China’s solar energy industry is currently facing an overall surplus in production capacity, as indicated by the first-quarter financial report released by leading solar backsheet manufacturer, Zhonglai Corporation. The report shows a significant 52.43% year-on-year decrease in revenue and a staggering 268% drop in performance. To address the challenging market conditions, the company announced the termination of a 14 billion yuan silicon-based project.
On April 25th, Zhonglai Corporation (300393.SZ) opened significantly lower, with its stock price dropping 7% by the close of trading to 7.49 yuan. The downward trend continued on the 26th, with the stock closing at 7.37 yuan.
In its annual and quarterly reports released on the evening of the 24th, Zhonglai Corporation disclosed a 52.43% decline in operating income compared to the previous year, amounting to 1.288 billion yuan, a reduction of 1.42 billion yuan from the same period last year. The net profit attributable to shareholders of the listed company shifted from a profit of 103 million yuan in the same period last year to a loss of 172 million yuan, marking a substantial 268.11% decrease.
In its quarterly report, Zhonglai Corporation attributed the decline in revenue to a reduction in sales volume.
Founder of Hongyang Solar, Liu Jimao, analyzed to Huaxia Times that photovoltaic application systems, photovoltaic components, and solar backsheets are Zhonglai Corporation’s top three main business segments. Despite achieving record-high operating income last year, the industry is currently experiencing severe overcapacity, leading to a focus on depleting excess inventory in 2024, resulting in a decline in first-quarter performance. Companies without core technological expertise will face elimination as the industry enters a period of consolidation due to overcapacity.
Lü Jinbiao, Deputy Director of the Silicon Expert Group of the China Nonferrous Metals Industry Association, explained that the industry’s overall surplus in production capacity is the primary reason for the current situation. Expectations for market demand were overly optimistic, leading to a rush for market share expansion, which has now created a shortage.
Following the release of its quarterly report, Zhonglai Corporation suddenly announced the termination of the silicon-based project.
Previously, on March 15, 2022, Zhonglai Corporation signed a “Strategic Cooperation and Investment Agreement” with the Taiyuan City Government and the Gujiao City Government, planning to invest in an industrial silicon production of 200,000 tons per year and high-purity polycrystalline silicon production of 100,000 tons per year in Gujiao City, Shanxi Province, with a total investment of 14 billion yuan.
Regarding the reasons for the project’s termination, Zhonglai Corporation stated that there is currently no feasible plan for the project to be implemented in the chemical park, the investment agreement failed to meet the effectiveness conditions, and there have been significant changes in the feasibility of the silicon-based project due to major shifts in the photovoltaic industry market environment.
Recent research reports from futures institutions have consistently shown a weak industrial silicon market. By Stone Futures research report indicates that there is no notable improvement in downstream demand, resulting in significant pressure on destocking and market downturn.
Zhonglai Corporation, referred to as the “leading backsheet manufacturer” in the solar industry, operates in the middle and lower reaches of the entire solar photovoltaic industry chain, involving battery cells, components, power plants, and component materials.
According to the company’s official website, Zhonglai Corporation was established in 2008 and went public in 2014. Headquartered in Changshu, Jiangsu Province, it is a national-level high-tech enterprise specializing in the research and manufacturing of solar energy technology products. In 2023, Zhonglai Corporation became a controlling subsidiary of Zhejiang Energy Group Limited’s (Zhejiang Energy Group) Zhejiang Energy Power.