China to erase excess solar-panel capacity by 2027, UBS forecasts
State-driven curbs on new facilities and production cuts by the biggest players will help rectify imbalance, analyst says
China’s solar-panel manufacturing industry will erase its excess capacity over the next two years and return to equilibrium as early as 2027 following curbs on new facilities and an agreement among suppliers, according to UBS.
The Swiss investment bank forecasts supply to start shrinking by 7 per cent every year from 2024 to 2026, in contrast to 70 per cent yearly growth recorded from 2021 to 2023, analyst Yan Yishu said at a webinar on Monday. China has about 1,200 gigawatts (GW) of solar photovoltaic manufacturing capacity, or twice the market demand, she estimated.
Beijing has introduced regulations to curb new expansion facilities by raising the minimum capital requirements and limiting their energy and water consumption. The government also lowered export tax rebates on solar products to 9 per cent from 13 per cent to help speed industry consolidation and ease trade tensions.
“The government and the enterprises will lead the industry’s recovery from the supply side,” she said. “Once the leading enterprises agree to reduce their production, the overall capacity will come down very soon.”
To rectify the supply-demand imbalance, over 30 of the biggest players agreed last month to cut production during the annual meeting of the China Photovoltaic Industry Association. They pledged to adhere to future production quotas and halt aggressive price discounting to stem industry-wide losses.
