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After a disastrous third quarter of 2012 featuring extremely low factory utilization rates across the entire photovoltaic (PV) supply chain, a surge in demand was seen in the final quarter of the year for PV modules. A new PV module shipment record of 11 gigawatts (GW) was reached in the fourth quarter according to the IHS Solar Integrated Market Tracker from information and analytics provider IHS (NYSE: IHS). Despite this positive sign the situation of the global PV industry remains critical and a substantial recovery of the supply-demand balance is not expected to occur before the second half of 2013.
PV markets rebound sharply in the fourth quarter of 2012
The third quarter of 2012 dealt another blow to the global photovoltaic industry. After a relatively strong second quarter resulting in global installations of 7.8 GW, markets softened again. “Installations in the third quarter amounted to just 7.5 GW. Wholesalers, EPCs, and PV suppliers were forced to carefully control their inventory levels due to falling prices and low shipment levels and production cuts were the consequence,” commented Principal Analyst Stefan de Haan. In the third quarter of 2012, average module capacity utilization fell to 49 percent, cell capacity utilization to 56 percent, wafer capacity utilization to a record-low 55 percent, and polysilicon capacity utilization to 63 percent. In parallel, prices continued their slide in the third quarter of 2012 resulting in module industry revenues of only $6.0 billion—the lowest value since the second quarter of 2009. These difficult conditions were reflected in an increasing number of suppliers exiting the market.
“In the fourth quarter of 2012 global PV markets rebounded sharply. Very strong demand from Asia, with the surge driven largely by China and Japan, helped to compensate for sluggish demand in Europe. IHS estimates that global PV installations were 10.1 GW in the fourth quarter of 2012. In particular leading Chinese module suppliers benefited from the uptick in demand and shipped much more than previously expected,” explained de Haan. In total, 11.0 GW of global module shipments are estimated for the fourth quarter of 2012 – a new record for the industry. As anticipated by IHS, average market pricing for crystalline modules declined to $0.65 per watt at the end of 2012, down from $0.70 at the end of September. Importantly, however, the price decline lost momentum in the course of the fourth quarter. Towards the end of the year some module prices even increased. Record-level shipments paired with stabilizing prices drove a profound recovery of revenues. According to the IHS Solar Integrated Market Tracker, fourth quarter 2012 module revenues grew by a stunning 42 percent quarter-over-quarter, reaching $8.5 billion.
Suppliers will experience seasonal weakness in the first quarter of 2013
In the first quarter of 2013 suppliers are predicted to experience the usual seasonal weakness of global solar markets. Global PV installations are forecast to drop to 6.7 GW in this quarter. As a result upstream shipments and revenues will temporarily come under pressure again. With prices forecast to decrease by another 4 -5 percent in the first quarter of 2013 (compared to the fourth quarter of 2012), module revenues will fall back to the critical levels of the third quarter of 2012—or even below. This will force more suppliers to review their business models and eventually leave the solar market.
2013 will be the year of the turnaround
After a tough first quarter, a substantial increase in global demand is forecast to drive increasing revenues and stabilizing prices in the second half of 2013. IHS forecasts 35 GW of global installations in 2013, up 10 percent over 2012. Although this level of growth is lower than previous years, it will drive a continuous improvement of shipments and revenues in the polysilicon to module supply chain throughout 2013. Recent positive signals from authorities in several key markets like China and France raise hopes for the recovery of the PV industry to happen even faster. “Whilst it’s too early to give the all-clear for the PV supplier industry, there is increasing indication that the year 2013 will mark the turnaround,” concluded de Haan.
The chart below presents a forecast of global shipments of the photovoltaic module industry (crystalline and thin film).
Source: IHS January 2013
For more information on this topic, see the new report, IHS Solar Integrated Q4 2012 Market Tracker
