Suntech Power Holdings Co Ltd's chief executive said on Tuesday the Chinese solar company expects to return to profit, along with the entire industry, in the fourth quarter as prices stabilize on tighter inventories and improving demand.

Suntech forecast its sales in the United States to grow a strong 40 percent this year, expecting little impact from a preliminary U.S. ruling on countervailing duties of less than 5 percent and possible higher anti-dumping duties later this year.

The world's largest photovoltaic solar module maker would be able to skirt around the U.S. duties by shipping its products from other manufacturing bases outside China, Chairman and Chief Executive Zhengrong Shi told Reuters in an interview.

There will be ups and downs happening in the industry, but the overall trend is clear - that we will have to rely increasingly on solar power as an alternative source of energy, said Shi, known in the solar industry as China's sun king, during the 2012 Boao Forum for Asia in Hainan.

Global solar companies such as Suntech, First Solar Inc , Trina Solar Ltd and Canadian Solar Inc all reported losses for 2011 due to aggressive pricing and a supply glut eroding margins.

Suntech's New York-listed shares have risen by a third since the beginning of the year, although industry difficulties had caused its stock to plummet more than 70 percent in 2011.

It'll be tough for the industry to return to profit in the first half because of falling prices and margins, while operational costs haven't been dropping fast enough, Shi said.

In the fourth quarter, Suntech reported a net loss of $136.9 million compared with a profit of $358 million a year earlier, with a gross profit margin of 9.9 percent.

BAD LUCK ON U.S. DUTIES

The first quarter will be weak, with shipments seen down by about 30 percent from the previous quarter and profit margins falling to 3-6 percent from 9.9 percent in the last three months of 2011. Shi expects shipments to begin rising sequentially starting in the second quarter.

Suntech will cut down its inventory in the first quarter due to market uncertainties, such as a decision by the United States to slap it with a 2.90 percent duty. Trina Solar, another Chinese solar module make, was levied 4.73 percent.

All other Chinese solar panel producers and exports received a preliminary rate of 3.59 percent.

It's bad luck, 49-year-old Shi said of the U.S. duties.

We are controlling our inventory now. We would rather forgo some opportunities than take any risks, said Shi, who founded Suntech in 2001 after studying about solar power in Australia.

However, he said the biggest uncertainty was in China, where fierce competition among too many players has led to a plunge in solar module prices, even though solar demand will hit 4-5 GW this year, exceeding the government's target of 3 GW.

Despite being the biggest player in China, Suntech is only targeting less than 10 percent of the market, Shi said.

There is irrational pricing in China and it's prompting us to be more cautious in assessing new projects, the China-born Australian said.

Shi said prices of polysilicon - the raw material used to make solar cells - should stabilize at $30 per kg in the long term to be conducive for the entire solar industry.

A frenzy in solar power demand has pushed up prices to around $500 a kg in 2008 before the global financial crisis struck. An oversupply then pushed prices down to around $20.

That explosion phase is gone, Shi said.

(Editing by Paul Tait)

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