Suntech says low prices will combat oversupply issue

Chief executive Zhengrong Shi said the company sold more than 50pc of its 2010 production of solar panels to customers in Europe, and that figure will drop only slightly this year.

Shi said that about 10pc of Suntech’s production will be sold in Italy which will be the same amount as last year, even though investors have expressed fear about an expected revision of solar subsidies in Italy after explosive growth in the solar power market there in 2010.

Investors in solar stocks are worried that there will be an oversupply of solar panels as a result of a large decline in government support. Shi revealed it was a possiblity that an oversupply could occur this year.

“Lower prices on solar panels, however, help spur demand,” he said. “Once oversupply occurs the price will be reduced and demand will increase too.”

Shi also said Suntech has agreements in place to sell more than 80pc of its planned 2011 production. He also predicts average selling prices on solar panels will drop about 10pc this year.

Suntech expects its margins to expand this year by producing its own wafers rather than buying outside the company. This will reduce manufacturing costs and it has already shown positive results with other solar companies such as Trina Solar and Yingli Green Energy Holding which have increased profit margins with the introduction.

Shi also said the overall Chinese solar market is forecast to increase to about 1.2 gigawatts from 600 megawatts last year. Suntech has about a 15 to 20pc share of the Chinese market, he said.