How much room for silicon prices to rise?

From the point of view of the demand side, the market prospect of polysilicon is good.First, the growth space of the photovoltaic industry is huge.Under the global market environment of low interest rate in 2020, a large number of overseas projects with financing locked in advance will be put into construction this year, and the global demand of photovoltaic industry will be soaring in 2021.Relevant data show that on a global scale, the demand for new installed PV capacity in 2021 will reach 160~170GW, and hence the demand for silicon wafers will reach 192~204GW, and the demand for polycrystalline silicon materials will reach 55.7~ 592,000 tons.

And according to China's new energy development planning goals, "fourteen five" during the domestic photovoltaic installation will grow rapidly.The New Times Securities Research Institute estimates that the domestic installation volume will increase by 67.3% year on year to 66GW in 2021, and the domestic silicon demand will also increase accordingly. Second, the direct downstream silicon wafer enterprises continue to expand production capacity. According to SolarZoom, wafer companies had about 189GW of production capacity at the end of 2020, and are forecast to expand by 50% year-on-year to 283.5GW in 2021. Moreover, the subsequent components and battery wafers of the industrial chain will also expand their production, but the silicon material manufacturers have not greatly expanded their production capacity, so the difference between the supply and demand of polysilicon and silicon wafers will further increase.Third, many downstream manufacturers sign long-term silicon purchase agreements in advance in order to maintain the stability of the supply chain.More than 80% of the capacity in the silicon industry in 2021 has been booked in advance. In this case, the remaining silicon will be more in demand, and there is the possibility of higher than expected silicon prices. Fourth, according to the inventory situation, the fourth quarter of the scramble to install the silicon inventory of upstream and downstream manufacturers almost left little, silicon demand will reach a peak.

The large increase in demand and small expansion of supply, and the increasingly unbalanced supply and demand relationship will widen the gap between supply and demand, so that in the whole industrial chain of photovoltaic manufacturing industry, the profit will flow from the relatively excess silicon wafer link to the relatively short silicon material link.At the same time, the expected return on investment of domestic central enterprises for photovoltaic projects is reduced, which makes investors have a higher price tolerance for modules in 2021, and provides additional room for silicon prices to rise this year. Industry insiders said that silicon prices may be higher than the market expectation of 85-90 yuan /kg.

However, the chances of the silicon industry repeating the extreme high prices seen in glass in the second half of 2020 are low.

On the one hand, the upstream and downstream patterns of silicon and glass are very different.In 2020, the CR2 of the glass supply side reached the level of 55%, while the CR5 of the component manufacturers located in the demand side only reached 55%, and there is a large long tail.The concentration degree of the downstream glass component industry is obviously lower than that of the upstream glass manufacturers, which makes the demand end do not have enough bargaining power in the face of the highly concentrated supply end, resulting in the surreal rise of the glass price in the fourth quarter of 2020.

By contrast, in the silicon market in 2021, Cr2 at the supply side of silicon will be about 30%, while Cr5 at the demand side of wafer manufacturers will be as high as 85%, and there is almost no long tail market.From the perspective of the market concentration of supply and demand, the bargaining power of silicon material enterprises is far lower than that of glass manufacturers.This suggests that once silicon prices rise beyond a reasonable equilibrium range, wafer manufacturers can limit the range of price fluctuations by means of inventory strategy or utilization rate adjustment.

Silicon and glass, on the other hand, face different demand-side conditions.In November 2020, six domestic photovoltaic enterprises jointly issued the Joint Appeal on Promoting the Healthy Development of the PV Module Market, pointing out that "the 'out of control' of glass supply and price has directly affected the normal production of module manufacturers".The demand end of photovoltaic glass is facing the situation of "almost no new supply + double glass permeability jump at the demand end".In the silicon industry, although the expected increase in supply is limited, the increase on the demand side is mainly due to normal industry growth.One expert pointed out that "the silicon shortage may even accelerate the process of reducing the industry's silicon consumption."