China Solar Giant Warns of Demand Whiplash after Rebate Rollback
(Bloomberg) -- China’s struggling solar sector faces fresh turbulence as the planned removal of a key export-tax rebate threatens to disrupt demand patterns, according to Longi Green Energy Technology Co.
The tax change — which is due to kick in from April 1 and is meant to promote industry consolidation — could leave manufacturers scrambling to ship orders ahead of the shift, followed by a sharp drop-off once the rebate is withdrawn, Vice President Zhang Haimeng said in an interview. To cope with the near-term rush, companies may ask staff to work overtime during the upcoming Chinese New Year holiday, Zhang said.
The potential upheaval risks adding to the mounting challenges faced by Chinese solar manufacturers. The sector has reported deep losses over the past two years due to persistent oversupply, and is now also facing lower margins as the price of key input silver soars to record highs.
While the removal of the rebates on solar products has long been under consideration, the demand surge won’t be sustained, according to Zhang, who spoke on the sidelines of the World Economic Forum in Davos, Switzerland.
“This is similar to the first quarter of last year,” said Zhang, referring to an earlier policy shift in renewable-power pricing. “That policy change resulted in a spike in demand, and then the demand came off quite a bit after that. My worry is the same thing may happen again.”
On the challenge posed by soaring silver prices, Longi and several domestic peers have announced a push to reduce usage of the precious metal in their products. A specific plan is still being finalized, according to Zhang.
“The technology is not fully commercialized,” Zhang said last week. “We’ll have more visibility in a few months in terms of the performance of the technology at scale, and the cost advantage.”
Longi has also expanded into energy storage to seek a new growth engine, in addition to its solar business. The company is currently in a market-testing phase, with Europe seen as a likely priority, and the US also of strong interest, according to Zhang.
On the Wire
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A cargo of iron ore subject to curbs by China’s state buyer is now en route to Malaysia after failing to find a buyer in its traditional market.
This Week’s Diary
(All times Beijing)
Tuesday, Jan. 27:
- China’s industrial profits for Dec., 09:30
Wednesday, Jan. 28:
- CCTD’s weekly online briefing on Chinese coal, 15:00
- CSIA’s weekly polysilicon price assessment
Thursday, Jan. 29:
- CSIA’s weekly solar wafer price assessment
Friday, Jan. 30:
- China’s weekly iron ore port stockpiles
- SHFE’s weekly commodities inventory, ~15:30
Saturday, Jan. 31
- China’s official PMIs for Jan., 09:30
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