Review and outlook of EVA and PV Film in April 2024 [SMM Analysis]

In April 2024, the PV film and PV-grade EVA resin markets experienced significant fluctuations. The price of transparent 420g PV film increased from an average of 6.83 yuan/㎡ at the beginning of the month to 7 yuan/㎡ at the end of the month, up 2.49% MoM. PV-grade EVA resin prices saw a rapid decline, dropping from an average of 12,916.96 yuan/mt at the beginning of the month to 11,966.54 yuan/mt at the end of the month, a decrease of nearly 1,000 yuan/mt, down 7.36% MoM.

Since the price fluctuations, market participants have felt the pressure brought by these changes to varying degrees. The sentiment of buying on the rise and not buying on the fall was vividly reflected during this period, with the two curves showing a trend of moving in opposite directions on the entire chart. Stockpiling was one of the main themes in April, and the invisible supply and demand (inventory) affected market prices to some extent. Amid inventory growth, sluggish film resin transactions and back-and-forth negotiations in the market, what will the future prices be?

As of the end of April, the inventory of PV-grade EVA resins had shifted from a previous upward trend to maintaining stability with a slight downward trend. From the overall market perspective, both resin and film companies hold relatively sufficient PV-grade EVA resins. It can be seen that although there were frequent maintenance activities in April, the supply basically met the market demand for PV-grade EVA resins. Whether the inventory will further increase remains uncertain.

The PV film market inventory continued to grow, reaching a new high since the beginning of 2024. Even in April, when resin prices declined, the inventory still increased to some extent. Currently, the main accumulation of film inventory is at the module end. From the trend, the inventory growth of film from March to April slowed down compared to the accumulation from February to March. The film inventory at module makers declined, and destocking may be the main theme in May.

From the perspective of the film companies and the petrochemical companies' resin inventory, PV-grade EVA resins are relatively stable and are significantly controlled due to the maintenance of petrochemical companies in April. There has been no significant impact on the bargaining power between petrochemical companies and film companies. However, the current high market price of PV film has shifted the pressure from the PV module end to the film, with PV module companies holding high inventory gaining the upper hand in negotiating film prices. When the inventory of PV film in May is reduced, it will inevitably significantly impact the production of upstream film companies. Although from the market perspective in early May, film companies do not have much inventory backlog, and some companies almost have no PV film inventory, the downstream inventory pressure will inevitably transmit to upstream, causing a decline in film market prices.

But how much will the price of PV film decrease for film companies? At the end of April, the main reason for the increase in PV film prices was the high cost of resins, leading to losses for producers. The high costs squeezed the market space for film companies. However, the price reduction of resins was not evident at the beginning of the month, causing film prices to increase in early April. However, due to the general judgment of poor market performance, the increase was limited, with the average price only reaching 7 yuan/㎡. It is clear that this price is unstable and unsustainable. In an unstable market, maintaining high prices is obviously difficult. The market will eventually adjust to the real demand price, and the price adjustment of PV film in May clearly reflects this instability leading to a price decline.

Starting from early May, the probability of market price decline is high, with a possibility of returning to January levels. However, due to the impact of resin companies' costs, there is a lower limit to resin prices. Correspondingly, after May, the market price is likely to remain low, with further reduction in film inventory. The procurement of PV-grade EVA resins at low prices may continue for about a month until early to mid-July, when there may be some relief. However, there is still some uncertainty on the supply side, stemming from the uncertainty of the production start time of new resin factories. If new companies successfully supply a considerable scale of PV-grade EVA resins to the market from June to July, the market price rise may be further delayed. If the film inventory reduction can be completed in a short time, the price increase time may also be earlier.

Compared to the expected production of resins at the end of March, the actual production at the end of April was only 90,000 mt. The limited production on one hand shows a decrease in the supply of PV-grade EVA resins due to production constraints, and on the other hand, it reflects the rationality of resin companies' production plans and their accurate and stable market forecasts. The future competition in the PV film market will not only involve technological advancements and cost advantages brought by resin procurement but also a long run of stable customer sources.

In April, high anti-PID low-acid EVA film was officially launched, and LECO double glass PV modules also officially entered the market from April 2024, becoming a new module product. This module will reduce the use of EPE film in double glass PV modules to some extent. However, the reliability of this type of module still needs to be tested by market practice. In the short term, the impact on PV-grade EPE film in the next three months is limited. Cost reduction will be a long-term and persistent choice for module manufacturers. The path to reducing module costs can be divided into two routes. The first route is to reduce costs by improving module power and photoelectric conversion efficiency, with the replacement of PERC modules by TOPCon modules being a clear example. We can call this "iterative breakthrough." This route is time-consuming, difficult, requires high investment, and has uncertain returns, and it is also very likely to trigger doubts from peers. The second route is to compress module costs as much as possible under existing conditions, as seen in the continuous updates of LECO, 0BB technology, and breakthroughs in dual EVA encapsulation. This route is less time-consuming, less difficult, has immediate short-term feedback, and is the mainstream approach adopted by enterprises. The continuous changes in the use of film will be an important direction for future module cost control. If bifacial EVA becomes the market mainstream, it may alleviate the pressure on EVA resins to some extent and transfer the pressure to POE resins, leading to further price reductions for POE resins.

There will be a certain degree of market irrationality in both market upswings and downturns, which will affect market participants' overall judgment of market trends, leading to overestimation or underestimation of market prices. However, with the continuous evolution of the market, many PV module makers struggle to break even. Returning to rational pricing and competition is the most critical route to a healthy market cycle. Long-term hovering around the cost line can easily trigger the spillover effect of losses.

Summary of April: Resin production was reduced, EVA inventory remained stable, film inventory increased, film demand decreased, film supply remained stable, resin prices decreased, and film prices increased.

Forecast for May: Resin prices and film prices will both decrease.