On November 1st, the Solar-Grade Polysilicon latest transaction prices, as reported by the Silicon Branch of the China Nonferrous Metals Industry Association, witnessed a “snowball effect.” The most significant drop was seen in the N-type material, which plummeted by nearly 20% compared to two weeks ago, while the prices of the other three silicon materials also fell below 70,000 yuan.
It’s worth noting that at the beginning of this year, the prices for various types of polysilicon were hovering around 210,000 yuan. “Silicon material prices may see a noticeable decline after November,” predicted an industry veteran in the photovoltaic sector.
Against this backdrop, major silicon material giants like Tongwei and Daqo New Energy have swiftly taken “stop-loss” measures, including terminating further financing for new capacity construction and delaying the start of new production lines.
The downward pressure starting at the upstream is likely to transmit to various stages of the industry chain, including silicon wafers, solar cells, and even module production. Recently, the module sector has already entered the “one-yuan” era, indicating that the solar industry is gradually experiencing an industry-wide “price showdown.”
Nearly 20% Drop in Two Weeks
According to the latest data released by the Silicon Branch, this week, prices for N-type and the other three types of silicon materials all experienced significant declines. Specifically, the transaction price for multi-crystalline silicon N-type material ranged from 70,000 to 80,000 yuan per ton, with an average transaction price of 75,200 yuan per ton, marking a 19.23% decrease compared to prices two weeks ago.
The other three types of silicon materials have all fallen below 70,000 yuan. Specifically, the average transaction prices for single-crystal recrystallized material and single-crystal high-density material were 69,700 yuan per ton and 67,900 yuan per ton, respectively, which represents a 15.10% and 15.23% drop compared to two weeks ago. The average transaction price for single-crystal crucible material was 65,000 yuan per ton, which reflects a 16.02% decrease compared to two weeks ago.
In fact, at the beginning of February this year, the prices for single-crystal recrystallized material and high-density material were still above 210,000 yuan per ton. By June, the prices had already dropped below 70,000 yuan. However, in the third quarter of this year, silicon material prices hit rock bottom, experiencing a 12-week consecutive increase at one point, with N-type material reaching an average transaction price of 93,300 yuan per ton. But in mid-October, silicon materials began a new round of price reductions.
On October 27th, the Silicon Branch made the rare decision to suspend its weekly release of multi-crystalline silicon prices. The explanation given was that although prices had been on a downward trend, there were disputes between buyers and sellers over specific transaction prices, and there were essentially no new signed orders.
“Downstream silicon wafer prices have recently approached the cost line for some manufacturers, and the downstream urgently hopes for lower silicon material prices. However, some silicon material manufacturers still had a mindset of maintaining stable prices,” said the aforementioned industry expert.
According to WIND statistics, this week’s average weekly price for multi-crystalline silicon wafers (156mm × 156mm) fell by 1.89%, reaching 0.156 US dollars per wafer, marking a new low since January 2021.
However, in the market’s view, the significant drop in prices is mainly due to the massive increase in multi-crystalline silicon material production capacity entering the market this year. According to the Silicon Branch, the domestic production of multi-crystalline silicon reached 1.0099 million tons from January to September, representing an 87.95% year-on-year increase. The domestic supply of multi-crystalline silicon is in a rapid growth phase.
According to publicly available information, Tongwei Corporation plans to have a production capacity of 800,000 to 1 million tons. LONGi Green Energy Technology plans for 1 million tons in the future. TBEA Co., Ltd. plans for 400,000 tons, Daqo New Energy plans for 330,000 tons by 2024, and Oriental Hope disclosed an investment plan with a capacity of 460,000 tons.
Jibang Consulting’s New Energy Research Center predicts that by the end of 2023, the total production capacity of multi-crystalline silicon will reach 2.14 million tons, an increase of 82.9% year-on-year. The annual output of silicon materials in 2023 will be approximately 1.34 million tons, with a year-on-year growth rate of up to 56.29%, which can support an output of more than 500 GW of modules, significantly exceeding the 330-350 GW installation forecast for 2023.
Price Approaching the Cost Line
“Silicon material has a relatively high startup cost. As long as we can cover the cash cost, we must ensure that the production continues. Therefore, unless it’s absolutely necessary, upstream manufacturers generally won’t halt production lines,” disclosed the aforementioned individual. This factor will further exacerbate capacity saturation, and with silicon material capacity saturation, prices will continue to decline.
However, some top players had already foreseen this and taken certain measures to “stop-loss.”
On the evening of October 31st, Daqo New Energy announced the delay of the start date for its Baotou Phase II annual production of 100,000 tons of high-purity polysilicon project to the second quarter of 2024.
As for the reason for the delay, Daqo cited, “Due to objective factors such as market conditions, supply and demand relationships, and the actual progress of the company’s construction, the overall implementation schedule of this project has slowed down, resulting in a delay compared to the original plan.”
Just a month before that, Tongwei Corporation announced the termination of its 16 billion yuan equity placement plan, which was originally intended for the 200,000-ton high-purity monocrystalline silicon project and the 200,000-ton/year high-purity monocrystalline silicon green energy project (Phase II) in Yunnan Tongwei Hydropower Silicon Material.
At the same time, silicon wafer giant TCL Huizhou sold 27% of its equity in Xinjiang Gongsen Energy Technology Co., Ltd., which held multiple monocrystalline silicon assets, for a low price of 696.6 million yuan. The rushed sale of the equity stake is believed to be driven partly by pessimistic expectations for the upstream monocrystalline silicon market, leading to capacity reduction measures.
Moreover, in addition to stopping and delaying new production capacity, silicon material giants, including Tongwei and Daqo New Energy, are actively moving towards vertical integration. For instance, Tongwei, on the day of its semi-annual report release, announced two hundred billion-level expansion plans, with the construction of 16GW crystal rod, slicing, and cell production projects in Leshan City’s Emeishan City and Wutong Bridge District, respectively.
However, in the view of the aforementioned expert, “If everyone ensures sales through vertical integration, it will lead to even more excess capacity throughout the entire industry chain.”
The industry insider revealed to the reporter that it is expected within the industry that silicon material prices may see a significant decline after November. “If silicon material prices fall below 50,000 yuan, it will trigger a chain reaction, with prices in various stages breaking through the lower limit. It’s worth noting that Tongwei, which benefits from economies of scale, had a production cost of less than 40,000 yuan per ton in the first half of the year.
Therefore, in the industry’s view, as silicon material prices approach the cost line, it will further reshuffle the industry. A new round of capacity clearance may be just around the corner.
Industry-Wide “Price Showdown”
It’s worth mentioning that the price “snowball” in the photovoltaic industry chain is not limited to upstream silicon materials and silicon wafers, but even the prices at the end of the industry chain, in the module segment, have experienced a sharp decline.
Recently, the opening results of the third batch of centralized procurement for 2023 by the central state-owned enterprise China Huaneng Group showed that the lowest bidding price for double-sided N-type modules dropped to 1.08 yuan per watt, while the lowest bidding price for P-type single/double-sided modules was 0.9933 yuan per watt.
The appearance of these prices not only signals the era of “one-yuan” module prices but also signifies that the entire photovoltaic industry chain is entering a comprehensive “price showdown” phase.
This trend can also be seen in the latest third-quarter reports of integrated listed companies. In the third quarter, Tongwei Corporation saw a significant drop in net profit, with an operating income of approximately 37.352 billion yuan, a 10.52% year-on-year decrease. The corresponding net profit attributable to the parent company was approximately 3.031 billion yuan, a steep 68.11% decline. Tongwei Corporation mentioned that the significant decline in net profit in the third quarter was primarily due to the year-on-year decline in the prices of the photovoltaic industry chain.
Silicon material and modules are the main sources of income for Tongwei Corporation. In the first three quarters of this year, the company’s sales of high-purity monocrystalline silicon reached approximately 280,000 tons. In terms of modules, in the first three quarters of this year, Tongwei Corporation shipped nearly 19GW of modules, a year-on-year increase of 645%. However, it’s clear that the growth in shipments had little effect on profit enhancement.
In addition, in the first three quarters of 2023, Daqo New Energy achieved operating revenue of 12.878 billion yuan, a year-on-year decrease of 47.81%, and a net profit attributable to the parent company of 5.115 billion yuan, a 66.09% decrease. In the third quarter alone, the company’s operating revenue was 3.553 billion yuan, a 57.38% year-on-year decrease, and the net profit attributable to the parent company was 689 million yuan, an 87.61% decrease.
In the industry’s view, as we enter the final quarter of the year, the performance of various segments of the photovoltaic industry chain may be affected by several factors, including changes in policy environment and fluctuations in international market demand. “For example, in the module segment, domestic demand will decrease in December, and the demand during the Spring Festival in January will also be affected, so prices may be even lower in the later period,” predicted the industry insider mentioned earlier.