Production of films and EVA granule will resume after the CNY, with the price increase being imminent. [SMM analysis]

The CNY has ended, and price changes have occurred. Price increase? Switch production? Information asymmetry? Where will the next month go? Please see this analysis.

1. The CNY holiday is over and production resumes in an orderly manner

Upstream granule companies:

During the CNY, upstream granule production companies made significant changes in production. Before the CNY, some upstream granule companies switched to the production of foam-grade EVA and wire and cable-grade EVA, and planned to switch to the production of photovoltaic-grade EVA after the CNY, which has been completed in an orderly manner.

There are more EVA granule companies switching production before the holiday. Upstream granule companies will still be able to meet the planned production schedule of photovoltaic-grade EVA granule as needed until the end of the month, so there is no need to worry too much.

Downstream film companies:

From Jan 31 to Feb 17, film companies have been on CNY holiday and suspended production. Starting from Feb 18, the film factory officially began to resume work and production, with the production progressing steadily. Although the demand from downstream module companies is not strong enough, film companies still continue to receive orders. After nearly half a month of holiday, film companies saw information asymmetry. Worries about the market may exceed the actual market trends. This situation may affect the strategic judgment of procurement and sales, so look at the market rationally is very important.

2.The willingness to increase the price of EVA granule is obvious. Is the price of film going to increase soon?

Upstream granule companies:

After the CNY holiday, the inventory of photovoltaic-grade EVA in upstream granule companies tightened. Even though the demand from downstream film companies is limited, this still results in supply crunch. The price of photovoltaic-grade EVA granule has gradually increased since this week, and the transaction has reached the range of 11,500-12,000 yuan/mt. Considering the current supply and demand relationship, it may continue to rise to a certain extent in the future.

Downstream film companies:

After CNY holiday, demand from downstream film companies is low. Affected by the increase in the cost of photovoltaic-grade EVA granule, mainstream manufacturers are willing to increase the prices of EVA film and EPE film. The number of companies with relevant intentions exceeds 80% of the total. Of course, the increase in EVA-related film production by film companies will not be completed immediately, and the increase plan needs to be demonstrated within the company before it can be implemented. However, due to the severe cost burden and low profit margins of film companies in the past, if the past stable pricing strategy is maintained under the current situation, it may have a more profound impact on the subsequent development and production of the company, especially on companies that have suffered losses in the past. Therefore, although the price increase has not yet arrived, the upward trend has basically been set.

3. Short-term outlook

Upstream granule companies:

For upstream EVA granule manufacturers, it is more economical to produce foam-grade EVA granule and wire and cable-grade EVA granule than photovoltaic-grade EVA granule. February and March every year are an important stage for the cyclical upward trend of the foaming market. The huge profits brought by switching to foaming production can be imagined. For the following month, the supply of photovoltaic-grade EVA particles may decrease. The increase in demand for films in modules boosted demand for photovoltaic-grade EVA granule. Price increases may be the norm for photovoltaic-grade EVA granule in the next month.

Downstream film companies:

For downstream film companies, the probability of price increases has been determined. However, the possible price increase may not be like the EVA granule which are weekly adjusted. The actual price adjustment is more likely to be stepwise and staged. For downstream companies, the heavy cost burden is the main contributor to price adjustment. In the next month, the prices of EVA-related films are likely to increase, but the frequency of adjustments is weak, and the number of monthly adjustments remains to be seen.