Bloomberg News

Jiangsu Sunshine Unit Files for Bankruptcy on Silicon Price Fall

January 31, 2013

Jiangsu Sunshine Co. (600220), a Chinese maker of textile products and raw material for solar panels, filed for bankruptcy at its polysilicon unit after failing to cope with a decline in prices.

Ningxia Sunshine Silicon Co., of which Jiangsu Sunshine owns 65 percent, is unable to operate because production costs are far higher than selling prices, the parent said yesterday in a statement to the Shanghai stock exchange. The insolvency petition, the nation’s first by listed solar company, was filed through the Shizuishan Intermediate People’s Court.

A supply glut dragged down the average spot price of polysilicon by 43 percent in the past year and gutted gross margins, according to data compiled by Bloomberg. The tumble led companies including Ningxia Sunshine and units of Baoding Tianwei Baobian Electric Co. (600550) to halt production and prompt GCL- Poly Energy Holdings Ltd. (3800), the world’s biggest maker of polysilicon, to halt expansion last year.

“Many small Chinese polysilicon makers don’t have the research and development capability to upgrade the process and lower the cost,” said Wang Xiaoting, a Beijing-based analyst at Bloomberg New Energy Finance. “Even if extra tariffs were imposed on imported polysilicon and spot prices rose, these companies won’t be saved as the prices would still be much lower than their costs.”

Jiangsu Sunshine gained as much as 3.2 percent to 2.95 yuan in Shanghai and traded at 2.87 yuan as of 2:18 p.m. local time. The shares have risen 2.1 percent this year, compared with a 5.2 percent increase in the key index.

Debt, Loss

Ningxia Sunshine is unable to repay debt, which includes 1.3 billion yuan ($209 million) owed to Jiangsu Sunshine. The unit had a 247.4 million yuan loss last year, leading the parent to forecast a deficit for 2012, compared with an 8.7 million yuan profit a year earlier.

“Small companies with uncompetitive costs will leave the market sooner or later,” Lian Rui, a Beijing-based analyst at research company NPD Solarbuzz, said by phone today. “Listed companies will either write off or sell their polysilicon assets to avoid an impact on profits.”

Baoding Tianwei, which makes solar-cell parts, expects a loss of 1.4 billion yuan, partly because some new-energy units including Tianwei Sichuan Silicon Co. suspended production following losses, it said in a statement yesterday. Shanghai Aerospace Automobile Electromechanical Co. (600151) today forecast a loss for 2012, saying its photovotaic manufacturing business is grappling with weaker demand and a supply glut.

Ningxia Sunshine has an annual capacity to produce 1,500 metric tons of polysilicon, its parent said on its website. GCL- Poly had a capacity of 65,000 metric tons a year in 2011, according to data compiled by Bloomberg Industries.

To contact the reporter on this story: Feifei Shen in Beijing at fshen11@bloomberg.net

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


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