The era of photovoltaic "silicon is king" may be over. Silicon prices, which have risen for nearly two years in a row, have attracted great attention from regulators.

According to the Ministry of Industry and Information Technology website on October 9 news, according to the Ministry of Industry and Information Technology, the General Administration of Market Regulation, the National Energy Administration (hereinafter referred to as the "three departments") jointly issued the "Notice on promoting the coordinated development of the photovoltaic industry chain supply chain" (hereinafter referred to as the "Notice") relevant requirements, in order to guide the coordinated development of the photovoltaic industry upstream and downstream, On the basis of organizing the cooperation and docking of the photovoltaic industrial chain and supply chain, the relevant business departments of the three departments have recently collectively interviewed some polysilicon backbone enterprises and industry institutions, and guided relevant units to strengthen self-inspection and standardized management.

Since the beginning of this year, the contradiction between polysilicon supply and demand has become the main contradiction in the development of the photovoltaic industry chain, and the demand for downstream installed capacity has continued to increase, and the price has continued to rise.

"In the past two years, the money-making effect of silicon material is too hot, too fast, and there is no end to making money, and individual companies have no bottom line actions." A photovoltaic industry senior to the first financial reporter said.

Three departments interviewed polysilicon enterprises and industry institutions

The relevant business departments of the three departments said that the prices of some parts of the domestic photovoltaic industry have continued to rise sharply in the near future, leading to violent shocks in the industrial chain and supply chain, including complex international trade environment, repeated impacts of the new coronavirus epidemic, substantial growth in downstream demand, differences in the construction cycle of various links, as well as factors such as some enterprises hyping up prices and individual practitioners hoarding.

The current development achievements of the photovoltaic industry are hard-won, in order to promote the overall sustainable and healthy development of the industry, the three departments put forward work requirements for relevant units:

1) To focus on the overall situation and long-term interests, adhere to upstream and downstream cooperation and win-win, to promote the high-quality development of the photovoltaic industry;

2) It is necessary to effectively strengthen the self-discipline of enterprises, carry out in-depth self-examination and self-correction, consciously regulate sales behavior, and do not engage in hoarding, taking the opportunity to hype up the price behavior;

3) It is necessary to coordinate the construction of photovoltaic stock projects, reasonably release the capacity already built, moderately accelerate the pace of construction of compliance projects under construction, and study and judge the large-scale production of follow-up new capacity in advance to prevent risks.

The above notice was issued on August 17 this year. "Notice" put forward: "The photovoltaic industry has staged supply and demand mismatch, some supply chain price shocks and other situations, individual links appear hoarding and other signs, some places appear to split the market, regional closure and other problems, it is urgent to deepen industry management, guide the industrial chain supply chain collaborative innovation."

Looking back at the price of silicon in recent years, the data shows that since the beginning of 2020, the price of silicon has risen from about 70 yuan /kg to 303 yuan /kg in the third quarter of 2022, a cumulative increase of more than three times, refreshing the new high of nearly ten years.

Beware of the risk of excess capacity after the price reduction of silicon materials

The high price of silicon material has driven the performance of related manufacturers to increase, making silicon material manufacturers "whale" the profits of the industrial chain, and middle and downstream manufacturers are facing cost pressure.

Polysilicon leading Tongwei Shares (600438.SH) on the evening of October 9 released the pre-increase announcement of the first three quarters of performance, the company is expected to achieve a net profit of 21.4 billion yuan to 21.8 billion yuan in the first three quarters of 2022, an increase of 259.98% to 266.71%; Net profit returned to the mother after deducting non-profits was 21.6 billion to 22 billion yuan, an increase of 264.20% to 270.95%.

In terms of quarterly earnings, Tongwei shares in the first quarter of 5.19 billion, the second quarter of 7 billion, and the third quarter of the lowest 9.2 billion. The profit scale of the first three quarters is 2.6 times that of the whole year of 2021, and the average daily income is 78,388,300 yuan, which is comparable to the printing machine.

Tongwei Shares said that during the reporting period, the market demand for high-purity crystalline silicon products continued to be strong, prices rose year-on-year, and the company's new capacity quickly climbed to reach production, achieving a substantial increase in volume profit; The production and sales of the battery business are flourishing, and the profitability is improved year-on-year. Feed business to achieve volume and profit double increase.

Another silicon factory Daqo Energy (688303.SH) in the first half of the revenue, net profit growth as high as 262.16%, 340.81%.

Silicon prices continue to remain high, causing concerns about the decline in the growth rate of new installed capacity. At present, the component side facing the end customer can not fully transmit the cost, and the component price is difficult to decline under the situation of high supply chain prices.

In the past September, the overall supply of silicon material increased quarter-on-quarter, and the effective increment was mainly concentrated in the second half of the year, and the industry is expected to continue to increase the new capacity of silicon material in the fourth quarter. The report released by Guolian Securities on September 30 is expected that domestic polysilicon production in September will increase significantly by 12,300 tons to 74,000 tons, and the increase is mainly from the capacity recovery of maintenance enterprises and the release of new capacity.

Silicon prices or scared the middle and downstream manufacturers, since the second half of the year, silicon wafers, cells, component manufacturers have signed tens of billions of silicon factories, hundreds of billions of long orders.

On September 30, the "new force" Shuangliang Energy Saving (600481.SH), which has developed rapidly in photovoltaic business in recent years, released a public security report saying that the company signed an estimated purchase amount of 45.450 billion yuan of silicon material orders with four sellers such as Xinte Energy Co., LTD.

Earlier, on September 9, JinkoSolar announced that it purchased about 382,800 tons of polysilicon products from the relevant subsidiaries of Tongwei Shares, and the total amount of this contract is estimated to be about 103,356 million yuan.

"Silicon is king" is actually a helpless move by silicon wafer, battery, and component manufacturers in the face of declining gross profit margins.

First financial reporter statistics show that including Longi Green Energy (601012.SH), TCL Central (002129.SZ), Shanghai CNC (603185.SH), Jinkosolar (688223.SH) and other silicon, battery and component manufacturers gross profit margin in the first half of the year all declined. They were down 5.1, 4.0, 4.1 and 10.7 percentage points year-on-year, respectively.

Bid up the speculation price can make short-term hot money, but also to see that the long-term silicon material surplus situation will not be absent, at most late. Once the supply of silicon production capacity is worry free, and the price returns to a reasonable range, excess production capacity will make the industry competition and profit pattern loose, silicon factories that do not have integrated competitiveness face the operating pressure, and small-scale manufacturers are forced or inevitable.

Source: China Business News