Industry recovers slightly despite supply glut and trade disputes

Many listed Chinese solar companies experienced a turnaround in the first half, even as the industry remained mired in near-depression amid a supply glut and trade disputes.

Of 22 listed companies, 10 have released interim statements indicating a recovery based on expansion in new markets and the domestic market.

Visitors look at solar panels at the Clean Energy Expo China in Beijing on July 3. Ten of 22 listed solar panel companies have released interim statements indicating a recovery based on expansion in new markets and the domestic market.

The other 12, including Hareon Solar Technology Co Ltd and Xi'an LONGI Silicon Materials Corp, warned of profit declines or outright losses in their interim statements, according to data provider WIND Information, the China Securities Journal said on Monday.

Zhejiang-based Zhejiang Sunflower Light Energy Science & Technology Llc, known as SUNOWE, said in a statement last Thursday that first-half net profit reached 20 million yuan ($3.26 million) to 35 million yuan, compared with a year-earlier loss of 170 million yuan, as prices stabilized or rose. It also noted a "successful expansion"in emerging markets.

The company's shares rose 1.3 percent to 11.57 yuan on Monday,

"By emerging markets, we mainly refer to Japan and Australia,"said a company executive surnamed Li, manager of the securities department.

SUNOWE has been exploring new markets after the United States imposed anti-dumping and anti-subsidy duties on Chinese solar products.

The company recently reached agreement with a Japanese company to export 40 megawatts of modules, she said, adding that product prices are up more than 50 percent since the fourth quarter.

Chinese solar manufacturers account for 70 percent of the global output of solar panels, and 90 percent of the products were for export in 2010.

But aggressive capacity expansion, cuts in European Union subsidies and the imposition of US duties have forced China's solar companies to undergo a painful restructuring and consolidation.

"The possibility of EU duties triggered a rush to buy from European customers in the second quarter, which pushed the product price higher and helped some Chinese firms.

"But uncertainty over the EU-China trade dispute will make most companies take a wait-and-see attitude. Product prices will be stable or decline a little bit in July,"said Zhang Sou, new energy analyst with Guosen Securities.

The European Commission announced in early June it is imposing temporary anti-dumping levies on Chinese solar panel imports, based on a charge that Chinese firms are unfairly undercutting rivals.

The duties will reach an average of 47.6 percent in August and last for five years from December, if China and the EU fail to reach agreement on the dispute.

Reuters reported on Friday that officials from Europe and China said more than two weeks of negotiations in Beijing were going well and they aimed to agree to an annual quota and a minimum price for Chinese importers above their production costs, although numbers are still fluid.

On the other hand, China's big solar companies, including Trina Solar Ltd and Canadian Solar Inc, have said they will shift manufacturing abroad, dodging penalties imposed by the EU.

Zhang said the domestic market is another significant factor that affects companies' financial reports.

China's National Energy Administration has announced a program to set up distributed solar photovoltaic demonstration power plants across the country. The plants will be constructed before July and operated in national economic development zones and industrial parks in China.

SUNOWE's Li said her company sees the program as a great opportunity to tap the domestic solar market.