Supply and demand review
Driven by installation rush in China and abroad, demand for mono-Si wafers was strong at the end of 2022, resulting in short supply. Meanwhile, massive capacity held by Longi, Zhonghuan, Jinko and JA Solar put wafer manufacturers under pressure amid rapid wafer size transition. High profits also attracted new players, leading to continued wafer capacity growth in 2021. With manufacturers unwilling to lower utilization rates of newly installed lines, polysilicon shortage pushed up prices further.
The mainstream prices for mono-grade polysilicon spiked from RMB 85/kg at the beginning of January to RMB 206/kg in June, up 142% within six months. Such a price level was believed to have reached the cap of the year, but China’s control on energy consumption and intensity drove up prices again in the fourth quarter, jumping to RMB 269/kg in November, an increase as high as 216% compared with the January level. This price hit a 10-year high since 2011.
Polysilicon price forecast
A new round of orders and price negotiations for polysilicon began in the second week of December. However, buyers and sellers remained in a standoff, as the two sides hold different opinions in terms of the degree and pace of polysilicon price decreases – sellers are not willing to give in as they want to prevent prices from falling too fast, so that they can keep a standard price not too low for the beginning of 2022 and avoid increasingly wait-and-see mode in the market, whereas buyers have stronger bargaining chip, for polysilicon inventory has been piling up amid low wafer utilization rates, especially among leading manufacturers, and polysilicon production has been on the rise each month. Most of the buyers seek to strike deals at RMB 210-220/kg, with negotiations continuing. Trading volumes have been low thus far; manufacturers were mostly busy delivering previous orders, and only a few buyers made small purchases to meet short-term demand.
Based on the range of price negotiations, overall polysilicon prices are estimated to come in at RMB 210-240/kg in December.
InfoLink projects demand to reach 204 GW to 217 GW in 2022. At present, the market expects polysilicon prices to decline more dramatically than anticipated. This could be attributed to four factors. First, China’s laxer policy on power rationing and production curbs effectively eased raw material short supply. With metal silicon prices decreased across different grades since October, polysilicon costs dropped in accordance. Second, smooth commissioning of new polysilicon capacity allows polysilicon supply to grow steadily in the first half of 2022, and it seems that new capacity planned for 2022 will come into operation as scheduled. This is believed to impact polysilicon prices. Third, advanced technology enables wafer manufacturers to shift from 170μm to 165μm in terms of price quotes. As wafer thickness thins down, production of wafers and capacity both increase with the same amount of polysilicon usage. Fourth, polysilicon prices have come down to RMB 236/kg in the third week of December. Amid an obvious downward price trend, manufacturers and merchandisers sent signals of risks caused by stocked inventory and price decreases. For three consecutive weeks of the month, decline in polysilicon prices has been exacerbated by a prisoner’s dilemma. With a lower standard price for 2022, polysilicon manufacturers have no choice but revise down prices based on the price level at the end of the year. Prices are expected to fall rapidly in mid-2022, when more polysilicon lines come online.
Indeed, polysilicon prices began to fall at the beginning of December. Buyers and sellers will not reach a consensus easily amid escalated negotiations. As the Lunar New Year holiday looms, ingot utilization rates will not be able to sustain new polysilicon capacity if end user demand remains sluggish. This will prompt polysilicon prices to decline continuously. Having said that, how fast and how much polysilicon price decreases hinge on the movement of supply and demand in 2022.