China Solar Shares Extend Surge on Possible Production Curbs

(Bloomberg) -- Shares in Chinese manufacturers of polysilicon, a key material in solar components, extended a sharp rally on expectations the government will move to curb production to tackle a massive glut. 

The Ministry of Industry and Information Technology may publish rules to limit polysilicon manufacturers’ energy consumption, Daiwa Capital Markets said in a note on Wednesday, without citing specific sources for the information. The ministry couldn’t be reached for comment. 

The policy could speed the retirement of less-efficient polysilicon plants, and also ensure that capacity that has already been suspended isn’t restarted, Dennis Ip, an analyst at Daiwa Capital, said in an emailed response to questions. 

GCL Technology Holdings Ltd. rose as much as 5.3% in Hong Kong on Thursday after surging 25% the previous day. Tongwei Co. climbed as much as 7.9% and Xinjiang Daqo New Energy Co. advanced as much as 7.4% after jumping nearly 20% in the previous session.

China’s solar firms have suffered massive losses this year due to severe overcapacity across the industry that’s led to a price war and bankruptcies. Polysilicon makers have already paused some production, and the sector is expected to be the first in the solar supply chain to emerge from the shakeout due to the high cost of restarting output.  

After two years of steady declines, solar stocks have seen increased volatility in recent weeks as the industry appeals for rational prices and China tries to revive the wider economy through stimulus measures. 

(Update with analyst comment from 3rd paragraph.)

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