Accounting Troubles, Weak Demand Stifle China's Solar Juggernaut (JASO, TSL, STP, YGE, LDK, FSLR, TAN)

Chinese solar PV makers are taking a few more lumps today as investors continue to shy away from a sector that has been damaged by low demand forecasts and accounting issues at several of the larger players. JA Solar Holdings Co., Ltd. (NASDAQ: JASO) replaced its CFO yesterday in just the latest shakeup.

Trina Solar Ltd. (NYSE: TSL) has faced similar accounting issues and the news has also affected solid Chinese companies like Suntech Power Holdings Co. Ltd. (NYSE: STP) and Yingli Green Energy Holding Co. Ltd. (NYSE: YGE). Both Suntech and Yingli shares are taking more hits today on relatively little news.

One development that could be weighing on Chinese shares today is a report from Taiwanese solar PV makers that orders for the third quarter are falling off sharply for deliveries after August.  Taiwan is not a big supplier of solar PV panels, so it’s possible to draw too general a conclusion from this.

What could very well be happening is that customers for all solar PV modules are placing what are essentially just-in-time orders, believing that the 30% price drop so far this year will continue. Inventories remain high, putting more pressure on prices and giving customers even more leverage.

Low-price suppliers like LDK Solar Inc. (NYSE: LDK) and First Solar Inc. (NASDAQ: FSLR) are better positioned to weather the pricing storm that is crushing margins. But LDK suffers from being associated with the other Chinese firms that have been hit by accounting issues.

The bad news about demand has been known for months. The accounting troubles are relatively new, and could continue to put pressure on the Chinese companies for a while yet.

But no one appears to be safe today. First Solar shares are down more than -1%, at $123.72, in a 52-week range of $111.40-$175.45. JA Solar’s shares are down nearly -1.7%, to $4.65, barely above the bottom of a 52-week range of $4.34-$10.24. Trina is down about -1.7%, to $18.49, in a 52-week range of $16.60-$31.89. Suntech is down more than -2.5%, at $7.33, again close to the bottom of a 52-week range of $7.05-$11.20. Yingli is down the most, -4.35%, at $7.26, again very near the bottom of a 52-week range of $7.01-$14.29. The Guggenheim Solar ETF (NYSE: TAN) is off about -0.3%, at $6.57, in a 52-week range of $6.44-$9.34.

Paul Ausick