The polysilicon market has not yet welcomed a turnaround? — H1 Review and H2 outlook of the domestic polysilicon market

According to SMM, domestic polysilicon production in H1 2024 was approximately 1.0021 million mt, up 50.6% YoY. Polysilicon inventory increased by 177,000 mt compared to the end of December, while downstream PV wafer production consumed about 840,000 mt of polysilicon. Over the half-year period, with the evident surplus trend, polysilicon prices continued to decline. Has the price of polysilicon bottomed out, and what will the H2 market look like? Has the polysilicon market welcomed a turnaround?

H1 Supply & Demand and Price Review

Supply and demand side, polysilicon was in a state of supply surplus and inventory accumulation almost every month in H1. However, in March, due to the end of the Spring Festival holiday, downstream crystal pulling plants notably increased operations and some leading producers implemented full production strategies, leading to a relief in the supply and demand balance. The surplus in March decreased from over 30,000 mt to 5,600 mt.

As for polysilicon production, before April, as polysilicon producers still had certain profits and new capacity was commissioned at the beginning of the year, polysilicon production was on an upward trend. In April, as the high scheduled production of PV wafers in the previous period boosted market sentiment, the monthly production of polysilicon reached a peak of 181,200 mt. However, after that, due to polysilicon prices falling below the cost line and the pressure of previous inventory accumulation, polysilicon began to experience continuous production cuts and reductions, with production declining all the way. From the perspective of polysilicon inventory, the polysilicon market was mostly in a stock accumulation phase in H1 2024. However, in January and February, due to limited upstream operating rates and downstream restocking after the Spring Festival, polysilicon inventory was relatively low. The only significant destocking phase occurred from late May to early June. According to SMM, low market purchasing sentiment in the earlier period and substantial consumption of raw material inventory resulted in concentrated replenishment during this phase. The announcement of production cuts by leading producers in Sichuan led to a bearish sentiment among downstream and traders, triggering some stockpiling behaviour, which caused inventory to decrease. However, the producer later cancelled the maintenance plan, and market inventory rose again.

From the price trend, it can be seen that at the beginning of the year, under the influence of stockpiling, rising electricity prices, and producers holding prices firm, polysilicon prices saw a slight increase. However, after stabilising in March, polysilicon prices experienced another "collapse," falling all the way below the cost line of all producers. After experiencing support from stockpiling at the beginning of June, polysilicon prices stabilised, but in mid to late June, they saw another slight decline. However, due to cost support, the decline was limited.

H2 Supply & Demand and Price Outlook

Currently, polysilicon prices have lingered below the cost line for quite some time and remained stable for several days. Will polysilicon prices rebound in H2? Has polysilicon hit the bottom? Has the polysilicon market welcomed a turnaround? For H2 2024, SMM predicts an overall trend of "rising first, then falling" for polysilicon prices. Before the year-end rush to stock up, SMM believes that polysilicon prices have already bottomed out and may even rise later. However, after the year-end demand surge ends, polysilicon prices may continue to decline, possibly falling below the current bottom around the Spring Festival. Overall, SMM estimates that the total supply of polysilicon in H2 will be around 890,000 mt. Demand side, SMM expects consumption to be around 850,000 mt in H2, indicating an overall inventory accumulation trend, but the accumulation will significantly shrink compared to H1.

Specifically, in July, polysilicon inventory still accumulated. However, entering August, due to further production cuts by polysilicon producers, supply will decrease. Demand side, year-end polysilicon stockpiling will begin, and the expected listing of polysilicon futures (expected in October) will lead to the entry of spot and futures traders, triggering additional demand for polysilicon. From August to October, polysilicon stocks will continue to drop, and polysilicon prices will also recover. Subsequently, the production resumption by some manufacturers and the production ramp-up of new major bases will lead to a recovery in polysilicon supply while downstream demand will decrease. Therefore, polysilicon prices will fall.

Summary

Overall, polysilicon is indeed expected to see some positive trends in the short term, but the scale and duration are limited. End-user demand in 2024 and 2025 will continue to rise significantly (global installations are expected to reach 444GW in 2024 and 540GW in 2025), but polysilicon overcapacity has not been effectively improved, and the industry is still at a relatively early stage of clearing out. The future of the upstream photovoltaic market is still bright, but the road ahead is challenging!