U.S. sales of solar panels are expected to remain depressed during the second quarter, driving South Korean supplier Hanwha Q CELLS Co. Ltd., one of the world’s largest makers of solar cells and modules, to seek out new markets in other regions. U.S. project developers are working through a backlog of equipment that companies stockpiled before President Donald Trump enacted a new round of tariffs earlier this year, according to executives at Hanwha Q CELLS, which is shifting its focus from the U.S. to Europe.
The U.S., which relies heavily on solar panels from Asia, saw seaborne imports fall by 74% in the first quarter after a buying spree during the second half of 2017, in anticipation of new import penalties. As a result of the tariffs, Hanwha Q CELLS, which operates factories in China and Malaysia, is prioritizing Europe, rather than the U.S., as its top market.
"In the U.S., we experienced a definite slowdown in sales activities following the stockpiling that took place" during the fourth quarter of 2017, Joo Yoon, senior vice president of global sales and marketing at Hanwha Q CELLS, said on the company's May 14 earnings call. The U.S. slowdown, he said, "is confined primarily to the utility-scale sector, in which the economic feasibility of projects is more sensitive to changes in input price."
Hanwha Q CELLS reported first-quarter net income of $31 million, or 37 cents per diluted American depositary share, compared to $17.6 million, or 21 cents per diluted ADS, a year earlier. The company's financial performance improved despite a drop in overall shipments from the prior quarter due to the geographic shift in sales, favorable raw material prices and the elimination of uncompetitive manufacturing activities, the company's chairman and CEO, Seong Woo Nam, said.
"[Our] efforts to adjust our geographical shipment allocation paid off, enabling us to significantly increase our market share in key markets following the [tariff] decision in the U.S." in January, Nam said. The company plans to continue to build sales in non-U.S. markets, he added.
Europe was Hanwha Q CELLS' third-biggest market in 2017, with approximately 10% of net revenues, according to a securities filing. Now it is the company's No. 1 market, Joo Yoon said. "Our products ... are well-received in Europe as evidenced by [average selling prices that are] significantly higher than the global market."
Globally, Hanwha Q CELLS expects record solar demand north of 100,000 MW in 2018.
"The fact that the global [photovoltaic] market is continuing to grow in spite of the various trade barriers being [erected] by protectionist governments is a testament to the fact that the new markets are capable of further driving ... growth," Joo Yoon said.
Hanwha Q CELLs lowered its guidance for 2018 module shipments to between 5,600 MW and 5,800 MW, from an earlier range of 6,000 MW to 6,200 MW.
The company's shares were up by 2.82% at $7.12 in afternoon trading May 14.
