2021 marks the first year of China’s initiation of carbon neutrality, where the concepts of emission peak and carbon neutrality are incorporated into the government work report for the first time, while the country and each province have proposed a significant amount of policies pertaining to the installation planning, energy consumption, and electricity subsidy of the PV industry. The constant improvement in the PV application market has generated a flourishing growth in end demand. As observed by EnergyTrend, the supply and demand of polysilicon remained in a tight balance during the first half of 2021, while the demand and the price of the product continued to rise. The overall supply of multi polysilicon is restricted in the second half of 2021, with a relatively faster growth in demand, and Q3 prices are expected to decrease owing to the pressure coming from the downstream sector within the short term. However, the prices may return to the slope of inflation during Q4 under a continuously enlarging void between the supply and demand of polysilicon.
Total Supply of Multi Polysilicon at 281K Tons in 2021H1 under a Tight Balance between Supply and Demand
According to the analysis of the China Nonferrous Metals Industry Association (CNIA), the total domestic supply of multi polysilicon was at about 281K tons in the first half of 2021, which is a YoY increase of more than 30%. Apart from a minor fluctuation in the production volume due to the fewer days in February and the overhaul period for two major polysilicon businesses during May, the remaining months saw a constant increase in production. In January, the domestic production of multi polysilicon arrived at approximately 36.4K tons, which is a YoY increase of 6.7%, and had primarily come from the capacity released by businesses such as Yongxiang, Ordos, and Dong Li after overhaul. In March, businesses such as Yongxiang and GCL had slightly increased their production in order to ensure optimized operation from a sufficient market supply, which resulted in a total volume of roughly 37.5K tons. In April, GCL started to release new capacity, while Daqo New Energy began production under the optimized capacity. Furthermore, businesses such as East Hope and Youser began releasing their scheduled capacity, and actuated the production volume to 39.4K tons. In June, the production volume of multi polysilicon arrived at the highest level of 40.1K tons after a gradual resumption in production from businesses who were previously in the midst of overhaul. The production volume is expected to deplete during Q3 as businesses, including Daqo New Energy and OCI, enter the overhaul procedure.
Source: CNIA
The demand and supply of polysilicon sat at about 298K tons and 281K tons respectively judging by the forecasted production volume of wafers during the first half of 2021, which indicates a predominantly tight balance between supply and demand. The advance and excessive release of wafer capacity has generated a surge in polysilicon demand, and polysilicon businesses were essentially operating under a full load status in the first half of the year, where Yongxiang, GCL, Xinte Energy, and Daqo New Energy had ascended to an operating rate of 106% in partial months, with other businesses of below 50K tons in capacity reaching an average operating rate of 111% during partial months.
Tongwei and Daqo New Energy are expected to produce a respective volume of multi polysilicon at 75K tons and 35K tons that will further elevate the domestic production volume, though the relatively prolonged duration required for the increment of capacity will lead to a restricted increase in the overall supply of multi polysilicon within the year. Looking at the progress of production expansion for downstream polysilicon businesses, the amplified volume for both Q3 and Q4 is above 50GW, and the demand for polysilicon will only continue to expand alongside the installation rush from the downstream market as the end of the year approaches.
Expansion in Polysilicon Production for 2021
Source: EnergyTrend
Multi Polysilicon Continue to Rise in Prices and May Reduce Within the Short Term
Polysilicon and wafer businesses are constantly expanding their capacity based on the prospective anticipation on new PV installations, though the expansion of the polysilicon sector requires a longer period of time over that of the wafer sector, and more businesses are signing long-term orders to ensure the supply of polysilicon, which resulted in more than 90% of the polysilicon being occupied by long-term orders in 2021. This particular phenomenon fully reflects the tension in the provision of polysilicon, and has exacerbated the excess demand status of the product during the first half of the year. As indicated by the statistics of EnergyTrend, the average price of mono polysilicon has risen from RMB 86/kg during early 2021 to RMB 210/kg right now, equaling an increase of 139.32%.
Source: EnergyTrend
The incessant inflation of multi polysilicon in June had prompted related departments to participate in the coordination for the operation of the polysilicon market. Simultaneously, multiple midstream and downstream businesses have successively lowered their operating rate and boycotted the continuous inflation of polysilicon, which finally suspended the inflation trend of mono polysilicon and stabilized the product at a high price level.
Downstream pressure has progressively emitted upward to the wafer sector as cell and module businesses continue to lower the demand. With the polysilicon and wafer sectors stuck in a bargaining, polysilicon prices may reduce by a restricted degree under insufficient downstream demand. An increasing number of businesses that are planning to enter overhaul will lower the supply of polysilicon to a certain extent, whereas the new wafer capacity and the installation rush from the downstream market as the end of the year draws near, will also provide support for polysilicon prices in second half of 2021. Q4 prices are expected to climb back up.
Complementary Granular Silicon and Modified Siemens Process to Produce 30K Tons at Year’s End
GCL has recently initiated the production of its demonstrative granular silicon application in Xuzhou, symbolizing another step towards the mass production of granular silicon. GCL is currently capable of a granular silicon capacity of 10K tons in Xuzhou, and is expected to elevate the figure to roughly 30K at the end of the year, with constant expansion planned in the future to fulfill the increasing demand. GCL has also planned to produce 100K tons of granular silicon in Leshan, for which output is estimated in early 2022. In addition, the R&D and production project for 300K tons of granular silicon with Shangji will derive a capacity of 60K during the first phase at Baotou, and is currently in arrangement with the local government.
GCL’s extensive investment in granular silicon fully demonstrates the vast market prospect of the particular product. Possessing distinctive advantages in cost, quality and applications, granular silicon is capable of low energy consumption, low cost, and continuity, which makes up for the poorer continuous production capability of the Siemens process. Granular silicon is mostly used as a mono compound feeding for the production segment of polysilicon. With a sizeable adoption of granular silicon, the product will complement with the modified Siemens process by constantly facilitating an increase in the capacity of polysilicon and mitigating the imbalance status between supply and demand.
On the whole, EnergyTrend believes that the following four major trends will be seen in the polysilicon market during the second half of 2021:
1. A restricted increase in supply. According to the planning, partial capacity for polysilicon expansion will gradually release in the second half of 2021, and the granular silicon capacity of GCL will also be released at the same time that will further enhance the domestic provision of multi polysilicon. However, the relatively longer duration required for the increment of capacity will lead to a restricted increase in the supply of polysilicon.
2. Growth in demand. An installation rush may emerge from the downstream market under favorable policies with the end of the year approaching, which further actuates growth in cell and module demand that will ascend to the polysilicon and wafer sectors. On the other hand, the continuous magnification of wafer capacity has proliferated the demand for polysilicon.
3. Multi polysilicon prices may reduce by a restricted degree in Q3 due to downstream pressure, and may return to the slope of inflation during Q4 from a continuously widening void between the supply and demand of polysilicon. Wafer businesses have started to adjust their operating rate under the pressure coming from the downstream sector in the short term, and polysilicon prices may deplete by a constrained degree in Q3 under insufficient demand. Generally speaking, polysilicon capacity will have an insignificant increase in the second half of the year, where the installation rush from the downstream market as the end of the year approaches, as well as the continuous release of new wafer capacity, will further expand the void between supply and demand of polysilicon, and provide a robust support for polysilicon prices that may trigger a rebound during Q4.
4. Vast market prospect for granular silicon. Known for its advantages in low energy consumption, low cost, and continuity, granular silicon will mutually complement with the modified Siemens process to further expand the capacity for polysilicon.