Oversupply maintained into next year

The Solarbuzz preliminary analysis shows that the third quarter global demand is growing by less than one percent, quarter over quarter (Q/Q), but up to 20 percent Y/Y.

The fastest rates of growth among the major markets in the third quarter are seen in the US and China. 58 percent of the third quarter’s global demand constitute the European markets.

This is a decrease from the 78 percent in the same quarter last year. Tier-one Chinese companies are maintaining their full year shipment guidance while some manufacturers have started to cut back on their production and shipment plans. Global shipments are forecast to exceed end-market demand by 4.4GW if manufacturers meet their second half 2011 guidance.

Crystalline silicon factory-gate prices are projected to fall 18 percent in the fourth quarter of this year, Q/Q, taking into account the changing supply composition. These reductions are also expected to stimulate cuts in thin film prices in the fourth quarter.

"Anticipating that falling prices could stimulate demand by year-end, downstream companies across Europe face the unnerving decision of whether to build inventories at the end of Q3’11," said Craig Stevens, president of Solarbuzz. "Any over-estimate of that demand ahead of an expected 15 percent German feed-in tariff reduction at the start of 2012 would likely result in further year-end inventory write-downs."

2012 looks like it is going to be a challenging year with Solarbuzz’s quarterly analysis showing that manufacturers are preparing to raise cell capacity by 50 percent over 2011 levels while end-market demand is forecast to increase by less than half that level.

Failure to cut back production will result in soaring module inventory levels to almost 22 gigawatts (GW) by the end of next year. In order to maintain the same level of inventory days as projected for the end of 2011, forecast production would need to be cut back by approximately 11 GW.