Silicon material will become the largest gray rhino in the photovoltaic industry

Silicon material will become the largest gray rhino in the photovoltaic industry in 2021. For downstream companies, ensuring the supply of "strategic materials" by locking orders and not locking prices is already related to the competition for photovoltaic market share this year or even the next few years.

In 2021, the "panic buying" of photovoltaic materials is continuing. This time, the former competitor came to the signing desk.

Following the large order in the photovoltaic glass field, which is one of the "Gemini" of photovoltaic material price increase, in January, the polysilicon material field has recently reappeared a major contract. On the evening of February 2, GCL-Poly Energy, a leading polysilicon material company, announced the signing of silicon material supply agreements with Longji and Zhonghuan. Its subsidiary Jiangsu Zhongneng Silicon Industry will sell no less than 91,400 tons and 35 10,000 tons of polysilicon materials.

Among them, the supply cycle with Longji shares is from March 2021 to December 2023, and the supply cycle with Zhonghuan shares is from January 2022 to December 2026. According to the current market price, the estimated combined value of the two contracts is close to 40 billion yuan. It is worth mentioning that, according to the reporter's understanding, in the future supply, GCL-Poly Energy will increase the supply of granular silicon.

Under the influence of the carbon neutral target and the "14th Five-Year Plan", the prosperity of the domestic new energy industry continues to rise, and market demand is expected to increase substantially. However, in the photovoltaic material sector, due to the limited supply of production capacity, the supply and demand relationship of polysilicon materials, photovoltaic glass and other material-based products is tight, and prices are rising. In 2020, leading photovoltaic companies have increased their procurement of photovoltaic materials, and contracts with tens of billions of orders have appeared frequently. The reporter's statistics found that only at the A-share level, the total amount of purchase orders for photovoltaic materials announced last year reached 109.484 billion yuan. It is worth mentioning that the purchase contract value of polysilicon materials accounts for as high as 48.16%.

Since the beginning of this year, the price of photovoltaic glass has remained high, and the price of polysilicon materials has risen again. For downstream companies, ensuring the supply of "strategic materials" by locking orders and not locking prices is already related to the competition for photovoltaic market share this year or even the next few years.

The 40 billion large order involves the supply of granular silicon

This is the largest polysilicon supply order received by GCL-Poly Energy in recent years. Affected by this news, in early trading on February 3, the company's share price rose more than 16%, setting a record high during the session.

Sitting on the Jiangsu Zhongneng Silicon Industry, GCL-Poly Energy was once the world's largest producer of polysilicon materials. But the biggest competitor, Tongwei, is "aggressive." As of the end of 2020, the latter has an annual production capacity of 90,000 tons of polysilicon, surpassing GCL-Poly Energy. In the past year, the domestic polysilicon material market was booming, and the "first fire" that caused the price of silicon material to rise was the "burning" of GCL-Poly Energy.

In July 2020, the Xinjiang polysilicon plant of GCL-Poly Energy shut down due to an accident, which affected the supply of about 45,000 tons of silicon materials. In August, the polysilicon plant of Tongwei's Sichuan Yongxiang Co., Ltd. suffered a flood, and its 20,000 tons of polysilicon production capacity was forced to shut down. Under a variety of factors, the relationship between supply and demand of polysilicon materials has been reversed, and prices have risen.

However, when the polysilicon material market was hot in the third and fourth quarters, GCL-Poly Energy did not enjoy the dividend in time due to the shutdown of major factories for maintenance. However, it is worth noting that during this period of time, the company's research and development of granular silicon (FBR) technology triggered the industry's discussion on the polysilicon link technology path, and "detonated" the stock price.

Since the fourth quarter of 2020, GCL-Poly Energy's stock price has risen by more than 800%. The main driving factor is granular silicon. On September 8, 2020, Jiangsu Zhongneng Silicon Industry's 54,000-ton polysilicon material project officially started construction. The project has a total investment of 4.7 billion yuan and uses granular silicon technology.

In fact, there are still some controversies in the market for this technology. Bank of Communications International analyzed that the key indicators such as the product cost and process stability of the FBR granular silicon project process are still unclear, and the cost issue even determines whether the technology can completely replace the Siemens method. "At present, granular silicon technology has not yet been put into mass production, the cost will have to wait until the production capacity is released." An analyst who asked not to be named told reporters that granular silicon technology still needs time to prove.

However, GCL-Poly Energy is obviously willing to fight for it. On February 3 this year, GCL-Poly Energy announced that its annual effective production capacity of Jiangsu Zhongneng Silicon Industry, which is responsible for the research and development and manufacturing of granular silicon, has increased from the previous 6,000 tons to 10,000 tons, officially entering the 10,000-ton capacity scale.

In this 40 billion silicon material supply agreement, GCL-Poly Energy said it will increase the supply of granular silicon products. The reporter noted that at the aforementioned production capacity increase ceremony, representatives from Zhonghuan, JA Tech, and Hongyuan New Materials all affirmed the high-quality certification results of granular silicon products as customers.

The battle of the downstream leaders is about to start

The photovoltaic industry in 2021 may continue to be "crazy."

Statistics from the National Energy Administration show that in 2020, my country’s newly installed photovoltaic power generation capacity will be 48.20GW. According to the forecast of the China Photovoltaic Industry Association, my country’s new installed photovoltaic power generation capacity this year may range from 55GW to 65GW.

Faced with huge market demand, leading photovoltaic companies will also enter a new round of market share wars. And this year, the downstream module market will usher in the mass production of large-size products into the market, which directly leads to major leading companies continue to spare no effort to "rush to buy" upstream photovoltaic materials.

In the past year, the two major materials in the photovoltaic industry, polysilicon and photovoltaic glass, have become the two main protagonists in the price increase of the industry chain. Among them, silicon material prices stabilized at the end of last year and fell slightly, but they are still high. As the Lunar New Year closes, downstream companies are getting more ready for stocking, the supply and demand relationship of polysilicon materials is tight again, and prices are rising.

Wang Bohua, vice chairman and secretary-general of the China Photovoltaic Industry Association, said that the tight supply and demand of the industrial chain has become one of the current challenges facing the photovoltaic industry. For example, silicon materials and glass are still in short supply, and major companies have begun to sign long-term orders to ensure product supply.

Behind the tight supply-demand relationship of polysilicon materials, market competition from downstream is a factor that cannot be ignored.

The tens of billions of module production base projects announced by the photovoltaic industry in 2020 will begin construction and production this year. This makes the large-size component "slobber wars" set off in the past year will directly evolve into fierce competition for market share in the downstream market this year. The reporter learned that the “182-size” module camp led by Longji and the “210-size” module camp led by Trina Solar will focus on large-size module products this year. Although the industry believes that this year's module market is still dominated by "166 size" modules, the shipment speed of larger-sized modules may exceed market expectations. According to the forecast of China's photovoltaic industry, this year, 160mm to 166mm silicon wafers will reduce to 45% of the market share.

"Large-size, high-power products will enter a stage of rapid mass production, and the proportion of large-size silicon wafers such as 210 and 182 will accelerate to 50%." Wang Bohua believes that the ability to control the supply chain will become the key to winning the competition.

There is no permanent "enemy"

When GCL-Poly Energy announced the signing of a large polysilicon supply order with Longji, the industry referred to this cooperation as a "historical hand-in-hand".

"In the past, the dispute between singles and multiples was "bayonet sees red", and now we have signed big singles and love to travel with you." Some industry insiders commented on reporters that there is no permanent "enemy" for photovoltaic arena. In fact, it is not the first time that Longji and GCL-Poly have cooperated in polysilicon materials. An insider of GCL-Poly Energy confirmed to reporters that the two parties had previously reached a polysilicon material supply agreement, but the supply of granular silicon was the first time. Longji shares also responded that the company is already experimenting with granular silicon products.

In an interview with reporters, Wang Yingge, general manager of Longji's brand, said that the polysilicon material cooperation between the two parties involved the supply of pellets and was optimistic about the economy and application prospects of pellets.

"The fluidized bed method granular material is not a new thing. It has been used in single crystal pulling more than ten years ago. The core problem is to adapt to the technical requirements of high-quality silicon wafers. We are happy to see the rapid improvement in the quality of granular materials." Wang Yingge said.

Looking back at the evolution of the photovoltaic industry's technological route in recent years, the single-polycrystalline dispute is an unavoidable event. The monocrystalline silicon wafer camp led by Longji shares and the polycrystalline silicon wafer camp led by GCL-Poly Energy have once competed in inexorable competition in the past few years. As the single crystal technology becomes more mature, the cost drops rapidly, and the cost performance of single crystal products is outstanding, and the era of polycrystal is king is replaced. However, when the two leading companies competed in the market, they brought the domestic photovoltaic industry into the era of giant alliances. In 2017, GCL Group and Zhonghuan Co., Ltd. formed the aforementioned strategic cooperation and formed allies; in 2019, Longji and Tongwei The shares reached a cooperation intention and were deeply bound.

However, the era of giant alliances is an era of chaos.

Entering 2020, the monopoly-crystalline debate in the photovoltaic industry has ended, and the new focus is on size. The battle between "182 size" and "210 size" in the past year brought an end to the confrontation era of "GCL + Central" and "Longi + Tongwei": Tongwei shares stood on the opposite side of Longji shares and embraced the 210 size .

In fact, whether it is the "182 size" camp or the "210 size" camp, the core factor for whether its products can be mass-produced and seized market share is the construction of the upstream and downstream supply chain of the product. Thus, in the construction of the supply chain, a new alliance system will be formed. "The purpose of strong cooperation between leading companies is to form complementary advantages, especially when downstream component companies build a vertical integration model, the vacant links in the industry chain can only go to other companies to cooperate." The aforementioned analyst told reporters.

It is worth noting that in the process of building a vertically integrated model, leading companies will indeed compete for interests. For example, in the cell segment, Longi and Tongwei have gone from past cooperation to a competitive level.

On January 19 this year, Longji announced that it will invest 8 billion yuan to build a 15GW monocrystalline battery project in Xixian New District, Shaanxi. This is another increase of the company after the company announced last year to build a 3GW monocrystalline battery project in Ningxia Leye. This means that when Longi shares promoted the "silicon wafer-cell-module" integration strategy, its previous complementary relationship with Tongwei shares in the industrial chain was weakened.