At a high-level meeting in early July, President Xi Jinping announced that the “disorderly price war” must end and that outdated production capacity should be phased out. Days later, the Ministry of Industry and Information Technology called in the leaders of China’s largest solar companies, including LONGi, Trina, Jinko, JA Solar and Sungrow.
The roots of the crisis are clear. By the end of 2024, China’s module capacity had exceeded 1,800 GW, while global demand stood at around 700 GW. Cheap capital and local incentives drove rapid factory expansion. As plant closures were politically undesirable, many firms continued producing at a loss. “The result was a price war where scale and survival mattered more than sustainable business,” says Scheper.
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Rising raw material prices
Self-regulation has failed. Attempts at price floors and production caps collapsed under conflicting interests. Now Beijing is turning to stronger tools: minimum price rules, restrictions on upstream supply, state-facilitated consolidation and deeper cuts to export tax rebates. “In the most extreme case, they could even be eliminated,” notes Scheper.
The impact is already visible. Raw material prices have risen more than 10 percent over the summer. Scheper expects further increases once policies are fully implemented. “That is ultimately healthy for the market. After years of falling prices and loss-making production, the industry needs space to recover. Companies must be able to heal their wounds and rebuild margins.”
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Opportunity for quality products
Still, Scheper warns against premature optimism. Stability will depend on how far Beijing goes, whether the new rules are enforced, and how companies attempt to work around them. “What is certain is that the period of relentless expansion and margin destruction is behind us.”
For Europe, the implications are clear: the era of rock-bottom module prices is coming to an end. Project margins will come under pressure, but Scheper also sees opportunity. “This shift creates space for companies that focus on quality, reliability and long-term value rather than chasing the lowest price.”
The early signs of recovery are visible, thinks Scheper. “The challenge is to turn them into lasting stability.” (Gerard Scheper/hcn)
