Lack of financing slow down Chinese module manufacturing: Jeffries

Tier 1 & 2 of China-based module manufacturers were running at ~50% utilization rates due to overcapacity and weak demand, according to the investor note of Jeffries equity analyst Jesse Pichel.

He cited lack of financing for PV projects across Europe as the reason behind this.

With respect to Tier 3 producers, Jeffries said that some have effectively stopped production and shut down plants. Pichel characterized the market demand conditions as ‘anaemic,’ noting that demand elasticity was now seen as a function of macro sentiment and credit availability, rather than the normal nvestor rate of return, which are at their highest levels thanks to falling prices and currently high feed-in tariffs.

Pichel believes that further capacity will be shuttered in China on the back of a prolonged weakness in market demand. The market will see consolidation but rather than through mergers and acquisitions, it will happen by "attrition," making the top 15 PV manufacturers stronger and creating a less volatile market for the future.

A resumption of volume and revenue and earnings growth is now expected to return in 2013, led by grid parity in certain European countries as well as California, Hawaii and Japan.