China solar stocks jump after a report by state media on overcapacity

The shares of China's solar firms soared on Wednesday, after a senior executive in the industry told state media leading companies were forming an alliance. This raised expectations that industry leaders would be moving forward with a plan that will reduce overcapacity.

"Seventeen companies are already in the process of signing." Zhu Gongshan (President of GCL Technology Holdings), told CCTV Tuesday night that "we are building an Association". We are working hard to finish it by the end of this year.

Some market participants interpreted these comments as being related to GCL's proposal in July, which would have seen China's biggest producers of polysilicon (a building block used to make solar cells) create a fund for the purpose of acquiring and closing down a part of the over-inflated capacity of the sector. GCL announced at the time the fund's launch would be in the third quarter.

Tongwei, a leading polysilicon manufacturer, closed Wednesday's trading down 10%. Trina Solar - a top producer of solar equipment - rose by 11%. GCL's Hong Kong stock exchange was closed for a holiday on Wednesday.

The CCTV segment reported on the repeated calls by the central government to reduce overcapacity in the solar industry and the unsustainable competition. It also stated that the industry was reducing production.

CCTV discovered that Longi's Xian operation had closed nine out of 15 production lines for upgrading.

An employee of a Jiangsu Polysilicon Factory told CCTV that the company adhered to the production limits set forth by the industry association.

Zhu also said that global solar demand was falling. He said that it is expected to drop to 480 gigawatts next year from 520-540 GW in 2018. This represents a significant decline for a market which has been growing for years.

(source: Reuters)