Profit crisis brews in China

Growing numbers of Chinese PV manufacturers are downgrading sales forcasts and shedding staff as profits continue to fall sharply in the Far East.

Gross margins have significantly contracted since 2011 – a year which saw the country export $35.8bn of panels. 2012 could see global demand for solar equipment rise to 30GW, however, China is threatened by falling panel prices in Europe and chronic oversupply.

Suntech said earlier this week that it would reduce its capacity by 25 percent as a result of saturation in the panel market and antidumping tariffs being imposed in the USA.

And things could get worse before they get better as Europe, China’s largest export market, considers restricting imports from China following complaints of unfair trading by European rival manufacturers. 

Suntech’s announcement is symptomatic of a growing trend with Trina Solar indicating it would slash 200 jobs to save costs and LDK Solar selling real estate to raise cash. LDK, which has laid of over 5,000 employees this year, is also urgently seeking investment after losing about three quarters of its value over the last 12 months.

The trade row between the EU and China has also taken another twist with European and US governments objecting to billions of pounds in credit lines being extended to Chinese solar companies by state owned banks. In July, authorities in Xinyu City said they would use taxpayers money to repay some company loans during the current downturn.

In the longer term, Suntech is predicting a return to positive cash flows during 2013 whilst LDK has said it does not anticipate making any further job losses.