The China end-market dominated shipments of solar panels during the final quarter of 2012 with 33% of global end-market demand, according to NPD Solarbuzz.
"Just two years ago, the China end-market was less than 10% of global solar demand," stated Michael Barker, senior analyst at NPD Solarbuzz. "However, during the fourth quarter of 2012, a third of all global solar panel shipments ended up in China. This is the start of a new chapter for the solar industry, with China potentially taking center stage in both the upstream and downstream channels."
Several factors are contributing to China's rise, including slowing growth in Europe with declining solar incentives and strong domestic policies within China that were designed to assist domestic China-based manufacturers.
Global solar demand increased to 8.3GW during fourth-quarter 2012, providing the characteristic year-end surge that solar suppliers have come to expect. However, the shift during 2012 in year-end demand from Europe to China has presented a new set of challenges for the solar industry. According to Barker, "The China end-market has different module supplier preferences, pricing expectations, and routes to market. However, threatened by the impact of global trade barriers, the biggest challenge will fall on China-based manufacturers that are restricted to domestic demand only."
China-based demand continues to be heavily back-end weighted. In 2012, fourth-quarter 2012 demand in China accounted for almost 60% of annual demand. However, this demand phasing provides a significant dilemma for suppliers as they struggle to balance the rewards of year-end shipments with the risks from rising inventories and potential write-downs earlier in the year.
In fact, it was only during the fourth quarter of 2012 that solar manufacturers' inventories declined. This occurred precisely because of year-end demand from China, allowing module shipments to exceed factory production levels. As a result, module inventory levels at solar manufacturers declined by 4% on-quarter in the fourth quarter of 2012, to a year-end low of 65 days.
"Manufacturers that succeed in broadening their end-market coverage should achieve a healthy balance between quarterly production and shipment levels in 2013," added Barker. "In addition, hedging against the effects of the various trade wars, which are expected to be settled sometime this year, will also be essential for success moving forward."
