Review and Outlook of EVA and PV Film in May 2024

1. Market Review

In May 2024, EVA resin, POE resin, PV film, and backsheet markets all experienced relatively difficult times. This period aligned with market adjustment patterns, supply and demand relationships, market sentiment changes, and the current situation. In May, prices fell, transactions were poor, demand decreased, and supply declined. Will there be a turnaround in June and July?

In May 2024, PV-grade EVA resin experienced a rapid and continuous decline. The price of EVA 28-25 resin dropped from 11,966.54 yuan/mt at the beginning of the month to 10,951.85 yuan/mt, a decrease of over 1,000 yuan per mt, down 8.48% MoM. The price of cable-grade EVA resin fell from 11,462.41 yuan/mt at the beginning of the month to 10,673.19 yuan/mt, a decrease of about 800 yuan/mt, down 6.89% MoM.

PV film performed poorly, with prices continuing to decline. The average price of 420g PV-grade transparent EVA film dropped from 7 yuan/㎡ at the beginning of the month to 6.62 yuan/㎡ at the end of the month. The average price of 380g PV-grade POE film decreased from 10.36 yuan/㎡ at the beginning of the month to 10.32 yuan/㎡ at the end of the month. The average price of 380g PV-grade EPE film slightly adjusted from 7.98 yuan/㎡ at the beginning of the month to 8.02 yuan/㎡ at the end of the month. the extremely low prices disappeared at the end of the month, so the price of EPE film did not show significant changes from May to June.

The price of POE resin were largely stable in May, with price negotiations among producers continuing. As of the end of the month, no significant changes had occurred.

2. Impact of the pullback of PV-grade EVA resin prices

Supply and demand changes are the only factors that impact market prices. When supply exceeds demand, prices decrease; when supply is less than demand, prices increase. From the supply side, comparing the scheduled production of EVA resin at the beginning of May with the scheduled production at the end of May, the upstream producers basically continued the cautious attitude at the beginning of May towards the scheduled production of EVA resin. There has been no large-scale increase in production, and compared to the estimated volume at the beginning of May, there has even been a slight decrease.

In May, PV modules required approximately 123,800 mt of EVA resin. From the perspective of supply and demand as well as inventory, the total market inventory of resin has shown a significant decrease since May. The inventory of EVA resin in petrochemical companies has also been rapidly decreasing. Although the destocking of resin was evident in May, affected by weak downstream demand, the price of EVA resin dropped in June. The demand for EVA film from module makers in May was relatively weak, and film inventory at module makers remained high. To cope with inventory pressure, mu\module makers cut film purchase. Meanwhile, film makers slowed down the purchasing of EVA resin due to relatively sufficient resin inventory and reduced production rates.

Under this impact, the module end bargained down the price of film. Film manufacturers had to reduce the average cost of raw material inventories to avoid excessive losses. However, as prices would inevitably decrease, the amount of EVA resin purchased was not particularly high, allowing companies to buy at lower points to optimize costs. Thus, film companies further pressed down the price of EVA resin, maintaining order through destocking while continuously putting pressure on upstream suppliers. Most upstream resin producers had already undergone equipment maintenance, making further maintenance and destocking unrealistic. Therefore, resin companies had to accept lower prices

The supply and demand, prices, and pressure transmission in the supply chain are directional. This wave of transmission was caused by weak demand from module makers, together with the impact of an oversupply of EVA resin, leading to a price drop. This has been reflected in the market as an overall price decline and market weakness. However, market optimism and pessimism are the results of the impact of supply and demand. Market participants should not be certain that the current market is either "good" or "bad" simply because of price drops or increases. For upstream enterprises, a more rational view of the market and production arrangements can ensure supply. For downstream enterprises, they should pay attention to moderate release of supply. Every participant in the industry chain is indispensable. Failure to reasonably control capacity in the early stage will eventually cause disorderly competition in market prices and supply.

From the perspective of scheduled production, the PV-grade EVA production in May decreased by nearly 10,000 mt MoM. The destocking is inevitable because petrochemical producers will not abandon other EVA products with higher profits due to low-price. Choosing higher profits is often the priority for companies. The scheduled production for June is expected to be further reduced. From this perspective, EVA resin prices will not be in a prolonged slump. The continuous rationality of the market and the production pace will ensure that the destocking of EVA resin will become the most important market trend in the next two months. After continuous destocking below the "safety line," prices will also rise.

3. Are PV film prices rising or declining?

The scheduled production of PV film in May was approximately 480 million square meters, with an overall operating rate of about 52%. Among this, the domestic share was around 93%, while the overseas share was about 7%. PV film producers had little inventory, and module producers experienced an inventory decline in May. However, due to the expected reduction in scheduled production in June, the inventory days remained high, and continued destocking is expected in June. The price of PV film, which increased in April, began to decline rapidly in May and returned to the levels of February and March by the end of May. However, destocking remains one of the important tasks for module producers in June. Together with the impact of reduced end-user installations and weak procurement demand from the module sector, the sales and production of PV film will continue to face severe challenges in June.

PV film prices are roughly composed of "resin prices + processing fees." The processing costs of different films vary due to factors such as additives and labor costs. As resin prices decrease, the bargaining for film by module manufacturers continues. However, the inventory cost of resin for PV film producers accumulated during March and April. The high inventory cost put significant bargaining pressure on PV film producers, leading to price negotiations with module manufacturers.

However, some small producers with stable orders have stood out. From the perspective of their inventory management, "zero inventory management" is a crucial factor ensuring safe production amid the ongoing price downturn. In terms of order management, their product delivery time is slightly slower than that of companies with clear inventory management requirements, but the safety of the company is somewhat guaranteed. They can even impact the market with lower prices. Inventory is a potential supply and demand factor that can cause significant impact, significantly affecting the apparent supply and demand based on production and demand.

The price of PV film is undergoing a noticeable price reduction, which may be rapid and continuous. In June, July, and August, the film prices may experience the following scenarios:

Scenario 1: The film inventories of module makers may decline in June, but the demand for modules will further decline, and film prices may remain stable.

Scenario 2: The film inventories of module makers may decline in June, and the demand for modules in July is the same as in June. The motivation for film makers to restock resin will increase, and the price may slightly rebound.

Scenario 3: Module makers succeed in destocking film in June, and the demand for modules in July is higher than in June. The motivation for film makers to restock resin is more evident, and the price rebound is significant.

Scenario 4: Module makers fail to destock film in June, and the demand for modules will further decline in July. The pressure on film will further increase, which will be transmitted to the resin, leading to a decrease in the prices of EVA and POE resin, even reaching the cost line. However, resin producers can still choose to suspend operations, causing a decrease in supply. The price decrease of resin is limited, and the prices of film will further decrease to a limited extent.

Scenario 5: Module makers fail to destock film in June, and the demand for modules in July is the same as in June. The module inventories will continue to drop in July. However, after the destocking in April, May, and June, the destocking in July will not last long. Due to weak demand, module producers will not stockpile rashly as cash flow will be affected. Therefore, restocking will be mainly based on rigid demand, market sentiment will be rational, and market prices will stabilize.

Scenario 6: Module makers fail to destock film in June, but the demand for modules in July will significantly rebound. Modules producers will restock at the low point of June-July (demand can be sustained) or restock a limited amount of film (film demand may not be sustained). Therefore, the prices of resin and film will both slightly increase.

4. Is the localisation of POE resin a chance or a challenge?

The localisation of POE resin has been achieved, and mass production is imminent. Currently, the demand for PV-grade POE resin remains limited, and the market cannot fully release sufficient demand for PV-grade POE resin. The annual demand for POE resin is about 450,000 mt, which is very limited compared to the demand for PV-grade EVA resin from film manufacturers. Perhaps we should not be overly concerned about the short-term impact on POE prices, but we must be vigilant about the long-term impact on market prices, especially whether there will be a severe overcapacity like other products in the photovoltaic industry chain.

However, judging from the current price trend of PV-grade POE resin, the impact of PV-grade POE resin prices on PV-grade EVA resin prices may not be far off. For end-users, modules with higher cost performance have more advantages, which are closely related to their lifespan and price per watt. For module manufacturers, films with higher cost-performance are key to ensuring their lifespan. For film manufacturers, low-price POE film can balance lifespan and cost. POE has very good technical feasibility and superior physical and chemical properties, and its cost performance is self-evident.

The production capacity expansion is ongoing. POE may inevitably follow the trend of EVA prices, but it could also be affected by costs, maintaining a limited price spread with EVA resin. This could even drive up the market demand for EPE and pure POE films.

The production ramp-up of LECO modules is still advancing. New technologies will also somehow affect POE demand. However, the issues with silver paste affect the dual EVA encapsulation solution. Overcoming the silver paste issue is key to ensuring the stable application of EVA in laser sintering-assisted technology. However, this reliability is still debatable. Based on the current progress and status, mature technical solutions are unlikely to be replaced.

5. Steady and long-term cooperation, working together

The price reduction will be inevitable. In a market with limited barriers, continuous and sustained production expansion will lead to market prices approaching the cost line. Steady and long-term cooperation, working together, and reasonable distribution of production may be issues that all market players need to consider.