The Zhitong Finance App learned that CITIC Construction Investment released a research report saying that the price of silicon has stabilized recently, and the price difference between N-type and P-type silicon has reopened. On the one hand, the current price of silicon is close to or lower than the full cost of most second-tier manufacturers, and industry inventory has not yet accumulated a large amount, so it is difficult for silicon manufacturers to accept price cuts; on the other hand, it is due to the tight balance between supply and demand for N-type silicon materials. Looking ahead, as silicon stocks continue to accumulate, it is expected that silicon prices may drop further in February-March. The annual clearance price is expected to be 50,000 to 60,000 yuan/ton. Among them, N-type silicon will maintain a premium over P-type silicon due to the tight balance between supply and demand, but it will not become a bottleneck in the photovoltaic industry chain in 2024, because the silicon wafer process side still has some adjustment capacity.

▍ The main views of CITIC Construction Investment are as follows:

Since December 2023, silicon prices have basically stabilized.

Among them, N-type silicon stabilized at 68,000 yuan/ton, and the weekly decline of P-type silicon continued to narrow. The price difference between N-type and P-type silicon widened again from 0.38 million yuan/ton at the end of November to 0.75 million yuan/ton.

Previously, it was determined that the price of silicon in Q1 would further bottom out, but the price of silicon stabilized. The judgment was mainly due to two factors:

(1) The current price of silicon is close to or below the full cost line of most second-tier manufacturers. Refer to Bloomberg New Energy Data 2023Q4, the weighted average variable cost of the silicon industry is about 56,000 yuan/ton, and inventories have not yet been accumulated significantly, so it is difficult for silicon manufacturers to accept price cuts;

(2) There is a tight balance between supply and demand for N-type silicon, the share of demand for N-type silicon has increased, and the number of silicon plants with supply capacity is limited, resulting in a tight balance between supply and demand for N-type silicon. Currently, the monthly demand for N-type silicon is about 39-41,000 tons, and the supply is about 43,000 tons/month.

Looking ahead, as silica stocks continue to accumulate, silicon prices are expected to drop further in February-March.

The main reason is that with the release of silicon production capacity, the silicon inventory may reach more than 80,000 tons from the current 60,000 tons, close to 80,000 tons of inventory corresponding to the rapid drop in silicon prices in June 2023. At that time, silicon prices may be further pressured. Referring to the 2024 silicon cost curve, it is estimated that the annual clearance price of silicon is 50-60,000 yuan/ton (corresponding cash cost of clearance is about 47,000 yuan/ton). Due to the tight balance between supply and demand, the premium for N-type silicon will be maintained compared to P-type silicon.

Despite the tight balance of N-type silicon, it is judged that N-type silicon will not become a bottleneck in the 2024 photovoltaic industry chain. The main reason is that the silicon wafer end also has some adjustment ability - technology-leading silicon wafer manufacturers can supplement it with a certain proportion of granular silicon and P-type silicon.

Investment advice:

Despite high silicon production capacity and overall oversupply in 2024, leading silicon manufacturers with N-type silicon production capacity still have obvious cost and premium advantages, and are expected to be more secure in terms of shipment volume and net profit per ton.

Risk warning

1) Demand side: changes in national infrastructure policies have led to power investment falling short of expectations; power grid investment falling short of expectations; demand for power equipment falling due to declining growth rate of new energy installations; declining electricity consumption growth rate for the whole society; progress of the two networks falling short of expectations; progress in UHV construction falling short of expectations, etc.

2) Supply side: Prices of commodities such as copper resources and steel have risen; the supply of power and electronic devices is tight, and the progress of localization falls short of expectations.

3) Policy aspects: Support related to the new electricity market fell short of expectations; progress in the electricity price mechanism fell short of expectations; progress in the electricity spot market fell short of expectations; differences in electricity peak and valley prices fell short of expectations, etc.

4) In terms of the international situation: the energy crisis is being mitigated more quickly, energy prices are falling faster; barriers to international trade are deepening, etc.

5) Market side: The competitive landscape has changed drastically; increased competition has caused the profitability of all aspects of power equipment to fall short of expectations; transportation and other expenses have risen;

6) Technical aspects: The progress of technical cost reduction is lower than expected; technical reliability is difficult to further improve, etc.