Weak European photovoltaic market demand in the first half of 2011 (1H'11) caused global solar module inventories to soar at the end of the second quarter of 2011 (Q2'11), according to the conclusions of the latest quarterly report from market research firm Solarbuzz.
Initial estimates from Solarbuzz show that Q2'11 shipments fell by 22% quarter-over-quarter compared to the increase of 12% quarter-over-quarter projected by manufacturers. Even with demand rising 79% and production falling an estimated 20%, quarterly cell and module inventories still increased by 559 MW.
Inventories are now forecast to reach a record 8.6 GW by the end of Q2'11, with upstream inventories showing a sharp 36% increase over the quarter, in contrast to a small reduction in the downstream. This excess supply caused factory-gate module prices to drop by 9% in Europe in Q2'11 and 16% since the start of the year, according to Solarbuzz.
‘Recent price reductions from Tier 2 Asian manufacturers will place enormous pressure on others to follow suit,’ says Craig Stevens, president of Solarbuzz. ‘Even with significant cutbacks in production and shipments, Q4'11 factory-gate module prices are still projected to fall 25 percent year-over-year.’
The PV industry is braced for a challenging 2H'11, Solarbuzz says. PV manufacturers' bullish stance that sustained production and shipments will grow to reach supply levels that are 1.4 to 1.7 times larger than 2010 contrasts with the forecast that the end market will grow only 5%.
The revised global PV market size of 19.3 GW for 2010 is now projected to increase to just 20.3 GW in 2011.
The report contrasts supply, demand and inventory outcomes according to the producers' expectations with Solarbuzz's forecast for ‘most likely’ outcomes in 2011, which projects 65% of full-year demand in 2H'11.
Many producers now anticipate that lower prices will generate the 2H'11 demand increment. However, chances for that depend on downstream inventories falling fast and on resolving the policy uncertainties in Europe that have characterized 1H'11. Rather than further procurement, most downstream companies are currently focused on reducing inventories in order to avoid write-offs emanating from the collapse in prices, Solarbuzz says.
‘Maintaining an accurate and timely picture of both company shipments and the global supply/demand balance in the industry will be key to ensuring inventories are managed effectively over the second half of the year,’ notes Stevens.