Review of the Domestic Polysilicon Market in H1 and Outlook for H2 [SMM Analysis]

According to SMM data, domestic polysilicon production in H1 2024 was approximately 1.0021 million mt, up 50.6% YoY from H1 2023. Polysilicon inventory increased by 177,000 mt compared to the end of December, while downstream PV wafer production consumed about 840,000 mt of polysilicon.

In the span of half a year, the trend of polysilicon surplus has been evident, and prices continued to decline. After experiencing the H1 market, has the price of polysilicon hit the bottom, and what will the H2 market look like?

H1 Supply and Demand Price Review

Supply and demand side, polysilicon was in a state of oversupply and inventory accumulation almost every month in H1. However, in March, due to the end of the Chinese New Year holiday, downstream crystal pulling factories showed a significant increase in operating rates, together with some leading producers implementing full production strategies, leading to a relief in the polysilicon balance. The surplus for the month decreased from over 30,000 mt to 5,600 mt.

Regarding polysilicon production, before April, due to certain profits for polysilicon producers together with the commissioning of new capacities at the beginning of the year, polysilicon production was on an upward trend. In April, the high scheduled production of PV wafers in the previous period boosted market sentiment, and monthly polysilicon production reached a peak of 181,200 mt. After that, due to polysilicon prices falling below the cost line and the pressure of previous inventory accumulation, polysilicon began to experience continuous production cuts, and production volume declined all the way.

From the actual inventory of polysilicon, in H1 2024, the polysilicon market was mostly in a stock accumulation phase. However, in January and February, due to limited upstream operating rates and downstream replenishment after the Chinese New Year, polysilicon inventory was relatively low. The only significant destocking phase occurred from late May to early June. According to SMM, the main reasons for this destocking were, on one hand, low market purchasing sentiment in the earlier period leading to significant raw material consumption, resulting in concentrated replenishment during this phase. On the other hand, the announcement of production cuts by leading producers in Sichuan led to a bearish sentiment among downstream and traders, causing some companies to hoard, which reduced inventory. However, the producer later canceled the maintenance plan, causing market inventory to rise again.

From the price trend, at the beginning of the year, due to factors such as replenishment, rising electricity prices, and producers supporting the market, polysilicon prices saw a slight increase. After stabilizing in March, polysilicon prices "collapsed" again, falling below the cost line of all producers. After experiencing price support from hoarding in early June, polysilicon prices slightly declined again in mid to late June, but the decline was limited due to cost support.

H2 Supply and Demand Price Outlook

Currently, polysilicon has been lingering below the cost line for a long time, and its price has remained stable for several days. Will polysilicon prices rebound in H2? Has polysilicon hit the bottom?

For polysilicon prices in H2 2024, SMM predicts an overall trend of "rising first, then falling."

Before the year-end rush to stock up, SMM believes that polysilicon prices have already bottomed out and may even rise later. However, after the year-end demand surge ends, polysilicon prices may continue to decline, possibly falling below the current price bottom around the Chinese New Year.

Overall, SMM estimates that the total supply of polysilicon in H2 will be around 890,000 mt. Demand side, SMM expects consumption to be around 850,000 mt, indicating an overall inventory accumulation trend, but the accumulation will significantly improve compared to H1.

For specific months, in July, polysilicon was still in the regular inventory accumulation phase. However, entering August, due to further production cuts by polysilicon producers, supply decreased. On the demand side, polysilicon began year-end stocking, and the expected listing of polysilicon futures (expected in October) led to the entry of spot and futures traders, triggering additional demand for polysilicon. From August to October, there was continued destocking of polysilicon, and during this period, polysilicon prices were also expected to recover. Subsequently, the resumption of production by some manufacturers and the ramp-up of new major bases led to a recovery in polysilicon supply, together with a decrease in downstream demand, causing polysilicon prices to fall...

Summary

Overall, in the short term, polysilicon is indeed expected to see some favorable market conditions, but the scale and duration are limited. In 2024 and 2025, end-user demand is also expected to continue to rise significantly (global installations expected to reach 444GW in 2024 and 540GW in 2025), but the fundamental issue of polysilicon overcapacity has not been effectively addressed, and the industry is still in a relatively early stage of clearing. The future of the upstream photovoltaic market remains bright, but the road ahead is challenging!