Under the terms of the agreement, Tongwei will sell 4,000 metric tons (MT) of polysilicon to monocrystalline PV module manufacturer Longi this year, followed by 21,000MT next year and 30,000 in 2020. Tongwei expects the deal to generate a net profit of CNY132 million ($20.6 million) this year, CNY694 million next year and CNY992 million in 2020, subject to fluctuating polysilicon prices and production costs, according to a statement by the supplier to the Shanghai Stock Exchange.
Tongwei said the arrangement will ensure “stable sales of polysilicon.” The contract sets out a pricing mechanism as well as minimum annual purchase levels, but Tongwei acknowledged market forces and policy changes could affect the ability of the two parties to fulfill the contract on schedule. Tongwei will partly gauge the profitability of the contract based on last year’s polysilicon prices.
The deal follows Longi’s announcement in February of an intent to triple its wafer production capacity to 45 GW by 2020, as part of a three-year plan to have 28 GW of monocrystalline wafer capacity by the end of this year, 36 GW by the end of next year, and 45 GW by 2020. The company also revealed plans this year to set up a 1 GW monocrystalline cell and module production capacity in the Indian state of Andhra Pradesh. And in April Longi signed a $787 million, 39,600MT polysilicon supply agreement with Daqo New Energy, alongside plans to invest $216.7 million in the construction of a 228 MW PV installation in Lingwu, in China’s Ningxia Hui region.
In November, Tongwei announced plans to invest $1.8 billion in the construction of two 10 GW solar cell factories in China, which will bring its production capacity to 30 GW, making it the world’s biggest PV manufacturer. And in March 2017, group subsidiary Sichuan Yonxiang unveiled a new joint venture with Longi to open a polysilicon production facility in China’s Sichuan province with a yearly output capacity of 50,000MT.
In February, independent solar analyst Corrine Lin said Longi’s plans to triple monocrystalline wafer production capacity to 45 GW by 2020 could lead to mono wafer oversupply in the industry in the second half of this year with Lin expecting global demand for mono wafers to hit roughly 40 GW in 2018.
Longi’s 28 GW capacity target for 2018 could help it edge out GCL-Poly as the world’s biggest mono wafer supplier by the end of the year. GCL-Poly is currently aiming for 23 GW of mono wafer production capacity.