In the midst of the fluctuating global photovoltaic market during 2020, the polysilicon sector managed to reduce on the consumption of polysilicon and implemented a further decrement in the cost of photovoltaic through the optimization on management and technology. According to the analysis of EnergyTrend under TrendForce, the growth in the end demand during 2021 will guarantee the stable elevation in the demand for polysilicon under the uncertain factors amidst the post-pandemic era, and the market will predominantly remain on a balanced supply and demand state. The simultaneous ascension in both the concentration of the polysilicon market and the rate of localization will preserve advantages for polysilicon businesses in areas of low electricity prices, and the development of granular silicon and N-type polysilicon.
Average Price of Mono-Si Dense Material at Over RMB 80/kg under Cost Support
Looking back at the price trends of polysilicon in 2020, the multi polysilicon market had repeatedly hit historical lows during the first half of the year, and the reduction in production induced by the incidents that occurred in the third quarter had exacerbated the prices of polysilicon. Although the release of the overall production capacity in the fourth quarter had slowly lowered the prices of polysilicon compared to late September, the vigorous demand in end installations had resulted in the recovering tendency for the prices of the polysilicon market as of the end of December.
There is a large differentiation in the production cost for the production capacity of polysilicon. As the production capacity of polysilicon completed the westward migration, the domestic layout of the three major polysilicon production base that comprises of Xinjiang, Inner Mongolia, and Sichuan has been constituted, and the arrangement for polysilicon bases in regions of low electricity prices, such as Yunnan and Qinghai, is starting to emerge subsequent to the pandemic. According to the polysilicon cost of various businesses in 2021, the new domestic production capacity for areas of low electricity prices will receive relatively better profit, whereas the cost for second-tier domestic businesses and overseas production is at over RMB 60/kg, which signals a higher cost and a poorer profit.
On the other hand, the time difference between the release of new production capacity for polysilicon and wafers during 2020 and 2021 has facilitated the anticipation regarding rising market prices in the future, whereas the larger degree of advantages in the production capacity from leading businesses has provided stronger bargaining power in the polysilicon market. The multi polysilicon market is expected to experience an overall tightened supply of polysilicon and periodic price fluctuations in 2021, of which mono-Si dense material may fall below RMB 80/kg during off seasons, and fluctuate between RMB 80-90/kg throughout the entire year.
Tight Supply Status Remains Unchanged for the Global Production Capacity of 575,000 Tons
According to the status in photovoltaic development and installations from various major countries/regions, the demand for photovoltaic installation is anticipated to be 145-160GW for 2021, and the downstream demand for wafers is gradually ascending simultaneously. As businesses such as LONGi, CMC, Jinko Solar, and Shangji refine on existing and technically transformed production capacity, the new capacity for mono-Si wafers is expected for a continual release in 2021, and the overall status where the growth in the capacity of wafers triumphs that of polysilicon will persist, whereas factors including the periodic fluctuations introduced by the demand for installations, as well as the rise of polysilicon prices, will diminish the demand for polysilicon.
The new production capacity for polysilicon in 2020-2021 is restricted due to the postponed production expansion under the pandemic. In terms of the progress of production for businesses, the new production capacity of 35,000 tons that East Hope began establishing in the fourth quarter of 2020 is gradually commencing production, and the production capacity for granular silicon by GCL continued climbing in 2020, whereas Tongwei is expected to initiate production for the 40,000-ton capacity during the fourth quarter of 2021, before extensively releasing large capacity in 2022, with no other new capacity throughout 2021. The concentration in the production capacity of the polysilicon industry is progressively centralized in leading polysilicon suppliers, where the capacity for the five leading suppliers will occupy 70.8% of the global ratio in 2021. The advantages in market bargaining for polysilicon businesses provide stronger support for polysilicon prices, and that the output decrement caused by the cyclical overhaul in polysilicon production is likely to carry forward the tight supply status of polysilicon to 2021.
Long-Term Agreements from Downstream Have Captured 80% of Production Capacity of Leading Polysilicon Suppliers
There has been a gap in the supply situations of polysilicon and wafers during 1Q20-3Q20. With the supply gap widening for polysilicon, most wafer suppliers have opted to arrange long-term agreements with polysilicon suppliers in order to ensure a stable supply of the raw material. Approximately 80% of the production capacity of the leading polysilicon suppliers (the top 10) have been secured through long-term agreements. Among the transactions that will take place in 2021, only the deal between Tongwei (seller) and LONGi (buyer) is expected to exceed 100,000 tons in quantity.
More Market Attention Will Be Paid to Process Technologies for Granular Silicon and N-Type Polysilicon
In the production of various types of polysilicon, process technologies related to granular silicon have again come under focus. Compared with the mainstream Siemens process for manufacturing polysilicon, the alternative process for manufacturing granular silicon has less processing steps and therefore saves time. Hence, the process for granular silicon could be the key in raising the purity of polysilicon while reducing its cost.
Due to the specific nature of the product, there is still some room for improvement in the process for granular silicon. For instance, there is a high level of safety risk during production, and this risk contributes to a relatively high hidden cost for the adoption of the process. Also, the actual production cost has to be further optimized.
Currently, the total operational production capacity for granular silicon in China is less than 30,000 tons. The process technology has yet to reach the mass production stage. At the same time, there is much uncertainty about the future of the polysilicon industry. Under the existing production system, granular silicon will not be able to supplant polysilicon that is manufactured with the improved Siemens process in the short term. However, granular silicon has a lot of potential in the long run.
Regarding N-type polysilicon, the demand for this material will pick up as product manufacturers in the downstream push their N-type offerings to the verification and mass production stages. Chinese polysilicon suppliers are initiating projects for setting up more production capacity for N-type polysilicon. They will probably be able to start supply N-type polysilicon in batches to customers by 2022, thereby accelerating the scale-up of the application for this material.
In sum, EnergyTrend believes that the polysilicon market will exhibit the following four major trends in 2021:
1. A slowdown in supply growth: The activation of the new production capacity that will be added in 2021 is expected to mostly occur much later in the year (i.e., 4Q21). The annual global production capacity for polysilicon is forecasted to reach 575,000 tons for 2021. Long-term agreements have already captured 80% of the production capacity of the leading suppliers, and production plants located in areas where electricity is relatively cheap will maintain a high level of capacity utilization rate. Given these developments, the leading suppliers will account for an even greater share of the total production capacity.
2. An increase in sources of demand: The outlook for downstream demand in China is fairly optimistic, while the outlook for downstream demand in overseas markets (outside China) is gradually improving. The annual global demand for PV installation is forecasted around 145-160GW for 2021. The polysilicon market will benefit from the gradual activation of the new production capacity for mono-Si wafers and the market releases of N-type products.
3. A rebound in prices: Price trends of various types of polysilicon will show differentiation in 2021. Prices of mono polysilicon already halted their decline and stabilized at the end of 2020. Afterward, they will show stages of fluctuations in accordance with the changes in the supply/demand relationship. Prices of multi polysilicon will be dragged down by low demand for multi-Si products in 2021, and the price of mono-Si dense material could fall below RMB 80/kg in the off-season. On the other hand, prices of mono polysilicon will be fluctuating within the range of RMB 80-90/kg.
4. Innovations in the development of technological roadmaps: The process technology for manufacturing granular silicon is starting to enter the mass production stage, but the actual production cost still needs optimization. Furthermore, customers in the downstream will need time to verify the quality of products made with this process technology. Nevertheless, granular silicon has a lot of potential in the long run.