According to Zhito Finance APP, Sinolink has released a Research Report stating that from May to September 2024, Photovoltaic Glass prices will be on a downward trend, with the entire Industry suffering losses (leading companies reported a single-quarter loss in Q3). Positive changes are emerging on the supply side, estimating a 26% marginal exit ratio of surplus capacity. With low supply and a visible inventory turning point, there is hope for a price turning point, especially as downstream component manufacturers are expected to replenish stock after the Spring Festival. Furthermore, from a stock price catalyst perspective, attention should also be paid to other policies affecting the supply side of the Photovoltaic Industry.

Sinolink Securities' main points are as follows:

Review of Photovoltaic Glass prices in 2024: A unilateral decline from May to September, gradually stabilizing in Q4.

Photovoltaic Glass is produced through a continuous production process, making it impossible to start and stop instantly. Reviewing the entire 2024 Photovoltaic Glass price trends: since mid-March, the Industry Chain has gradually heightened expectations for an increase in Photovoltaic Glass prices, which began to materialize in early April. This was primarily due to a recovery in demand after the off-season in January-February and a significant month-on-month increase in component production in March, while changes in the supply side of Photovoltaic Glass remained minimal in the short term, leading to continuing decline in inventory under stocking expectations. Due to simultaneous pressure from both supply and demand, Photovoltaic Glass prices were nearly on a downward trend from May to September; by the end of November, the price of 3.2mm coated Photovoltaic Glass was 19.5 yuan/square meter, down 25.7% from the high of 26.25 yuan/square meter in early April.

This round of price decreases reflects two characteristics: (1) The amplitude is large; the last significant drop in Photovoltaic Glass prices can be traced back to the first half of 2021; the price of 3.2mm coated Photovoltaic Glass fell from 42 yuan/square meter at the beginning of 2021 to 22 yuan/square meter by the end of June 2021, a drop of 47.6%. However, at that time, prices were heavily influenced by strict supply controls in the Industry (new Photovoltaic Glass capacity was strictly controlled before December 2020, and the revised "Cement and Glass Industry Capacity Replacement Implementation Measures" in December 2020 specified that no capacity replacement scheme was required for Photovoltaic rolled glass). The price rose from 24 yuan/square meter in mid-2020 to a high, indicating that the price drop in the first half of 2021 was more a reflection of changes in supply policy, bringing the Photovoltaic Glass Industry down from "excessive profits" to average profits. In 2024, without substantial previous increases, prices are on a unilateral decline, and leading companies reported a single-quarter loss in Q3.

(2) Multiple price decreases occurring mid-month are evident; generally, adjustments to Photovoltaic Glass order prices occur at the beginning of each month (that is, the previous month’s price negotiations with downstream component manufacturers reflect price adjustments at the beginning of the current month). However, from June to September 2024, there were multiple price decreases during the middle of the month, indicating a pessimistic outlook on supply and demand and price expectations within the Industry Chain. As supply-side capacity gradually clears, prices stabilized in December, with the price of 3.2mm coated Photovoltaic Glass dropping to 19.25 yuan/square meter at the beginning of the month; throughout the month, prices remained stable.

The marginal exit ratio of excess production capacity has reached 26%, and multiple positive changes have emerged on the supply side of the Photovoltaic Glass Industry.

In early September 2024, leading enterprises in the Photovoltaic Glass sector, along with ten major Photovoltaic Glass companies, agreed to reduce production by 30% due to a monthly decline in Photovoltaic Glass prices. From July to August, cold repairs in the industry have accelerated significantly, with a total of 34 lines cold repaired in H2 2024, and cold repair capacity reached 21,930 tons. Additionally, from July to September, the industry has reduced the daily melting capacity by approximately 8,177 tons at blocked kiln openings, estimating the marginal exit ratio to be around 26.3%.

Several significant changes have emerged on the supply side: (1) By the end of 2024, the nationwide daily melting capacity of Photovoltaic Glass in operation totals 92,490 tons/day (considering some devices have blocked kiln openings, the actual capacity is lower), which has decreased below the industry’s daily melting capacity at the end of last year (98,530 tons/day). Unlike float glass, the Photovoltaic Glass Industry sees an increase in demand; (2) The proportion of shut-down small furnaces is high, with a total of 34 lines cold repaired in H2 2024, including 21 lines of furnaces with ≤650 T/D cold repaired, with cold repair capacity reaching 8,730 tons. This is expected due to the higher unit energy consumption and unit cost of small furnaces, which were built earlier, leading to doubts about the possibility of recovering small furnace capacities.

(3) Once the Photovoltaic Glass furnace is normally ignited, it requires about 8 years of operation before cold repair; however, this downturn has seen multiple large furnaces that have not been operational for long undergoing cold repairs. In H2 2024, 13 furnaces with >650 T/D were cold repaired, and many second- and third-tier companies have also experienced early cold repairs, such as Chongqing Wujun's 900 T/D being repaired after 1 year and 9 months of operation, Heyi Chongqing's 900 T/D after 8 months, Shanxi Rishengda's 1000 T/D after 5 months, Tangshan Feiyuan's 1000 T/D after 6 months, Guangxi Dejin's 1200 T/D after 6 months, and Hubei Yijun's two 1200 T/D after 2-3 years of operation; (4) Leading enterprises are actively cold repairing part of their capacities to adjust the industry’s supply and demand, such as Flat Glass Group cold repairing 3 lines and Xinyi cold repairing 2 lines.

The inflection point in inventory has appeared in the industry, with expectations for a price turning point, and attention is focused on the downstream component factories’ stocking demands after the Spring Festival.

With low supply and an inventory inflection point having appeared, there are hopes for a price turning point. According to data from Zhuochuang News, industry inventory declined for two consecutive months from November to December, reaching 1.6742 million tons by the end of December, down 17.3% from the end of October. Generally, the period from January to February before the Spring Festival is a traditional off-season for component production. After the Spring Festival, downstream component factories will likely initiate stocking demands, which is expected to continue driving the Photovoltaic Glass Industry to reduce inventory, anticipating a price turning point.

From a catalytic perspective, other policies on the supply side of the Photovoltaic Industry should also be closely monitored, such as the Ministry of Industry and Information Technology's release of the "Normative Conditions for the Photovoltaic Manufacturing Industry (2024 Edition)" in July 2024, which proposed requirements for comprehensive electricity consumption and reduction electricity consumption for existing and renovated projects related to polysilicon, silicon rods, silicon wafers, solar cells, and components. There are hopes that subsequent energy consumption policies will continue to be implemented, accelerating the clearance of high-energy-consuming capacities from the supply side of the Photovoltaic Industry.

Risk Warning

The supply and demand in the Photovoltaic Glass Industry continue to deteriorate; international trade risks in the Industry; risks of price fluctuations in raw materials.