For the First Time, Solar Is Contracting. But China’s Giants Are Doubling Down

(Bloomberg) -- The top solar manufacturers in China are boosting production capacity, betting higher output will help them seize a bigger chunk of the global market that is set for its first-ever annual contraction.

JinkoSolar Holding Co., which has lost almost half its market value this year, is ramping up cell and panel capacity and targeting higher-quality production, Qian Jing, vice president of the world’s largest panel maker, said in an email. GCL-Poly Energy Holdings Ltd., Tongwei Co. and LONGi Green Energy Technology Co., which have all plunged at least 45 percent over the same period, also announced expansion plans.

For the First Time, Solar Is Contracting. But China’s Giants Are Doubling Down

The push for growth comes even as global solar prices have tanked after China cut domestic subsidies to rein in record growth in 2017 and integrate existing capacity into the grid. Since the release of its ‘531 Policy’, named after the date of the plan, Goldman Sachs Group Inc. and others cut estimates for solar capacity additions in China, the world’s largest market, and Bloomberg NEF forecast that panel prices may slump 34 percent this year.

“As long as these producers are able to get financing, they should keep expanding,” said Han Qiming, a Shanghai-based analyst at SWS Research Co. “That will give them a chance to grab more market share and achieve greater scale of operations.”

JinkoSolar will raise cell capacity by 40 percent, and panels by 20 percent, by the end of this year from levels seen in the second quarter, according to a results presentation in August. Tongwei will more than triple its polysilicon capacity by year-end and double cell capacity. GCL-Poly plans to raise polysilicon capacity at its new Xinjiang plant to 50,000 tons from a proposed 40,000 tons, while LONGi seeks to triple its annual wafer capacity to 45 gigawatts by 2020.

For the First Time, Solar Is Contracting. But China’s Giants Are Doubling Down

While the fallout from China’s clampdown has hurt manufacturers from Asia to Europe, there are good reasons not to cut back. Raising output will allow them to pare unit costs and boost sales while less efficient suppliers get squeezed, according to BNEF analyst Jiang Yali. This could help them to weather the slump of more than 20 percent in panel and polysilicon prices since China’s plan was announced, BNEF data showed.

The outlook for demand for China producers is also getting sliver of hope as the European Union this month ended anti-dumping measures on the country’s photovoltaic products, which were in place since 2013. The EU said the decision was made after considering the needs of producers and those importing solar panels, as well as the bloc’s renewable energy targets.

Overcapacity in China’s solar industry is likely to remain in the near term and any additional EU demand may be only incremental for the country’s photovoltaic manufacturers, Daiwa Capital Markets Hong Kong Ltd. analyst Dennis Ip said in a note. He maintained a bearish estimate on China’s solar power capacity installations, forecasting 35 gigawatts will be added this year, a 34 percent decline from 2017.

“There’s not been a change in our capacity utilization rates after the 531 plan,” Qian said, adding that JinkoSolar has been running at full capacity. “Continuous strong demand from overseas more than offset headwinds from the unfavorable domestic policy shift.”

To contact Bloomberg News staff for this story: Feifei Shen in Beijing at fshen11@bloomberg.net

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