Solar Industry in 2009

There seems to be a glut of polysilicon going into 2009 and that should hurt the solar cell makers and poly suppliers.

Wang downgraded Chinese solar giant Suntech (STP) and set a price target of $4.50 - down sharply from HSBC’s earlier target of $55. Suntech was trading at near $10 Monday afternoon but still nearly 90% off its 2008 high. (SunPower (SPWRA), First Solar (FSLR) and other solar cell makers have also seen their share prices nose-dive.) “High portion of polysilicon based on contract prices will hurt Suntech,” writes Wang, who estimated that 80% of Suntech’s polysilicon supply is locked into contracts “on less favorable fixed prices.”

This might be a next positive for companies that are making their own solar panels like SunPower and First Solar since one of their input costs will be much cheaper next year. That means some pretty decent margin expansion and will allow for bigger projects installed at a cheaper price.

It just depends on how much prices are locked in. SunPower for instance has $421 million in non cancelable purchase orders coming up in 2009. The bad part is that even if polysilicon prices fall to new lows SunPower will still be forced to pay this amount during the coming year no matter what. They can still negotiate any spot market purchases if solar demand is high enough. I guess that part is really up to Obama.