(Yicai Global) Dec. 2 -- This week’s decision by Longi Green Energy Technology, a leading Chinese maker of solar panels, to cut the prices of monocrystalline silicon wafers for the first time in 19 months could stimulate demand from solar power plant developers, according to industry insiders.

Longi’s move, the first among major domestic players, will benefit the photovoltaic industry’s long-term development as it could drive a recovery in demand, an analyst who covers the sector said. Demand has been crimped this year by rising raw material costs, he said.

On Nov. 30, Xi’an-based Longi announced a 7.2 percent to 9.8 percent cut in silicon wafer prices, the first since May last year.

The move did not come on a whim. Last week, silicon wafer spot prices fell 3.1 percent to 9.7 percent, along with a dip in market prices of solar cells and modules, as more capacity comes on line and demand is held back by high raw material costs, according to research institute PV InfoLink.

Silicon material prices are unlikely to change before the end of the year, even after Longi’s price cuts, an executive at a PV firm told Yicai Global. Silicon material prices may fall in the second quarter of next year, as new capacity becomes available, the person said.

The shares of Chinese PV companies retreated in the wake of Longi’s price cut. Longi [SHA: 601012] lost 3.8 percent yesterday and a further 1.1 percent today. Tianjin Zhonghuan Semiconductor [SHE: 002129] fell 2.2 percent, after slumping almost 6.3 percent yesterday.

Yicai Global learned that Longi is clearing out its silicon wafer and module stocks as inventory costs are very high. At the end of October, Longi had 200 million silicon wafers and about six to seven gigawatts of silicon modules in stock.

Reducing inventory as soon as possible before raw material prices reach an inflection point is a reasonable strategy for silicon wafer makers, the executive said.

Since last year, Chinese silicon wafer makers have unveiled capacity expansion plans which are expected to be completed and put into production next year. At least 12 firms will also continue to hike capacity in 2022, with the total to exceed 299 GW, according to Yicai Global’s calculations.

Editors: Tang Shihua, Futura Costaglione