Recent news announcements about the US Commerce Department duties on Chinese solar panel manufacturers will likely have short-term negative impacts on Chinese solar stocks, said Adam Krop, vice president of equity research for Ardour Capital Investments.
And announcements from Saudi Arabia about plans to invest $100 billion in solar will likely have longer-term positive impacts on solar stocks, though the news won’t show up in stock prices for a couple years, Krop said.
“The sector has been out of favor for a long time,” Krop said. “The oversupply in the industry is massive.”
That oversupply drives down solar panel prices and causes significant pressure on profit margins for solar manufacturers.
“You’re going to see a lot more consolidation in the market,” Krop said. “You’ll continue to see a lot of bankruptcy and insolvency. Until those get out of the headlines, we’ll continue seeing prices at record lows.”
But recent changes in the market will also make some waves.
The US Commerce Department’s new tariffs on Chinese solar panel manufacturers will likely have a short-term downside for the purely Chinese manufacturers, while those with US manufacturing facilities or even facilities outside of China, the short-term impact could be slightly positive, Krop said.
“But that will probably only be a one or two quarter impact,” he said.
Chinese manufacturers will likely establish facilities outside of the country to get around the ruling.
Saudi Arabia, the World’s largest oil exporter, announced last week that it would install 41 gigawatts of solar over the next two decades and get a third of its electricity from the sun. The announcement was paired with a $100 billion commitment to 1.1 gigawatts of solar power and 900 megawatts of concentrated solar photovoltaic power.
“That’s not necessarily a surprise to us,” Krop said.