Closing higher for two consecutive trading days, can the upward trend of polysilicon futures prices continue?

Last week, polysilicon futures prices showed a rebound trend, closing higher for two consecutive trading days. On May 9, the most-traded PS2506 polysilicon futures contract closed at 38,175 yuan/mt, with a daily increase of 5.7%.

Li Xiangying, an analyst at Guosen Futures, believes that the recent rise in polysilicon futures prices is a correction of the previous oversold conditions.

"The polysilicon futures prices were previously oversold, falling below the cash cost line of enterprises and trading at a significant discount to spot quotes," Li explained. The spot quote for polysilicon is around 37,000 yuan/mt for mixed-grade material, while the delivery brand for polysilicon futures is higher-quality dense material. Although the supply and demand situation for polysilicon has not improved, there is upward momentum after the oversold prices.

"The time period for the market-oriented reform of new energy electricity prices is approaching, and the rapid contraction of end-user order demand has triggered expectations of negative feedback in the industry," said Wang Yanqing, an analyst at China Securities Futures. The fundamental situation of polysilicon remains weak, leading to the previous decline in futures prices below the cash cost line of mainstream enterprises. Therefore, the current futures prices have some correction momentum.

From the perspective of the industry's cost curve, Zheng Feifan, an analyst of non-ferrous metals and new materials at CITIC Futures Research Institute, introduced that at the beginning of 2024, the cash cost line for the most advanced 1.5 million mt of capacity in the industry was around 42,000 yuan/mt, mainly from several leading manufacturers. With technological progress and a decline in raw material prices, by the end of 2024, the cash cost line for the most advanced 1.5 million mt of capacity in the industry had fallen to around 38,000 yuan/mt. In 2025, polysilicon production processes are expected to continue to be optimized, with costs potentially falling further, and the cash cost line is expected to drop to 33,000-34,000 yuan/mt.

In addition, the registration of polysilicon warrants is still in its early stages, and the quality requirements for delivery brands are high. The deliverable resources in the market are relatively concentrated, with spot and warrant factors supporting near-month prices, resulting in a "backwardation structure" in the futures market. As the delivery time for the PS2506 contract approaches, the market is also watching whether the futures market can alleviate the high inventory pressure in the spot market.

According to SMM data, as of the week ending May 9, the social inventory of polysilicon was 257,000 mt, down 1.9% WoW, but still at a high level.

"When the absolute price falls below the key level of 35,000 yuan/mt, the market believes it has fallen below the industry's average theoretical cash cost, which may indirectly affect the speed at which spot inventory is transferred to the futures market," said Liu Yixian, an analyst at Hongze Research. Currently, downstream demand for polysilicon is low, and the market is showing an active destocking pattern. From the perspective of the supply-demand gap in the production schedule for "polysilicon-wafers," although polysilicon is currently in a slow destocking phase, inventory levels in the polysilicon segment remain high, with spot cargo still being sold at a volume discount.

From a fundamental perspective, domestic polysilicon production remained at a low level of 95,000 mt in April. Zheng Feifan believes that polysilicon companies are currently operating at a loss overall, and supply is expected to remain tight in May. However, the market still has some concerns about production resumptions at major plants during the rainy season. On the demand side, production scheduling for solar cells and modules remained high in March and April, driving a rebound in the operating rate of silicon wafers. However, crystal pulling enterprises mainly focused on digesting inventories, resulting in relatively limited procurement of polysilicon. The PV "installation rush" in May may come to an end.

Looking ahead, Li Xiangying stated that the current fundamental situation for polysilicon remains unfavorable, with little improvement expected in the short-term weakness of demand. The trend in spot prices will depend more on supply-side adjustments to the operating rate. "Futures price trends follow changes in supply and demand, as well as cost conditions in the spot market." Li Xiangying believes that, in the absence of significant changes in the supply-demand pattern, polysilicon spot prices are likely to continue fluctuating around the cost line.

"From the current market trading logic, polysilicon futures prices may have short-term rebound momentum, with potential expectations for production cuts also providing support to the futures market." Wang Yanqing cautioned that overall polysilicon inventories remain high, and there is significant downward pressure on prices from downstream buyers, leading to sluggish spot transactions. Under the negative feedback from the industry chain, the upside room for polysilicon prices is limited.