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Unprecedented Supply Chain Pressure: China’s Key Silicon Industry Nears Cost Equilibrium, Halts Price Announcements

The Silicon Branch of the China Nonferrous Metals Industry Association has exceptionally suspended its weekly polycrystalline silicon price release. They stated that due to insufficient new transaction information obtained this week, although the price shows a downward trend, there is still disagreement on the specific transaction prices. With virtually no new orders and last week’s quoted transaction prices no longer reflecting the actual market situation, the announcement of polycrystalline silicon prices will be halted this week, resuming only when actual transactions are recorded.

Silicon price quotation halted again

The last time the Silicon Branch paused the release of polycrystalline silicon quotations was in September of the previous year. At that time, the price of polycrystalline silicon exceeded 300,000 yuan/ton, and there was much skepticism about the upstream supply chain. In contrast, this week’s suspension appears to be a short-term action and is not expected to persist.

According to the Silicon Branch, in the past week, only a few transactions were made among silicon companies. None of the top five industry leaders signed new orders. Among the second and third-tier companies, some have slightly adjusted prices, with adjustments hovering around 10 yuan/kg.

Towards the end and beginning of each month, companies generally concentrate their order signings. By the end of October, most previous orders from companies will be completed, and negotiations for November orders have begun this week. According to price negotiations between silicon producers and feedback from downstream companies, it is anticipated that the new transaction price for N-type silicon from top five factories will balance around 77,000-80,000 yuan/ton, while P-type recycled silicon will balance at 70,000-73,000 yuan/ton. Other manufacturers might see further price reductions.

Predicted transaction prices match the aforementioned adjustments. Last week, the average transaction price of N-type silicon was 93,100 yuan/ton, while the dense single-crystal silicon averaged 80,100 yuan/ton. “Driven by the significant decline in the price acceptance capacity of downstream companies, a decrease in silicon transaction prices is inevitable. This is further influenced by the general reduction in the production rate of silicon wafers and cells, leading to a rapid decline in demand for silicon.”

The Silicon Branch believes that even if silicon prices continue to fall, the demand they can stimulate remains limited and will further transmit a signal of price reduction to downstream enterprises. Therefore, some silicon manufacturers still hope to stabilize prices, expecting the stock of silicon wafers and battery cells to be consumed quickly, with market demand returning to stability. Furthermore, due to recent difficulties in signing contracts, the stockpile in silicon enterprises continues to accumulate.

“Because there are no transactions, we are only delivering based on existing orders. Negotiations for next month are still ongoing,” Lu Jinbiao, Deputy Director of the Expert Committee of the Silicon Branch, told reporters in an interview. He believes that top silicon companies can control costs within 60,000 yuan/ton and remain profitable at current price levels. “In the third quarter, leading polycrystalline silicon companies could still achieve a gross margin of 30%.”

Pressure on profits along the industrial chain

Regarding this week’s silicon segment, the Silicon Branch did not provide a detailed analysis. However, according to another consulting agency, InfoLink Consulting, the average transaction price of dense polycrystalline silicon this week was 82,000 yuan/ton, a weekly decrease of 5.7%. Nevertheless, the agency pointed out that by Wednesday of this week, the buying and selling parties of silicon are still in a standoff, with hardly any new orders being concluded.

It’s noteworthy that the price quotations of silicon wafers by InfoLink and the Silicon Branch are very close. InfoLink pointed out that the silicon wafer segment is continuously affected by inventory accumulation. Manufacturers are trying all means to ensure shipments, and a pessimistic atmosphere pervades the market.

A major concern is that the Silicon Branch has stated that the current price of silicon wafers has reached the breakeven point for most manufacturers, with some even facing losses. InfoLink believes that predictions about prices among silicon wafer manufacturers vary. Second and third-tier manufacturers are focused on destocking, clearing inventory at low prices, while some manufacturers are maintaining relatively firm prices to control profit levels and anticipate subsequent procurement needs.

InfoLink also mentioned that the biggest risk for silicon wafer manufacturers will be the production planning of battery manufacturers. As battery manufacturers maintain full operation, silicon wafer stockpiles are inevitably building up, and overall production for the silicon wafer segment has been reduced to 80% or less. If subsequent battery manufacturers reduce production to address rapidly falling prices, the reduction in production by silicon wafer manufacturers may further expand.

Recently, Tongwei Co., Ltd. and TCL Environment, covering the upstream photovoltaic sector, released their third-quarter reports. In them, Tongwei’s third-quarter revenue and net profit were 373.5 billion yuan and 30.3 billion yuan, respectively, down 10.5% and 68.1% year-on-year. Meanwhile, TCL Environment’s third-quarter revenue and net profit were 137.6 billion yuan and 16.5 billion yuan, respectively, both with a decline exceeding 20%.

The impact of price fluctuations on leading enterprises in the industry chain is evident. In fact, the effect of price reductions on the industry chain is twofold: it impacts the scale of revenue and affects the level of gross margin. Combined, the effect of price reductions is magnified on company profits.

Emphasizing quality in module quotations

On the downstream side of the industry chain, according to InfoLink data, the prices of mainstream-sized batteries plummeted this week. P-type M10 and G12-sized battery mainstream transaction prices were between 0.5-0.53 yuan/watt and 0.52-0.53 yuan/watt, respectively, with a drop ranging from 15%-18%. As battery manufacturers are also considering production cuts, the overall price trend will depend on subsequent manufacturer productivity changes.

In the module segment, although recent tenders have seen prices below 1 yuan, this week’s decline was only 1.7%, with an average of 1.13-1.14 yuan/watt. However, InfoLink also mentioned, “Whether the price can stabilize still depends on module production and inventory levels. If manufacturers increase production due to the influx of new capacity, further price reductions might occur, potentially dropping the average price of PERC modules below 1.1 yuan, with lower prices even breaking 1 yuan.”

“When the price of polycrystalline silicon drops to within 100,000 yuan/ton, and the module price is within 1.5 yuan/W, it’s quite normal,” Lu Jinbiao analyzed. “At the end of June this year, silicon touched a low point of 60,000 yuan/ton, with module prices still above 1.3 yuan/W, and the downstream was still profitable.”

He pointed out that in the third quarter, the price of polycrystalline silicon rebounded to 80,000-90,000 yuan/ton, but modules continued to decline, breaking the 1 yuan/W mark. He believes this is due to a severe oversupply at the module end. “Overall, the price of modules is not being determined based on the return on investment in power stations,” he said.

Lu Jinbiao emphasized a significant issue: the imbalanced development between distributed and centralized markets. “Currently, we need to return to the normal demand for step-by-step applications, reduce the weight of prices in large-scale tenders, and increase the weight of enterprise brands and product reliability. The current price level of high-efficiency modules is no longer a sensitive indicator in the investment of photovoltaic power stations.” He suggested that distributed photovoltaic applications can still be improved, and there is still much potential in some areas concerning grid connection permits and scenario expansion.

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