Financial Services Association, May 30 (Reporter Liu Mengran) For the photovoltaic industry chain, which has been tight for a long time at extremely low prices, a slight change may be a sign of an inflection point. Qian Jing, vice president of Jinko Energy (688223.SH), recently told CFA reporters that bottoming out of profits in various sectors indicates that an inflection point is approaching. More than 70% of companies lost money in the first quarter, indicating that the inflection point is imminent. Yang Bao, global marketing president of TRW Solar (688599.SH), believes that demand grew normally in the first and second quarter, and demand is expected to increase further after the installed capacity of terrestrial power plants increases in the second half of the year.

In anticipation of accelerated clearance of backward production capacity and recovery in demand, the photovoltaic sector collectively rebounded yesterday, and many individual stocks hit a standstill. Dongfang Risheng (300118.SZ), Jingao Technology (002459.SZ), Yijing Optoelectronics (600537.SH), and Zhonglai (300393.SZ) increased significantly. According to news, the industry is expected to gradually return to a healthy development path with high costs, accelerated clearance of production capacity with poor technology, implementation of relevant policies, and recovery in market demand.

However, many business people interviewed also said that although production capacity clearance is expected to accelerate, it is still difficult to determine when to reverse it.

New low prices in the industrial chain = inflection point approaching?

In October of last year, after the tender price of photovoltaic modules fell below the “bottom line” of 1 yuan per watt, profit levels in all sectors were generally under pressure, and the price decline was difficult to stop. In the polysilicon segment at the top of the crystalline silicon industry chain, only N-type rod-shaped silicon remained above 40,000 yuan/ton this week. The average transaction price was 41,800 yuan/ton, down 2.79% from the previous month. The average transaction prices for P-type dense materials and N-type granular silicon were 37,300 yuan/ton and 37,500 yuan/ton, respectively.

According to the Silicon Industry Branch, the current price has surpassed the cash costs of all production companies. In the current extremely low price situation, the actual value of polysilicon is increasingly at odds with the price. More and more production companies choose not to sell it, and parking companies are suspending export sales.

The reduction in silicon production is almost on the verge of an arrow. According to the latest weekly review, the Silicon Industry Branch believes that companies have cut production one after another and supply pressure has eased. Polysilicon production is expected to be about 180,000 tons in May, down about 5% from the previous month. Infolink believes that if there is still no significant reduction in the supply-side supply level, the silicon inventory level at the end of the second quarter is likely to face an ultra-high warning line close to three-month production.

The low price wave caused by the conflict between supply and demand is also spreading downstream, and none of the four major links in the crystalline silicon industry chain have been spared. Price crackdowns are also occurring in component processes close to end customers. This week, Beijing Energy Group opened tenders for the 2024-2025 PV module framework agreement. The average bid price for 25 companies was 0.805 yuan/W. Of these, the bid price for a single watt of 9 companies was less than 0.8 yuan, with a minimum of 0.76 yuan/W.

With the accelerated release of production capacity in all links of the industrial chain, the photovoltaic manufacturing industry began a downward cycle in the third quarter of 2023. Judging from the financial reports of listed companies, the PV industry's revenue and net profit to mother declined in the first quarter of 2023 and 2024. Among the leading companies, only Jinko Energy, Artes (688472.SH), and Tianhe Solar had positive net profits. Longji Green Energy (601012.SH), Tongwei Co., Ltd. (600438.SH), and TCL Central (002129.SZ) all lost money in the first quarter.

Qian Jing believes that 2024 will be a test for all enterprises in the supply chain. “In the downturn of the industry, the lack of competitiveness in enterprise innovation or technological routes will be magnified, thus harming profitability.”

However, the agency research report believes that in a harsh market environment, it will also speed up production capacity clearance. With inventory adjustments in the third quarter and supply-side contractions, the supply-demand relationship is expected to gradually improve in the second half of the year.

When surveyed by investors this month, Jingao Technology said that judging from the demand in the global PV market, demand in the PV market is strong this year. Currently, the PV industry is facing an imbalance in the industrial chain. During the industry adjustment period, companies with core technology, sales channels, brand advantages and market competitiveness will be easier to overcome difficulties.

Jingao Technology believes that the pace of industry expansion is slowing down, and backward production capacity is also being cleared, so there will definitely be good performance after adjustments.

Component manufacturers are optimistic about market demand in the second half of the year

Last week, the China Photovoltaic Industry Association held a “Symposium on High Quality Development of the PV Industry” in Beijing under the guidance of the Electronic Information Department of the Ministry of Industry and Information Technology. The conference released a new signal on the development of the industry. According to the agency's interpretation, the symposium presented expectations for “supply-side reforms” of photovoltaics.

Regarding how the industrial chain can regain balance, Qian Jing told the Financial Federation reporter that the main thing is the market's own natural regulation mechanism. Photovoltaics is a means of production. If more electricity is generated, there is more electricity revenue per hour, so pure low price is not the customer's first consideration. The conditions for rebalancing the industrial chain depend on the speed at which inefficient production capacity is removed.

The industry is still optimistic about the new PV installations this year, and the total number of new installations is expected to exceed that of last year. Yang Bao told the Financial Federation reporter that the world is expected to install 650 GW of new PV installations this year. The biggest new market is still China, and the optimistic forecast is probably 260 GW to 300 GW. Among them, the installed capacity targets for domestic ground power plants this year will all increase significantly, which will be the main increase.

As for component price expectations, he doesn't think there will be much change because the supply side is still sufficient. However, at present, module prices have basically reached the end. This is reflected in the overall revenue and profit of the industry in the first quarter. There is very little room for further decline, and for power plant investors, even if the unit price of the module currently fluctuates by 3 to 5 percent, it will not affect the yield of terminal power plants.

In terms of exports, Zhang Haiwei, vice president of Longji Green Energy, said in an interview with the Financial Services Association and other media that he is cautiously optimistic about demand in overseas markets. Due to demand bursts and supply chain cycles, European overseas markets have previously formed large inventories, and recently there has been a Red Sea crisis incident, which has disrupted supplier procurement.

He believes that with the gradual elimination of supply chain disruptions, overseas market demand began to re-enter a healthy growth path in the second quarter.