On September 5th, the top ten photovoltaic glass manufacturers held an emergency meeting and reached a unanimous agreement to implement a closure and production reduction plan, with a reduction rate of up to 30%. According to industry sources, this production reduction action is proposed by the leading company in the industry, Xinyi Solar Energy, in conjunction with Flat Glass Group.

Affected by this news, the stock prices of many photovoltaic related companies rose at the opening today (September 5). Among them, Goodwe Power Supply Technology increased by more than 9%, Cybrid Technologies Inc. increased by more than 5%, Henan Ancai Hi-Tech, Jinlong Technologies, Risen Energy, Ginlong Technologies, Shenzhen S.C New Energy Technology Corporation, Flat Glass Group, and Longi Green Energy all followed the upward trend.

Companies: Limited short-term impact.

"It is difficult to achieve supply-demand balance in the glass segment in the short term." Multiple sources expressed the above views on this production reduction news.

As an investor, a reporter from the Scientific and Technological Innovation Board News contacted the Secretary Office of Changzhou Almaden Co., Ltd. The staff said, "This meeting did involve the participation of 10 companies, and Changzhou Almaden also participated. However, this is currently only a discussion stage and will be implemented in stages, not to achieve a target all at once. Currently, the company's production is normal."

During the performance conference on September 4th, the Chairman of Flat Glass Group, Ruan Hongliang, mentioned, "Based on the company's own situation and market environment fluctuations, we have reduced production and did not participate in the joint production reduction. In addition, the price of photovoltaic glass is affected by cost fluctuations, downstream market environment, and supply-demand factors." He mentioned that the reduction in photovoltaic glass production is influenced by factors such as kiln age and supply-demand environment, and currently the willingness of downstream customers remains stable compared to July and August.

It is understood that photovoltaic glass is located in the middle of the industrial chain, with characteristics of high strength, high transmittance, and high weather resistance. It is an important accessory in the photovoltaic industry chain and the main consumable for encapsulating photovoltaic modules.

According to the research report of Zheshang Securities, photovoltaic glass ranks second in component costs and has the highest proportion of auxiliary materials costs, exceeding 10%. And due to the increase in the permeability of double-glass modules, the proportion of photovoltaic glass in the components' costs further increases.

Regarding the specific impact on the downstream, Lu Jinbiao, the secretary-general of the SEMI China Photovoltaic Standard Committee, told reporters from the Science and Technology Innovation Board Daily that "the 30% reduction in photovoltaic glass production capacity still meets the demand for component production, and does not have a negative impact on the control of production costs of photovoltaic components. In addition, the dilemma of the photovoltaic industry is that in order to compete for orders below the cost, prices are being aggressively lowered, and the high or low cost has lost reference."

An official from the securities department of Trina Solar told reporters from the Science and Technology Innovation Board Daily that "price impact is influenced by multiple factors, and photovoltaic glass is only a part of our auxiliary materials. Our previous orders are still being executed, and the reduction in production may primarily affect new orders."

At the same time, industry insiders mentioned that component manufacturers currently hold a strong position in price negotiations, which may affect prices. The aforementioned Trina Solar official also stated that the company has multiple customers for photovoltaic glass procurement, not just one. "As a leading company, our prices are certainly lower than the prices publicly announced in the market. Because our own demand is relatively large, we do have the ability to negotiate in this area."

- Photovoltaic glass supply and demand mismatch is evident.

Industry insiders told reporters from the Science and Technology Innovation Board Daily that the attention given to this production reduction reflects the obvious mismatch between supply and demand for photovoltaic glass, and that capacity adjustments are urgently needed.

Jue Zhu's team from China Securities stated that photovoltaic glass, due to its characteristics of heavy assets, long construction cycles, continuous production, and large inventory space, usually has a "step-like" release of capacity, making it more prone to temporary supply and demand mismatches compared to other auxiliary material processes when component production rapidly increases.

From the disclosed interim report, although the top-listed companies in the photovoltaic glass industry still achieved double growth in revenue and net profit, in the second quarter, due to the reduction in component production, photovoltaic glass prices declined, causing several listed companies to experience a decline in performance compared to the previous quarter.

Taking Flat Glass Group and Zhuzhou Kibing Group as examples, the semi-annual revenue and net income of the two companies both increased. However, looking only at the second quarter, the revenue and net income of the two companies both decreased compared to the previous quarter. Among them, Flat Glass Group's Q2 net income attributable to shareholders was 0.739 billion yuan, an increase of 28.83% year-on-year, and a decrease of 2.78% compared to the previous quarter; Zhuzhou Kibing Group's Q2 net income attributable to shareholders was 0.369 billion yuan, with year-on-year and quarter-on-quarter decreases of 30.91% and 16.42%, respectively.

According to calculations based on glass costs by SMM, the current glass industry has reached the stage of complete industry loss costs, and is continuously approaching the industry's cash cost loss line.

In terms of prices, according to SMM data, after a slight rebound in April-May, the prices of photovoltaic glass have shifted from increases to decreases. In September this year, domestic photovoltaic glass prices fell again, with the low price of 2.0mm single-layer coated glass dropping to 12.5 yuan/square meter.

Regarding inventory, according to Zhuochuang data, the inventory of photovoltaic glass has exceeded 35 days, reaching the highest inventory level since July 2021. "Under the pressure of high inventory, it is expected that companies will only increase their willingness to offer discounts, and transaction prices are expected to decrease slightly," industry insiders said.

Industry adjustments are imminent, but the turning point has not yet appeared.

"The adjustment of the leading companies in the photovoltaic glass industry is a good example for photovoltaic enterprises," said Lv Jinbiao, Joint Secretary-General of the SEMI China Photovoltaic Standards Committee.

Recently, the photovoltaic industry has undergone multiple adjustments, with many companies choosing to reduce annual shipment expectations or cut production capacity.

On September 2nd this year, according to the official WeChat account of the China Photovoltaic Industry Association, the association organized the "Photovoltaic Power Plant Construction Bidding Price Mechanism Symposium" in Beijing. Representatives from power generation companies such as China Huaneng Group, State Power Investment Corporation, China National Energy Group, State Grid Corporation of China, and representatives from photovoltaic manufacturing companies such as Longi Green Energy Technology, Trina Solar Co., Ltd., JinkoSolar, Sungrow Power Supply, Jinko Solar, ATS, Chint New Energy, and Tongwei Co., Ltd attended the meeting.

The participants at the above-mentioned meeting called for the optimization of the bidding mechanism for the construction of photovoltaic power stations, such as: using a two-step bidding process, using a reasonable average price as the reference price, incorporating product and technical innovation, product quality reliability, intellectual property rights, sustainable operational capabilities, performance capabilities, social responsibility, ESG, self-reliance and controllable, green supply chain, etc. into the scoring system.

In terms of prices, following the news of price increases from the two leading silicon wafer giants, Longi and TCL Zhonghuan, on the same day, on September 4, the Silicon Industry Sub-Association released the latest transaction prices for solar-grade polycrystalline silicon, with production reaching a new interim low this week and prices rising across the board.

However, the leading companies have not provided a clear answer as to when the industry will reach a turning point.

At a recent earnings conference, the chairman of Longi Green Energy, Mr. Zhong Baoshen, believes that every link is currently under sustained operational pressure, prices are expected to rise, but the timing for further adjustments remains unclear.

TCL Zhonghuan indicated on a recent interactive platform that in the second half of 2024, the global photovoltaic industry is still at the bottom of the cycle, intensifying the competitive game.

"Currently, the most challenging aspect is the price. Although the fluctuations are significant, at least for now, it can be determined that the price is at the bottom of the range, which is quite certain." A person from a leading company told the reporter at the Star Daily.

Regarding the current start-up situation, the aforementioned person further mentioned, "In terms of modules, the start-up rate of leading companies may still be higher because their cost control will be better. Currently, the major reduction or suspension of production is mainly second and third-tier companies, companies that cannot calculate costs.

In response, Mr. Lv Jinbiao, the Joint Secretary-General of SEMI China Photovoltaic Standards Committee, believes that "in the future, all enterprises should proportionally reduce their loads, especially leading companies should play a regulating role, where the top companies with high loads are the ones losing the most by competing for price reduction."