Jinko Solar announced on September 10 that it and its subsidiaries have inked a polysilicon procurement agreement with Tongwei’s subsidiaries. Under this deal, Jinko will buy around 382,800 tons of polysilicon products. This news was first reported by other Chinese renewable energy news platforms.
Silicon China, which is a branch of the China Nonferrous Metal Industry Association, reported on August 31 that the average transaction price of monocrystalline dense material in China reached RMB 305,100 per ton (including tax). Using this price as a reference, the latest deal between Jinko and Tongwei is estimated to value around RMB 103.356 billion (including tax). Note that this figure does not constitute an actual price commitment. The value of the contract will be determined by the finalized transaction price.
Just half-a-month ago on August 26, Jinko and its subsidiaries also signed a polysilicon procurement agreement with Xinte Energy. Between 2023 and 2030, Xinte will supply Jinko with 336,000 tons of raw polysilicon for RMB 102.077 billion.
Hence, Jinko has spent more than RMB 200 billion on polysilicon within a span of less than a month. According to the reporting by Chinese news platforms, Jinko in its presentation for the first half of this year stated that fluctuations in prices of raw materials such as polysilicon are having a significant effect on its profitability. Therefore, it has to be well prepared in the aspect of inventory management in order to prevent sharp turns in material prices from causing production cost overruns or a sharp decline in prices of its own products. Such scenarios would further squeeze the room for profit.
Commenting on the latest deal with Tongwei, Jinko said this transaction supports the long-term growth of the company. The procurement is made through a long-term supply contract. Therefore, Jinko has locked in the total procurement quantity but will be able to negotiate the price and shipment quantity on a monthly basis. Jinko also pointed out that it is necessary to further increase and stabilize its polysilicon supply. Additionally, this transaction will not affect Jinko’s financial performance for the current period. Likewise, Jinko’s main business operations will not become dependent on Tongwei as the contract is being implemented.