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TrendForce: Manufacturers Demanded to Execute Contracts as Cell Prices and Utilization Rates Continue to Dip

published: 2012-08-16 9:57

Manufacturers’ utilization rates have been on a decline as the market remains in a slump, which in turn affects their inclination to carry out the contracts with suppliers. According to EnergyTrend, the green energy research division of TrendForce, recently cell makers’ utilization rates ranged between 50% and 70%, with some stronger companies’ utilization rates reaching 70%-80%. Due to the stagnant outlook, companies failing to acquire more orders chose to postpone carrying out their contracts. However, suppliers are starting to lose patience and put more pressure on their clients.

According to EnergyTrend, given the long-standing partnership between manufacturers and suppliers, in the past the latter seldom took it to the court when the market suffered from downturn; suppliers usually just managed to find the middle ground – despite the gap between the contract price and the spot price, both parties could still find a way to make the closing price closer to the spot price, allowing the manufacturers to cut down costs. However, the situation has started to change lately – on account of the bleak market outlook and weakened demand, orders from downstream companies has significantly decreased. In addition, with the prices continuing sliding and coming close to suppliers’ variable costs, suppliers can no longer afford to meet their clients’ price expectations in exchange of contract execution. Related companies noted they have received legal attest letters from their suppliers demanding the contracts to be executed. According to EnergyTrend, certain manufacturers were forced to forfeit their down payment. Whether or not suppliers will take legal action against their manufacturers remains to be seen.

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