% since October. Spain is planning to cut the on-grid price of solar power-generated electricity generated by 45%. The Czech Republic is also mulling over reducing its investment in a 700MW solar power plant.
Solarbuzz, the PV market research specialist, believes that the policy changes will reduce demand for China's domestic PV products, and this will take effect from the beginning of 2011. There is a consensus that China's PV industry is not likely to maintain its fast growth in 2011. Also read: China Tier 1 PV producers prepare for vertically integrated assault
An insider with Suntech predicted that in certain periods of 2011, international PV demand may be lower than in 2010.
However, despite of unfavorable changes in the solar power policies of European countries, China's domestic PV companies are actively expanding their production capacity:
According to China's development plan for the PV industry, China is aiming to increase PV installed capacity to 20GW by 2020. But judging by the current rate of expansion, it is likely to top 50GW by then.
Meanwhile, the entire PV industry, including PV cells and PV modules, may face periodical oversupply in 2011 due to concentrated operation of newly added production capacity.
According to statistics, there will be 11 solar cell producers with production capacities exceeding 1GW in 2011.
A PV producer noted that China's solar cell production capacity is expected to reach 35GW in 2011, while total international demand would not surpass 20GW. If all domestic production capacity is fully operated, there will be 50% oversupply of solar cell products in 2011.
In the face of a gloomy outlook for international PV demand, domestic PV companies may encounter challenges in getting a return on investment in the short term. Oversupply will force the prices of PV products to drop further in 2011.
Solarbuzz claimed that the expansion plans of PV companies would drag down PV products price in 2011 unless there were better incentive policies in major international markets in 2011 to underpin robust demand growth for PV products.
Although aggravated competition in PV industry would push down prices of PV products price, this would help to cut PV power generation costs very quickly.
At present, China's PV power generation costs are 15,000 to 20,000 yuan/kW, which is lower than previous years but remains at a high level.
Meanwhile, decreases in the prices PV products will inevitably lead to mergers and acquisitions in PV industry. Small PV product manufactures find themselves under huge pressure from more aggressive competition and low market prices.
Analysts believe state-owned PV companies will occupy dominant positions following mergers and acquisitions. On the one hand, state-owned PV companies have solid financial strength and are capable of building an entire PV industrial chain. On the other hand, state-owned PV companies are more likely to get government support than private companies.
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