In a further sign of the continue supply-demand imbalance in the solar sector, weekly data from Bloomberg New Energy Finance suggests that the spot price of polysilicon, the raw material used in most solar panels, accelerated to the downside last week, falling at the fastest pace since June. Prices of solar wafers and cells also continued their decline:
‘The average selling price dropped 5.8 percent on the week to Oct. 10 to $43.78 per kilogram, according to the latest results from the London-based research firm’s survey of contracts conducted from Oct. 3 to Oct. 10. The price of six- inch solar wafers dropped 3.3 percent to $1.74 each and multicrystalline photovoltaic cells slid 4.1 percent to 70 U.S. cents per watt of capacity’.
Solar continues to face difficulties regarding two clear concerns:
- continued oversupply in the sector, as evidenced by the new data from BNEF
- the ongoing political fall-out in the US regarding the investigations into the Solyndra affair – for a fuller discussion see here.
However, the price performance for now is likely to be broadly determined by the direction of the overall market. Having been very bearish last month, I have recently taken an overall bullish view of the S&P as a whole – for a full discussion see here.
As we move towards the end of the month, talk is likely to grow of a possible deal at the G20 on European debt – quite possibility backed by China in a significant way. This is likely to provide a sustained rally in the overall stock market. And if that is the case, it will no doubt drag solar with it. However, given the issues discussed above, on a risk-reward basis it would probably be better to play the potential rally ahead with exposure outside of the solar sector.
Disclosure: I am long SPY. I have no exposure in solar stocks.