China’s Solar Sector Unlikely to Recover Soon as Glut Persists

(Bloomberg) -- China’s floundering solar sector is unlikely to return to profit anytime soon, as the market may remain oversupplied for up to two years, analysts cited major manufacturer Longi Green Energy Technology Co. as saying. 

Longi told Citi Research and Daiwa Capital that prices are unlikely to recover enough to surpass costs anytime soon. “Industry-wide losses will persist amid oversupply,” Citi said in a note released on Monday.

China’s world-leading solar industry is grappling with a deepening glut after production outstripped demand in recent years. Major firms including Longi reported reported losses in the first quarter as they were forced to sell below costs.

The solar manufacturer believes existing products are unlikely to be profitable in the foreseeable future, and is betting on its new technology that it says is more efficient in transforming solar energy into electricity. Longi’s new product is more advanced, but not yet cost-competitive, Citi said in the note.

“We don’t see any catalyst in sight justifying a fundamental recovery for the sector, and suggest investors not place false hope in a solar recovery,” Dennis Ip, an analyst at Daiwa Capital, said in a note on Thursday, adding that Longi sees prices recovering slightly in the next three months.  

Longi declined to comment on the research notes.

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