Polysilicon remained in surplus in H1, silicon wafers prices will bottom out. How to schedule production for the next year?

Polysilicon:

Analysis of recent polysilicon market: At the end of April and the beginning of May, under the impact of cost pressure, the cost-performance ratio became a more significant factor, leading to an increase in the market share of mixed and inferior polysilicon. Mixed polysilicon was the first to fall below the 40 yuan/kg, with prices dropping to 39 yuan/kg. Later, some mixed polysilicon' prices fell to 35 yuan/kg.

H1 Polysilicon Market Review:

•The overall polysilicon market remained in a state of oversupply, with inventories continuously accumulating. By May 2024, polysilicon inventories had approached 300,000 mt and were expected to continue accumulating in May and June.

• Polysilicon supply has shown a MoM decrease, first reflected in May, mainly because prices have fallen below the full cost line for most manufacturers. The cash cost line for some small producers and old production capacities has also been breached, leading to production halts and maintenance for several manufacturers.

• The market share of leading polysilicon manufacturers continued to increase, with new production lines being commissioned and ramping up rapidly.

• Currently, except for the top 5 manufacturers, other polysilicon producers suffered loss.

Production Forecast:

• May 2024 - August 2024: Polysilicon scheduled production will continue to decline, reaching its lowest point by August 2024—mainly due to the previous polysilicon surplus. The cost and inventory pressure of polysilicon will lead to an increase in maintenance.

• September 2024 - November 2024: After the previous round of inventory reduction, polysilicon production will gradually resume with the commissioning of new capacities. This period is also the traditional peak season, leading to increased demand and scheduled production.

• December 2024 - January 2025: Together with the end of stockpiling and the impact of the Chinese New Year holiday at the end of January, production will sharply decline.

• February 2025 - April 2025: With the launch of new polysilicon projects and the recovery in demand, production will start to increase. However, this will be followed by an oversupply.

Price Forecast:

• May 2024 - June 2024: SMM believes that the average price in June will fall to 32 yuan/kg, with the lowest price of N-type material possibly falling below 30 yuan/kg at certain times.

• June 2024 - October 2024: The initial price drop below the cost line will also trigger a reduction in polysilicon production, leading to a decrease in inventory and a price rebound. However, SMM believes that a strong price rally is unlikely.

• October 2024 - January 2025: After experiencing year-end fluctuations, polysilicon prices will decline again as production capacity is released.

• January 2025 - April 2025: After the holiday, demand will begins to recover, boosting prices.

Silicon Wafer:

Analysis of Silicon Wafer Situation in May: The cost pressure on silicon wafers continued to increase, with current losses reaching approximately 0.3 yuan per wafer. Integrated manufacturers raised their share of outsourcing to save costs. The decline in silicon wafer prices is slowing down, and SMM believes that silicon wafers prices will bottom out.

Detailed Breakdown of China's Monthly Silicon Wafer Production Schedules (May & June 2024)

• N-type: The N-type market is further expanding, expected to reach 78% by June.

• P-type: The P-type market is further shrinking, expected to drop to 22% by June.

• 182mm: Silicon wafer 182mm are still the mainstream choices in the market.

• 210mm: The proportion of silicon wafer 210mm remains relatively stable from May to June; the proportion of 210R has increased.

• Top-tier enterprises: In May, due to significant inventory pressure and severe cash cost losses, as well as lower downstream PV module output, the production of leading silicon wafer enterprises were expanded from 974GW to 1171GW.

Production Forecast:

• May 2024 - June 2024: Silicon wafer production schedules will continue to decrease significantly. The previous inventory pressure is relatively high, and market confidence is insufficient, leading to low purchasing enthusiasm together with severe losses.

• June 2024 - September 2024: Silicon wafer production will begin to recover, especially reaching a high level in August and September, benefiting from previous inventory clearance and increased year-end demand.

• October 2024 - January 2025: Silicon wafer production will remain low. From the end of the year to the eve of the Chinese New Year, downstream procurement demand will be weak.

• February 2025 - April 2025: With the start of new polysilicon projects in the new year together with the recovery of demand, silicon wafer production will begin to increase, but this will be followed by an oversupply.

Price Forecast:

• May 2024 - June 2024: SMM believes that the monthly average price of silicon wafers in this period will be around 1.1 yuan per piece, with the lowest price falling below 1.1 yuan per piece, but the price of 1 yuan per piece found solid support.

• June 2024 - October 2024: Losses and inventory reduction in the previous two months will cause a rebound in silicon wafer prices, together with the year-end rush to install, leading to a generally high prices before October.

• October 2024 - January 2025: The increase in operating rates and the decrease in year-end demand will cause prices to decline continuously.

• February 2025 - April 2025: After the Chinese New Year, demand will recover, and prices will rebound again.