[SMM Annual Review] Silicon products and module prices plummeted in 2023. Polysilicon supply growth will slow down in 2024, installed capacity to hit a new high

2023 was the "first year" when the reshuffle of the domestic photovoltaic industry began. There were severe surpluses in various main material links, with prices fluctuating. Enterprises ran at a loss. Prices of polysilicon, an upstream raw material, fell by 68.78% annually in 2023, silicon wafer prices dropped by 52.97% annually, and module prices plunged by 44.75% ..... Meanwhile, China's photovoltaic industry is expanding too fast. Medium and low-end overcapacity have become increasingly prominent. The price of polysilicon has been falling due to the oversupply, and the price of modules has reached the era of "1 yuan"...

Amid the increasingly fierce competition in the photovoltaic industry, has upstream polysilicon price bottomed out? SMM reviewed the photovoltaic market in 2023 and make an outlook for the market in 2024.

Polysilicon prices plunged in 2023

As the upstream raw material of the photovoltaic industry chain, polysilicon has finally lost its glory in 2022 due to oversupply in the market in 2023. The price has experienced many rounds of rises and falls. As of December 29, 2023, dense polysilicon prices fell to 59 yuan/kg, a decrease of 130 yuan/kg or 68.78% from 189 yuan/kg on December 30, 2022.

Polysilicon price trends

In early January 2023, domestic polysilicon prices continued the "collapse" trend at the end of 2022. With no improvement in terminal demand, polysilicon prices fell to a low of 120 yuan/kg; but in the second half of January and in early March 2023, with the recovery of some downstream demand before the Chinese New Year holiday, the leading polysilicon companies held meetings to discuss and held back goods, and even stopped shipments. The market suddenly fell short of polysilicon which, coupled with price hikes by leading companies, helped the price of polysilicon rebound, reaching a peak of 230 yuan/kg. However, as the price of polysilicon continued to rise, downstream resistance gradually increased, resulting in high inventories. Polysilicon inventory increased rapidly from 60,000 mt to 118,000 mt.

From March to July 2023, the overall polysilicon market was in a state of "oversupply", and leading companies were forced to reduce prices and stockpile inventory under the pressure of inventory and funds. Polysilicon prices immediately experienced a slump with mainstream transactions prices falling to 58 yuan/kg, and prices for some large orders even dropped to 55 yuan/kg. At that time, the price of polysilicon had already caused some second- and third-tier companies to suffer losses. Meanwhile, downstream crystal pulling companies began to stock up after discovering that prices hit bottom, causing polysilicon inventories to continue to decline - the inventory fell to about 70,000 mt in March. However, due to the end of stockpiling by crystal pulling plants and the collapse of silicon wafer prices, demand decreased, and polysilicon inventory increased to 130,000 mt.

From the end of July 2023 to September 2023, the polysilicon market once again ushered in a rebound. At the end of July, the polysilicon market rebounded slightly due to destocking and cost support. With the competitive price wars in the module market, module production far exceeded demand, driving up demand in all upstream links. Many domestic polysilicon projects reduced production due to price and other reasons, resulting in supply falling short of expectations. And prices rose immediately beyond market expectations. Before that, many silicon wafer companies, including LONGi and Zhonghuan, snapped up a large quantity of low-priced silicon resources in the market, causing a further shortage of polysilicon. The price of polysilicon once rose by about 81 yuan/kg. Downstream companies increased purchases, causing polysilicon inventory to fall rapidly to about 20,000 mt.

Silicon wafer companies' raw material inventories once approached the 100,000-mt mark. Polysilicon prices deviated from actual market demand.

In October 2023, as downstream solar cell and silicon wafer companies collapsed, polysilicon market demand and sentiment weakened. Participants were unprecedentedly unanimous in their attitude towards the decline of polysilicon prices. Purchases were reduced, and polysilicon inventory recovered to about 40,000 mt. Polysilicon inventories continued to increase amid oversupply, once reaching 74,000 mt on November 17, 2023. The market sentiment was slightly pessimistic.

At the end of November 2023, as the price of polysilicon continued to fall, the price gradually approached the psychological price of the downstream. Some leading crystal pulling plants even had discounts for purchasing goods. Downstream purchasing interest improved. Some small customers also had difficulties in purchasing high-quality materials. Demand for low-quality polysilicon was poor. Most of the polysilicon companies’ 60,000 mt inventory were low-quality cargoes.

In December 2023, the price trends of high-quality and low-quality polypolysilicon diverged. The price of high-quality materials remained strong, while the price of low-quality materials continued to fall. However, although the supply of N-type polysilicon from major manufacturers was still tight with leading companies continuing to support the market, the continuous price reduction and production reduction in all downstream links prompted the crystal pullers to push for lower prices. Prices of high-quality polysilicon remained on the decline with the quotation price of N-type polysilicon falling to 67 yuan/kg at the end of 2023.

Polysilicon production increased by more than 80% in 2023. What are the expectations for 2024?

According to SMM data, as of December 31, 2023, China's polysilicon production totaled 1.5041 million mt, an increase of 687,100 tons compared with 2022, or 84.1%. SMM believes that it is mainly due to the substantial increase in new production capacity. According to SMM statistics, as of the end of 2022, China's polysilicon production capacity reached about 1 million mt. In 2023, China's polysilicon production capacity increased to about 2.78 million mt, an increase of approximately 178%.

Compared with the substantial growth in polysilicon supply, terminal installed capacity and its direct downstream silicon wafers also increased less. According to SMM statistics, domestic installed capacity was 390GW and silicon wafer output was 580GW in 2023, with year-on-year increases of 68.8% and 76.8% respectively. Both were below the 91% increase of polysilicon. Among them, the silicon wafer production of 580GW translated to about 1.34 million mt of polysilicon consumption. It can be seen that the oversupply of polysilicon in 2023 was very obvious.

It is worth mentioning that in the first month of 2024, domestic silicon wafer production schedules are expected to continue to decline. In January, domestic silicon wafer production schedules are expected to drop to around 56GW, a month-on-month decrease of 7.9%. Meanwhile, affected by market demand and transformation, N-type wafer production is scheduled to be approximately 33GW, accounting for 58.9%.

As early as the second half of December 2023, many silicon wafer companies in the market reduced production due to worsening downstream demand and sentiment. The domestic module production schedule in January is expected to fall below 40GW, which will further increase the pressure on solar cells. Currently, cell profits have been compressed to the extreme. In particular, P-type cells plants are almost at a loss, and many cell production lines have experienced production reductions. Procurement, production reduction or even production suspension by many solar cell plants had a significant negative impact on the silicon wafer market.

Meanwhile, as the market environment weakens, the decline in silicon wafer prices has also affected the production enthusiasm of some companies to a certain extent. The market transaction prices of P-type silicon wafers for 182mm and 210mm are as low as 1.9 and 2.9 yuan/piece.

The polysilicon market is bearish in January 2024 with expectations of lower silicon wafer production schedules. However, the supply of high-quality cargoes in the market is still slightly tight. Recently, a leading domestic polysilicon factory has announced a price increase for N-type polysilicon. The order price of some high-quality N-type polysilicon has risen to 72 yuan/kg, and prices of several orders rose to 75 yuan/kg. But the overall current price of polysilicon remains stable.

In 2024, SMM understands that according to the polysilicon production plans disclosed by various companies, the nominal polysilicon production capacity will reach about 3.17 million mt by the end of 2024, which will meet the installed capacity of 1,400GW. In 2024, the growth rate is far less than that in 2023. But overcapacity will ease as many plants being pushed to losses will lower operating rates due to polysilicon prices dropping to their cost levels and inventory pressure.

China’s newly installed photovoltaic capacity hit a record high in 2023 and will continue to grow in 2024!

There is no doubt that the decline in product prices in the photovoltaic industry chain in 2023 has greatly stimulated enthusiasm for terminal installations. The market has made good expectations for China's new photovoltaic installed capacity in 2023. Cao Renxian, chairman of the China Photovoltaic Industry Association and chairman of Sungrow, said that China's photovoltaic market will continue to expand in 2023, and new installed photovoltaic capacity will hit a record high. By the end of 2023, China's cumulative installed photovoltaic capacity reached 5.61 kilowatts, accounting for nearly 20% of the total installed capacity.

Wang Bohua, honorary chairman of the China Photovoltaic Industry Association, also raised the forecast for China's new photovoltaic installed capacity for the second time, from the previous 120-140GW to 160-180GW. It said that China's centralized and distributed PV development are simultaneously carried out, and large base projects will become an important support for the growth of centralized projects. However, affected by uncertain factors such as consumption, power market transactions, and source network construction progress, the future market will be more hard to predict. Previously, SMM also mentioned that solving the problem of grid consumption and land space on the terminal power demand side in the future also deserves attention.

Regarding the forecast for global new photovoltaic installed capacity in 2023, Wang Bohua, honorary chairman of the China Photovoltaic Industry Association, raised the forecast from the previous 305-350GW to 345-390GW. The overseas markets are mainly Europe, the United States, India, Brazil, etc.

Zhang Jianhua, Secretary of the Party Leadership Group and Director of the National Energy Administration, said that the national new wind power and photovoltaic installed capacity target for 2024 will be about 200 million kilowatts, which is 25% higher than the 2023 target.

CITIC Securities predicts that the scale of new domestic photovoltaic installed capacity will reach 200-210GW in 2024, and the year-on-year growth rate may slow down to 5%-10%. Before consumption bottlenecks are effectively resolved, installed capacity growth may enter a relatively stable new normal.