SMM Assists in Reasonable Module Pricing: Outlook on PV Material Price Turning Points and Module Cost Index Launch Conference Coming Soon! [SMM Analysis]

SMM, Oct 31: The photovoltaic industry faced a difficult situation in 2024, with the supply-demand imbalance intensifying throughout the year. On one hand, the imbalance was due to the slowdown in demand growth, and on the other hand, the deteriorating international trade environment posed significant challenges to the photovoltaic industry. The current market competition was fierce, and the continuous operating losses throughout the year severely impacted major photovoltaic companies, preventing capital and technological investments from forming a virtuous cycle of effective output. Additionally, hit by the downward price trend, producers suffered losses in 2024. To jointly maintain the healthy development of the industry, upstream and downstream sectors began to strengthen cooperation, with a growing sentiment to stand firm on quotes. SMM believed that the market started to use module production costs as a key anchor point to assist in reasonable module pricing.

Since the beginning of 2023, the issue of losses and continuous profitability decline in the four major material segments of the photovoltaic industry chain had become increasingly prominent. This phenomenon was usually caused by multiple factors such as supply-demand imbalance, fierce market competition, and fluctuations in raw material prices.

Firstly, the price of polysilicon was affected by market sentiment and excess supply-demand relationships, leading to a continuous decline. The price of N-type polysilicon dropped from 70 yuan/kg at the beginning of the year to 42 yuan/kg today, a decrease of 40%! The current polysilicon prices had already crossed the cash cost line including tax for most polysilicon producers, resulting in thin or even negative profits. Entering Q4, the end of the rainy season caused electricity prices to rise in some regions, further increasing polysilicon costs, with gross margin losses reaching at least 20%!

At the same time, downstream PV wafer producers also faced similar market pressures. Due to rapid capacity expansion, the market was oversupplied, putting pressure on PV wafer prices and further squeezing profit margins. At the beginning of 2024, due to continued weak demand, PV wafer prices fell below the "cost line," further damaging market confidence and accelerating price declines. With the current PV wafer price at 1 yuan/piece, PV wafer producers faced significant cash cost and full cost losses, with single-piece full cost losses exceeding 30%!

The issues in the solar cell and module segments were equally concerning. With cyclical changes in market demand and technological upgrades, solar cell producers faced immense pressure between prices and costs. Since the end of 2023, the oversupply issue of solar cells had become severe, with prices continuously approaching or even falling below the cost line! Starting from Q2 2024, although solar cell costs decreased rapidly, weak demand led to accelerated inventory buildup, fierce competition among enterprises, and frequent low prices. By mid-2024, solar cell producers entered a stage of negative cash flow, with high inventory levels and significant shipment pressure for specialized solar cell manufacturers! With the current solar cell price at 0.27 yuan/W, the full cost loss for specialized solar cell manufacturers had exceeded 22%!

The price competition for modules was even more intense, especially with the uncertainty in global market demand, making it difficult for module prices to stay above profitability levels. Under the pressure of high inventory, fierce market competition, accelerated switch from P type to N type modules, and declining upstream cost prices, module transaction prices had significantly dropped since the beginning of 2024. Module producers were forced to lower prices to clear inventory, with transaction prices once penetrating the cost line of enterprises. The price of N-type TOPCon182 modules dropped from 1 yuan/W at the beginning of the year to 0.65 yuan/W on Oct 30, a decrease of 35%! Low-priced, low-quality modules flooded the market, and frequent low bid prices affected spot cargo transaction prices. With the current module prices, both specialized module producers and integrated module producers faced cash cost and full cost loss pressures. The full cost loss for integrated module producers exceeded 10%, while the full cost loss for specialized module producers exceeded 5%!

Weak demand posed numerous challenges for photovoltaic enterprises to navigate through cycles. In such a difficult market environment, continuous profitability losses severely impacted the healthy development of the industry. The instability of polysilicon prices directly led to increased costs for downstream products, while intensified market competition for PV wafers and solar cells further compressed manufacturers' profit margins. The decline in module prices forced enterprises to expand market share while facing continuously weakening profitability.

How to break the deadlock? How to stop the decline? The SMM photovoltaic research team plans to bring a live broadcast on "Reasonable Cost Assessment for Profit and Loss, A Healthy Trading Environment to Quickly Navigate Through the Trough" on Friday, November 8, 2024, at 14:00. The live broadcast will invite senior analysts from the four major material segments of the SMM photovoltaic industry chain to analyze recent market dynamics, price trends, supply-demand status, and production cost structures of each segment, share SMM's outlook on PV material price turning points, and launch the SMM Module Cost Index. SMM calls for the photovoltaic industry chain prices to return to reasonable levels and strives to achieve sustainable development for the entire photovoltaic industry!