Until the third quarter of 2021, prices of the whole supply chain of the photovoltaic industry have continuously raise. It is driven by the shortage of polysilicon, considering that polysilicon is the fundamental component of photovoltaic. The whole industrial chain has set off a wave of price rises. Eventually, the price of PV is beyond the willingness to buy of power station developers. In other words, demand has continuously decreased since the prices have remained high. Compared with the depressed installed market, does photovoltaic manufacturing make a big money? It is obviously not the case. This unprecedented wave of price increases has changed the profits allocation, and the profitability of enterprises has also differentiated according to their business layout.
Rain after a long drought
It is no surprise that polysilicon vendors make the most money. Since this year, polysilicon has become the most scarce resource. According to the data of China Nonferrous Metals Industry Association (CNIA) polysilicon Branch, the average price of polysilicon rose from 87.2 yuan per kg in January to 212.4 yuan per kg in June, the largest jump of 143.58 % in 6 months.
According to semi-annual financial reports of the four top polysilicon vendors, they have all generated the highest profits in history.
Taking Tongwei Solar, the polysilicon material owner, as an example, the company’s polysilicon was fully produced and all sold, in the first half of the year. The capacity utilization rate was 126.5 %, and the average gross margin was 69.39 %. It was only 27.7 % in the same period last year. Much of this increase has been absorbed by vendors of solar wafers, cells, and modules.
The polysilicon price continues to increase due to the large capacity gap between polysilicon and wafers.
The current photovoltaic industry chain has a unique capacity structure. The terminal construction needs to match polysilicon production capacity. While capacities of wafer, cells and modules have larger production capacity, wafer producing the highest capacity. This year, there are 58 tons of polysilicon output and it is matched with the 200GW installation demand. In other words, there are no shortcomings. However, if compared to polysilicon wafers with a production capacity of more than 300 GW, the capacity of polysilicon is in short. This huge difference in capacity between polysilicon and wafers is pushing up the price of polysilicon.
Why dose the capacity of polysilicon have great difference with the wafer?
Unlike the other three links，polysilicon industry is a chemical line with higher standard in investment, technology and safety supervision, which means it has the highest threshold. In addition, polysilicon project takes more time to put into operation and the output elasticity is small. Before this positive cycle, enterprises of polysilicon have low profit and even loss for a long time, nobody making inquiry.
Although the price of polysilicon has been a quotation of rise occurrence this year, there is no new player. The old polysilicon companies are still the main force of the capacity expansion. The scale of polysilicon expansion is smaller than that of the other links.
However, the technological differences between mono and multi wafers bring super profit of several years from 2006. Moreover, shorter construction period, lower admittance threshold and the motivation of carbon peak and neutrality, all of these hold great attraction for old and new enterprises who is willing to invest tens of billions in the capacity expansion.
Insiders all focus on the polysilicon price in next few months. It is anticipated that it is difficult to rise or decrease, and the price would maintain the high level concussion quotation.
There is no cause to reduce price at the end of this year. The demand of polysilicon would be exceeding supply for the reason that the busy season(Q4) is coming, new capacity of wafers releases continuity while nearly no new capacity of polysilicon. It is limited for the price to rise though the polysilicon is not enough.
When would the price of polysilicon return to normal?
With the release of new polysilicon capacity, it is benefit of alleviation of polysilicon supply next year, especially H2, thus the price would return to normal to 100,000 ~ 150,000 RMB MT.
Now polysilicon link is the only link without capacity surplus in the whole solar industry. Those companies having their reward after sufferings are overexcited in this cycle.
Almost all domestic polysilicon enterprises have their capacity expansion plan for the rise tendency of price. Generally speaking, it takes nearly 18 months to put into operation for polysilicon project. Because of long construction time, small output elasticity and high cost of operation and shutdown, once the terminals begin adjustment, polysilicon businesses will be passive.
According to the statistics of Silicon Association about main companies’plans, it is estimated that domestic polysilicon capacity would be 720000 MT each year while the demand would be about 700000MT at the end of 2022. The supply is a little more than demand. In the next 2 ~ 3 years, new capacity will continually release.
Lv Jinbiao, the vice chairman of Silicon Association expert committee, said, “The excess attention on every solar industry link is an important unhealthy signal. Haphazard expansion will cause harmful development about the industry and polysilicon enterprises. Capacity should be expanded matching with the terminal demand but not the demand of manufacturing terminal.”
Translated by EnergyTrend