China Vows to Increase Oversight of Wayward Solar Sector
(Bloomberg) -- The Chinese government vowed to increase oversight of the nation’s beleaguered solar industry, which has suffered billions of dollars in losses as an over-abundance of manufacturing capacity slashes prices.
The Ministry of Industry and Information Technology said in a statement that it would strengthen its guidance over the industry to help it solve urgent problems. Minister Li Lecheng met Thursday with leaders from 14 solar companies, and stressed that they need to better manage disorderly competition and speed up the elimination of outdated production capacity, echoing words from a high-level meeting earlier this week chaired by President Xi Jinping.
US-listed shares of JinkoSolar Holding Co. and Daqo New Energy Corp. both rose on Thursday. Most major solar names also increased after the Chinese market opened on Friday, with Trina Solar Co. up as much as 3.5% and LONGi Green Energy Technology Co. adding 2.6%.
“Over the past week, there are several developments resulting in rising expectation of faster solar industry consolidation and supply cuts,” said a note by BofA Global Research.
But the policy-driven rush installation in the early part of this year may still support production in the coming months, meaning supply chain prices could be more resilient than expected and delay capacity exit, according to the note.
China dominates every step of the solar supply chain, but profitability at the mostly private manufacturers has collapsed as fierce competition forces them to sell at a loss while mounting protectionism threatens exports to some markets like the US. Companies have tried a slew of measures since late last year to reduce output and set a price floor, but they’ve so far failed to stop the bleeding.
It’s unclear whether Thursday’s meeting will signify a change of fortune. The minister is the highest-level government official to meet with industry leaders so far, highlighting the seriousness with which Beijing views the troubles. But the ministry’s statement didn’t include any details or specific action plans to eliminate the overcapacity.
(Updates shares in third paragraph and adds additional details in the last paragraph.)
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