Price hikes drive module demand down and make PV giants even more dominant

Blasts at Xinjiang-based polysilicon factories in July have sent ripple effects across the PV supply chain, pushing up prices and driving down module demand in China and abroad. PV InfoLink has revised down its 2020 forecast for module demand from to 43.5 GW to 41 GW in China and from 121.5 GW to 117.1 GW worldwide, taking into account into the price increases for overseas module orders and the possibility that grid-parity PV projects in China might have been postponed until next year to avert the necessity of buying high-priced modules. If the price hikes persist one way or another, module demand in China and worldwide may continue to shrink.

In the wake of the polysilicon factory explosions, very few polysilicon producers were operating as a result of government demand for self-inspection. In turn, wafer makers became concerned with polysilicon shortage; polysilicon makers took advantage of this concern and refrained from selling their products in anticipation of price hikes. Against this backdrop, the trading price for mono-grade polysilicon leapt by 56% to an average of RMB 94/kg in mid-August, whereas that for multi-grade polysilicon surged by 106% to RMB 66/kg in late August.

However, with Xinjiang-based polysilicon producers having reopened since late August and OCI’s Malaysia-based factory and Wacker Chemie AG’s factory running at full capacity, polysilicon shortage is easing up. Thus, polysilicon prices could start to budge as early as October. As such, they may decline to RMB 90/kg for mono-grade polysilicon and RMB 61/kg or multi-grade polysilicon at the end of this year.

Mono-Si wafer prices, after experiencing three consecutive pricing increases by Tier-1 manufacturer Longi, have recently begun to stabilize as shortage of mono-grade polysilicon subsides. As of the late September, G1 wafers stayed at RMB 3.03–3.08/piece and M6 wafers at RMB 3.18–3.23/piece. The stability of mono-Si wafers is also sustained by some Tier-1 wafer makers undergoing maintenance and smaller producers refraining from procuring polysilicon at high prices. At the end of the day, as polysilicon supply is picking up and demand for mono-grade polysilicon is diminishing, mono-Si wafer prices will come down to RMB 2.95/piece for G1 and RMB 3.1/piece for M6 at the end of this year.

Multi-Si wafer prices also remain stable—at RMB 1.55–1.65/piece in late September—with polysilicon prices hovering at high levels and wafer makers piling up polysilicon ahead of China’s National Day. However, as producers balk at raising their utilization amid increasing polysilicon prices and demand for multi products is stable, multi-Si wafer prices may drop to RMB 1.45/piece at the end of this year.

In the cell sector, mono-Si cell makers have become the first across the supply chain to sustain price decrease, particularly because module producers are running at diminished capacity in response to price hikes upstream. So, the price for G1 cell has come down to RMB 0.86–0.87/W as of mid-September from a high of RMB 0.91/W in August. This marked decline was also aggravated by excessive production capacity, growing wafer costs, and falling demand (due to a growing shift to M6 adoption). The G1 cell price is forecast to decline to just below RMB 0.8/W at the end of this year.

Meanwhile, the price for M6 cells has recently gone down along with that for G1 cells, now sitting at RMB 0.92–0.93/W. However, the price for M6 cells will sustain less decrease in Q4—when demand from non-Chinese markets will peak. It will then be trending down slowly to RMB 0.85–0.86/W at the end of this year.

The price for multi-Si cells will sit at RMB 2.6–2.65/piece for a while, considering that multi-Si wafer prices are not going to decline anytime soon, making it hard for multi-Si cell producers to cut prices.

Module producers are the hardest-hit sector by the price hikes. Many Tier-1 makers have been running at a capacity 5%–20% lower than usual in response to continued rising prices across the supply chain. Prices for mono PERC modules are thus struggling to pick up; they stay at RMB 1.58–1.62/W in China and USD 0.2/W and above overseas recently. Still, with utility-scale PV projects in China to be grid-connected within this year, whereas grid-parity projects have been postponed for grid connection, module demand will balance supply in Q4, in which case developers’ downward price pressure will push down the prices to RMB 1.55/W–RMB 1.6/W between October and December. Price increases in PV glass and EVA films make it even more difficult for module makers to generate profits.

 

Strategic focus shift

In face of price increases caused by monopoly, module manufacturers will pursue vertical integration to improve profits through better control over its business. The top five vertically integrated companies also have capacity expansion plans for wafers, cells and modules next year to achieve sustainable development. In particular, since production lines in Southeast Asia are mostly older, Jinko is going to gain GW-scale module capacity in Malaysia and Vietnam, whereas JA Solar will add GW-scale cell and module capacity in Vietnam.

As such, the cell sector will witness a surplus of production capacity, in which case prices will plunge in low seasons and Tier 2 and 3 makers will come even closer to withdrawing from the market. Tier-1 makers, now in the midst of expanding their production capacity to optimize their costs, will in time edge out Tier 2 and 3 makers, making the cell sector increasingly concentrated.