Few rays of sunshine for solar stocks

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Few rays of sunshine for solar stocks

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As the cost of polysilicon, a key material in the production of solar cells, keeps plummeting, so do the stock prices of solar energy firms in the local market.

Sparked by the announcement of an earnings shock by OCI, the largest polysilicon producer in the country, on Wednesday, companies in or related to this industry saw their stock prices hit annual nadirs during market trading yesterday.

OCI said it posted 33 billion won ($29.88 million) in operating profit in the third quarter, down 87 percent from a year earlier. It cited a 31.8 billion won deficit in its polysilicon manufacturing business for the drop due to sluggish sales and falling profits.

The company’s poor performance contrasted with high hopes from the market. Financial analysts forecasted earlier that the company would achieve at least 75 billion won in operating profit in the latest quarter.

After the earnings shock was revealed, OCI’s stock price started about 3 percent lower yesterday from Wednesday. It hit a 52-week-low of 156,500 won during the day before rebounding slightly. The company’s stock reached its peak of 318,500 won on Feb. 10.

“The chronic problem here is an oversupply of polysilicon and resulting price falls,” said an executive at OCI. “The country’s total demand for polysilicon stands at round 200,000 tons, but there is an excess of 100,000 tons being produced by scores of second-tier companies.”

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According to market researcher PV Insights, polysilicon fell to $17 per kilogram yesterday from $79 in March last year. The figure has been continuously declining for the past year.

The executive pointed to cheaper products from China as another culprit for the falling prices.

OCI produces 42,000 tons of polysilicon in the country at three plants, while China’s GCL produces about 600,000 tons. OCI decided to postpone its plan to build two more factories that would raise its capacity to 80,000 tons due to the drawn-out recession in the global photovoltaic (PV) market.

“As 70 percent of our customers are based in Europe, we don’t know when the market will recover,” the OCI executive said.

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Hanwha Chemical, Woongjin Energy and Nexolon, all of which are investing heavily in solar power, also witnessed stock price falls of between 1 and 3 percent yesterday.

Hanwha Chemical’s stock slid 1.05 percent, affected by the atmosphere created by OCI’s earnings report.

Hanwha Group is working to foster its PV business but there is growing concern about how it will fare among investors and financial analysts as the solar market shows no sign of recovering.

“Hanwha may be experiencing a liquidity crunch as it has invested too much in the solar business in recent months, including the acquisition of German solar firm Q-Cells in August,” an energy stock analyst said.

Woongjin Energy’s stock price tumbled yesterday, too. It fell as soon as the market opened to the lowest point of 1,910 won from 1,990 won on Wednesday. The solar-cell-making unit of Woongjin Group, which is currently under court receivership, was cited as one of main causes of the group’s financial pinch.

By Song Su-hyun [ssh@joongang.co.kr]

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