Month: June 2011

Solar Power Industry Outlook

by Tony D’Altorio, Investment U Research
Friday, June 17, 2011

GTM Research forecasts that global solar installations will rise from about 17,400 megawatts in 2010 to 20,900 megawatts this year. And for 2015, GTM predicts that solar installations will increase to 35,500 megawatts.

Most of these installations will probably take place in China, according to a report released six months ago by a HSBC research team that traveled to China.

In the report, HSBC said that the country was on track to outstrip its own aggressive government targets for clean energy, solar energy included, by 50 percent in 2015. By 2020, HSBC expects China to install about 20 gigawatts of solar power facilities.

Solar Demand Wanes as Production Amps Up

While interest in the solar industry is at a new high, it’s a different story for the companies trying to make a profit from solar power.

The outlook isn’t sunny. Surprisingly, demand for modules and other parts is slowing just as production capacity is ramping up.

Shares in some of the world’s leading solar manufacturers like First Solar (Nasdaq: FSLR) and Trina Solar (NYSE: TSL) fell by about 10 percent this year, due to concerns about oversupply and falling prices. .

And rightly so…

GTM Research estimates that industry production capacity for solar modules will increase by 115 percent this year and 134 percent in 2012, due to Chinese manufacturers increasing production.

This is leading to a supply glut of solar components and tumbling prices. For example:

• According to Credit Suisse analysts, prices for solar panels dropped by about 17 percent in just the past five months.

• Executives at solar module manufacturing companies such as Trina and JA Solar (Nasdaq: JASO) speak of constant pressure on margins.

• Prices for the inverters that connect the panels to the grid also slipped, so inverter companies like Power-One (Nasdaq: PWER) also issued earnings warnings.

The Bright Side to Solar Power Doom and Gloom

Of course, there’s a bright side to all this doom and gloom among solar companies.

The falling cost of solar power is hastening progress towards the elusive goal of grid parity. This, in turn, may actually create a larger global market for the solar industry. A market that does not rely on government subsidies.

Rob Gillette, the CEO of First Solar, spoke about a sunny outlook and a market where government subsidies aren’t needed. He said, “At that point, we move from a 65,000-megawatt market to a 1.7-million-megawatt market opportunity.”

Of course, grid parity isn’t a universal point reached simultaneously around the globe. It’ll vary from location to location.

For example, with its recent nuclear problems and expensive electricity prices, Japan could be a viable market for solar power.

But for right now, solar power is still a long way from taking the workload off of fossil fuels and nuclear power for electricity generation.

For solar power companies, this move towards grid parity through plunging prices means it’ll come down to Darwin’s theory… There will be a fight for market share and only the strongest will survive.

Look for a period of consolidation in the solar industry, where companies disappear or are bought out by stronger competitors. A few years down the road, we’ll see fewer solar companies in existence, with strong survivors like First Solar still around.

Good investing,

Tony D’Altorio

The euro paired its losses during the European trading session, continuing to build on slight gains made late yesterday. Supporting the euro were comments from the German finance ministry and German Chancellor Angela Merkel . This afternoon traders will be eyeing developments in the European debt crisis as well as consumer sentiment data from the US.

Comments by German finance ministry spokesman Martin Kotthaus gave the euro a boost when he said a solution to the key elements of the program may be agreed upon on Monday. Beginning on Sunday euro zone finance ministers will meet in Luxembourg with an additional meeting scheduled for Monday where the European elite are expected to hash out a new aid package for Greece. This may include some sort of investor participation as lobbied for by Germany.

Also supporting the euro was a meeting today between German Chancellor Angela Merkel and French President Nicolas Sarkozy. France is aligned with the ECB and is against any restructuring of Greek debt that may trigger a credit event as defined by the major rating agencies. Following Merkel’s comments that she will be willing to compromise with the ECB the euro rallied. However, this doesn’t change the facts on the ground as the ECB has been staunchly against any debt restructuring.

The price action over the past 24 hours may have the effect of shaking out some of the recent euro shorts before the EUR/USD makes another move lower. Initial resistance is found at 1.4320 and a break here would likely test 1.4500 where the euro bears would need to make a stand. To the downside, a move below yesterday’s low of 1.4070 would open the door to May’s low at 1.3970 and the 200-day moving average at 1.3825. The latter of the two options is more likely as today’s euro rebound may be a “dead cat bounce”.

Later this afternoon US consumer sentiment will be released and may be better than expected as a decline in energy prices may have a positive effect on the US consumer. However, the economic data cold pass unnoticed as market players focus on the European debt crisis. Weekend risk is back on the table as all eyes will be focused on the differences between the Germany and the ECB at this weekend’s meeting in Luxembourg.

Read more forex trading news on our forex blog.

Source: ForexYard

With the Republican debates kicking off this past week, and Rep. Anthony Weiner (D-NY) stepping down from office from his recent scandal, criticism of President Obama’s economic policies and stimulus will likely get revved up, possibly leading to a steep decline in American confidence levels, which will get reported on by the University of Michigan (UoM) today. The US dollar may not see much weakness from this turn of events, however, as it tends to do well in times of risk aversion.

Economic News

USD – US Dollar Mixed as Traders Weigh Manufacturing Data

Poor economic data out of the United States continued to weigh on the US dollar yesterday as investors continued to eye the interest rate differentials between the US and Europe. Yesterday’s manufacturing data out of Philadelphia highlighted a stark downturn in the manufacturing sector of the American northeast over the past month, raising risk aversion.

The data comes on the coattails of similar downturns across Europe seen earlier this month. A decline in British retail sales yesterday may also translate over to a flight to safety. News out of the American economy continues to reveal softness and stagnation as global output levels enter a period of decline. If data remains as weak as they are now, traders will likely continue to see weight applied to the value of the world’s riskier assets while the USD sees mixed results.

On tap today will be consumer confidence levels from the University of Michigan (UoM). The reports on consumer sentiment will likely support the latest news of stagnation and declines in growth. With the Republican debates kicking off this past week, and Rep. Anthony Weiner (D-NY) stepping down from office due to his recent scandal, criticism of President Obama’s economic policies and stimulus will likely get revved drastically, possibly leading to a steep decline in American confidence levels. The US dollar may not see much weakness from this turn of events as it tends to do well in times of risk aversion.

EUR – EUR Makes Mid-Day Gains as US Data Falters

The euro rose in yesterday’s late-trading sessions as economic news, mixed with some political drama, has had investors balancing between debt concerns and interest rate differentials. Soft data out of the American economy, however, has held many traders leery of seeking safety in the greenback. After yesterday’s severe downturn in the Philly Fed Manufacturing Index, investors appear to have shifted their gaze on Greece’s potential for a bailout, with optimism beginning to take hold late yesterday.

As for today, the euro zone turns its economic data engine back on with the publication of two less significant reports. At 9:00 GMT, Italy will publish its trade balance. The figure is expected to reveal a mild slowdown in the growth of Italy’s deficit. The news may help support an impending growth in Italy’s home market.

Following Italy’s data release will be a 10:00 GMT publication of the euro zone’s regional trade balance. This report measures the change in value for imported and exported goods. Expectations are for a growth in the region’s trade deficit which may put pressure on the EUR ahead of the week’s close. News surrounding the appropriation of funds for Greece is gripping the market right now after the data falter in the United States drastically altered many portfolios. Look to a mildly strengthening EUR if the dollar can’t find its footing today.

JPY – JPY Experiencing Relatively Flat Trading

The Japanese yen (JPY) has been trading with somewhat mixed results since Thursday, with gains made against several currencies and losses elsewhere. After a week of ups and downs, the Japanese yen appears set to make gains today as investors appear to be seeking safety. The dominant stance of risk aversion overarching yesterday’s environment of optimism has many traders moving towards the yen against the higher yielding currencies like the euro, which dropped to a six-week low during yesterday’s afternoon sessions.

However, the yen was slightly lower versus the US dollar as the pair moved up from previous intervention levels near 80.00. The USD/JPY held steady at yesterday’s low, finding support near 80.30 and moving up towards 80.90 by today’s opening Asian sessions. Japan’s morning release of its Monetary Policy Meeting Minutes should have shed light on JPY values and direction, but so far the forex landscape appears calm. If this past week’s soft data from the Western powers proves pivotal, the JPY could find solid support ahead of this week’s closing.

Oil – Oil Prices Sent Lower as Investors Seek Safety

Oil prices slumped below $92 a barrel yesterday morning following a report out of the United States on Wednesday which revealed a decline in its oil stockpile data. These US oil stockpile reports had shown significant growth for a few weeks before finally experiencing a downturn. The sudden halt of this inventory growth had a sharp effect on the value of Crude Oil as its price fell from a recent high near $103 a barrel to a current low just under $92.

The value of the US dollar versus the euro in recent trading has pushed towards a three-week high near 1.4160, which originally hurt the value of oil. With today’s steady sideways movement, traders appear likely to see oil faltering somewhat before this week’s market close. Whether oil traders decide to lift oil prices from a buy-in on physical assets, or whether they decide to pull away from the black gold out of a perceived risk averse environment, is a point traders will bear witness to next week.

Technical News

EUR/USD

A three week rally was met with a failure of the pair to breach 1.4700, a level not far from the previous trend line which opened the door for a significant pullback that retraced 50% of the late May to early June gains. The week’s declines ended at the 20-day moving average at 1.4330 and will serve as initial support. Falling daily stochastics suggest the move lower may have scope to continue where the pair may find resistance at 1.4250, a level that coincides with the 61% retracement and the rising trend line from the May low. A breach here and the pair will test the 100-day moving average followed by the May low at 1.3970. To the upside, resistance will likely come in 1.4570 followed by 1.4700.

GBP/USD

The weekly candlestick suggests further declines may be in store as last week’s candlestick ended on a shaven bottom, indicating momentum is moving to the downside. A confirmation will be needed from this week’s trade to confirm the bearish pattern. In the meanwhile the move lower finished at the 38% retracement level of the December to April move and is quickly approaching the trend line off the May 2010 low at 1.6180. The pair could receive a bounce from this level, as was the case in late May. Resistance is located at 1.6400 and 1.6460, and 1.6550. Should the pair not receive a bounce at the trend line declines could mount to 1.6060 and the April low at 1.5935.

USD/JPY

The yen was relatively unchanged from the previous week after an attempt to breach below the 80 yen level was only briefly successful before the pair was bid higher. While most oscillators remain in neutral territory, the pair continues to trade lower with resistance at the falling trend line from April high which comes in near the 20-day moving average at 81.00. This level may offer traders a better price to enter short. Further resistance is located at 81.75 from the May 31st high followed by 82.25 of the May 19th high. Support comes in at the May low of 79.50 followed by the all-time low at 76.11.

USD/CHF

The pair is testing a short term resistance level at 0.8450 and a breach here would expose the resistance at 0.8550 which lies just below the 20-day moving average. A rise to this price may offer traders better levels at which to enter short. Above these levels rests the falling trend line from the mid-February high which comes in at 0.8670. Support is found at the all-time low at 0.8325.

The Wild Card

EUR/CHF

The pair is a favorite to play the Greek debt crisis and yesterday the EUR/CHF hit a new all-time low at 1.1985. Daily stochastics are falling indicating further potential moves to the downside. Forex traders may want to be short on the pair with resistance located at 1.2315 followed by 1.2470.

Forex Market Analysis provided by ForexYard.

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This afternoon’s publication of the Philly Fed Manufacturing Index cast doubt on speculations for positive growth in the second quarter across the manufacturing and industrial sectors of the American economy. The reading’s significant contraction underlined the growing weakness in the nation’s manufacturing sector, first outlined by the Empire State index published yesterday.

With global manufacturing in such sharp decline, many analysts are beginning to consider the possibility of significantly reduced growth outlooks in several leading industrial nations. Forecasts for today’s numbers were for a mildly bullish reading of 7.1. The negative 7.7 reading published recently has helped drive many more investors into risk flight mode, which in turn is driving the safe-haven USD and CHF ever higher.

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Statistics Canada published a report early this afternoon which reviewed the change in the amount of foreign purchases of domestic securities. The data suggests that investors are beginning to find greater value in Canadian securities as soaring oil prices help the Canadian economy gain value at a faster pace than some of its rivals.

Many analysts had assumed, given the recent downtick in Canadian industrial and manufacturing figures, that foreign investment would slow down in comparison with the previous month’s reading of C$6.44B. The expectations for C$5.45B in investment growth, however, were trounced when the report was published with a reading of C$8.22B in foreign purchases of domestic securities. The timing of the report couldn’t be better considering the slew of data which has pulled down on the CAD in recent weeks.

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The US Census Bureau published its June report on approved building permits this afternoon. The annualized data suggests that new housing demand may be rising as we head into the turbulent summer months.

Expectations for this report were for the issuance of 0.55M building permits for the previous month. The actual results, however, surprised some investors with an optimistic jump to 0.61M new building permits issued. The report could serve as a foreshadowing of increased activity in the US housing market, but whether it will help lift home prices from their detrimental low is yet to be seen.

Read more forex trading news on our forex blog.

As with a recent report out of Canada which showed new motor vehicle sales in distinct decline, a similar report released this morning by the Australian Bureau of Statistics centered on a seemingly connected plummet in new motor vehicle sales in the Land Down Under. The report comes as many economists analyze the sudden downturn in AUD values brought on by an environment of global risk aversion.

The report, which came without built-in expectations, revealed a 7.6% decline in vehicle sales for the previous month. Last month’s revised numbers revealed a previous 4.1% decline, month-on-month, for April. May’s number’s combine to form an ominous outlook for Australian manufacturing which lines up with similar reports across Europe and the Western Hemisphere. Such news points to an expected sluggish second quarter for manufacturing-based companies.

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A report out of the Swiss National Bank (SNB) today highlighted just how much havoc the super-strength Swiss franc (CHF) has wrought on the Alpine economy. Expectations were for a stark contraction of 7.5% in industrial output, yet the report’s actual results revealed a 9.2% decline for the month of May.

The rate statement out of the SNB regarding its 3-month inter-bank lending rate with London (Libor) should have addressed this downturn, yet appears to have shrugged at the news. SNB board member Jean Pierre Danthine commented that he saw no need for the bank to intervene in the market to weaken the top performing CHF as he views the Swiss economy to be in great shape.

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Contributor Article:

China and trading are inseparable. Their history will show you how China and trade are integrated with each other. China entered into the globalized environment almost thirty years go and since then has been one of the most influential countries in the world. This is because the centralized government of China helps manufacturers in setting up processes to produce things which in turn they will sell to the world which is hungry for cheap products. And in turn, the government uses the income they get to pay for their education and equipment in China, things that would develop the whole country of China. China is popular in producing low cost products that is because they have low cost labor.

Trade surplus is defined as a positive balance of trade where the exports exceed the imports of the country. And to be able to understand the trade surplus in Chin, let’s cross reference it with the US. If you compare Yuan to US Dollars, you can easily see the undervaluation of the Yuan, and that would result into at least two or three percent trade surplus.

The three main reasons for the Chinese surplus are the low cost labor, less consumer and the undervaluation of their currency.

The trade surplus between china and the US has created a co-dependency, and the dependency ratio of this relationship is the major concern of China. And you can get a better picture by now who has the greater dependency ratio. In China, the major work force depends on their agriculture and lives in the rural areas, which leads to low consumer spending. Compare that in the US where the consumer spending accounts is almost 70 percent of the GDP whereas in China, it is about 50 to 60 percent. Another two reason s added to the China surplus, low dependency and low consumer spending.

The Chinese government had made some changes in the value of the Yuan but it will not solve the trade imbalance in China. Major changes should be implemented to correct this and moderate its Trade Surplus. But the government doesn’t seem concern about that and until it takes seriously the reevaluation of its currency, it will be difficult for them to move into moderate trade surplus.

About the Author

Brendan Elias and Alex Ryan have been teaching individuals how to import from China in their free 30 day video training series. Visit our website to sign up to this free training. You will discover how to source products from China, contact factories, negotiate to get the best price and much much more. http://chinaimportformula.com.au/