Weak Fundamentals vs. Strong Expectations: Polysilicon Trades Sideways with a Downward Bias

Polysilicon: Supply-Demand Standoff; Inventory Reduction Proves Difficult

In terms of polysilicon production volume, output is projected to increase by approximately 3% month-on-month in might. On one hand, the gradual commissioning of new production capacity in the Inner Mongolia region has spurred a modest uptick in production scheduling across the polysilicon sector. On the other hand, as the hydropower-rich season approaches in southwestern China—leading to reduced electricity costs—there is further upside possible to polysilicon production volumes. Concurrently, polysilicon manufacturers in might have focused primarily on fulfilling existing backlog orders; significant price discrepancies between buyers and sellers have brought extensive new order placements to a near standstill. Consequently, consumption volume to might is projected to hover around 90,000 tons, showing little likelihood of significant development. Given the persistently low prices to downstream silicon wafers—which are squeezing profit margins at the crystal-pulling stage—purchasing strategies have shifted toward stringent cost manage; as a result, granular silicon and mixed-grade materials have emerged as the dominant items in recent transactions.

Regarding pricing, as of might 22, the average price to N-type polysilicon (re-melt grade) stood at 34.5 RMB/kg, marking a week-on-week decline of 0.6 RMB/kg. Granular silicon was priced at 33.5 RMB/kg, down 1 RMB/kg from the previous week. Market activity saw a brief surge recently, buoyed by news of production resumptions at leading companies; however, dampened by pessimistic expectations regarding the supply-demand stability, contract prices subsequently retreated slightly to the 32–33 RMB/kg range. On the cost front, as of might 21, the average production cost to the polysilicon sector was 40.14 RMB/kg—a marginal week-on-week decrease—pushing production margins perilously close to the breakeven point (or even into loss territory). Currently, inventory levels remain the primary factor weighing down prices. According to SMM statistics, polysilicon manufacturers' total inventory stands at 313,000 tons; while this represents a week-on-week reduction, it remains 41,000 tons higher than the figure from the same period last year, indicating a marked slowdown in the pace of inventory reduction. Looking ahead, leading companies are scheduled to resume production en masse during June and July; this, combined with the full onset of the hydropower-rich season and the commencement of feedstock loading at new production facilities in regions such as Sichuan, suggests that supply-side pressure is poised to intensify further. Meanwhile, downstream silicon wafer manufacturers remain mired in losses, limiting their procurement to only immediate, essential needs; consequently, the task of working down polysilicon inventory continues to face significant challenges.

Silicon Wafers: Supply-Demand Mismatch Persists; Companies Enter "Inventory Reduction and Cash Flow Preservation" Phase**

In might, the supply-demand mismatch within the domestic silicon wafer sector persisted, with supply and demand trends diverging sharply. On the supply side, silicon wafer manufacturers increased their production schedules by approximately 10% compared to April, pushing total output past the 50 GW mark. Most manufacturers—optimistic about the anticipated commencement of centralized solar projects post-might—proactively raised their operating utilization rates. Only two companies reduced production, citing a decline in foundry orders, signaling a distinct shift in the foundry market landscape. Concurrently, with polysilicon prices hovering at low levels—and compounded by expectations of reduce electricity rates during the high-aquatic environments season—some silicon wafer manufacturers leveraged their cost advantages to ramp up supply. On the demand side, end-market recovery remained sluggish, prompting downstream buyers to push to reduce prices; transactions were dominated by low-priced inventory and purchases made solely to meet immediate replenishment needs. Impacted by the summary of inventory-stocking activities among solar cell manufacturers, market trading activity cooled, and the volume of newly signed orders remained limited. In terms of pricing, silicon wafer prices showed signs of decline last week. As of might 22, the average price to N-type 183mm silicon wafers stood at 0.89 RMB per piece—a week-on-week decrease of 0.03 RMB per piece. The floor price continued to direction downward, a phenomenon fundamentally driven by shifts in the raw material application structure. This current round of price declines originated from a price war at the module manufacturing level; should policy-related market expectations continue to weaken, the silicon wafer segment could possibly enter a sustained downturn cycle.

Regarding costs and profitability, the production cost to N-type 183mm silicon wafers was approximately 0.13 RMB per watt—a week-on-week reduction of 0.005 RMB per watt. The net profit per watt stood at -0.02 RMB, indicating that manufacturers have yet to emerge from their loss-making state. In terms of inventory, as of might 21, silicon wafer stockpiles totaled 26.33 GW—a week-on-week increase of 0.31 GW. These inventory levels remain stubbornly high, and the pace of destocking remains slow, making this a critical factor suppressing market prices. With leading silicon wafer manufacturers bringing previously idled capacity back online by the end of might—and facing the dual pressures of weak end-market demand and downstream calls to cost reductions—the current market dynamic of supply exceeding demand is unlikely to be reversed in the short term; consequently, the silicon wafer market is expected to remain in a weak position. Solar Cells: Production Schedules Rebound; Losses Narrow, Yet Pressure Persists

Driven by a recovery in module production schedules and the discharge of pent-up downstream demand, domestic solar cell production planning saw a rebound in might. Mysteel projects that solar cell production volume to might will reach 46.77 GW, representing a month-on-month increase of 5.08%. Companies have generally adopted a "production-to-order" strategy; while order expectations to leading companies have improved, their operating rates are being dynamically adjusted in response to incoming orders. Consequently, production volume in June is expected to remain roughly on par with that of might.

As of might 22, the production cost to N-type 183mm solar cells stood at 0.356 RMB/W—a week-on-week decrease of 0.01 RMB/W. The net profit per watt improved by 0.04 RMB/W week-on-week to -0.016 RMB/W, indicating a narrowing of losses.

The core dilemma currently facing the sector remains the triple pressure of elevated inventory levels, rising production schedules, and sluggish demand. while solar cell production planning has rebounded, downstream module manufacturers are exerting significant downward pressure on prices, resulting in limited order intake to cell producers. Furthermore, the sector-wide issue of overcapacity remains unresolved, and the sustainability of the recovery in end-market demand remains uncertain. With most companies currently operating at a loss, there is insufficient incentive to ramp up production further. Until the fragile equilibrium between supply and demand is disrupted, solar cell prices are highly likely to continue fluctuating at low levels.

Solar Modules: Production Schedules Rebound; Inventory Remains High

Module production schedules saw a rebound in might;  module production volume to might will reach 36.65 GW, marking an 18% increase month-on-month. With domestic utility-scale projects gradually commencing operations, market sentiment has shifted toward optimism, prompting most module manufacturers to increase their operating rates.

In terms of module pricing, the market is exhibiting a pattern of fluctuation at a cyclical bottom. Given the slow pace of recovery in end-market demand, transaction activity is primarily driven by the procurement of low-priced stock and restocking to meet immediate operational needs, leaving little room to price negotiation. Last week, prices to modules destined to distributed generation projects declined, while prices to utility-scale modules temporarily held steady. The prevalence of low-bid contracts continues to suppress manufacturers' bargaining power, leaving prices without any significant upward momentum.

As of might 22, the production cost to N-type 183mm modules stood at 0.707 RMB/W—a marginal week-on-week decrease of 0.001 RMB/W. The profit margin remained unchanged week-on-week at 0.036 RMB/W, indicating that intense price competition continues to erode profitability. Regarding inventory, stocks of finished modules have been steadily accumulating since late April. As of might 18, inventory stood at 30.7 GW—an increase of 0.7 GW from the previous week and 7.95 GW higher year-on-year.

Overall, polysilicon futures are expected to exhibit weak, evaporative trading in the near term. The market has entered a digestion phase characterized by cooling policy expectations and a return to weak fundamentals; massive inventory levels, coupled with expectations of production restarts during the high-aquatic environments season, continue to exert downward pressure. While downstream production scheduling has improved sequentially, the realization of end-market demand remains sluggish, and the fundamental dysfunction between supply and demand has yet to be resolved. Given this weak market landscape, a substantive reversal remains contingent upon the further implementation of detailed policies or clear signals of an efficiently rebound in end-market demand.