Bloomberg News

Trina Solar Shifts Strategy in Fight Against Low Prices

November 20, 2012

Trina Solar Ltd. (TSL:US), China’s third- largest maker of solar panels, is shifting its focus to profitable orders and away from deals aimed primarily at gaining market share, in an effort to curtail “irrational” pricing.

“We see profitability as number one and the focus for now,” Chief Financial Officer Terry Wang said during a conference call yesterday. “Market share is going to be secondary.”

Wang said the Changzhou, China-based company won’t continue to cut prices to chase sales even with its factories running at half-speed. Overcapacity and a global supply glut have driven down the industry’s average panel price by 21 percent in the past year, and Trina is among the first to take steps to impose a floor. Others may follow suit, said Mark Bachman, an analyst at Avian Securities Inc. in Boston.

“It’s the first hint of rational behavior we’ve seen from a Chinese manufacturer,” Bachman said yesterday in a telephone interview. “We could see more manufacturers wake up and follow Trina’s lead.”

Trina reported third-quarter sales of $298 million, down 38 percent from a year earlier, according to a statement yesterday. Solar-panel shipments fell 9.2 percent from the prior quarter to 380 megawatts as the company opted to focus on profitable contracts. Shipments in the current quarter will be unchanged or will increase as much as 5.2 percent to 400 megawatts.

‘Irrational Pricing’

The company said its panel price declined sequentially without giving the figure. That was due in part to “the irrational pricing practices by some competitors,” Chief Executive Officer Gao Jifan said in the statement.

Solar panel prices are starting to rise. They averaged 79 cents a watt on Nov. 5, according to Bloomberg New Energy Finance, up from 67 cents on Sept. 24, the lowest since the London-based research company began tracking the market in November 2010.

Trina may find it difficult to unilaterally hold its pricing ground, according to Gordon Johnson, an analyst with Axiom Capital Management in New York.

“The idea that somehow they’re going to determine pricing is just funny,” Johnson said in an interview. “They’ve said this before and they were wrong.”

It will be hard for the company to convince the rest of the industry to fall in line, he said.

“A cartel works when you have three or four guys,” Johnson said. “When you have 50 guys, it doesn’t work. Cartels don’t work in oversupplied, commodity markets.”

Chasing Share

Other companies continue to focus on sales over profits, including JinkoSolar Holding Co. (JKS:US) and many of it peers, Bachman said. Chinese manufacturers, “they’re all still chasing market share,” he said.

Jinko, based in Jiangxi, China, shipped 280 megawatts of panels in the quarter, up 28 percent from a year earlier, while revenue fell 22 percent to 1.39 billion yuan ($223 million), according to a statement yesterday. It reported a net loss of 54.8 million yuan, compared with net income of 68.1 million yuan. Shipments in the current quarter will be 250 megawatts to 300 megawatts.

Jinko’s price in the third quarter was 68 cents a watt, Chief Financial Officer Zhang Longgen said during a conference call yesterday. The company said in September its price in the second quarter was 74 cents a watt.

Suntech Power Holdings Co. was China’s largest panel maker by capacity last year, followed by Canadian Solar Inc. (CSIQ:US), which makes most of its products in the country, according to Bloomberg New Energy Finance.

To contact the reporters on this story: Ehren Goossens in New York at egoossens1@bloomberg.net; Christopher Martin in New York at cmartin11@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net


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Companies Mentioned

  • TSL
    (Trina Solar Ltd)
    • $12.07 USD
    • -1.13
    • -9.36%
  • JKS
    (JinkoSolar Holding Co Ltd)
    • $27.49 USD
    • -1.68
    • -6.11%
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