LONGi announced an increase in the prices of M6 and G1 wafers by 11% and 10.3% respectively, following a round of price adjustments a week earlier. July has seen significant price increases throughout the photovoltaic supply chain due to short-term shortage of upstream polysilicon products.
In an interview with Energy1, Dennis She, SVP Global Sales and Marketing at LONGi Solar, saidthat it is critical to maintain market stability during this period of price volatility. Price increases of silicon wafers and modules are the direct result of the rising cost of raw silicon materials. This upward adjustment is more obvious given the price drops of silicon wafers in previous periods. Dennis She stressed that LONGi will not “a quick profit” in the spot market, and the company calls on all parties in the industrial chain to adjust prices rationally, which will be beneficial to its overall and healthy development in the long term.
Energy1 has learned from major manufacturers that the supply of silicon materials, wafers, cells and modules is currently restricted. Some manufacturers are already out of stock, while others are reluctant to sell out. This round of price increases is undoubtedly a challenge for module manufacturers, since the imposition of additional costs will directly affect the wide range of customers they have to supply.
Energy1 has learned from multiple sources that overall product price trends are prone to significant fluctuation at present, with polysilicon, silicon wafers and cells and modules all showing rapid upward trends. In addition, the prices of aluminum and glass have been adjusted from their previously lower levels. In cells, where supply is relatively concentrated, some manufacturers are currently unable to supply module companies, because they themselves are either short of product resources or deliberately reluctant to sell out, depending on their existing policy.
Some module companies have complained to Energy1 that, despite encouraging cell manufacturers to deliver on a daily basis, they are no longer able to control their suppliers’ delivery scheduling and pricing, with the overall atmosphere becoming stressful. Module manufacturers with ‘unreasonable’ industrial chain deployment will need to adjust the price of their modules so as not to lose money.
Energy1 has learned that many customers and module manufacturers have recently been renegotiating prices. For projects that have already started bidding in the first half of this year, assuming a module price of 1.4 yuan per watt, a module manufacturer will certainly not be able to break-even. For some recent power station projects that opened bidding recently, quoted prices have exceeded 1.5 yuan per watt.
What is the reason for LONGi’s continuous adjustment of wafer prices?
Dennis She: “The price of LONGi silicon wafers has fallen sharply in past year. The recent price adjustments of silicon wafers are based solely on the principle of digesting the increase in raw silicon material costs. LONGi have not increased prices due to supply and demand forces.
LONGi calls on the industrial chain to adjust price rises rationally, otherwise it will weaken the competitiveness of photovoltaic energy. Through concerted efforts across the world, the trend of increasing photovoltaic energy over traditional energy has solidified in the past two years. We cannot let traditional fossil energy turn back.
In terms of price control, LONGi will moderately adjust prices within a range that is acceptable to our customers. LONGi hopes to maintain a stable market and a smooth transition when the market fluctuates sharply due to short-term changes in supply and demand.
It is estimated that, by the end of 2020, our capacity for monocrystalline modules will reach 25GW or beyond. In addition, we produce silicon wafers in house, and cell manufacturers are also our strategic partners, so our timeliness of supply and price advantages will be stronger.”
The rise in price of some products (raw and auxiliary materials) has exceeded 10%. If the price increase is too high, the downstream market cannot afford it and the market will change drastically. For example, a price increase in cells will be transferred to modules, and on to power stations. If it’s deemed to be unrealistic for the power station, new projects may be abandoned. Moreover, any rise in LCOE is unfavorable to the photovoltaic industry’s ambitious goal to replace coal power.
According to data from EnergyTrend and PV Infolink, polysilicon prices had shown a downward trend since April, from 49 yuan/kg, to 36 yuan/kg in June, rebounding in mid-June to reach 39 yuan/kg at the end of July. Affected by accidents and maintenance at two polysilicon manufacturers, Daqo New Energy and GCL-Poly, the price has now risen sharply, with the current price of polysilicon over 70 yuan/kg. Coupled with the restricted transportation and logistics at the two companies’ production bases, the supply of polysilicon has become increasingly restricted.
The downstream sector has reacted to the rising prices of polysilicon and has begun increasing prices. In addition to LONGi, another large domestic silicon wafer manufacturer has increased the price of monocrystalline by 0.3 yuan per kg. On July 24, when LONGi completed its first round of price adjustment for silicon wafers, TW Solar also adjusted its prices, increasing the price of a monocrystalline PERC cell by 11% (0.09 yuan).
An insider revealed that, whether the increase in prices of photovoltaic downstream and auxiliary materials will continue would depend on the supply of polysilicon raw material production bases. Previously, a senior manager at GCL-Poly told Energy1 that they needed about 10 days to complete maintenance at their polysilicon base, and now 3-4 days have passed. The affected logistics and transportation at the key production bases of GCL-Poly and Daqo may therefore be back to normal within two weeks.
On the whole, as TW Solar is the only polysilicon manufacturer that plans to expand production next year, and assuming that downstream demand remains high from this August to next year, the supply capacity of polysilicon will remain relatively tight. It is hard to say in the short term whether the price of polysilicon will fall.
Instead of making quick profits, LONGi will give priority to strategic customers when supply is tight
Dennis She: “LONGi is in the market for the long term. We do not make quick money in the spot market. Instead LONGi always prioritizes supply to strategic customers when resources are tight. We hope to give over customers security. Steadiness and reliability are core values of the LONGi’s brand. In this volatile period, we may be unable to serve temporary spot orders. LONGi does not want to see a sharp rise or fall in module prices, since neither is a positive.”
Now that prices in all links of the industrial chain are rising rapidly, LONGi has agreed price adjustment mechanisms with many of its partners, so it is relatively confident to be able to deal with the price rise. Facing a rising market, LONGi will not simply quote the highest price, but will instead use a reasonable price curve adjustment to cope with the drastic market change.
What is the impact of the current price increases on overseas markets?
According to Dennis She, the impact on overseas markets is relatively small, because many overseas customers lock in their orders six months in advance. They need to carry out project development, product financing, spend 2-3 months for project review and approval, and then place module orders, ship and finally install them on the project sites, so the whole cycle can be long.
Energy1 learned that, in the first few months of 2020, module prices were relatively high compared with those in May and June, but were already at a lower level when compared with current module prices. Most overseas projects were signed off in the first half of this year, and several of the large module manufacturers would have set aside some capacity for medium and large scale domestic power plant projects.
Price rises within the industrial chain should be rational, otherwise it will weaken the overall competitiveness of photovoltaic energy
The deputy general manager of a core module manufacturer revealed toEnergy1 that, for domestic bidding projects above 20GW, if module prices rise, they may not be overly concerned, since some projects can be postponed or even deferred to next year. However, for partners who need modules to carry out distributed project construction now, they have a dilemma, with previously agreed prices needing to be renegotiated, resulting in a possible temporary delay in construction of some projects.
Dennis She said that prices within the industrial chain should show a rational upward trend, not an insane price surge. Although such a price surge may be profitable in the short term, it will do great harm to the photovoltaic industry and weaken the overall competitiveness of photovoltaic energy in the medium to long term.
Moreover, when the roadmap of “cost reduction – technological innovation – enterprise and industry scale expansion – continuous innovation” is realized, there will be clear and reliable development opportunities for the PV industry. Therefore, the overall market definitely won’t achieve cost improvement through continuous price increases.
Dennis She said, “In this period of volatile changes in supply and demand and price adjustments in all links of the industry, LONGi’s production capacity, output and sales volume will not change, but production will be adjusted appropriately and matched to existing situations. The industry should gradually return to normal. It is possible that supply and demand will reach equilibrium in the third quarter of next year.”
In terms of product planning and sales strategy, LONGi will still adhere to the logic of new product value – that is, it will promote the new 166mm and 182mm modules step by step as planned, with a small price differential between each. In the end, the product delivered to the customer, will be the most valuable and cost-effective.