China Solar Group Flags Raw Material, Labor Shortages on Virus

(Bloomberg) -- China’s solar industry is facing potential raw material and labor shortages amid efforts to contain the coronavirus, curbing their ability to resume full production.

Manufacturers run a higher risk of shortages should factory shutdowns be extended, according to the China Photovoltaic Industry Association, citing feedback from companies. This could raise production costs and increase cash flow pressure.

Producers had stockpiled just enough raw material for one to three months before the new year holiday as they weren’t prepared for such extended closures, Liu Yiyang, deputy secretary-general of the industry group, said in a phone interview Thursday.

While some companies have kept parts of their production lines running during the holiday, many could struggle to resume full production as travel restrictions lead to a shortage of workers, Liu said. The movement of solar material and components is also a challenge.

The association has been seeking feedback from solar companies over the impact of the virus on their supply chains. More than a dozen Chinese provinces have extended the new year break until Feb. 9.

Analysts including Fitch Solutions Inc. and Wood Mackenzie Ltd. have forecast that panel prices will climb if production is affected significantly beyond the next few months. This could erode profit margins of developers and threaten growth.

Overseas Plants

Smaller companies are more likely to be affected by the disruptions, Liu said. Furthermore, some northern provinces have idled large solar farms owned by private operators due to weaker industrial demand, worsening their cash flows, Liu added.

Some overseas manufacturing plants could also be hit as they will be unable to receive components from China given flight restrictions, he said.

The association has called on the government to support the industry, including delaying tariff cuts for solar power and providing subsidies or interest-free loans.

LONGi Green Energy, one of China’s biggest solar companies, has said it sees no significant impact on its panel sales and production. It kept its shipment targets for the year unchanged. Tongwei Co., another top manufacturer, has restarted operations at its production base in Chengdu, Sichuan.

©2020 Bloomberg L.P.

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