Market Analysis September 2016 - The price war has begun - the urgent need to unload excess capacity

The downward trend in module prices over the past few months has held steady in August. The only outliers in the downward slide were modules from Japan and Korea with average prices slightly above the 60-cent mark.

The trend lines for products from China and Europe are once again converging, but at a level some 10% below that of last year. These modules cost an average of 52 euro cents per watt in August. The modules surveyed span a price range of 45 to 65 cents for Chinese products and 49 to 73 cents for German goods.

The most recent minimum import price of 56 cents per watt negotiated between the EU Commission and Chinese manufacturers appears to have completely gone out the window in the current market. However, nearly all of the relevant players have willingly abandoned the Undertaking, or been barred from trading due to various evasion-related offenses. Now that they are free of the burden of the restriction, Asian manufacturers appear to have slipped casually back into their low-price policies. The continued punitive tariffs levied on modules manufactured in China are no great annoyance to these corporations since nearly all of them now operate cell and/or module production facilities outside of their home country and are therefore not impacted by the penalties.

Up to now, the average price spread for the year between European and Chinese products has been two cents. However, the German manufacturers Aleo Solar, Heckert Solar and Solarworld almost simultaneously slashed prices - in some cases massively - in the first weeks of September. This caused the return of a level playing field for all regions of origin. They justified the reduction citing lower global market prices for cells, on the one hand, and general overproduction, on the other. The latter is understandable with the loss of the British market and significantly slower expansion rates for PV in China and South America. We could not confirm a drop in cell prices, however. Nevertheless, the difference in price between polycrystalline and monocrystalline wafers has apparently disappeared, which is why for the same output both technologies can be had for the same price and why more powerful monocrystalline modules can be offered at comparatively lower prices in the future.

Thus, a steadily growing price war on every level of the value chain is in the cards. The first manufacturers are already surging ahead and others will have to rush to follow suit. Now, the name of the game is to draw down surplus stock rapidly that filled warehouses over the summer because the new goods are already on the way. The big Chinese manufacturers have taken up their positions and will not yield ground to European competitors without a fight. Some manufacturers could offer discounts in the range of 10%, and in some cases these are already in the works. In any case, more fair market prices will give the European solar industry a boost as long as the players can manage to pass on the low wholesale prices at least in part to their customers.

This, of course, raises the question of what justifies continued market restrictions against Chinese products if all of the manufacturers beyond a certain size are now in a position to unload modules for significantly below 50 cents - that is, some 20% below the currently applicable minimum import price? Or are companies worldwide now guilty of price dumping? At least one thing seems certain: the protectionist measures of the EU commission are having less and less effect. It will be interesting to see the upshot of the EU commission's review of the policy prior to its expiration and what new regulation the ladies and gentleman in Brussels will come up with rather than scrapping the whole thing. Perhaps we will soon celebrate a new minimum import price of 46 cents for all non-EU modules – a comfortable level for the remaining European manufacturers – which will again become obsolete as a result of general price development...

Overview of price points, broken down by technology, for August 2016 including the change over the previous month:

(The prices shown reflect average asking prices for duty-paid goods in the European spot market.)