Polysilicon Price Crisis: Cost Breakthrough Amidst Expansion Frenzy
2024-05-21 17:44

Has the price of silicon material bottomed out? This question has been asked from 2023 until now. Since the second quarter, the price of silicon material has continued to fall, and the most profitable part of the photovoltaic industry chain, the silicon material link, has also started to lose money. Huaxia Energy Network noticed that on May 15, the latest silicon material price published by the Silicon Industry Association showed that the transaction average price of silicon materials, including recycled materials, single-crystal dense materials, and N-type granular silicon, has collectively dropped to the 30,000 yuan range. Clearly, from 40,000 yuan to the 30,000 yuan range, the industry's expected "rebound" in silicon material prices has not occurred, and the situation is further deteriorating. Now, even the first-line silicon material leaders with the deepest "moat" can hardly bear it.

Lu Jinbiao, deputy director of the Expert Committee of the China Nonferrous Metals Silicon Industry Association, believes that according to the polycrystalline silicon capacity scale of 2 to 2.1 million tons at the beginning of this year, maintaining an 80% capacity utilization rate at the silicon material end can achieve a supply-demand balance in the industry chain. However, this balance is not easy to achieve. In May this year, as 8 silicon material factories were successively reported to be shut down for maintenance, a 200,000-ton new silicon material project of Tongwei was put into production. And in the first half of the year alone, there will be a production of 600,000 tons of capacity. This means that the situation of supply and demand imbalance will further intensify, and it is too early to say that the price has bottomed out now. Silicon material companies have started to fight fiercely, and a fierce "life-and-death battle" has begun.

The price has dropped below the cost line of leading enterprises

On May 10th, the silicon material leader Tongwei signed a massive order with the component leader Longi for 862,400 tons of silicon material, valued at 39.1 billion yuan, a scale that has shocked the entire industry (see the previous report by Huaxia Energy Network "39.1 billion yuan, 862,400 tons! Just now, Tongwei and Longi signed another huge order").

It is worth noting that before the announcement of this huge order, on May 8th, the Silicon Industry Association announced that the industry's average transaction price for silicon material had generally dropped to the 40,000 yuan level, which the association called "breaking through the cash cost of the vast majority of enterprises".

The cooperation between the two giants is actually a mutual need. For Tongwei, it is obtaining a big customer in the current market downturn; for Longi, it has a bit of the meaning of "bottom fishing", taking advantage of the historical low point of silicon material prices to stock up a large amount of silicon material, which is conducive to reducing costs in the future.

In fact, for any enterprise, it is somewhat a "gambling bottom" at this time. But where is the bottom?

Since April of this year, the price of silicon material has continued to fall. In May, relevant research institutions called it "irrational fall". On May 15th, the Silicon Industry Association announced that the price of silicon material continued to fall. The association said: "The current price has broken through the cash cost of all producing enterprises." The price data of the Silicon Industry Association on May 15th shows that except for the average transaction price of N-type material at 43,000 yuan/ton, the rest have all fallen into the 30,000 yuan price range - the average transaction prices of recycled material, single-crystal dense material, and N-type granular silicon are 38,600 yuan/ton, 37,300 yuan/ton, and 37,500 yuan/ton respectively, and the single-crystal cauliflower material has even fallen to 33,700 yuan/ton.

It is understood that the cost line of the general silicon material enterprise in the industry is about 50,000-70,000 yuan/ton. This means that a large number of enterprises are in a huge loss to save their lives.

Huaxia Energy Network has specially collected and organized the cost data of the silicon material leader, from which the profit and loss state of each enterprise can be seen:

Tongwei shares have publicly stated that its polycrystalline silicon material production cost is within 40,000 yuan/ton; Daqo Energy revealed in the 2023 annual report that its polycrystalline silicon unit cash cost has been reduced to 42.7 yuan/kg (the cost line is about 42,700 yuan/ton); Xingda Technology disclosed in the 2023 semi-annual report that the production cost of its Leshan Xingda granular silicon project is about 35.68 yuan/kg, that is, 35,700 yuan/ton. Obviously, when the silicon material collectively falls into the 30,000 yuan price range, the leading silicon material enterprises are inevitably in a situation of losing money to sell. "Under the pressure of high inventory, some small capacity, old capacity has already stopped for maintenance, the vast majority of enterprises have a strong willingness to support prices, and choose to hold goods when the price is low." On May 15th, the Silicon Industry Association made such a comment on the current silicon material market situation in the weekly review, and mentioned, "Only some enterprises with cash flow difficulties and new factory trial materials can still accept the reduction of the transaction price.


When will the supply-demand imbalance be reversed?

Lu Jinbiao believes that the main reason for the decline in this round of prices is still the supply and demand relationship, that is, the growth of demand every month cannot reach the growth rate of supply, resulting in an increase of 20,000-30,000 tons of silicon material industry inventory every month. In the first quarter of this year, the silicon material link was running at full capacity, which released some silicon material capacity that was put into place in the fourth quarter of last year, driving an increase in output. At the same time, downstream demand is shrinking. On the one hand, this is related to the accelerated pace of the structural contradiction brought about by the transition from p-type to n-type; on the other hand, it is also affected by the downstream market's price reduction and production reduction.

According to Lu Jinbiao's disclosure, after the silicon material end went through a full production operation in the first quarter, the inventory reached a maximum of 250,000 tons. "In fact, there is no problem when the monthly turnover inventory is between 170,000 and 180,000 tons. The current problem is that due to the shrinkage of silicon material shipments, a large amount of inventory is accumulated in the silicon material factory." Under the pressure of price reduction and inventory, by May 15th, five out of 17 domestic polycrystalline silicon enterprises have begun to suspend production for maintenance. According to the Silicon Industry Association, the remaining enterprises also have plans for maintenance and load reduction. Therefore, the future capacity level is also in a state of dynamic change. "It is expected that the reduction in this month's output will be slightly greater than the increase, and if the enterprise maintenance exceeds expectations, this month's output is expected to fall back to 180,000 tons." The Silicon Industry Association predicts. According to the current capacity scale, if silicon material enterprises achieve an 80% capacity utilization rate, the industry chain can achieve a supply-demand balance." Lu Jinbiao said. In fact, the expansion cycle in the silicon material field is about one and a half years, and several leading enterprises are still expanding production. It is difficult for the industry to reverse the supply-demand imbalance in a short period of time.

On May 1st, Tongwei's second phase of 200,000 tons of high-purity crystalline silicon project in Yunnan announced successful operation. In addition, Daqo Energy and Hesheng Silicon Industry respectively announced that their second phase of 100,000 tons of polycrystalline silicon projects in Baotou, Inner Mongolia, and the 200,000-ton polycrystalline silicon project in the east are expected to be put into production in the second quarter of 2024; Asia Silicon Industry also announced that the 100,000-ton polycrystalline silicon project is expected to be put into production in June this year. According to this calculation, at least 600,000 tons of new polycrystalline silicon capacity will be put into production in the first half of this year.

In the second half of the year, there will also be Tongwei Baotou 200,000 tons, Xingda Technology 80,000 tons, Qinghai Lihao Yibin 100,000 tons, Qi Ya Silicon Industry Hami 100,000 tons, Ju Guang Silicon Industry 50,000 tons, Geely Ju Neng 100,000 tons and other capacities are expected to be put into production and landed. According to the statistics of the Silicon Industry Association at the beginning of the year, there are still 13 projects under construction in 2023, with a total capacity of 1.515 million tons. According to Lu Jinbiao's judgment at the beginning of this year, the surplus degree of silicon material in 2024 will be relatively high. "By the end of this year, the capacity will reach 3.68 million tons. Even if some production lines with poor cost competitiveness are shut down, the total capacity is expected to reach 3 million tons." And from the demand for installation volume, this year's silicon material supply of 1.5 million tons is enough." He said. This means that by the end of 2024, the supply of domestic silicon material may exceed the market demand by twice, which is an extremely terrifying number.

There is no doubt that some manufacturers will be out of the game

Top companies have already lost money, and other companies will only suffer greater losses.

"The company will not initiate a price war... and prefers to see the stable development of the industry and the automatic adjustment of the market," Tongwei said in an investor communication in April this year. But under the current industry situation, the reshuffling of the silicon material link is inevitable.

Lu Jinbiao believes that it is still difficult to say that silicon material has gone through the cycle, "There may be a slight rebound in the price of silicon material in the third quarter, but don't think about profits. Under this background, the silicon material industry is bound to eliminate some players in a fierce battle. Top companies have more competitive advantages in terms of cost, scale, financial strength, and resources. Companies with poor cost control and weak financial strength will be squeezed out and eliminated. At present, many companies in the market are under great pressure, and a few are mentioned to illustrate the risks:

1. Asia Silicon Industry

Originally, with an annual production capacity of 90,000 tons of polycrystalline silicon, it ranked sixth in China. However, the old capacity is an issue that Asia Silicon Industry cannot avoid. In 2020, Asia Silicon Industry planned to go public, but the IPO process was "terminated" by the China Securities Regulatory Commission in May 2022. According to its prospectus, its first, second, and third phase projects were put into operation in 2008, 2011, and 2015, respectively. Its most recent production capacity has been nearly ten years, and it is hard to say whether it can be upgraded to N-type. After the failure of the IPO, Asia Silicon Industry was acquired by Hongshi Group at a price of 8.1 billion yuan in 2023. The latter invested in a silicon-based new material industry park project with a total scale of 29.5 billion yuan in Qinghai, which will be built in two phases, with an annual production of 200,000 tons of polycrystalline silicon, 250,000 tons of industrial silicon, and supporting waste heat power generation facilities. However, facing the situation of "producing at a loss," the fate of Asia Silicon Industry is full of uncertainty.

2. Hesheng Silicon Industry

Hesheng Silicon Industry is a rare "silicon-based full industry chain" company in the industry, but it is a newcomer to the polycrystalline silicon and photovoltaic fields. Since 2021, in order to transform, Hesheng has invested a total of more than 80.5 billion yuan in the photovoltaic and silicon-based material fields. As of the end of the first quarter of 2024, the total assets of Hesheng Silicon Industry were 89.8 billion yuan. This is equivalent to using 90% of the company's assets for expansion. Now, what Hesheng is facing is a sharp drop in prices from industrial silicon, polycrystalline silicon to the downstream photovoltaic industry chain, and the whole industry chain is not making money. The latest financial report data shows that as of the end of March this year, the cash flow generated by Hesheng Silicon Industry's operating activities was -2.594 billion yuan, indicating that the money earned by the company's operations is no longer sufficient to cover the operating expenses.

3. Henan Sai Neng Silicon Industry

Henan Sai Neng is a silicon material manufacturer that has crossed over, and its controlling shareholder, Shaanxi Lu Neng Energy, which holds 80% of the shares, has no previous experience in polycrystalline silicon. The 10 billion yuan Sai Neng Silicon Industry Puyang 100,000-ton polycrystalline silicon project held a groundbreaking ceremony in February last year. At the beginning of the construction, it was hoped by the local government as the "largest polycrystalline silicon project in Henan Province." But soon, the industry situation changed dramatically, and the plan to put into operation in October of the same year was postponed, and it was even suspended for several months. Now, although the work has resumed, there is still no news on when it will be put into operation, but it has been reported by the media that the shareholders Sai Neng Xin Yu and Jinhong Gas have successively withdrawn.

4. Inner Mongolia Run Da Industrial

Inner Mongolia Run Da Industrial Development Co., Ltd., a subsidiary of Ordos local state-owned assets, was previously engaged in real estate. In March this year, its annual production of 100,000 tons of polycrystalline silicon and supporting 150,000 tons of industrial silicon project was approved by the record. A company with no experience in polycrystalline silicon production, still regardless of the current risk exposure of the silicon material industry, still rushes in, the consequences are either to invest a lot of money and fall in the ruthless reshuffling, or to be like the 50,000-ton high-purity crystalline silicon project of Nanbo A, which has been under construction for a long time. History is always surprisingly similar. What is more tragic is that people never learn from historical experience. This is particularly evident in the silicon material industry. From 2008 to 2009, the price of silicon material fell sharply from a high of $500/kg to $40/kg, and a large number of once popular star companies disappeared. In this round of adjustments, the price of silicon material has fallen from 300 yuan/kg in 2022 to about 37 yuan/kg now, and it may continue to decline in the future. Now, the silicon material industry is experiencing a historical replay from "having silicon as king" to cost inversion.

When the tide comes, people rush to be trend-setters; but when the tide recedes, what is left on the beach is not only the embarrassment of "naked swimmers" but also the price that some people pay with their lives. In this round of the sharp drop in silicon material prices, which company will fall first?