Chinese solar companies Suntech Power Holdings, JA Solar Holdings Co and LDK Solar Co posted larger-than-expected quarterly losses and warned the bleak sector outlook would continue well into next year. The price of solar panels has dropped 40 percent this year as key European markets trimmed their subsidies, leaving the market awash in extra supplies and sending shares in most of the companies down more than 70 percent since 2010.
That glut of inventory has exacerbated tensions between China's industry and manufacturers in the United States, where the Obama administration is now investigating whether Chinese companies have been "dumping" their panels at unfair discounts. China's solar industry fired back on Tuesday, with top executives of the trade association saying the companies may ask Beijing to probe imports of US polysilicon, the key material in most solar panels.
With margins sagging under the pricing pressure, Suntech, LDK and JA Solar are all moving to conserve cash and reduce capital expenditures. Suntech, the world's largest maker of photovoltaic panels, trimmed its shipment forecast for the current quarter by about 10 percent and said it would seek to aggressively cut costs in 2012.
All three companies, as well as Canadian Solar Inc and Hanwha SolarOne Co, took one-time charges to write down the value of their inventories, and all were carefully eyeing the market and managing their factory output. "We're monitoring our inventory level carefully and currently producing to order," Min Cao, JA Solar's chief financial officer, told a conference call.
Still, companies appear wary of cutting spending too deeply and losing pace with their competition. "We've been a little bit surprised that there haven't been larger declines in (spending) by some of the marginal players," said Edward Guinness, co-manager of the Guinness-Atkinson Alternative Energy fund, which owns shares in Trina Solar, Yingli and LDK Solar
Companies remain under heavy pressure to cut their production costs to keep ahead of the market price declines. Chinese manufacturers, who produce the majority of the world's modules, are targeting module costs of about 80 cents per watt next year, down more than 25 percent from current levels. Those reductions will likely only be reached by the largest players, who can buy supplies at a discount and drive down costs.
"The only people that are going to achieve 80 cents (per watt) are the volume leaders," Guinness said. Suntech, which has been among the fastest to expand its manufacturing capacity, posted a net loss of $116.4 million, or 64 cents per American Depository Share (ADS) for the third quarter versus a year-ago profit. "Looking forward, we expect excess capacity to fuel strong competition and consolidation in the next two to three quarters. This will be challenging for all solar companies," Zhengrong Shi, Suntech's chairman and CEO, said in a statement.