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SNEC 2021 Wrap-Up III: Post-SNEC demand and price trends

June 21, 2021 PV InfoLink


Prior to the SNEC, continuous hikes in polysilicon prices stopped and China demand expected to slightly decline, as approved grid parity projects are allowed to be postponed to next year. PV InfoLink lowered forecast for China demand from 55 GW to 50 GW.

Market analysis

According to China’s National Energy Administration’s notice published in mid-May,“projects failed to be connected to the grid within the year shall be administered by provincial energy bureaus and directly subsumed into the guaranteed grid connection capacity in the following year.” The policy allows grid-connection deadlines for grid parity projects to be postponed to next year, helping ease up this year’s short supply.

However, China’s PV stations have seen IRR drop to 6% or even lower amid module price hikes, short inverter supply, and continual uptrends in steel and other raw material costs. Still, China’s Big-5 utilities and four affiliated firms will manage to fulfill this year’s installation goal as much as possible and thus only deferred some of the projects.

With RMB 500 million subsidy allocated to new residential projects by the National Development and Reform Commission, this year is estimated to see 15.5-17 GW of residential PV demand, despite slightly decreased demand from grid parity projects. Additionally, with at least 90 GW of guaranteed new wind and PV capacity, China demand will not see significant declines, even if market slows down. Therefore, PV InfoLink only revised down forecast for China demand marginally from 55 GW to 50 GW.

Post-SNEC price trends

Polysilicon prices surged in May, with trading prices between major manufacturers coming in at RMB 160/kg before the Labor Day holiday and then soared to RMB 200-220/kg at the end of May. During the SNEC, with unclear China demand and weak foreign module demand in July and August, cell and module manufacturers continually cut utilization rates during May and June amid high production costs and inventory accumulation, with overall capacity utilization going down to 40-60%. High prices across the supply chain cast uncertainties over end user demand. After the SNEC, trading prices of polysilicon between major manufacturers temporarily stabilized at RMB 200-210/kg, whilst buyers of sporadic orders no longer accept RMB 220/kg. Afterwards, the wafer and cell sector remain in a standoff for the time being, since leading mono-Si wafer maker Longi did not released official pricing in mid-month, as it usually does.

Cell inventory has been accumulated since the end of May. As the market sit on the fence in mid-June, the cell sector received inventory pressures. Downward pressure on prices from the module sector has taken effects, driving cell prices to slip. M6 and G12 cells saw slower inventory draws, with prices for mono-Si cells coming in at around RMB 1.05/W and some lower prices at RMB 1.03-1.04/W for M6 cells.

Successive polysilicon and wafer price hikes drove up trading prices for monofacial modules with a power output exceeding 500 W in May, to RMB 1.75-1.8/W, whilst distributed orders and spot orders were signed at prices higher than RMB 1.8/W. The skyrocketing ocean freight rates, doubled with high module prices, affected demand overseas in July and August and weakened inventory draws. Since Chinese projects may not get off the ground during July and August, temporary weak demand is expected, putting higher pressure on the module sector in which inventory level remains high. In recent terms, module prices are estimated to stabilize at RMB 1.75-1.8/W, as polysilicon and wafer costs remain high amid unbalanced supply-demand relationships. If module sellers and buyers accept such prices after negotiations, and if the prices see no further increases, an equilibrium price is expected to be reached.

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