On 20 April, polysilicon futures prices hit the daily upper limit, with the benchmark contract rising by approximately 3,500 RMB/ton, followed by two days of relatively firm trading. On 23 April, polysilicon futures prices rose before retreating, with the benchmark contract closing at 42,925 RMB/ton. The tug-of-war between strong market expectations and weak actual conditions has led to significant short-term volatility in polysilicon futures prices.
Key Drivers of the Rise
On 17 April, the Ministry of Industry and Information Technology, the National Development and Reform Commission, the State Administration for Market Regulation, the National Energy Administration and other departments jointly convened a symposium on the photovoltaic industry to deploy measures to regulate competition within the sector. The meeting called for strengthened inter-departmental coordination and concerted efforts to continuously deepen the governance of the photovoltaic industry. It urged the full-scale advancement of comprehensive ‘anti-involution’ measures, including capacity regulation, standard-led development, innovation-driven growth, price enforcement, quality supervision, mergers and acquisitions, and intellectual property protection, to promote high-quality development in the sector. Unlike the symposium organized by the Ministry of Industry and Information Technology on 3 July last year, where participants were predominantly upstream enterprises in the photovoltaic supply chain, the focus of this meeting shifted to downstream power generation groups.
This shift in the composition of participating enterprises may indicate that the policy focus is now more inclined towards addressing issues from the downstream and end-user sectors, aiming to phase out outdated production capacity by raising quality and conversion efficiency standards; attention is also being paid to whether the module sector can achieve industrial upgrading and capacity regulation through quality improvement and efficiency gains. Although the meeting did not disclose specific ‘anti-race-to-the-bottom’ measures and the focus was on the downstream and end-user sectors, if the module sector takes the lead in reducing overcapacity and drives price recovery through quality and efficiency improvements, the pace of adjustment will be relatively moderate.
Following the symposium convened by the Ministry of Industry and Information Technology on 3 July last year, driven by expectations of “anti-overcapacity” measures and the requirement to “sell above full cost”, polysilicon spot prices rose rapidly, pulling futures prices up sharply from 30,000 RMB/ton to over 50,000 RMB/ton. If we refer to market conditions following last year’s “anti-overcapacity” campaign, polysilicon prices may return to levels above full cost and are likely to challenge the 50,000 RMB/ton mark once again. It should be noted that following this meeting, the rise in polysilicon prices has been reflected first in the futures market, whilst spot quotations have remained unchanged for the time being. In the coming period, attention should be paid to changes in corporate quotations, as well as whether the opening of hedging and arbitrage opportunities following the rise in futures prices will boost companies’ willingness to ramp up production.
No Significant Changes in Fundamentals
Currently, there are no significant changes in supply and demand, and the futures-spot price spread provides hedging opportunities for upstream enterprises. The deep contango market structure reflects the pricing disparity between weak current conditions and strong expectations. On the supply side, weekly polysilicon output has stabilized at 19,300 tons, with production expected to remain largely stable in April. Domestic demand remains less than optimistic. Last week, downstream quotations continued to fall, with wafer, cell and module prices all under downward pressure; this reflects both falling costs and lackluster demand. Data from relevant institutions indicates that in April, wafer production schedules fell slightly to 48.73 GW, cell production schedules edged down to 44.3 GW, and module production schedules retreated to 32.15 GW. Based on April production schedules across the upstream and downstream sectors, the supply side’s output of 85,000 tons corresponds to demand of 43 GW, suggesting that polysilicon inventories are expected to continue building up. Although the futures market is performing strongly on the back of robust expectations, the spot market and near-month contracts more accurately reflect the current weak reality. At present, the polysilicon market exhibits a deep contango structure, with spot prices higher than near-month futures contracts, which in turn are higher than far-month futures contracts. The price spread between the spot market and the near-month 2605 contract is approximately 3,000 RMB/ton, whilst the spread between the 2605 and 2606 contracts is approximately 5,000 RMB/ton. in May–June, primarily due to the concentrated cancellation of warehouse receipts in May.It is estimated that approximately 30,000 tons of warehouse receipts will flow into the spot market, further increasing supply pressure and causing the price of the 2605 contract to come under downward pressure. There is a possibility of a rebound in subsequent production; attention should be paid to whether any substantive policy measures will be introduced to constrain enterprises’ production and sales volumes.
Looking ahead, the supply-demand balance currently remains in a state of oversupply. The sharp rise in futures prices has opened up opportunities for hedging and arbitrage, and upstream enterprises’ enthusiasm for production is expected to increase further, meaning supply pressure will remain high. If production continues to rise, it will not only suppress spot prices but also lead to an increase in warehouse receipts, thereby exerting pressure on the futures market. If demand fails to recover significantly, the oversupply situation will persist or even intensify.
From the perspective of ‘anti-involution’ expectations, if we refer to last year’s market conditions, once polysilicon prices return above full production costs, they are likely to approach the 50,000 RMB/ton threshold from a technical standpoint. Polysilicon futures prices still have upward momentum, but with no significant improvement in fundamentals for the time being, the oversupply situation will continue to exert downward pressure on prices. As expectations and reality have yet to align, price fluctuations remain substantial.
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