China Solar Glass Sector Nears Turning Point on Supply Cuts, Morgan Stanley Says

China's solar glass industry is approaching a turning point as widespread supply reductions help stabilize the market, according to a new analysis from Morgan Stanley. The investment bank stated that after months of losses, producers are taking action that should lead to a gradual improvement in industry fundamentals.

Producers Curtail Capacity

Morgan Stanley reports that solar glass manufacturers have significantly curtailed production in response to financial pressures and high inventories. These supply-side adjustments are seen as the primary driver of the market's rebalancing.

• Year-to-date, producers have suspended approximately 13,500 tons per day of capacity.
• This has reduced the industry's effective operating capacity to roughly 70,000 tons per day, down from 88,200 at the end of 2025.
• While leading firms like Xinyi Solar and Flat Glass reduced capacity in 2025, the latest maintenance actions are primarily from second and third-tier producers facing losses at the cash cost level, the bank said.

Demand Expected to Rebound

A sharp drop in solar installations in the first half of 2026, which fell 66% year-over-year, contributed to the sector's difficulties. However, Morgan Stanley projects a strong recovery in the second half of the year, forecasting 120 gigawatts of new installations that will bolster demand for solar glass.

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Module producers' operating rates have already shown slight improvement, with production plans for August reaching up to 41.6 gigawatts. The bank also noted that inventory levels have declined to 45 days. New policies released in mid-June are also expected to boost distributed solar projects, further supporting demand.

Valuation at Historic Lows

The challenging market conditions have pushed share prices for solar glass companies down by more than 25% year-to-date. According to Morgan Stanley, major players including Xinyi Solar and Flat Glass are now trading at historical lows.

The firm highlighted that both companies are valued at a 0.6 times one-year forward price-to-book ratio, a metric that may signal a potential valuation floor as the industry's fundamentals begin to mend.