Solar

Solarbuzz: Don’t expect demand rebound from inventory, pricing flux

Weak demand in Europe has led to rising inventory levels and prices going down — but one analyst argues that demand won’t necessarily pick up again later in the year.

July 5, 2011 – Weak demand in Europe has led to rising inventory levels and prices going down. But one analyst argues that demand won’t necessarily pick up again later in the year.

2Q11 solar PV module shipments sunk 22% (vs. 12% expected by manufacturers, notes Solarbuzz), and despite surging demand and production cutbacks, cell and module inventories still rose by about 559MW to reach an estimated record 8.6GW. As a result, factory-gate module prices sunk 9% in Europe, and are down 16% through 1H11.

Solarbuzz president Craig Stevens sees Tier 2 Asian manufacturers putting “enormous [pricing] pressure” on competitors; despite significant cutbacks in production and shipments, he sees prices in 4Q11 a full -25% lower than the same period a year ago. He’s only predicting 5% growth in the global PV market in 2011, to just 20.3MW from 19.3MW, even as PV manufacturers’ supply levels swell by 1.4×-1.7×.

This assessment is a tad bearish compared with IMS Research’s recent report, which predicts that crashing PV module prices will turn into a boon in 2H11 for module shipments that have suffered on weak demand in key markets. IMS Research’s Sam Wilkinson forecasts 30% growth in PV module shipments for both 3Q11 and 4Q11, channel inventories down to about a quarter’s worth of production, and full-year PV module shipments exceeding 23GW.

Not so fast, says Stevens. Lower prices generating 2H11 demand will “depend on downstream inventories falling fast and on resolving the policy uncertainties in Europe that have characterized 1H11,” he notes. And right now those downstream companies, instead of ramping up procurement, are still trying to reduce their own inventories (successfully, with a small reduction vs. the 36% spike in upstream inventories) to avoid write-offs that would result from a pricing collapse.




Global PV demand and cell/module inventories. (Source: Solarbuzz)