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ReneSola Resumes Sichuan Plant Op.

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Following the completion of upgrades to the furnaces and hydrochlorination technology, ReneSola Ltd. (SOL - Free Report) announced the resumption of full production at its Sichuan polysilicon plant. The modernization program included new proprietary reduction furnaces and enhanced hydrochlorination technology.

This would reduce energy consumption to less than 100 kilowatt-hours per kilogram (kWh/kg) from the usual 145 kWh/kg. ReneSola had stopped polysilicon production at the Sichuan plant in Nov 2012.

Besides upgrading the plant, the company also combined its Phase II and Phase I production facilities for a combined production capacity of about 10,000 metric tons ("MT"). Earlier, ReneSola commenced trial production at the plant in the first quarter of 2013.

The modernization tasks were carried out to fulfill the company’s objective of cost reduction as well as optimizing output levels. The upgrades became essential in view of a volatile polysilicon market that called upon ReneSola to reduce wafer and module producing costs. This would give the company a competitive edge over other industry players.

For the third quarter of 2013, ReneSola estimates to produce roughly 1,800 MT to 2,000 MT of polysilicon at a projected cost of $18/kg. This is favorable compared to the prior-year production of around 1,176 MT at a cost of $24/kg.

Although polysilicon usage in solar cells is steadily gaining ground worldwide, we believe the popularity of cheap monocrystalline silicon applications will continue to be in demand. This will to some extent dampen the company’s Sichuan polysilicon development initiatives.

Moreover, the undesirable impact of countervailing duties of 15.24% and anti-dumping duties of 25.96% levied by the U.S. will pose a headwind to ReneSola’s export business. Europe too has also followed suit and announced its decision to impose tariff duties on solar panels manufactured in China.

As a result other China-based solar operators like JA Solar Holdings, Co. Ltd (JASO - Free Report) , Yingli Green Energy Holding Co. Ltd. (YGE - Free Report) and JinkoSolar Holding Co., Ltd. (JKS - Free Report) will also be affected by the above tariff restrictions.

Based in Jiashan, the People’s Republic of China, ReneSola Ltd operates as a brand and technology provider of solar photovoltaic products. ReneSola carries a Zacks Rank #4 (Sell).

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