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EU Financial Crisis to Dampen Global Solar Industry

published: 2011-07-14 18:32

Recent financial crisis burst in the Euro zone has put international financial markets at impasse. The 10-year bond yields of Italy climbed to above 6% which is the highest borrowing cost in the past decade while Ireland’s debt rating was downgraded to junk status by Moody which indicated the country might require more rounds of financial aid. Since the Euro zone alone accounts for the largest geographical market for the solar industry, the resulted impact may be extensive on the global solar market.

Additionally, British banks have withdrawn considerably huge funds from the short-term loan market of Euro zone. The Euro zone might encounter a credit crunch, and banks without sufficient capital might have to file bankruptcy, leading to another financial crisis. As a result, it is possible that the stagnated solar market demand caused by the 2008 financial crisis will be repeated.

Italy, as one of the most indebted countries, sold 6.75 billion Euros of treasury bills in the first auction as costs of borrowing increased. Though the successful sales attempt has led the Italian stock market to rebound, the International Monetary Fund has urged Italian government to reduce its public debt and adjust its fiscal structure. On the other hand, as Greek debt crisis is intensifying, market worries about tighter credit conditions in the Euro zone will badly hurt global investment confidence and the solar market is no exception.

EnergyTrend believes that global capital market condition, especially the Euro zone, will have an influence on solar industry in 2H11. Since the European market is still the largest market for solar energy and the solar market demand is closely tied to the capital market, the financial health of European countries will directly affect the outlook of solar market.

EnergyTrend believes that the European debt crisis has temporarily lessened, which can help the recovery of the European market demand. Total installation volume from March to May in Germany has set a record low, and manufacturers intentionally lowered the volume in an attempt to influence German government’s planned subsidy cut in the mid year. Therefore, it is expected that the cut might be smaller than previously planned if not totally foregone. On the other hand, Italy will announce the list of manufacturers for 1.2 GW solar project plan in mid July, which can further help the European market demand of 3Q11. Apart from the European market, the US market also will receive enormous benefit from the new subsidy plan, making the U.S. solar market demand remain strong. The Japanese government, on the other hand, plans to increase the use of renewable energy, which will help the domestic market development. In addition, China and India, two major emerging solar markets, are also expected to start materializing their market potentials. EnergyTrend believes that the recovery of major global markets altogether will reverse the solar components price downtrend in 3Q11. German government has recently announced the cancellation of previously planned subsidy cut in July.

However, despite the dim outlook of the solar market from the crisis, a number of companies have come strong on their perspectives with solid order backlogs. Trony Solar, the largest amorphous silicon thin film solar cell manufacturer and solutions provider in China, made an announcement earlier on 13th of July that the company’s operation is not affected by the financial crisis in the Euro zone. The company will carry out the capital expansion as previously planned. In addition, the president of China Singyes Solar Technologies, a company focused on renewable energy systems integration with the core of building energy saving and dedicating to economical solutions for green building, indicated in the stockholders’ meeting that the company’s percentage of foreign sales revenue grew from 10% to 25% and financial report of 1Q11 showed solid growth in every aspect of the company’s operation.

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