- New polysilicon supply ramping up in 2H22-2023, removing key overhang on solar value chain
- Solid demand for solar components despite high prices with China’s 2M22 new installations up 234%
- Omicron disruption to production minimal; Government issued directive to unclog transport network
- Normalized solar value chain pricing to benefit solar installations and sales volume of solar components. Top picks: LONGi and Flat Glass
Resolution of polysilicon bottleneck in sight.
High polysilicon prices have been cited by various solar chain participants as the most important constraint to new installations. A decrease in polysilicon prices should help return the entire solar value chain to more rational pricing. This should remove a key overhang on new solar installations.
New polysilicon capacity ramping up in 2H22-2023.
Major polysilicon producers in China could add 534,000 tonnes of capacity in 2022, up >69% from 2021. With a visible near-term capacity ramp-up, we reckon polysilicon supply tightness should ease in earnest starting 3Q22 and into 2023. Polysilicon production volume could rise c.40% to c.300GW equivalent, more than sufficient to meet our c.246GW forecast of new solar installations globally in 2022. Our channel checks indicate COVID-19 Omicron infections in China had minimal impact on polysilicon production. While logistics had been clogged by pandemic controls, China’s top-level government agencies are actively troubleshooting these blockages.
Rational solar value chain pricing removes overhang on installations. With new polysilicon supply coming to the market, we expect polysilicon prices could soften by c.15% below US$30/kg starting 3Q22. Resolution of the polysilicon bottleneck should benefit overall solar installations, helping demand and sales of solar component manufacturers. Our top picks are LONGi (601012.CH) and Flat Glass (6865.HK, 601865.CH).