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China’s National Energy Administration has issued an urgent notice on Jan. 30, requesting the electricity sector to make timely adjustment to construction plans and re-establish a reasonable timeframe. It also forbids them to rush construction to meet deadlines.
Although the government hasn’t yet decided whether to postpone the installation deadline and for how long it should be extended, it’s certain that the timing of demand in China will be delayed to Q2 and Q3 because of the delayed opening.
On overseas demand side, the inventory draw has not yet slowed for now. However, supply is running a bit short because of suspended production and logistics hiccups. In fact, overseas markets have seen undersupply of modules in early February. India, which has high demand for multi-Si products, will experience significant shortage.
Overall, PV InfoLink projects that the anticipated demand in Q1 will delay to Q2 and Q3 this year. Nevertheless, the 2020 demand level will sit at 134.3 GW as predicted earlier.
The postponed opening in China will cause demand from tendered projects in Q1 to delay.
A delay will occur in overseas demand due to a shortage of modules caused by logistics hiccups.
In response to the epidemic, public sectors in Suzhou and Shanghai have launched policy measures to support affected companies. Local governments in other provinces are expected to follow suit to help minimize the impact of coronavirus on companies.
Polysilicon producers wouldn’t reduce utilization rates unless they undergo equipment maintenance at a large scale, so the overall utilization rates have maintained high. However, some polysilicon manufacturers may have to reduce utilization rate now amid shortage of polysilicon powder caused by logistics and labor issues.
Polysilicon powder shortage, coupled with potential increase in delivery costs, make it highly likely for polysilicon prices for mono-Si and multi-Si wafer to increase. It appears that polysilicon prices for mono- and multi-Si wafers will climb by RMB 1/kg. Yet, their changes depend on how long the coronavirus epidemic is going to last.
Production of multi-Si wafer suffers more from the outbreak because most Chinese multi-Si wafer manufacturers are based in Jiangsu province.
Since Q4 2019, multi-Si wafer segment has been experiencing flagging demand. Consequently, wafer prices drop rapidly, causing some multi-Si producers to close production ahead of time before the Lunar New Year. In the face of coronavirus epidemic, supply of multi-Si wafers will decrease further, and prices will thus remain stable or even rise slightly.
Supply of mono-Si wafer has been running short before the Lunar New Year. As the coronavirus spreads through China, some mono-Si wafer manufacturers have reduced utilization rates. It now takes longer time to deliver goods to the customers due to transport restrictions. Overseas markets also saw short supply of mono-Si wafer because China is the largest supplier, and this issue is expected to worsen later. Having said that, large mono-Si wafer manufacturers’ supply is stable, so mono-Si wafer prices are predicted to stay steady for the short term.
Although quite a few manufacturers have suspended production, the overall utilization rates of mono-Si cell makers are high. Moreover, vertically integrated companies have kept their mono-Si cell lines operating at the same utilization rates during the Lunar New Year holiday, so the production volumes are also high. Multi-Si cell makers, in contrast, have closed during the holiday, and they will postpone opening. Therefore, the production of multi-Si cells is low.
Cell segment suffers less shortage of materials than the module segment. For now, mono- and multi-Si cell prices will remain stable because the situation of logistics and the supply and demand across the supply chain is unclear. Further information on the states of supply chain will be updated after work resumes.
Jiangsu and Zhejiang provinces house large volume of module capacity. Quite a few Tier-1 module manufacturers based on these two provinces have suspended production or operated at a low utilization rate. As workers are requested to conduct self-quarantine after returning to work, the overall production in February will remain low even if China resumes work on Feb. 10 as scheduled. The global module production in February is predicted at 7.5-8 GW. If the logistics issue continues, the production volume might be slightly lower than the predicted level, which is significant lower than the average 10-10.9 GW over the past months.
Module segment, which suffers more severe issues of logistics and production than other segments, is experiencing serious shortage of junction box and aluminum frames. Therefore, it’s not likely to reach the expected utilization rates after market opens.
On the demand side, some module manufacturers are unable to deliver goods to their overseas customers after the global supply chain operations are disrupted. Normally, it’s difficult to adjust prices after modules are shipped, but the coronavirus outbreak could drive up retail prices slightly overseas.
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