Silicon material prices continue to rise, when will the rise last?

In the past week, the photovoltaic sector of A shares has entered an adjustment period.

Wind data shows that the photovoltaic index has fallen by 8.06% since March 3.

Contrary to the pullback of the photovoltaic index, the price of silicon materials, the upstream raw material of the photovoltaic industry chain, has continued to rise.

According to data from the Silicon Industry Branch of China Nonferrous Metals Industry Association (hereinafter referred to as the "Silicon Industry Branch"), the price of polysilicon continued to rise last week. The transaction prices of double-feed materials, single crystal dense materials, and single crystal cauliflower materials increased by 4%- 5%. According to data from the photovoltaic think tank SOLARROOM Guangshou Yijia, a reference quotation of 110 yuan/kg for silicon materials has even appeared recently.

Silicon material prices jumped one after another in short supply

This round of silicon material price increases began in December last year. In mid-December last year, the price of silicon materials, which had been slowing down for three months, bottomed out and rebounded.

According to data released by the Silicon Industry Branch on December 16 last year, the average domestic transaction price of single crystal double-investment materials was 83,700 CNY/ton, and the average transaction price of single crystal dense materials was 81,300 CNY/ton. During the week, the transaction prices of double feed materials, single crystal dense materials, and single crystal cauliflower materials all rose slightly (about 1%), and only the prices of polycrystalline materials fell slightly.

The price of silicon materials that bottomed out has since started an upward pattern.

In the three months from mid-December to the present, the price of various silicon materials on the market has risen by as little as 1% every week, and as high as 12%.

According to data from the Silicon Industry Branch, as of last week, the average prices of single crystal double feed materials, single crystal dense materials, and single crystal cauliflower materials reached 110,800 CNY/ton, 108,000 CNY/ton, and 105,300 CNY/ton, respectively, in three months. The cumulative price increase has exceeded 30%.

"In the first week after the Spring Festival, the price of silicon materials rose by about six or seven yuan, but at that time the company could not get any goods," said Ma Yiwei, vice president of Solarroom, said in an interview with reporters. The survey information shows that the recent supply and demand of silicon materials are still extremely tight, "Neither the leading silicon wafer companies nor the small and medium-sized enterprises can get the goods."

Behind the rise in silicon material prices is the gap between supply and demand.

On the demand side, at the end of last year, downstream companies began stocking for the Spring Festival one after another, and the actual demand increased gradually. Moreover, the release of expanded silicon wafer production capacity has also stimulated demand growth.

The production capacity of silicon wafers expanded in the second half of 2020 will be put into production one after another after entering 2021. The Silicon Industry Branch stated at the end of February that "the release of silicon wafer companies' capacity expansion is far faster than expected."

According to Ma Yiwei, the newly expanded silicon wafer production capacity has a one-time demand to purchase basic silicon stocks for normal production, "usually prepare for half a month or a month."

On the supply side, data from the Silicon Industry Branch shows that as of the beginning of 2021, the production capacity of solar grade silicon materials is about 560,000 tons, of which overseas production capacity is nearly 100,000 tons.

Since silicon wafer companies have signed long-term contracts or strategic cooperation in 2020, more than 80% of the industry's silicon material production capacity has been locked in by long-term orders of enterprises, and the silicon material market has fewer circulating stocks.

"At the end of January and early February, there were no stocks, and the intermediaries had very few goods. The mainstream manufacturers had to guarantee the performance of long-term orders. Basically, they did not expect the intermediaries. Leading companies would also urge silicon factories Silicon materials. There is basically no inventory in the upstream and downstream. There are also no middlemen." In a survey summary of Tongwei shares on March 7 obtained by the reporter, relevant personnel of Tongwei introduced the recent shortage of silicon materials.

Although the silicon material companies on the supply side will also expand their production significantly in 2020, since the silicon material capacity landing cycle is as long as 14-18 months, the expanded silicon material capacity cannot be released simultaneously with the expanded silicon wafer capacity, so silicon material will be effectively supplied in 2021. The increase is very small, far less than the increase in demand.

It is worth mentioning that in December last year, the market had reached expectations on the tight supply and demand of silicon materials. This expectation has stimulated the bullish mentality of the industrial chain and the mentality of hoarding in the industrial chain, and the subsequent stock hoarding by downstream companies has in turn boosted the price of silicon materials.

"The stocking cycle of silicon wafer factories is normal to stock up to half a month to one month." Ma Yiwei told reporters that when silicon wafer companies are particularly optimistic about the price of silicon materials, they are definitely willing to stock up more. "For example, companies may Change the stocking cycle to one and a half months to two months."

According to data from the Silicon Industry Branch, last week, the number of domestic silicon material companies with new orders has increased significantly from the previous week. Almost all in-production companies have signed new orders, and the new orders of first-line companies have basically been signed up to April.

Pressure of rising downstream digestion costs is highlighted

In fact, the impact of rising silicon material prices has long been transmitted to the downstream of the industrial chain. After the price of silicon materials has risen, some companies in the downstream sector have made corresponding adjustments to product specifications or product prices this year to hedge against the cost increase caused by the price increase of silicon materials.

Take the silicon wafer industry as an example. At present, major manufacturers have increased their prices significantly to cover the cost of silicon material price increases. Last week, the prices of monocrystalline silicon wafers and polycrystalline silicon wafers were still rising.

In February of this year, Longi increased its M10 wafer and M6 wafer quotations twice on the 5th and 26th. On February 26, LONGi's M10 and M6 silicon wafer prices were 4.44 yuan/piece and 3.65 yuan/piece, respectively. Comparing the prices of 3.9 yuan/piece and 3.25 yuan/piece a month ago, the cumulative increase in the two price increases of M10 and M6 silicon wafers reached 13.8% and 12.3%, respectively.

In addition, LONGi also reduced the thickness of some silicon wafers in February to reduce single-chip costs. On February 5, while adjusting the price of silicon wafers, Longi reduced the standard thickness of G1 and M6 silicon wafers from 175μm to 170μm.

Another silicon wafer giant Zhonghuan also issued a proposal on February 23, planning to reduce the thickness of silicon wafers to ease the cost pressure on downstream battery and module customers.

According to Zhonghuan’s experience, if the price of silicon materials rises by 10 yuan/kg, the corresponding silicon wafer cost rises by 0.18 yuan/piece, and it is necessary to reduce the thickness of 18μm to keep the unit price of silicon wafers unchanged. The thickness of the silicon wafer is reduced from 175μm to 160μm, which can cover the price increase of 8 yuan/kg of polysilicon material and reduce the cost pressure on the downstream industrial chain.

Calculations show that thinning can enhance the profitability of silicon wafers and hedge the cost of silicon material price increases. According to calculations by Shenang Securities, the price of silicon materials will increase by 19.8%. If the silicon wafers are not thinned, the cost of silicon wafers will increase by about 12%. Thinning 5μm can increase the output of wafers by about 3%, which will offset the 2.1% increase in silicon materials. The cost increase caused by the silicon wafer, that is, the cost increased by about 10%, and the gross profit margin was increased by 1.2%.

A person from Longji shares told reporters, "Whether (silicon wafers) will increase prices in the future depends on the price of silicon materials," if silicon materials rise further, it is possible. "The person said, "In terms of thinning, 170 specifications are still the main thing, because if the thinning is further, the industrial chain may have problems. "

The sharp rise in the price of upstream silicon materials has also been transmitted to the cell link. Last week, the leading domestic monocrystalline battery companies announced their prices in March, and the prices of cells of all sizes are still rising. Other battery manufacturers in the market also followed up to varying degrees.

However, the price increase signal sent by the cell manufacturers to the downstream has not been universally recognized. "The price difference between the battery transaction price and the quotation is relatively large. At present, the profit margin of the battery is very low. We estimate that by the end of March, the profit of the battery may turn negative." Ma Yiwei said.

It is reported that some cell manufacturers may experience production cuts in late March.

In the component sector, some institutions have found that due to the sharp rise in silicon materials and the continued strength of component auxiliary materials, major component manufacturers have recently begun to increase the component quotations for new orders, and the old orders with lower prices in the previous period have also seen heavy prices. The situation under discussion.

"Because the recent increase in raw material prices will increase the cost of our corresponding product purchases. We will adjust the quotation when bidding." A person from JA Tech told reporters.

The relevant person of Longji shares also told reporters, "Now that the first-tier component manufacturers have already mentioned a relatively high level, there will be some game between component manufacturers and customers."

It is reported that the production schedule of component manufacturers may decline in the second quarter. SOLARROOM data shows that the current net profit margin of component manufacturers is already at a loss.

Industry chain price increase game terminal demand is suppressed

Since March, the market for silicon materials has remained hot.

"Silicon wafer companies are currently full of production schedules. Now all parts of the country are rushing to get goods. Manufacturers care not about price, but about quantity." A person from the Silicon Industry Branch introduced to reporters.

So, when can the price of silicon materials, which have risen for three consecutive months, fall back?

At present, the industry and institutions generally predict that the supply of silicon materials in 2021 will continue to be tight. Many organizations have pointed out that based on the production cycle, the actual new capacity of silicon materials this year is relatively small, and the production is mostly concentrated at the end of the year.

In terms of the production time, the silicon material plant announcement shows that Tongwei Yunnan Baoshan 40,000 tons and Sichuan Leshan 35,000 tons will be put into production at the end of October 2021 and December 2021, respectively, and 35,000 tons of Daqin Energy Xinjiang will be put into production at the end of December 2021. , Asia Silicon Industry Qinghai 30,000 tons will be put into production at the end of June 2021.

CITIC Securities pointed out that according to the actual operation of the silicon material plant, it will take 3-6 months from the production capacity to the stable output of a higher proportion of single crystal materials. Therefore, although there will be production capacity in 2021, there is no actual production capacity that can be supplied to the market.

CITIC Securities predicts that the global new installed photovoltaic capacity will reach about 165GW in 2021. Considering the 1:1.2 capacity ratio, it is estimated that the global new photovoltaic installed capacity corresponding to the module demand will be 198GW. In the case of a single GW module silicon material demand of 2900 tons, the silicon material demand corresponding to the scale of this module is about 580,000 tons, slightly exceeding the aforementioned silicon material supply this year (about 560,000 tons).

"Considering the supply of granular materials, the supply of silicon materials is still in short supply or tight balance. We expect the tight supply and demand of silicon materials will continue to 2022, exceeding market expectations." CITIC Securities said.

Therefore, considering the tight supply and the landing of new capacity at the end of the year, there are some views that silicon material prices may not fall until the fourth quarter.

However, there are also market views that silicon material prices may fall as early as the second quarter. For example, Western Securities (002673, stocks) pointed out last week that the price of silicon materials may have a certain correction at some stage in the second quarter.

"From the perspective of supply, the price of silicon material may indeed be relieved in the fourth quarter. However, since the price increase of silicon material will continue to be transmitted downstream and ultimately affect demand, if you consider from the demand side, the time point for the price of silicon material may fall. It was earlier than the large-scale production of silicon materials." Ma Yiwei told reporters that the price of silicon materials may fall as early as the end of May.

“The component sector’s acceptance of price increases is low, and the current component net profit is already at a loss. We expect that by the end of March, the profit of the solar cell may also turn negative. Once the profit of the solar cell is squeezed out, the profit of the silicon wafer The price will not rise. In this case, if the silicon material continues to rise, it will squeeze the profit of the silicon wafer segment. Finally, when the silicon wafer company reduces production due to the thinning of profits, then the price of silicon material will not rise. ." Ma Yiwei said.

A relevant person at Longi also told reporters that the price of silicon materials is still relatively high in the short term, "maybe after the end demand has responded, (silicon material prices) will respond under pressure."

In an interview, a seller's new analyst said that the current industry chain is gambling with price increases. "At present, all links of the photovoltaic industry chain are still playing games. Price transmission is not simple and smooth, and the pattern of each link is different. The price increase from silicon materials to cells is relatively strong, while cells and modules do not have complete transmission. The ability of cost pressure.” The analyst said.

CITIC Securities pointed out that after the price increase of the industry chain entered the game period, the transmission mechanism of component prices to the terminal power station was not smooth, and it began to suppress terminal demand to a certain extent, and the operating rate of related products around the component side also declined. After the price of the industry chain finds a new balance point, demand is expected to usher in release again, but the capacity utilization rate of key links still needs to be tracked in detail.