China’s Shaken Solar Sector Rallies on Plan to Halt Slump

(Bloomberg) -- The main industry body for China’s solar companies, which dominate global supply chains, called for an end to a profit-slashing price war to halt a slump that some executives forecast could last through 2025.

New efforts, potentially including government intervention, are required to crack down on sales of equipment and materials at below cost-prices, the China Photovoltaic Industry Association said in a Tuesday WeChat post. The statement described a May 17 meeting attended by company executives and an official from the Ministry of Industry and Information Technology.

“It is better to solve the current industry difficulties through market-oriented means,” the association said. “However, the government’s visible hand should also be fully utilized.”

Further cooperation is also needed to manage the industry’s growth, encourage mergers and acquisitions within the sector and facilitate smooth exits from the market, the association said.

Shares of Chinese panel makers surged on hopes that the meeting could be a turning point in a nearly two-year slump for the sector. Trina Solar Co. jumped 18% in Shanghai and GCL Technology Holdings Ltd. gained 12% in Hong Kong. Nine of the top 10 performers Wednesday on the CSI 300 Index were solar firms. 

Solar companies have been calling for government intervention for months, including cracking down on low prices, but have yet to see any policies introduced.

The meeting was attended by Jin Lei, director of the Electronic Information Department at the Ministry of Industry and Information Technology, who also gave a speech, according to the post. The MIIT didn’t immediately respond to a faxed request for comment. 

Chinese firms control more than 80% of production in every step of the solar supply chain, but have seen their market value eroded in the past two years as a rapid build-up of factories has outpaced global demand, leading to falling prices and shrinking profit margins.

They’ve also been at the center of a global debate about Chinese overcapacity, with leaders from the US and Europe criticizing their low prices for stymieing the development of supply chains in other parts of the world. Tongwei Co. founder Liu Hanyuan told investors on Monday that the industry could take as long as until the fourth quarter of next year to rebound. 

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