Tough first quarter, but prices to stabilize in 2Q2013

A new PV module shipment record of 11 GW was reached in the fourth quarter according to the IHS Solar Integrated Market Tracker. However, the analysts warn that the global PV industry situation still remains critical and a substantial recovery of the supply-demand balance is not expected to occur before the second half of 2013.

Sharp rebound in 4Q 2012

3Q 2012 was another blow to the industry, states IHS. After a relatively strong second quarter resulting in global installations of 7.8 GW, markets softened again. "Installations in the third quarter amounted to just 7.5 GW. Wholesalers, EPCs, and PV suppliers were forced to carefully control their inventory levels due to falling prices and low shipment levels and production cuts were the consequence," commented principal analyst, Stefan de Haan.

In 3Q 2012 average module capacity utilization fell to 49%, cell capacity utilization to 56%, wafer capacity utilization to a record-low 55%, and polysilicon capacity utilization to 63%. Module industry revenues were only US$6 billion as a result of falling prices in the third quarter. This is the lowest value since 2Q2009. The exit of solar companies reflected this.

"In the fourth quarter of 2012 global PV markets rebounded sharply. Very strong demand from Asia, with the surge driven largely by China and Japan, helped to compensate for sluggish demand in Europe. IHS estimates that global PV installations were 10.1 GW in the fourth quarter of 2012. In particular leading Chinese module suppliers benefited from the uptick in demand and shipped much more than previously expected," explained de Haan.

In total, 11 GW of global module shipments are estimated for the fourth quarter of 2012 – a new record for the industry. As anticipated by IHS, average market pricing for crystalline modules declined to $0.65 per watt at the end of 2012, down from $0.70 at the end of September.

The point to note is that the price decline lost momentum in the course of the fourth quarter. Towards the end of the year some module prices even increased. Record-level shipments paired with stabilizing prices drove a profound recovery of revenues. According to the IHS Solar Integrated Market Tracker, fourth quarter 2012 module revenues grew by a stunning 42 percent quarter-over-quarter, reaching $8.5 billion.

Seasonal weakness

What does the first quarter of this year hold? IHS reports that suppliers are predicted to experience the usual seasonal weakness of global solar markets. Global PV installations are forecast to drop to 6.7 GW in this quarter.

As a result, upstream shipments and revenues will temporarily come under pressure again. With prices forecast to decrease by another 4-5% in the first quarter of 2013 (compared to the fourth quarter of 2012), module revenues will fall back to the critical levels of the third quarter of 2012 – or even below. This will force more suppliers to review their business models and eventually leave the solar market. Previously IHS did predict that falling prices and consolidation will remain in 2013.

2013: Turnaround year

The first quarter will be tough but thereafter, a substantial increase in global demand is forecast to drive increasing revenues and stabilizing prices in the second half of 2013.

IHS forecasts 35 GW of global installations in 2013, up 10% over 2012. Even though this figure is lower than previous years, it will drive a continuous improvement of shipments and revenues in the polysilicon to module supply chain throughout 2013. Recent positive signals from authorities in several key markets like China and France raise hopes for the recovery of the PV industry to happen even faster.

"Whilst it’s too early to give the all-clear for the PV supplier industry, there is increasing indication that the year 2013 will mark the turnaround," concluded de Haan.