Blog: Frank Heijckmann


Prices keep rising, a balance is still a long way off


The first quarter of 2021 is over and it has become clear that our predictions have come true. The prices of panels are rising in a straight line. For instance, at the beginning of the year we had to pass the threshold of € 0.20/Wp and later of € 0.21/Wp. And the trend remains rising, but how long will this continue?

To understand this we need to dive a bit deeper into the matter. At the moment the price is mostly affected by the price of poly-silicon and the relationship between supply and demand. Below, you can see the price trend of poly-silicon this year.

As you are probably aware, wafers, and in turn cells, are made of poly-silicon. The prices of other semi-manufactured products also continue rising, e.g. copper, silver, EVA. However cells represent a much more considerable part of the total cost price. Last week the price rose further to 170 RMB/kg. The entire market is wondering how long this can still continue. Daqo, a large manufacturer of poly-silicon, expects it to settle around 170RMB/kg, however TongWei expects a new balance around 200 RMB/kg. The Chinese manufacturers of modules are exerting ample pressure on the suppliers of poly-silicon, however this does not make an impact yet. Our idea is that the demand for poly-silicon well exceeds the supply. At the beginning of this year the following numbers were expected: a total production capacity of panels of approximately 180 GWp, a global demand for modules of approximately 190 GWp, and a comparable capacity of poly-silicon in 2021. After the tremendous price rise of, first, glass and now poly-silicon, we can draw no other conclusion than that the capacity of the production of panels expanded faster than the supply chain has been able to keep up with. And as long as the global demand for solar panels remains high, this will not change rapidly. Of course, the production capacity of poly-silicon is increased, however the pace is too low at the moment.

We even understood from China that the Chinese government is interfering. After all, high prices of panels could undermine the climate objectives of the government. Experience teaches us that official interference will always have an effect. However, the question is how soon we will start noticing anything of it in Europe. Some say that projects will be postponed due to the higher prices and that, consequently, the demand will drop and hence the prices. However, many manufacturers have already been sold out up to and including Q3, because many of their customers have taken positions. We are not observing a fall in demand and we pick up few signals in the market that point to this. Others say that the prices have to fall because it happens every year. After all, the prices follow a fixed pattern of falls and rises…

We understood that there are manufacturers who are switching off their production lines because they cannot ask competitive prices for their panels with the high prices of wafers and cells. Not producing anything is cheaper than producing at a loss. If this would already be the case then this would imply that the prices will only rise further.

What is also remarkable at the moment is that the price of cells rises less rapidly than the price of silicon. This can be attributed to the fact that independent cell manufacturers are trying to prevent the ‘Big 5’ (Longi, Jinko, Trina, JA and Canadian) from further expanding their own cell production. These Big 5 become even bigger and more powerful and I expect the rest to mostly disappear or be swallowed up. Hence, the future of these cell manufacturers does, to a considerable degree, depend on the willingness of the Big 5 to purchase cells from them. By keeping the price relatively low (read: have it rise less rapidly than the price of poly-silicon) they hope to secure their future sales.

It is interesting to see to what degree the Big 5 have integrated vertically and to what degree they are affected by the rising price of poly-silicon. I created the following overview for this:

It goes without saying that this is a snapshot in time, all manufacturers are scaling up, hence this changes quickly. A number of quick conclusions can be drawn:

  • They are all suffering from the higher prices for poly-silicon on account of the fact that it is purchased from third parties;
  • Because Longi finds its origin in the production of wafers, they have the highest production of wafers. The rest more or less geared the relevant production to their own production of cells;
  • They all need to purchase cells from third parties in order to optimally deploy their production capacity of modules.

We understood from China that all manufacturers are suffering financially because of the sharp rise in prices of semi-manufacturers. They are not producing poly-silicon (yet). Large parties in the world, like us, that realised in time that prices could rise further and consequently anticipated this in a timely fashion through large purchases, put considerable pressure on the margins at the manufacturers. In the coming quarters the large manufacturers will make every effort to ‘salvage’ their figures for 2021; hence, this is an additional reason not to expect any falls in prices at the moment.

So it will still take some time. I expect the prices to rise further. Therefore, it is not recommended to wait too long with purchases for the projects that you still intend to realise this year. It may well be that the price stabilises sometime this year, however this is all but certain. The chance of bad availability at the end of Q3 and Q4 this year is bigger than the chance of a fall in prices. On the other hand, nothing is certain and everybody should make their own considerations. However, I do hope that, despite these uncertain times, I did provide you with a bit more insight.


Frank Heijckmann

Commercial Director PVO International