September 17, 2012 / 1:52 PM / 5 years ago

UPDATE 2-Suntech cuts solar cell production capacity

* Reduction to affect 1500 employees

* Shares up 8 pct

Sept 17 (Reuters) - Suntech Power Holdings Co Ltd, the world's largest solar panel maker, said it temporarily shut a portion of its solar cell production capacity in China, as it grapples with weak selling prices and import duties in the United States.

Suntech shares, which have fallen 61 percent this year through Friday, rose 8 percent on Monday on the New York Stock Exchange.

A glut in supply has sent prices of solar panels crashing, erasing profits across the industry.

A massive reduction in supply and also capacity is necessary to balance supply and demand in the solar market, Raymond James analyst Pavel Molchanov wrote in a note.

First Solar Inc earlier this year cut output of its thin-film solar panels, while SunPower Corp shut down some production at its Philippines plant. A number of other players have been operating their plants at reduced rates.

Chinese solar companies have also been hit by anti-dumping tariffs in the United States and they now face a similar action from regulators in Europe, their largest market.

"In light of the preliminary U.S. anti-dumping tariff, the European anti-dumping investigation, and oversupply of solar modules, we have decided to right-size our production capacity and continue to optimize our organization," CEO David King said.

Suntech's operational solar cell capacity will temporarily be reduced to 1.8 gigawatts (GW) from about 2.4 GW.

The cut at the Wuxi facility is expected to affect about 1,500 employees in China. Most of these employees would be offered positions at other production facilities but some would face severance, Suntech said.

Suntech said it is on track to reduce recurring operating costs by 20 percent in 2012.

The company last month estimated weak margins for the second quarter and cut its full-year shipment outlook.

Another solar equipment manufacturer, China's LDK Solar Co Ltd, reported on Monday a much bigger loss, downgraded its sales forecasts and said it was in talks with potential investors.

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