Industry insiders have long foreseen that the export-oriented PV product sales will inevitably face multiple risks. Recently, the central bank's exchange rate reform has thrown exchange risk into the face of PV practitioners. Some people are pessimistic that PV exports may be hit hard. Some people are not willing to raise prices, how can we smoothly digest the risk of exchange reform? The fundamental is to enhance product competitiveness and brand awareness to enhance the ability to dissipate exchange rate fluctuations.
Since the central bank announced on June 19 that the exchange reform has been promoted, the central parity of the RMB against the US dollar has risen from 6.8275 to 6.7790, up 485 basis points. For industries that include PV modules, toys, textiles and apparel, which are mainly dependent on exports, the appreciation of the renminbi will bring considerable operational pressure.
Some PV companies said that exchange rate fluctuations caused the company's previously signed foreign orders to become unprofitable. This affected the company's normal order, and the company had to find ways to avoid the risk of exchange rate fluctuations.
In fact, China's PV module exports account for 890% of total sales. The depreciation of the euro has already brought exchange losses to many companies. Once the renminbi appreciates sharply, the low-cost advantage of domestic enterprises will inevitably be challenged. For example, for domestic PV manufacturers, their sales are mainly denominated in Euros or US dollars, while manufacturing costs are denominated in RMB, so the appreciation of the RMB will have a negative impact on its profit margin. On the contrary, the RMB exchange rate reform will indirectly benefit foreign PV product manufacturers.
In this regard, some domestic PV companies indicated that they no longer choose to sign orders in the euro. Some enterprises indicated that they would hedge their risks with hedging. Some enterprises indicated that they might try to raise the price to offset the impact of the exchange reform.
How much loss will the RMB appreciation cause to PV exports? The answer is still uncertain, the sensitivity of foreign PV product demand to price will directly affect the impact on exports.
At present, the annual output of China's photovoltaic cells has exceeded 2 million kilowatts (2000 megawatts), accounting for 40% of global production, ranking first in the world. China's PV products are playing an increasingly important role in the global PV trade, and the global PV market is showing a boom in supply and demand in the first half of this year.
Some optimists expect that the demand for foreign PV products will increase substantially. Therefore, the impact of China's exchange rate reform factors on domestic PV companies may be overwhelmed by the increase in demand. In addition, the average profit margin of PV module manufacturers in China can reach 20%. More than %, so for these companies, even if the exchange rate loss brings a 10% shrinkage of profit margins, most companies can still live well.
However, the good PV export situation cannot be used as an excuse for PV companies to ignore exchange rate risks. In my opinion, the export-oriented PV sales itself has various risks including foreign demand and foreign policies, among which exchange rate risk bears the brunt, and these factors may continue to eat away the existing profits. In the context that the domestic PV market is difficult to grow rapidly in the short term, domestic companies must actively absorb the exchange rate risk in order to ensure that the market must actively absorb the exchange rate risk.
On the one hand, it can technically improve the quality and competitiveness of domestic PV products, and hedge the disadvantages of exchange reform with brand advantage; on the other hand, exchange rate reform also gives domestic PV producers the opportunity to obtain cheaper raw materials. Conducive to the compression of enterprises, enterprises should take the opportunity to improve the level of profits and enhance the ability of enterprises to absorb the factors of exchange reform.
Since the central bank announced on June 19 that the exchange reform has been promoted, the central parity of the RMB against the US dollar has risen from 6.8275 to 6.7790, up 485 basis points. For industries that include PV modules, toys, textiles and apparel, which are mainly dependent on exports, the appreciation of the renminbi will bring considerable operational pressure.
Some PV companies said that exchange rate fluctuations caused the company's previously signed foreign orders to become unprofitable. This affected the company's normal order, and the company had to find ways to avoid the risk of exchange rate fluctuations.
In fact, China's PV module exports account for 890% of total sales. The depreciation of the euro has already brought exchange losses to many companies. Once the renminbi appreciates sharply, the low-cost advantage of domestic enterprises will inevitably be challenged. For example, for domestic PV manufacturers, their sales are mainly denominated in Euros or US dollars, while manufacturing costs are denominated in RMB, so the appreciation of the RMB will have a negative impact on its profit margin. On the contrary, the RMB exchange rate reform will indirectly benefit foreign PV product manufacturers.
In this regard, some domestic PV companies indicated that they no longer choose to sign orders in the euro. Some enterprises indicated that they would hedge their risks with hedging. Some enterprises indicated that they might try to raise the price to offset the impact of the exchange reform.
How much loss will the RMB appreciation cause to PV exports? The answer is still uncertain, the sensitivity of foreign PV product demand to price will directly affect the impact on exports.
At present, the annual output of China's photovoltaic cells has exceeded 2 million kilowatts (2000 megawatts), accounting for 40% of global production, ranking first in the world. China's PV products are playing an increasingly important role in the global PV trade, and the global PV market is showing a boom in supply and demand in the first half of this year.
Some optimists expect that the demand for foreign PV products will increase substantially. Therefore, the impact of China's exchange rate reform factors on domestic PV companies may be overwhelmed by the increase in demand. In addition, the average profit margin of PV module manufacturers in China can reach 20%. More than %, so for these companies, even if the exchange rate loss brings a 10% shrinkage of profit margins, most companies can still live well.
However, the good PV export situation cannot be used as an excuse for PV companies to ignore exchange rate risks. In my opinion, the export-oriented PV sales itself has various risks including foreign demand and foreign policies, among which exchange rate risk bears the brunt, and these factors may continue to eat away the existing profits. In the context that the domestic PV market is difficult to grow rapidly in the short term, domestic companies must actively absorb the exchange rate risk in order to ensure that the market must actively absorb the exchange rate risk.
On the one hand, it can technically improve the quality and competitiveness of domestic PV products, and hedge the disadvantages of exchange reform with brand advantage; on the other hand, exchange rate reform also gives domestic PV producers the opportunity to obtain cheaper raw materials. Conducive to the compression of enterprises, enterprises should take the opportunity to improve the level of profits and enhance the ability of enterprises to absorb the factors of exchange reform.
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