© begemot 30 dreamstime.com Analysis | December 15, 2015
Overseas capacity expansion will cause moderate price slide
The downward revision of income tax credit for photovoltaic systems for next year in the U.S. has resulted in a general installation boom, which is prolonged by the planned feed-in tariff (FiT) reduction by the Chinese government also in 2016.
The global PV demand is therefore expected to remain strong and generally unaffected by next year’s off-peak season. Corrine Lin, analyst for TrendForce’s green energy division EnergyTrend, said companies at different levels of the value chain are seeing rising orders, so the current price uptrend will persist to the end of this year. After the next Chinese New Year holidays in February, however, governments of major markets will have reduced their FiT rates for PV power plants; and large PV firms will begin producing their products overseas (outside China and Taiwan). These factors will constrain prices of PV products and cause a moderate decline. Polysilicon prices will continue their decline next year due to oversupply Despite demand being at its highest this year, the Chinese polysilicon market for the fourth quarter still has a serious oversupply problem and is facing tremendous downward price pressure. The country’s inventory level is still too high even though tariffs have blocked imports from major U.S. suppliers, forcing them to cut back their production. This is because domestic suppliers have greatly expanded their capacity this year and will continue to do so in the next. Lin added that Chinese polysilicon prices may again fall to the cost price level during next year’s off-peak season since seasonality effects tend to hit polysilicon suppliers first. Demand is strong in the multi-Si wafer market but weak in the mono-Si Multi-Si wafer manufacturers are seeing demand outstripping supply – a rare situation in recent years. Since suppliers have not made definite plans to expand their production for the 2015~2016 period, multi-Si wafers may be in much tighter supply next year compared with products from other parts of the supply chain. Multi-Si wafer prices will thus keep rising unless downstream cell and module markets encounter a slump that will force wafer companies to adjust their prices accordingly. Low demand has resulted in high inventory level for mono-Si wafers this year. However, EnergyTrend expects mono-Si wafers will become more competitive next year because their costs will be brought down by an overall increase in production capacity. Mono-Si wafers will also be aggressively priced next year so that they can compete with multi-Si wafers for market share. Hence, future price declines in the mono-Si wafer market are expected to be larger than those in the multi-Si market. Entire supply chain to face sliding prices after the next Chinese New Year holidays as pressures mount in both cell and module markets Due to strong demand in the fourth quarter, cell and module markets will reach their long-awaited supply-demand equilibrium and see further price increases. Though the supply of both cells and modules seem tight, companies are operating at their full capacity to fulfill visible orders. This situation will last to the first quarter of next year. To avoid U.S. tariffs, PV firms have set up new overseas bases for cell and module production, excluding China and Taiwan. Their factories in Southeast Asia and other countries will begin rolling out products at the start of 2016. At the same time, the governments of major markets (China, the U.S., Japan and the U.K.) will implement their plans to reduce subsidies for PV power plants. These factors will constrain prices in the downstream markets, halting their rise in January. Furthermore, demand in Japan and China will temporarily slow down after the Chinese New Year holidays, so prices across the supply chain are expected to slide at that time. Cell companies, which have just managed to turn profit at the turn of the year, are expected to face serious challenges in 2016. ----- More can be found at Trendforce.