Solar Sector To Feel Aftershocks From Quake; Bullish Long Term?

The solar sector will experience aftershocks from the earthquake in Japan, including disruptions in polysilicon supplies and near-term impact on demand, Piper Jaffray analyst Ahmar Zaman writes in a research note this morning.

In response, Piper today reduced ratings on Canadian Solar (CSIQ), JA Solar (JASO), SunPower (SPWRA), Yingli Green Energy(YGE), Trina Solar (TSL) and Suntech (STP).

Zaman notes that Japan accounts for 2 GW of expected 2011 demand, over 19,000 metric tons of polysilicon capacity, 650 MW of wafer capacity, 2.2 GW of cell capacity and 2.5 GW of module capacity. Piper cuts its 2011 solar demand forecast to 1 GW from 2 GW, bringing its global estimate down to 17.5 GW.

“We believe lowered demand in Japan resulting in Japanese module suppliers looking to place more product in the rest of the world, will pressure ASPs in 2011,” he writes. “Also, the drop-off in poly production in Japan, will tighten global supply further, keeping ASPs north of $70/kg over the near-term. This will challenge downstream margins.” He goes to Underweight from Neutral on CSIQ and STP, and cuts SPWRA, JASO, TSL and YGE to Neutral from Overweight.

The Piper analyst also sees a major impact on the LED sector, where Japan provides about 40% of global supply, about half of that from Nichia.

“While the majority of the solar and LED supply chain was not directly impacted, we believe that rolling blackouts, electricity rationing, and infratructure issues will affect supply and demand in the near term,” he writes.

Earlier: Memory Chip Prices Spike After Quake On Tighter Supplies

Update: Looking at the situation another way, Barclays Capital analyst Vishal Shah notes that the earthquake improves the long term policy outlook for the sector even though it weakened the near-term outlook, as the company’s leaking nuclear plants poses new challenges for the nuclear sector. “We see the Japanese nuclear development as an incremental positive for the [solar] sector…The bull case for nuclear policy could now become weaker and this could indirectly benefit solar/wind policy development, in our view.”