Global solar demand is projected to hit 240-270 GW this year fueled by accelerated energy transition worldwide. China Customs data compiled by InfoLink found China exported nearly 89 GW of cells and modules to the world in the first half of this year, with Europe dominating demand, having imported 43 GW, accounting for nearly 50% of the total. The Chinese market also saw strong demand growth, with distributed generation projects contributing to 30.9 GW of new installations in the first half, up 138% YoY.
However, disproportional supply and demand in the supply chain has persisted since last year, keeping module prices at high levels. In addition to high silicon costs, prices for BOM materials were also impacted. As of the end of June, calculation of non-silicon costs of the M10 format among Chinese module manufacturers came in at RMB 0.6-0.7/W, which is around US$ 0.079-0.092/W.
Breaking down module costs, module production consists of silicon and non-silicon costs, with the former representing 60% of the total. Non-silicon costs, which contain glass, EVA film, backsheet, and aluminum frame, as well as labor and electricity bills, account for around 40%. At present, BOM materials prices have returned to normal levels, allowing module makers to press down prices by controlling purchase volumes, especially glass, EVA, and backsheet. As of the end of July, glass prices stayed at RMB 27.5/m2 (US$3.6/m2 excluding tax); 420g EVA film prices slipped by RMB 14/m2 (US$1.84/m2 excluding tax); and backsheet prices sat at RMB 13.5-14/m2 (US$1.77-1.84/m2 excluding tax).
Prices for aluminum frame fluctuated along with aluminum prices. Although the prices slightly rose during July and August, prices of other BOM materials will fall slowly and steadily in the second half. Therefore, overall non-silicon costs of modules are estimated to gradually stabilize. Polysilicon prices, nevertheless, will continue to rise and reach the peak of the year in the third quarter, driving up silicon costs. Calculation suggests that module profits may decline marginally in the third quarter, and then slightly recover in the fourth quarter, when prices in the supply chain stabilize.
Lower-than-anticipated polysilicon production caused by accident occurred in East Hope’s plant at the end of June and China’s power rationing imposed during the July-August period led to continued increases in polysilicon prices in the third quarter. Production from July to September is estimated at 220,473 MT (around 81.67 GW), meaning only 27 GW of production is available each month, falling short of 28-29 GW of demand from the wafer and cell segments. Moreover, power rationing during August to September in some manufacturing hub, such as Jiangsu, Changzhou and Sichuan, forced cuts to factory output, making it difficult for prices to decline markedly in the quarter; prices will remain unchanged.
On the demand side, end users in China, Asia Pacific, and Europe are sitting on the fence due to high prices. Currently, module prices stood at RMB 2/W and US$ 0.275-0.28/W, putting off some high-priced orders. China received the most impact, with ground-mounted PV projects originally scheduled to get off the ground during July and August postponed, and progress of several projects were delayed in mid-August as they couldn’t acquire modules. The market became less active compared with July, with even some distributed generation projects postponed. Overall, the Chinese market is expected to be sustained by distributed generation projects in the third quarter; a few of orders for ground-mounted projects were not delivered.
Other overseas regions are growing tired of the rising module prices. Some small distributors in Europe have reportedly started to sell inventory. In addition, instable supply of inverters and maritime labor shortage slowed projects’ installations. In Asia Pacific region, orders were delivered stability, with module prices hovering at RMB 0.267-0.285/W. Prices are rather stable in South Korea and Japan. In the Australian market, prices stayed at US$ 0.27-0.285/W. The market was expected to enter peak season during August and September, but demand is restrained by the continuous rising module prices.
September and October will be a determining period. Module makers, which represent the limit of end user acceptability, continue to negotiate with manufacturers in the upstream and pass on pressure to them through pressing down prices and production strategies. Overall module production in August was revised down to 23-24 GW. If module makers succeed in negotiations, prices will start to stabilize across the supply chain. InfoLink expects module prices to return to RMB 1.93/W and US$0.265/W overseas. Amid high costs in the supply chain, vertically integrated companies stand out with their advantage of costs and overseas distribution channels amid high costs in the supply chain, and they will continue to overtake share of medium and small-sized module makers. It is likely that vertically integrated companies will initiate price wars in the second half to grab market share, with prices in the low-price range potentially coming in at RMB 1.9/W and US$0.255-0.26/W in overseas markets.