IHS: No end to wafer-cell-module production imbalance in sight


Are there any signs of polysilicon prices rebounding?

Edurne Zoco: Asian polysilicon inventory has reduced significantly and almost all Asian tier-1 manufacturers are sold out until April. All Asian producers are running at almost full capacity and tariff-free and low tariff polysilicon to China market is tight for demand now.

Spot pricing has been up. In fact, before the Chinese New Year in February 2016, polysilicon sold for just RMB 90 per kilogram (US$13.90); however, prices are now expected to rise to RMB 125 per kilogram ($19.30/kg) by April 2016, those prices include 17 percent VAT. The main reason behind this rapid price increase is the rush to install projects in China before the June 30 deadline in order to receive 2015 FIT levels of those projects

How are trade barriers in terms of poly continuing to impact the market?

Edurne Zoco: Most negative impact is being felt by the western producers, especially those U-S.-based, on who a very high tariff for exporting to China is imposed. This has continued to put pressure on western producers, in that they are experiencing increasing inventories and low prices. The problem is that 80% of global wafer capacity is in China, according to IHS’ PV Integrated Tracker data. So the possibilities to sell and find customers outside of China are rather limited, even at a very low price level.

Some of the western producers are cutting off capacities or delaying expansion plans. If trade barriers continue, some production plants are at risk to be shut down permanently. An exception among western producers is Wacker, which was tariff exempted until the end of April 2016, being able to deliver polysilicon in China at competitive terms. It remains to be seen if this agreement will expire or continue at the end of this month.

Has the reported multi wafer supply imbalance been rectified? And if so, how?

Edurne Zoco: There have been few announcements in terms of adding additional wafer capacity in recent months. However, only in March, we have seen some changes on pricing of both mono and multi wafers. Multi wafers have seen a small decrease in price while mono wafers actually went actually up on the spot market. Mono prices had been declining all throughout 2015, closing the price gap between mono and multi wafers.

Multi Wafer ASP in March is more flat and showing a slight decrease compared to February. The current expectation is that multi ASPs will go down in April and May due to increasing market uncertainty on demand in the second half of 2016 from big utility scale projects. Mono will be less affected by this dynamic.

Is the wafer/cell/module capacity imbalance, particularly internally within vertically integrated manufacturers, remaining a feature of the market?

Edurne Zoco: In short, yes. When considering the different manufacturing processes and costs of the three nodes, module production is the simpler one and the one needing lower CAPEX. It also takes less time to have a module assembly plant in full operation. Even at times of very strong demand, as it is right now, we are seeing total global module capacity way higher than current demand. With smaller producers more sensitive to market conditions and operating according to OEM agreements generally having lower utilization rates than tier-1 producers.

The situation is much tighter for wafers and cells. In the last two years, the new capacity announced for modules have been higher than for cells and much more higher than for wafers. A big reason for this is that the financial situation of most wafer manufacturers, essentially because of low margins, did not allow them to invest in further capacity expansions and tier-1 module companies have decided to go with a model of outsourcing. Cell and wafer lines require higher CAPEX and manufacturing costs are very sensitive to utilization rates levels.

How has the expansion of Southeast Asian manufacturing impacted on price trends?

Edurne Zoco: This question has several parts. First, Southeast Asian manufacturing expansion has been happening at the same time as relative module price stabilization. A big reason for that is the strong demand during this period, especially for tariff-free cells. Southeast Asia manufactured modules can be sold in the U.S., and this market has higher ASPs than globally and there is still limited capacity of tariff free modules. This helps maintaining prices higher. Also, the production cost for most manufacturers in Southeast Asia is higher than for tier-1 Chinese players. However, in China, the biggest PV market by far, Southeast Asian modules are not present, so the expansion of Southeast Asian manufacturing did not have a price impact. Price increase in the China market is due to the June 30 deadline.

It remains to be seen how the expected decline of the US market and relative slowdown of Global demand expected in 2017 will impact this Southeast Asian manufacturing base, and consequently the price trends in 2017, in new market conditions where cost optimization will be key to mitigate ASP decline next year.

What production stages are delivering the most significant cost reductions?

Edurne Zoco: Based on IHS recent research, the main drivers of cost reduction and that explain tier 1 China cost advantage are scale and high utilization rates, local supply-chain, and product standardization.

On the poly side, one important driver will be the declining trend of poly conversion (g/W), that IHS forecasts to be around 4.5g/W in 2020 and increasing the harvest per CVD reactor. On the wafer side, reducing the kerf by employing thinner wire and smaller grit size is an important area for cost reduction. Then, employing diamond wire based sawing also has potential to reduce the costs.

For cells, PERC and reducing silver consumption is a major process to reduce the costs in cell lines. For modules, reduction of process consumables are the major contributors to the costs in module making, such as reducing the thickness of glass and cost-effective backsheet configuration, amongst others.

These and other trends will be discussed in detail in the free “2016 module market outlook and main supply-chain trends” webinar hosted jointly by IHS and pv magazine on April 12. Register here to take part.

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