China solar power makers flush with increasing inventory and anti-dumping woes in their core markets... [+]
The U.S. has been gunning for China's major solar companies for the past two years under the Obama administration, with anti-dumping cases and higher tariffs killing sales. And with the budget crisis in Europe, countries like Italy are no longer providing incentives to state governments to use Made in China solar panel power. That result? Layoffs at the big named solar panel makers are on the rise.
It was only a matter of time. With that kind of fire power so focused against China solar companies, the majors and those down market are finding themselves in quite the bind. Not only is their core market shrinking, or shrunk, but the local market is in no condition yet to pick up the slack.
Suntech Power Holdings (STP), one of the world's largest producers of solar panels, said this week that in order to cut production costs and operating expenses, it was shutting down some of its solar cell production capacity at its Jiangsu province headquarters, the China Daily reported on Wednesday. Their share price is down over 50 percent year to date. The paper also said that Trina Solar (TSL) plans to cut about 200 employees at the management level and LDK Solar (LDK) said it is going to cut a whopping 5,554 employees, or 22 percent of its staff.
China's latest five year plan is focused on green energy and the nation's solar panel makers are expected to be on the receiving end of those plans. They would likely mean provincial governments of China will convert some of their power source to solar, revving up demand where the major market in Europe has essentially disappeared.
The country is going through a new government in the months ahead. The Communist Party of China will choose a new leader sometime between mid-October and November. At that point, investors are expecting to see some forward movement on stimulus policy and solar companies could be on the receiving end of that.
The weak outlook for solar stocks was basically ignored by investors looking for either short term volatility or finding value and hoping for long term gains. LDK Solar shares rose 4 percent on Wednesday, while Trina rose 2.03 percent and Suntech rose by more than 7 percent.
