TheChek News Flow

China’s solar sector could be on course for a glow-up

After a plague of overcapacity and falling prices, there are signs the sector may be approaching a bottom

After years of turmoil — marked by overcapacity, plunging prices and declining investor confidence — China’s solar sector is showing faint but discernible signs of recovery.

In 2010, Europe’s dominance in the global solar panel market had appeared unassailable. The region accounted for about three-quarters of global solar photovoltaic installations, with Germany leading by a wide margin. Then China decided to break into the market. Its plan worked, perhaps too well.

While the People’s Republic managed to snatch market share from Germany, the cost has been a plague of overcapacity and falling prices. Investors have avoided the sector for its unappealing outlook and bleak growth prospects. But there are now signs that the sector may be approaching a bottom.

It is hard to overstate the extent of slack in the solar industry. China’s solar cell production capacity reached about 1,000 gigawatts last year — not only exceeding current global demand but enough, at the rate of last year’s growth, to exceed total projected demand through to 2035.

As a result, in the decade through to 2020, the cost of solar panels fell about 85 per cent. Earnings have deteriorated: about a third of China’s listed solar companies reported a loss last year and several went bankrupt.

Potential policy shifts in important markets outside China, notably the US, add to the uncertainty. Subsidies offered under President Joe Biden’s Inflation Reduction Act could come up for debate under president-elect Donald Trump.

But there are some signs of recovery. Prices of polysilicon, a vital material for solar cells, rose 2.2 per cent this week compared with the previous week to its highest level since last May, continuing a trend that started in December. Production cuts and declining inventories are starting to yield results. The rapid growth of renewables in important markets such as south-east Asia and India could start to redefine the sector.

China can help itself, somewhat. As the world’s largest consumer of solar panels, it has been ramping up installation plans through new large-scale projects in the region. This includes China’s “Solar Great Wall” in Inner Mongolia, which is set to transform deserts into renewable energy hubs at an unprecedented scale, adding demand for solar panels. An over-dependence on government-driven demand is no real solution, but eases some pressure as the industry works through its glut of solar panels.

Investors adjusted to the gloom long ago. Shares of JA Solar Technology and JinkoSolar Holding, two large manufacturers, have sagged by about two-thirds since their 2022 peak. But they are up more than a fifth over the past six months. With the sector seemingly nearing a bottom, it might finally be time to lighten up.

China’s solar sector could be on course for a glow-up

After a plague of overcapacity and falling prices, there are signs the sector may be approaching a bottom

After years of turmoil — marked by overcapacity, plunging prices and declining investor confidence — China’s solar sector is showing faint but discernible signs of recovery.

In 2010, Europe’s dominance in the global solar panel market had appeared unassailable. The region accounted for about three-quarters of global solar photovoltaic installations, with Germany leading by a wide margin. Then China decided to break into the market. Its plan worked, perhaps too well.

While the People’s Republic managed to snatch market share from Germany, the cost has been a plague of overcapacity and falling prices. Investors have avoided the sector for its unappealing outlook and bleak growth prospects. But there are now signs that the sector may be approaching a bottom.

It is hard to overstate the extent of slack in the solar industry. China’s solar cell production capacity reached about 1,000 gigawatts last year — not only exceeding current global demand but enough, at the rate of last year’s growth, to exceed total projected demand through to 2035.

As a result, in the decade through to 2020, the cost of solar panels fell about 85 per cent. Earnings have deteriorated: about a third of China’s listed solar companies reported a loss last year and several went bankrupt.

Potential policy shifts in important markets outside China, notably the US, add to the uncertainty. Subsidies offered under President Joe Biden’s Inflation Reduction Act could come up for debate under president-elect Donald Trump.

But there are some signs of recovery. Prices of polysilicon, a vital material for solar cells, rose 2.2 per cent this week compared with the previous week to its highest level since last May, continuing a trend that started in December. Production cuts and declining inventories are starting to yield results. The rapid growth of renewables in important markets such as south-east Asia and India could start to redefine the sector.

China can help itself, somewhat. As the world’s largest consumer of solar panels, it has been ramping up installation plans through new large-scale projects in the region. This includes China’s “Solar Great Wall” in Inner Mongolia, which is set to transform deserts into renewable energy hubs at an unprecedented scale, adding demand for solar panels. An over-dependence on government-driven demand is no real solution, but eases some pressure as the industry works through its glut of solar panels.

Investors adjusted to the gloom long ago. Shares of JA Solar Technology and JinkoSolar Holding, two large manufacturers, have sagged by about two-thirds since their 2022 peak. But they are up more than a fifth over the past six months. With the sector seemingly nearing a bottom, it might finally be time to lighten up.

Múte Egede open to continuing co-operation with US, but rejects Donald Trump’s attempt to buy Arctic island

Greenland does not want to be American or Danish but independent, according to the Arctic island’s prime minister at the end of a tumultuous week following US president-elect Donald Trump’s refusal to rule out force to take control of the territory.

Múte Egede said that “the status quo is not an option” as he laid out the desire of the vast and geopolitically crucial island of 57,000 to have “its own voice” by gaining independence from Denmark and turning down Trump’s attempts to buy Greenland.

“We don’t want to be Danish, we don’t want to be American, we want to be Greenlandic,” he told a news conference on Friday.

Denmark’s prime minister Mette Frederiksen said at the same meeting that Greenland’s desire for independence was “legitimate and understandable”, while calling US interest in the autonomous territory “positive”.

Frederiksen added that she wanted to keep together the Kingdom of Denmark, which includes Denmark, Greenland and the autonomous territory of the Faroe Islands. “I personally believe that if we stand together, we are stronger in the global game,” she stressed. 

Trump this week refused to rule out using military force against a Nato ally to bring Greenland under US control as Washington seeks to counter rising Russian and Chinese interest in the Arctic.

The world’s largest non-continental island is already home to a US military base and is seen as central to Arctic security as well as being the start of two new subpolar shipping routes, and possessing large amounts of rare earths and other minerals.

Greenland, which has home rule over most matters except for foreign and security policy provided by Denmark, has long wanted independence but has struggled to find sufficient economic growth to cut ties with Copenhagen.

Egede, who has repeatedly stressed that Greenland is not for sale, said that the territory was open to co-operating with the US as it long had done so, but insisted that its fate would be decided by Greenlanders. He said Trump’s military threat was “serious” but that Greenlanders had to avoid becoming “hysterical”.

“When I speak with another country’s leader, I have to be together with the Danish ambassador. These are the things where we want to have our own voice,” he added.

Frederiksen is seeking a meeting with Trump to discuss the matter, and said the president-elect had not raised the topic of Greenland with her when they spoke following his election victory in November.

“It’s positive for us to see the increasing US interest around Greenland . . . There is a need for closer co-operation on investments and business, and the exploitation of minerals. From the Danish side, we are happy to invest further in Greenland,” the Danish prime minister added.

Danish politicians including Frederiksen reacted with anger and ridicule when Trump first proposed buying Greenland in 2019. But they have responded in a much more nuanced manner this time around, insisting that the island is not for sale but that they are keen to co-operate with the US on the Arctic.

Danish ministers have conceded that they have not invested enough in the defence of Greenland where they only have four ships, a surveillance aircraft and some dog sled patrols. They have pledged up to $2bn in additional investments, but officials said privately that they are dependent on Nato and the US military to protect the island fully.

Chinese companies have tried to invest in Greenlandic airports and in several mining projects, but were rebuffed by the US and Denmark.

Scion of European banking dynasty “hopes to withdraw” claim against German financier

Lord Nathaniel Rothschild has reaffirmed his commitment to his business partnership with Lars Windhorst just days after filing a lawsuit against the controversial German financier.

Rothschild, 53, a scion of one of Europe’s most storied banking dynasties, announced in July 2024 that he would take a minority stake in Windhorst’s investment firm Tennor and become its executive chair.

Less than six months later, Rothschild sued the German financier, filing a lawsuit against Windhorst and his Swiss company Tennor International in London’s high court on Wednesday. A spokesperson attributed the dispute to an alleged default on a personal loan.

Rothschild’s spokesperson told the FT on Friday that he was still committed to the partnership struck with Windhorst, however, and could withdraw the lawsuit.

“Positive discussions with Lars Windhorst around a mutually acceptable outcome continue and Lord Rothschild remains committed to the partnership announced in July 2024,” Rothschild’s spokesperson said. “He hopes to withdraw the claim and draw a line under this matter as soon as possible.”

Windhorst declined to comment.

Windhorst, whose business career has been marked by repeated scandal, has faced several claims from aggrieved creditors in recent years. During a 2023 London high court hearing, he denied under oath that he lived a “billionaire lifestyle” while large unpaid debts remained outstanding.

The entrepreneur, 48, shot to fame in 1990s as a so-called “wunderkind” of German business, earning the admiration of the country’s chancellor Helmut Kohl. By the time he was 34, however, he had weathered the collapse of numerous ventures, personal bankruptcy and a suspended jail sentence for “breach of trust”.

Rothschild unveiled his partnership with Windhorst at a party at the German financier’s Mayfair offices in July.

Rothschild compared Windhorst to his great-grandfather Sir James Dunn, “who was a buccaneering Canadian industrialist who went bust three times” but went on to become “the richest and most successful industrialist that Canada ever produced”.

In an interview with the FT last month, Windhorst said: “I am very pleased, and in fact excited, to have Lord Rothschild with us.”

Owner of British Gas says low temperatures have strained supplies

The UK has “less than a week” of gas reserves in store as plunging temperatures strain supplies, according to the owner of energy company British Gas.

Inventories at gas storage sites were, as of Thursday, 26 per cent lower than at the same point last year, Centrica said on Friday, leaving them roughly half full and at “concerningly low” levels.

Britain’s cold snap, during which temperatures have fallen to close to minus 20C in places, has led to increased heating demand from households, most of which rely on gas.

The drop in temperatures, which is forecast to last into the weekend, also comes less than two weeks after Russian gas flows to Europe via Ukraine ended.

“The UK has less than a week of gas demand in store,” Centrica said in a statement on Friday.

“We are an outlier from the rest of Europe when it comes to the role of storage in our energy system and we are now seeing the implications of that,” added chief executive Chris O’Shea.

Britain has much lower storage capacity compared with countries in mainland Europe, leaving it more vulnerable to surges in demand for gas.

European states are also interconnected with a vast network of pipelines, allowing flexible supplies between countries.

About half of Britain’s gas needs are met by imports at present, and domestic gas prices have risen almost 20 per cent since the start of the winter.

The UK competes with mainland Europe for gas and liquefied natural gas supplies, and its gas prices need to be at a meaningful premium to European prices to incentivise traders to send gas to the UK.

Centrica is lobbying for government support to invest in and upgrade its Rough gas storage site so it can store hydrogen in the long term.

The facility off the Yorkshire coast is the biggest in the UK. It closed in 2017 but partially reopened in 2022 at the request of the previous Conservative government at the height of the energy crisis triggered by Russia’s full-scale invasion of Ukraine.

The energy supplier has said it is ready to invest £2bn to upgrade and redevelop the site, but wants the government to introduce a “cap and floor” mechanism to supports its revenues.

O’Shea claimed that if Rough “had been operating at full capacity in recent years, it would have saved UK households £100 from both their gas and their electricity bills each winter”.

The current level of regulator Ofgem’s energy price cap, which runs until March, means a typical household is paying £1,738 a year for gas and electricity, compared with £1,717 at the end of 2024.

Natasha Fielding, head of European gas pricing at pricing agency Argus Media, said the UK could either import more LNG or pipeline gas from mainland Europe through two large pipelines. But “they all require the UK gas price premium to the EU to grow even more”, she cautioned.

National Gas, which owns Britain’s main transmission network, said “the overall picture across Great Britain’s eight main gas storage sites remains healthy”.

“Britain obtains its gas from a diverse range of sources . . . meaning we are well placed to respond to demand this winter,” it added. 

The Department for Energy Security and Net Zero said it had “no concerns” and was “confident we will have a sufficient gas supply and electricity capacity to meet demand this winter”.

“We are committed to designing a new business model for hydrogen storage infrastructure. Prospective projects will have the opportunity to apply for support and more information will be provided in due course,” it added.

Move by outgoing Biden administration made in co-ordination with UK

The Biden administration on Friday issued sweeping sanctions targeting the Russian energy sector, taking aim at Moscow’s oil revenues just days before Donald Trump takes office.

The measures include sanctions on Russian oil producers Gazprom Neft and Surgutneftegas, and the blacklisting of 183 vessels involved in Russian energy exports.

Dozens of traders, Russia-based oilfield service providers and energy officials were also targeted.

The US Treasury said that the UK would also apply sanctions to the two major oil producers in co-ordination with Washington.

Brent oil, the international benchmark, rose by almost 4 per cent on Friday to $79.84 per barrel, a three-month high.

The outgoing Biden team said it was able to take such significant action on Russia’s energy sector, the country’s largest and most significant source of revenue, because oil markets are expected be oversupplied in 2025.

It also noted that US inflation has dropped to within range of the Federal Reserve’s 2 per cent target.

“To put it plainly, the context changed, and so the moment was ripe to change our strategy,” one senior Biden administration official said.

The last-minute move creates a challenge for President-elect Trump, who campaigned on ending the war between Russia and Ukraine quickly and has expressed scepticism of imposing additional sanctions, saying in September: “I want to use sanctions as little as possible.”

Should he try to undo the moves, Trump could face pressure from Congress, where Republican members had urged President Joe Biden to do more to crack down on Russian energy revenues.

Under existing sanctions authorities, Congress would be notified if Trump tried to reverse the new measures, and could vote on a resolution of disapproval.

The outgoing Biden team said the sanctions would be a useful tool for the new Trump administration, which has largely distanced itself from Biden’s Ukraine strategy.

While on the campaign trail, Trump pledged to end the war between Russia and Ukraine within 24 hours, although he now says that he will try to end it in six months.

“The next administration will have to make a decision about what they want to do, but we think that by taking these actions, it puts them in a better position to help find just and sustainable peace from this conflict,” another senior Biden administration official said.

As part of the package, the state department blocked two active Russian liquefied natural gas facilities, a large Russian oil project and foreign organisations supporting Russia’s oil exports.

It also blacklisted Russia-based oilfield service providers and senior officials of state-run nuclear energy company Rosatom.

Adding 183 vessels directly to the sanctions lists, rather than the companies which manage or own them, may have a significant effect.

FT analysis has found that the 54 oil tankers previously blocked by the US were forced to carry dramatically less oil because it became riskier for their counterparties to do business with them.

Some of the vessels sanctioned on Friday were listed for making “calls in a Russian port where oil has consistently traded well above the $60 price cap on Russian-origin crude oil”.

Since December 2022, Ukraine’s allies have sought to keep Russian oil flowing but to restrict the Kremlin’s revenues from the trade by placing a limit on the price.

Ingosstrakh, a large Russian company previously identified by the FT as a significant insurer of shadow fleet vessels, has also been added to the list.

Should the new sanctions be fully enforced, they will undermine Russia’s oil revenues and increase its energy costs by upwards of billions per month, the first Biden administration official said.

“We are ratcheting up the sanctions risk associated with Russia’s oil trade, including shipping and financial facilitation in support of Russia’s oil exports,” said US Treasury Secretary Janet Yellen.

The US has imposed more than 5,000 sanctions and export controls on Russia since it launched its full-scale invasion of Ukraine in February 2022.

Friday’s measures follow the Biden administration’s November 2024 decision to sanction Russia’s state-owned Gazprombank, the main conduit for Russian energy payments as part of its efforts to restrict the Kremlin’s ability to fund its war effort.

The analyst upgraded shares of the Michael Kors parent to outperform and said investors have been too harsh in their judgement.

Wall Street can give that impression that it’s all about numbers — margin multiples, revenue growth, PE ratios and all the other metrics that add up to a stock price.

But that’s only half of it.

The other half is how investors feel about all those numbers.

For Michael Kors-parent Capri Holdings — which struggled as it waited at the altar for the Tapestry Inc. buyout and then saw its stock price collapse along with the deal — sentiment has ranged from bad to very bad.

Shares of Capri increased 7.9 percent to $21.88 on Monday after BMO analyst Simeon Siegel upgraded the stock to outperform with a target price of $31. That gave the company a market capitalization of $2.6 billion.

An outperform rating means that an analyst thinks a company is stronger than the market is giving it credit for. And Siegel said the Capri bears have gone too far and are too “negative” or “uninterested” on the stock, which has fallen about 60 percent over the past years while the S&P 500 rose 24.7 percent.

While upgrades are most often based on some sign of better performance at the company, Siegel’s is based more on vibes and the underappreciated base Capri is working from as it builds back from a tough stretch as it waited for the deal with Tapestry, at $57 a share.

“Capri deserves management and investor focus,” Siegel said. “It’s regained the former; the latter should follow.”

Since the buyout was dropped, John Idol, chief executive of Capri, has been busy.

In November, he laid out plans to rev up the company’s three brands — Michael Kors, Versace and Jimmy Choo — and then stepped in to personally take the reins of Michael Kors as CEO of the brand.

And last month, WWD reported that Versace and Jimmy Choo have been put up for sale in a process managed by Barclays.

Even though the turnaround at Michael Kors, the company’s largest brand, will take time, Siegel said Capri has multiple ways to start turning sentiment and its stock price around.

“While we don’t see clear signs of strength/inflection — yet — we see potential upside as sales, margins and debt pressures turn ‘less-bad,’” Siegel wrote in his research note.

Capri’s revenues fell 16.4 percent to $1.1 billion in its fiscal second quarter.

But that’s a decline with some peculiarities.

“Unlike most large brand oversaturation issues — something Michael Kors knows well — Capri’s recent revenue drop appears more a function of distraction/lack of effort post-transaction announcement than of an overstretched logo,” Siegel said. “To wit, inventory is [down by a percentage in the double digits]; typically, overstretched brands first need to address inventory gluts. Metaphorically — maybe literally too? — turning the lights back on should prove a powerful opportunity.”

But Siegel argued that the shortest path to upside for the stock is a reduction in the company’s debt load as net debt is high at about 62 percent of the companies’ market cap, equivalent to $12 to $13 a share.

Net debt stood at $1.5 billion at the end of the second quarter in September and is on track to be about $1.2 billion by the end of the fiscal year.

“Whether via asset sales or cash flow from business improvement, shrinking the market cap-to-enterprise value gap could represent meaningful and underappreciated upside to shares,” Siegal said.

The analysis looked at the various pieces of the business separately and found hidden value.

Siegel estimated that even if Michael Kors continued to decline next year with sales dropping to $3 billion, that should still produce earnings before interest, taxes, depreciation and amortization of $500 million to $550 million.

With that math — if Michael Kors were valued at 6-times EBITDA, or about $2.5 billion — Capri shareholders have been valuing Versace and Jimmy Choo at about $740 million combined.

That would be a bargain basement price considering Capri bought Versace for $2.1 billion in 2018 and Jimmy Choo for $1.2 billion in 2017.

Selling the luxury brands could help Capri pay down debt and speed along Michael Kors, while shareholders, under Siegel’s reasoning, see a nice bump up.

FDIC Vice Chairman Travis Hill to call for no change in capital requirements for largest banks in Friday speech

President-elect Donald Trump has yet to name his picks to head Washington’s banking agencies, but possible nominees for key posts are already teasing a pullback of regulations and embrace of technologies such as cryptocurrency.

Federal Deposit Insurance Corp. Vice Chairman Travis Hill is expected to outline plans to lessen the regulatory burden on banks, encourage innovation around crypto and address the issue of so-called debanking in a speech Friday morning, according to prepared remarks viewed by The Wall Street Journal.

He also plans to advocate for regulators to pull back on previous proposals to force banks to hold more capital.

Hill, who is poised to become the acting chairman when FDIC Chairman Martin Gruenberg steps down the day before Trump’s inauguration, is set to speak at an American Bar Association event in Washington.

He is one of two Republicans on the agency’s five-member board and is seen as a potential pick for the permanent role.

“The agency needs a new direction,” Hill plans to say. “And—one way or another—I expect that work to begin on January 20th.”

Bank executives are optimistic that Trump will ease a host of regulations on capital cushions and consumer protections, as well as scrutiny of consolidation in the industry. The Trump transition team has started to explore pathways to shrink, consolidate or even eliminate the top bank watchdogs in Washington, the Journal previously reported.

Separately, Federal Reserve Gov. Michelle Bowman, one of three Republicans on the seven-member board, had a similar message as Hill in a Wednesday speech at a banking seminar in Laguna Beach, Calif. She said banking supervisors should take a more tailored approach and balance oversight with a desire for economic growth.

Bowman is a candidate to succeed the Fed’s Vice Chair for Supervision Michael Barr, its top banking regulator. Barr said this week he would step down in February, rather than risk a legal fight with Trump to keep the job. He had pushed an aggressive regulatory agenda during his tenure, which sparked fierce pushback from the industry.

Here are some of the highlights from Hill’s prepared remarks: