Component futures, future price fluctuations or normal

In today’s interdependent supply chain, price changes in each link are like the butterfly effect in the Amazon forest, or a tropical storm is set off across the ocean. The current round of price increases in the industry chain originated from the short-term shortage of polysilicon, and the price per kilogram increased by 24 Yuan, which is equivalent to an increase of 6.5 points per watt, a 2.5 point increase for silver paste, and a 4 point increase for glass, EVA, POE, and other chemicals. These add up to 1 cent, which constitutes the main factor in the price increase. Component companies previously signed orders with 1.3-1.5, face the risk of loss.

Although the overall trend of photovoltaic module prices in the future is still declining, it is a high probability event that similar fluctuations occur during the period.

For component companies and companies that have not signed a collective procurement contract, it is a process of speculating in futures.

Component companies sign orders with owners or EPCs ranging from three months to one year, and then purchase with silicon wafer, battery, and auxiliary material manufacturers. Most of these are spot prices, and the components will be delivered on the delivery date. For component companies and EPC, whether it is a loss or a profit depends on the changes in the industry at this stage.

Crappy component sales tend to be shipped at low prices during downturns, and then there is no capacity to sell during the rush season, while crappy purchases are the opposite.

Smart component sellers or buyers will formulate appropriate pacing strategies and make plans that are most beneficial to them.

In the past few years, a certain component company with very low bid prices in the industry has often been criticized. In fact, before quoting, the company will ventilate with upstream cell silicon wafer manufacturers and auxiliary material manufacturers. These products will be in the future. For the price trend of the company, ask yourself: whether you can reach the price of xx, and finally grasp the price accurately. Although the profit is not very high, it captures the large customers of state-owned enterprises. In addition, sometimes the industry catches up with technological progress and other reasons. It’s an unexpected joy.

The extremely rapid cost reduction in the photovoltaic industry over the past decade has left most people with two illusions:

● The price of components can drop indefinitely;

● Component prices can only fall but not increase. Even if there are occasional rebounds, component companies will often endure most of the pressure of price increases due to fierce competition.

As a result, due to the sudden shortage of silicon materials, the tight component market, and the previous rebound in silicon wafer prices after a sharp plunge, the rapid rise in silicon wafer prices has caused component companies to bear the greatest pressure, while silicon wafer companies have received the most infamy.

Futures are risky. Habits are not taken for granted.

Whether it is for competition purposes, clearing of inventories, or China’s PV parity process, LONGi and Zhonghuan have frequently cut prices in the past six months, and battery manufacturers have followed suit, becoming the biggest driving force for photovoltaic parity online. As a result, the industry’s bidding prices also broke new lows, but the basis of this price comes from-can silicon wafers continue to fall at the bottom of the valley?

When silicon wafer companies lowered the price of silicon wafers, the external reason was that they were affected by the epidemic and brought pressure from the market. This also shows that these price cuts did not come from technological progress. Therefore, when the market improves and the supply of components exceeds supply, the price increase has also become a reality. inevitable.

This wave of price cuts brought about by the new crown epidemic gave the terminal market a wrong signal: that this price cut will still be the same as in the past ten years, only a drop but not an increase.

The long-term lack of contractual spirit of photovoltaic enterprises has caused a lack of risk awareness in the downstream

When module prices have fallen sharply, the signed module contracts will also be required to re-negotiate. The module companies are in a weak position, so they almost always give in.

Insufficient contract spirit leads to the reality of futures in photovoltaic module trading, but no concept of futures. Every time the market fluctuates, it can be won in the form of negotiation, which makes buyers insufficiently predict market fluctuations: even if there is no black swan event such as a shortage of silicon materials, it is inevitable that component prices will rise with rising costs and market rebound.

In the second half of 2018, the overseas market took advantage of the “531” occasion to depress the price of Chinese components of 50 cents, which caused a loss of 20 billion in the 40GW exported by Chinese companies in the second half of the year. Some component companies suffered losses that year. This fluctuation came when , Can the end customer be able to pull the component companies?

A good industrial ecology must either support each other to achieve a win-win situation, or follow market rules, accept fluctuations, drive the market with demand, and regulate the market with price.

The so-called double standard is to stand on one’s own position instead of looking at right and wrong. Whether it is on the manufacturing side or the application side, this trend has become more prominent recently as the industry becomes more concentrated and the pressure on parity increases, and it is very harmful to the industry.

The non-silicon cost (including tax) of each piece of silicon wafer is about 1 yuan, which is converted to 0.16 yuan per watt. Assuming that the component cost is 1.5 and the system cost is 3.5, the non-silicon cost of the silicon wafer accounts for 10.7% of the component, accounting for the system cost. 4.6%, the cost control of silicon wafer enterprises is slightly lower than that of silicon materials. The cost of silicon materials per silicon wafer is about 1.5, which is equivalent to 0.24, accounting for 16% of the components and 6.9% of the system. At present, the two major silicon wafer giants, Longi and Zhonghuan, and the price increase of Tongwei and other battery manufacturers are mainly to absorb the pressure of rising silicon materials. The increase is basically linked to the increase of silicon materials, but this is indeed a discourse. The component companies with the weakest rights have brought blows.

The increase in module prices is a short-term behavior. Generally speaking, the main photovoltaic links are still overcapacity, and the industrial chain is also being eliminated due to accelerated technological development. Generally speaking, it is a long-term trend to reduce prices or provide more valuable products. Therefore, for short-term prices In a volatile situation, investors with conditions can choose to wait and see for a period of time.

The price increase presents the characteristics of the post-parity era

In November 2018, the author predicted the characteristics of the post-parity era (link below). In addition to silicon material being the most important factor, the price increase also reflected the two previously predicted changes:

● The rigid price reduction model in the terminal market will be less sensitive to prices after it is separated from policy control. Photovoltaic manufacturing companies have moved from passively accepting price reductions to actively adjusting prices.

● Excessively low prices are not in line with China’s overall interests, especially when overseas markets have high profits and an increasing proportion. Therefore, in this case, China, which is one of the few remaining countries that have not yet achieved full price parity, cannot be the decisive factor forcing prices to be set. This is also another factor in the price increase: overseas markets can still digest the production capacity after the price increase, and then remove the proportion of distributed and household use. The proportion of China’s photovoltaic ground power stations is not enough to rigidly limit price increases.

Therefore, the overall trend in the future is still that energy prices are getting lower and lower, but like the rise of Bitcoin, unexpected events such as the increase of memory consumption by mining machines that consume a lot of memory will continue to occur.

Problems in the industry and the way to break the situation

Manufacturing end: technology breaks the game

From the perspective of manufacturing, it is still the route of technological disruption. This is also an important reason why the author likes 210 silicon wafers: the inclusive technology of large silicon wafers can bring more value space to the industry chain, allowing enterprises to The gap between price competition and fighting wins development space.

From the current point of view, whether it is 210 or 182 technology, it can greatly reduce the cost of electricity.

As the price of silicon materials rises, the cost-effectiveness of the thinning technology will also become higher.

In addition, it might as well explore more overseas markets and diversify the market.

Application side: thinking upgrade

From the application side’s response to this price increase, the application of photovoltaic power plants still lays emphasis on finance and capital, but not technology. At the same time, due to issues such as operating mechanism and manpower, developers, owners and ultimate owners are not the same entity. People are only responsible for capital and no one is responsible for technology. China’s photovoltaic manufacturing industry has long been ahead of the world, but it has lagged behind in some application areas. A small number of owners still blindly believe in the financial advantages brought by central state-owned enterprises, and ignore the technological innovation of photovoltaic power plants.

In fact, from the beginning or even before the development of large silicon wafer technology last year, the entire manufacturing end has undergone profound changes. This change covers components, inverters, brackets, EPC and other links, even the traditionally conservative equipment. Enterprises have also begun to innovate in products and models.

The industry has entered a new node, and investors should also have new investment ideas: the previous model of solely relying on module price reductions will continue but the effect will become weaker and weaker. In the future, the ways to reduce photovoltaic costs should be diversified, rather than rigid. For the wool of component companies, component prices have dropped from dozens of dollars to more than one dollar. Although the decline is still in proportion, the impact on absolute investment is getting smaller and smaller. Future investment companies need diversified ways to improve efficiency and reduce costs. . The person in charge of the enterprise must think about how to transform from a capital advantage to a technological advantage, and upgrade from technology to model, otherwise they may face the danger of being eliminated at the next outlet.