Confirming its predictions from last October, IHS says the solar industry is experiencing a wafer supply shortage, despite the fact global production rocketed from 47.6 GW in 2014, to 61.9 GW last year. Demand is expected to remain tight throughout 2016.
As such, it estimates all suppliers will reach a utilization rate of 83% this year, while tier 1 players will hit 88%, the highest reported since the boom year of 2010. "With capacity expanding year over year, tier 1 wafer suppliers are forecasted to reach a high average utilization rate of 85% in the following three years," add the analysts in a statement.
Furthermore, both tier 1 vertically integrated players, which use their wafers for in-house production, like Chinas Trina and Yingli, and independent producers, including GCL-Poly, Xian Longi silicon, and Green Energy Technology, are said to be increasingly outsourcing wafer production to their tier 2 partners in China.
"Most vertically integrated players have for a long time opted to not increase in-house wafer capacities and outsourcing manufacturing via long term contracts with minimum fixed volumes and prices adjusted on monthly basis. Given this strong wafer demand and shortage situation, wafer manufacturers do not want to lock-in the price of these contracts, although final pricing is usually linked to payment conditions," writes IHS in a statement released.
The analysts go on to say that due to the strong demand, pre-payment clauses are being applied to many long-term wafer contracts, which could impact module manufacturers balance sheets. Pricing of multicrystalline wafers, both contract and spot, has been on the increase since the last quarter of 2015. Q1 2016 can expect to see further rises in average selling prices (ASPs), they say.
Last week, analysts at Taiwan’s EnergyTrend said they expect wafer prices to peak in February. They added that enough capacity to produce 5 GW of PV cells annually will come online over the course of 2016, which will also limit price increases.
According to IHS, ASPs for multicrystalline spot wafers are US$0.88 per piece, with some suppliers saying these could increase to $0.90. Overall, however, the analysts expect to see stable prices throughout the year. "With the continued decline in polysilicon prices, average wafer gross margin will reach 20% in 2016," they add.
Regarding monocrystalline wafers, IHS forecasts a market increase in total production from 24% in 2015, to 26% this year, on the back of rising rooftop solar PV installations. It adds that prices between multi- and mono-crystalline wafers will be similar, with ASPs for the latter not expected to fall below those of the former. "Overall, IHS forecasts a blended wafer ASP of $0.20 per watt (W) in 2016, a decline of nearly 1% over 2015."
Commenting on monocrystalline in its report last week, EnergyTrend said market oversupply shows no sign of ending, with 15 GW of capacity coming online in 2015, significantly more than the 9.5 GW of demand during the year. It estimated current mono wafer prices at $0.89 per piece, and said it expects prices to gradually fall.