Solar inventory still building

Continued solar module overproduction will lead to sustained price pressure across global photovoltaic (PV) markets, already reeling from factory gate prices now down 33% Y/Y, according to conclusions in the latest Solarbuzz Quarterly report.

Preliminary analysis shows Q3'11 global demand growing by less than 1% Q/Q, but up 20% Y/Y. European markets are projected to account for 58% of Q3’11 global demand, down from 78% in the same quarter last year.

Among the largest PV markets, the US and China are seeing the fastest rates of growth among major markets in Q3’11.

While some manufacturers have started to cut back their production and shipment plans, tier-one Chinese companies have maintained their full year shipment guidance.

Price cuts have started to stimulate 2H’11 end-market demand, but to date, this has occurred more slowly than expected.

After taking into account the changing supply mix, crystalline silicon factory-gate module prices are now projected to fall 18% in Q4’11 Q/Q, reflecting both price and supply mix changes.

These reductions will also stimulate large cuts in thin film prices in Q4’11. Meanwhile, Q2’11 gross margins for the major cell, wafer and polysilicon manufacturers have already dropped on average by more than 50% compared to the preceding quarter.

Heading into 2012, the industry is braced for another challenging year. Solarbuzz Quarterly shows manufacturers are preparing to raise cell capacity by 50% over 2011 levels, while end-market demand is forecast to increase by less than half that level.