Global PV Sector Surges in February: Strong Performance, Rising Prices, and March Outlook
The photovoltaic (PV) sector witnessed a remarkable performance in February, with the photovoltaic manufacturing (Changjiang) index surging by 11.32%, outperforming the Wind All-A index by 1.65%. This strong showing was driven by both the booming overall market, as evidenced by the 9.67% increase in the Wind All-A index, and the robust volume and price growth within the PV industry itself.
Scheduled production for March has locked in at over 50GW, pointing to a sustained upward trend in Q2. Furthermore, the domestic PV installation growth is well-supported by strong policy tailwinds for development, surging energy consumption pushing up the upper limit of wind and solar installations, state-enforced on-time construction and commissioning of large-scale PV bases, and enhanced grid capacity accommodating more distributed PV access. Price hikes are also taking place across the industry chain, with component manufacturers planning to raise prices by 2-4 cents RMB/W, battery prices having increased by 1 cent RMB/W, and price increases of particles being transmitted to encapsulants. Looking ahead to March, the PV sector is expected to maintain its upward momentum, supported by strong fundamentals and rising volume and prices.
The photovoltaic (PV) industry is poised for significant growth in 2024, with several key factors driving this positive outlook.
Policy Support: The Chinese government's continued providing a clear policy direction for the PV industry in 2024. Favorable policies such as those related to grid connection, and green power certificates further incentivize PV development.
Strong Domestic Demand: Rising energy consumption and ambitious non-fossil energy targets create ample growth space for PV in China. Government outlines a clear roadmap for PV development, with supportive policies and regulations in place.
Growing International Markets: Emerging markets present significant growth potential, driven by policy support and economic development. The Belt and Road Initiative opens up new opportunities for Chinese PV companies in overseas markets.
Technological Advancement and Cost Reduction: Ongoing technological improvements enhance the efficiency and reliability of PV systems. Continuous cost reduction makes PV more competitive and accessible to a wider range of applications.
Investment Opportunities: The strong growth prospects of the PV industry in 2024 present attractive investment opportunities for market participants.
With multiple factors driving demand and technological advancements enhancing efficiency, the PV industry is poised for a strong year in 2024. This bodes well for both the industry and investors, signaling a promising future for solar energy.
Chart 1: Third-party organizations are generally optimistic about the china photovoltaic installation in 2024, Unit: GW
Chart 2: In 2023, China's newly added PV installations reached 216.3 GW, a yoy increase of 147%, Unit: GW
Supply: Production of Cell and module Recovers, Further Accelerating Capacity Clearance
February PV Industry Chain Production Schedule:
Production and Shipment: The production of polysilicon and silicon wafers increased in February, and the supply of components will be sufficient in March.
The production of cells and modules increased significantly in March, driven by the recovery of downstream demand.
Prices: Polysilicon prices remained high in February, but are expected to stabilize in March.
The prices of silicon wafers and cells are under pressure due to oversupply.
Module prices are expected to stabilize or rise slightly in March.
Profit Pressure and Financing Difficulties Accelerate Industry Supply Clearance:
Since November last year, most of the existing PERC battery capacity has been losing money.
The TOPCon capacity of integrated component companies continued to ramp up in the fourth quarter of last year, and the proportion of PERC in orders decreased rapidly, leading to a huge decline in the external demand for PERC batteries. Most companies are starting to consider phasing-out or upgrading their existing PERC capacity, and the scale of impairment losses has increased significantly in the fourth quarter. This is a significant development for the photovoltaic industry, as it indicates that the transition to new technologies is accelerating.
PERC is a type of photovoltaic cell technology that has been the dominant technology in the market for several years. However, it is now being replaced by newer technologies, such as TOPCon and HJT, which are more efficient and cost-effective. The accelerated exit of old PERC capacity is likely to have a number of effects on the industry, including: 1)Lower prices: As the supply of PERC products decreases, prices are likely to fall. 2)Increased competition: As companies compete to sell their new products, competition is likely to increase.3) Consolidation: As smaller companies struggle to survive, the industry is likely to consolidate.
The long-term impact of the accelerated exit of old PERC capacity on the industry remains to be seen.
In addition to the increasing pressure on profitability, the continuous increase in financing pressure is also the main reason for the accelerated clearing of supply in the PV industry. This is mainly reflected in the three aspects of the capital market, local government, and banks. Specifically:
1) Increased resistance to refinancing in the capital market. In August 2023, the CSRC issued the "Announcement on Optimizing the Regulatory Arrangements for Refinancing", which clarified the overall requirements for refinancing supervision. In November, the Shanghai and Shenzhen Stock Exchanges issued specific measures to optimize refinancing, focusing on further strengthening refinancing supervision. The above matters have made it much more difficult for photovoltaic companies to refinance in 2H 2023. Recently, companies that have canceled or reduced their refinancing plans include Guodian Technology, Tongwei Co., Ltd., King Kong Photovoltaic, Hongyuan Greenery, and Gudewei. We believe that under the current market environment, some other companies that plan to implement fixed increase or convertible bonds also exist The possibility of cancellation or reduction of scale has not yet been disclosed.
2) The support of local governments has declined. In 2023, affected by the macro-economic environment, the financial support of local governments for new energy projects has also weakened. On November 7, 2023, at the Third Series of Press Conferences on Ten Emerging Industries held by the Anhui Provincial Government Information Office, Wang Dinging, Deputy Director of the Anhui Provincial Department of Economy and Information Technology, answered a reporter's question about the risk of overcapacity in the photovoltaic industry. Said: "The current overcapacity is more the ‘structural overcapacity' of old and obsolete production capacity...In order to prevent overcapacity, we have studied and proposed targeted measures such as preventing the repeated construction of low-end production capacity, preventing regional homogeneous competition, and improving the stability of the industrial chain and supply chain." On January 29, 2024, Boqian New Materials announced that it had received the "Notice of Return of Rewards". The notice stated that the two government subsidies that the company received in March 2023 and June 2023 did not comply with relevant policies and needed to be returned. The total amount of the refund was 24 million yuan.
3) Bank loan policies have tightened. At the press conference of the State Council Information Office on January 24, 2024, Yi Gang, Governor of the People's Bank of China, said that the People's Bank of China will continue to optimize the allocation of financial resources. Guide financial institutions to scientifically assess risks and restrict financing to industries with overcapacity. On March 6, 2024, Yi Gang, Governor of the People's Bank of China, reiterated at the press conference of the two sessions that he would restrict financing to industries with overcapacity. In this context, we believe that banks will be more cautious in lending to photovoltaic companies, and it is not ruled out that there will be cases of loan withdrawal and loan breaks in the future.