China, Solar

China Sunergy Snags 106 Metric Tons of Silicon

October 9, 2007 (GreenTechMedia) – China Sunergy got a break from bad news Tuesday when it announced a deal to buy about 106 metric tons of solar-grade polysilicon from Chinese manufacturer Luoyang Zhonggui High-tech.

The deal is especially welcome to China Sunergy, which has become emblematic of the silicon shortage plaguing the solar industry (see Could China Steal the Solar Throne?).

On Monday, China Sunergy’s stock tumbled 9.52 percent, to close at $10.08 per share, after shareholders filed a class-action lawsuit against the Chinese company (see China Sunergy Troubles Continue).

And Wall Street jitters have been shaking up some Chinese solar companies’ stocks as investors react to allegations surrounding inconsistencies in LDK Solar’s inventory of solar-grade silicon (see LDK Says Inventory Discrepancy Allegations Have ‘No Merit’ and New Details Surface as LDK’s Stock Continues to Plunge).

News of the silicon deal helped push the China Sunergy’s stock back up 20.7 percent to close at $12.17 per share Tuesday.

China Sunergy (NSDQ: CSUN) said the contracted amount will support the production of about 13 megawatts of solar cells from September 2007 to March 2008. But the company kept a tight lip on how much it paid for the goods, stating only that it garnered a fixed price for the length of the contract.

“The agreement further demonstrates our ability to improve our supply chain management in spite of challenging market conditions,” said Lu Tingxiu, chairman for the company, in a statement.

In combination with a previous September silicon deal that gave the company 68 megawatts worth of silicon wafers, Cowen and Company analyst Robert Stone estimated in a research note that China Sunergy is now covered for about 90 to 100 percent of its 2008 shipment targets.

But some solar-industry insiders questioned the quality of the silicon China Sunergy will get out of the deal.

Travis Bradford, president of the Prometheus Institute and a Greentech Media partner, said he wasn’t familiar with Luoyang Zhonggui’s polysilicon quality.

“Some Chinese company is going to sell them some polysilicon of some dubious quality and they are going to make ingots, wafers, cells and modules out of it,” he said. “They might work just fine and they might not … We don’t really know how much polysilicon is being made and of what quality is being made from China.”

He’s not the only one raising doubts about the quality of solar material coming from China.

Paula Mints, principal solar analyst at Navigant Consulting, also has said that poor-quality wafers are an issue and that people need to be more skeptical in evaluating companies’ claims (see New Details Surface as LDK’s Stock Continues to Plunge).

Bradford suspects that in five years China will have hefty polysilicon producers in its midst. “The question is when do they start making volume sales of polysilicon that’s good enough to use,” he said. “We won’t know until we see these products going on the market.”

Products from China Sunergy will be among those helping to answer that question.

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