Chinese Solar Firms Agree to Voluntary Production Cuts Amid Intense Competition
In a rare move, around 33 Chinese solar companies, covering 90 percent of domestic output, signed a self-discipline pact to curb production amid fierce market competition. The initiative, backed by industry leaders, aims to prevent irrational competition, ensuring sustainability amid global trade pressures and falling prices.
December 09, 2024. By EI News Network
According to local reports, the firms signed the pact during a symposium titled ‘Preventing Cutthroat Malicious Competition’ at the 2024 Annual Conference of the PV Industry held from December 4 to 6 in Yibin, Sichuan province.
The firms signing the pact cover 90 percent of China's domestic photovoltaic manufacturing output, which includes several major Chinese PV manufacturers, as per reports.
Furthermore, pointing towards organisations like the Organisation of the Petroleum Exporting Countries (OPEC), Chinese market leaders noted that Chinese companies find it challenging to form such alliances, unlike Middle Eastern oil-producing countries that have successfully formed organisations like OPEC.
The leaders stressed self-discipline rather than relying on external regulation. The market leaders have urged their peers to avoid overestimating their current position and to prepare for potential challenges that could impact investment decisions.
Although there is uncertainty about the specific self-discipline rules, the industry is unified in avoiding irrational competition. The industry leaders stressed the importance of self-regulation and cautioned against excessive competition, highlighting the need for a more disciplined approach.
However, the agreement reportedly aims to address significant details, including future quota allocation and supervision implementation, with subsequent regulatory measures and ultimate goals to determine the certainty and extent of profit gains.
It may be mentioned that earlier this year, the China Chamber of Commerce for Import and Export of Machinery and Electronic Products raised concerns about overcapacity and falling prices in the solar sector, driven by intense competition. The body also noted the pressures from the United States and warned that excessive competition could further exacerbate global trade challenges. It emphasised the need to address these issues to ensure the sustainability of the industry. It stated that, in 2023, Chinese solar exports were valued at USD 47.59 billion, down 4.9 percent from the previous year. Solar cell shipments increased by 69.4 percent, but their sales value rose by only 5.2 percent. Exports to the US dropped by 6.7 percent to just USD 3.3 million. In contrast, exports to the EU reached USD 19.2 billion. As per its report, Chinese firms are focussing on markets in Asia, Europe, and the Americas, with China expected to add about 172 GW of solar capacity in 2024.
Furthermore, the market report indicates that global solar installations increased by 76 percent in 2023, with a further 34 percent growth expected this year. However, growth is forecast to slow significantly to just 8 percent in 2025, which might create uncertainties for Chinese manufacturers.
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