"Recent checks across the solar supply chain indicate further confirmation of preliminary signs of a pick-up in demand," Shah wrote. "Utilization rates are increasing and poly prices could likely increase further in Feb. Demand pickup in multiple markets appears to be the primary driver of recent strength in fundamentals. Tier 1 companies in China, Taiwan and Korea are seeing increasing bookings momentum and as such are currently running at ~100% utilization. Downstream companies in Europe are also seeing rising orders and as such are likely looking to accelerate module deliveries by paying for air freight."
Prices fell so far and so fast in solar that supply/demand elasticity had to kick in, spurring solar installations in markets where subsidies support project economics. That's occurring, but pricing has stabilized, as opposed to hit a level where companies would again be making money hand over fist.
There seems to be a backward-looking sense that solar is about to get rich again with another "fourth quarter 2010." That was when pessimism ran high about solar but Italy came out of nowhere to install so much that the industry had its most profitable quarter in recent history.
Yet what's occurring right now is improving demand as prices stabilize a little bit higher, and that does not suggest runaway profitability and gross margins back in the 30%-range for Chinese solar companies.If pricing were to continue straight up and to the left, that might choke off some demand. And keep in mind that while polysilicon, wafer and cell prices have improved, module prices haven't.
Eric Rosenbaum. >To follow the writer on Twitter, go to Eric Rosenbaum. Follow TheStreet on Twitter and become a fan on Facebook.
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