India has become the fastest growing photovoltaic (PV) market and replaced the U.K. as one of the top three exports markets for Chinese modules, found EnergyTrend, a division of TrendForce. Based on EnergyTrend’s latest report, the Chinese PV industry exported 12GW of modules during this half-year period, with over 6GW going to three principal overseas markets – Japan, the U.S. and India.
“Going into the second half of 2015, the global PV market will continue to witness strong demand driven by China, the U.S., Japan and India,” said Corrine Lin, analyst for EnergyTrend. The support from these four regional markets will ensure fully loaded capacity for module and cell manufacturers at both the first and second tier. However, module companies will pass over China and Taiwan when setting up additional capacities because of the ongoing PV trade disputes. They will also want to be proximally near the emerging markets, so future production relocation or capacity expansion plans will take place in these countries. This wave of overseas capacity expansion will once again disrupt the supply-demand equilibrium that has been gradually formed in the recent period.
Second- and third-tier polysilicon manufacturers will leave the supply chain as oversupply becomes critical
“The biggest factor influencing the raw material market this year is China closing its polysilicon process trade loophole,” said Lin. “With the tariff exemption rule suspended in August, polysilicon manufacturers are starting to feel the effects of the changing policy environment.” Major American and European polysilicon companies now face high tariffs when exporting to China. Conversely, their Chinese counterparts and South Korean competitors that are in lower tariff bracket have been increasing their capacities to an excessive level. Consequently, the Chinese polysilicon market has still been sufficiently supplied in absence of European and American imports.
Polysilicon prices in China are expected to rise from their current range of RMB 115~118/kg after the suspension of tariff exemption for imports. However, the increase will be marginal since major manufacturers based in western China, such as Daqo and TBEA, enjoy lower electricity costs and can therefore offer highly competitive prices. Based on EnergyTrend’s estimation, the Chinese polysilicon prices will be under a great pressure not to rise above the RMB 125/kg threshold. Also, the market will again be too competitive for second- and third-tier domestic manufacturers that initially anticipated to profit from a bigger price increase following the end of process trade. As for foreign polysilicon companies, they will reduce their capacities as they are shut out the Chinese market due to high tariffs.
Cell and module companies increase their capacities in response to high demand
Since European and U.S. campaigns against Chinese PV imports mainly target cells and modules, large and vertically integrated manufacturers have included these products in their overseas expansion plans. Moreover, India has stood out as a rising PV markets with many manufacturers scrambling to establish a production base inside the country. As large PV companies increase their overseas activities (i.e. investing in new plants, relocating production bases, working with local companies in foreign countries), they also undermine China’s dominance in the global PV production. On the other hand, PV industry clusters in growing markets such as India, Malaysia and Thailand are becoming more mature.
First-tier manufacturers, including Trina, Jinko and JA Solar, have significantly increased their capacities and again pushed up the global PV market supply. Second-tier manufacturers, which are smaller and rely on orders released from the first tier, will be facing an immense price pressure as prices in an oversupplied market will fluctuate widely during the off-season. For Taiwanese cell manufacturers, their attempt raise prices for their products will be limited as they will be competing against large PV companies operating abroad and around the tariff barrier. Taiwanese companies will therefore have to be more flexible in their strategies so that their turnaround in the next half of 2015 will not be short-lived. EnergyTrend also expects consolidation activities, such as strategic alliance and merger, will become more frequent between small and large companies or between module and cell companies.
