Industry leaders in China's solar industry had a weak financial performance in the first quarter of this year due to a reshuffle in the domestic photovoltaic sector, with the entire supply chain's profitability encroached amid falling prices.
The operating performance of major listed Chinese solar firms dipped in the first three months of the year, impacted by plunging product prices across the supply chain, according to these companies' latest financial reports. The first quarter of each year is also an offseason for PV power station installation, they added.
Among the four leading Chinese PV module firms in the midstream and downstream of the PV supply chain, Jinko Solar and Trina Solar's net profit tumbled from a year earlier, while Longi Green Energy Technology and JA Solar Technology turned a loss.
Shanghai-based Jinko Solar's net profit narrowed 29 percent to CNY1.2 billion (USD166.3 million), while its operating revenue fell 0.3 percent to CNY23.1 billion (USD3.2 billion). Trina Solar's net profit sank 71 percent to CNY516 million (USD71.5 million), with its operating income dropping 14.4 percent to CNY18.3 billion.
The weak performance was mainly caused by plunging module prices, according to Jinko, noting that its profitability was hurt by the need to honor supply contracts with long-term customers.
As newly-built capacity became operational, Trina Solar saw increased inventory at the end of the first quarter, while increased procurement of raw materials led to more spending, the Changzhou-based company noted.
Longi, the world's biggest PV module supplier, reported a net loss of CNY2.4 billion in the three months ended March 31, while its operating revenue plunged 38 percent to CNY17.7 billion from a year earlier. JA Solar's net loss was CNY483 million, with its operating income falling 22 percent to around CNY16 billion.
Longi faced grave operating challenges, Chairman Zhong Baoshen pointed out. As more new capacity quickly came on stream, the industry has seen an imbalance in supply and demand from last year, while high-efficiency modules are replacing existing products, he added, noting that these factors dragged down the Xi'an-based firm's financial performance.
Silicon material supplier Tongwei, part of the upstream of the PV supply chain, posted a net loss of CNY787 million last quarter, compared with a net profit of CNY8.6 billion a year ago. The Chengdu-based company's operating revenue sank 41 percent to CNY19.6 billion.
Tongwei had a net loss of CNY2.7 billion in the fourth quarter of last year, its first quarterly loss in more than seven years. Besides slumping product prices, the impairment of fixed assets, induced by cutting outdated battery capacity, was also a reason behind its high loss.
TCL Zhonghuan Renewable Energy Technology, a leading silicon wafer supplier, reported a net loss of CNY880 million. The PV industry entered a downward cycle starting in the third quarter of last year, and a fundamental change occurred in the sector's development environment, it noted.
Price Dip Caused by Supply-Demand Imbalance
By the end of 2023, with the completion and start of operation of a significant number of newly-built capacities, the annual production capacity in various links of the global PV supply chain rose to 900 to 1,000 gigawatts, according to data from TCL Zhonghuan. The industry's supply capability ratio to the market's demand swelled to 2:1 by the end of last year from 1.02:1 at the end of last June.
The supply-demand imbalance also led to a decline in product prices at various links in the PV supply chain. For example, the mainstream market price of PV modules nearly halved throughout last year, while the average slump in silicon wafer prices was over 50 percent.
Nevertheless, prices have not yet bottomed out despite significant drops. "The decline in silicon material prices is still smaller than what downstream users expected, and the sector downstream continues to be bearish," the silicon branch of the China Nonferrous Metals Industry Association reported.
The sale prices in various links, ranging from the upstream of industrial silicon to the mid and downstream of PV modules, have all fallen below companies' production costs, meaning that market competition is irrational in the short run, according to the report.
This also means the entire solar sector is experiencing an "in-depth reshuffling," which will continue for some time, Tongwei pointed out. The survival room for mid and small-sized firms in the sector will narrow further, it added.
However, Longi's Zhong remains optimistic about the growth prospects of the PV industry, although the market is in a "cold winter." PV module prices will significantly improve the profitability of PV power stations, stimulating more construction demand, he said, adding that the newly installed capacity of power stations in the sector downstream will likely continue to hit record heights.
China's PV sector will continue to grow against the backdrop of global energy systems' green transformation, according to Zhong.
（Picture: Veer）
