Module utilization rates dropped further, driving up BOM inventory pressures
March 31, 2021 PV InfoLink
Wafer price hikes have ceased, but polysilicon prices are still on the rise. Since major polysilicon makers are still fulfilling previous orders and have not released official price quotes yet, trading prices will be clear in the following one to two weeks. Presently, sporadic orders were mostly signed at RMB 125-130/kg, some even higher than RMB 130/kg. Prices for overseas orders also see marginal increases. Prices negotiated between major manufacturers are thereby expected to rise from the previous RMB 120/kg to RMB 125-130/kg. However, the increase has already ebbed relatively. With end user demand remaining weak and module production slacked, April may have already seen polysilicon prices peak in the first half of this year.
Wafer demand was strong in March, leaving almost no inventory left for wafer manufacturers. However, the official pricings from leading wafer manufacturer, Longi, stayed where they were in the middle of March, due to downward price pressure from cell makers, which are struggling to break even. Another leading manufacturer, Zhonghuan, on the other hand, slightly raised prices for April, since there were no additional price increases in the middle of March. Overall, the market sees stable average prices. M6 (166mm) mono-Si wafers with the thickness of 175um were traded at RMB 3.78-3.8/piece in the Chinese market, and at around USD 0.518/piece in the overseas market. Prices for M10 (182 mm) and G12 (210 mm) with the thickness of 175um sit at RMB 4.56/piece and RMB 6.16/piece in the Chinese market, respectively.
In the face of polysilicon shortage and cost pressures, cell makers will quickly adopt 170um-thick wafers for M6-sized and smaller cells during Q2 and Q3.
Multi-Si wafers have seen an upturn in demand recently, as mono-Si module prices markedly rose, and India is expected to see strong demand in the second half of the year. In response to the polysilicon price hikes previously, manufacturers’ price quotes ranged further to RMB 1.65-1.8/W. This week, orders were mostly signed at around RMB 1.7/piece.
This week, mono-Si cell prices stayed where they were last week. On March 25, leading cell makers trimmed down their official pricings, which have been gradually approaching market trends, indicating no space for cell price increases.
Utilization rates for April remain low in the module sector, some manufacturers are reducing their purchases of cells and self-sustaining with their own capacities. Cell makers are expected to halt production for 3-7 days during the Chinese Qingming Festival, some of them have plans for production line modifications. Overall, the downward trend in cell utilization rates is not as evident as in that of modules, with some cell makers still having stocked inventory. So, cell prices are not likely to rise. As prices remained high in the upstream, cell prices are forecast to level out in the short term and will be contingent on the extent of wafer price hikes afterwards.
G1 cells see weaker demand in April. This week, order volumes are low, and prices started to slip, with trading prices slightly declining to RMB 0.89-0.96/W, averaging RMB 0.9-0.92/W.
This week, multi-Si cell prices rose steeply to RMB 2.9-3.2/piece, chiefly due to multi-Si wafer price hikes and shrinking cell demand. Additionally, India, the primary market for multi-Si products, will impose high custom duty on solar imports in the nest April, driving up inventory draws this year.
Modules have seen end user demand fall behind expectations, with demand sitting at 30-33GW for Q1 and that for Q2 does not seem promising either. Coupled with high polysilicon and wafer prices, module manufacturers are cutting production even further in April. In March, Tier-1 module makers were running at a utilization rate of 65%-70%, and then cut capacity utilization further to 60% or lower this month. Meanwhile, Tier-2 and Tier-3 manufacturers see even lower utilization rates.
Module manufacturers’ production cut in March and April have brought to module BOM and cell makers huge inventory pressures, which have sent the six-month-long high glass prices to decline markedly. Prices for glass with the thickness of 3.2 mm tumbled by 25% within a month, from RMB 38-40/m2 to RMB 28/m2. The price slump also took modules to see more than RMB 0.04/W of cost decreases, giving module manufacturers, which have been struggling to reach break-even point since the Lunar New Year, a brief break.
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News & Analysis
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Wafer makers operating at nearly full capacity; upward price trend continues for polysilicon
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As end user demand fell behind expectations, inventory levels for module makers rose. Module makers continued to cut production and kept raising pricings since the increasing polysilicon and wafer prices show no sign of stopping.