China-based LDK Solar Co. (NYSE: LDK), one of the world’s biggest solar wafer manufacturers, recently reported major quarterly losses, based in large part on high polysilicon production costs and declining prices worldwide.
Contrary to expectations of revenue around $370 million by analysts, LDK revised expectations to between $220 million and $270 million for the second quarter. The news caused LDK shares to drop 9% on Tuesday.
First quarter net losses amounted to $185.2 million, a huge turnaround from last year’s income of $135.4 million in the first quarter.
LDK has already had to trim almost 5,000 jobs as it fights to readjust supply to available demand.
Most of the loss on LDK’s part stems from the high cost of polysilicon production—LDK makes it for roughly $41 per kilogram, compared to its spot price of $22.63, according to Bloomberg. Oversupply and lackluster demand are the solar sector’s biggest pitfalls, and the worldwide economic slump doesn’t help matters.
Europe, the world’s biggest solar market, continues to see its solar product prices under extreme pressure.
Reuters cites a GTM Research study that indicates worldwide panel production capacity is around 59 gigawatts, whereas actual demand is nearer 30 gigawatts.
LDK’s wafer shipments exceeded company predictions of between 140 to 150 megawatts to hit 164.4 megawatts last quarter.
Following a recent U.S. allegation that China had been dumping their solar panels into the country, the American government slapped a 30% import tariff on Chinese-made panels.
However, LDK does not intend to change its central strategy and will continue to compete in the U.S. market.
LDK was down 6.8% on Wednesday afternoon to $1.77.