The Zhitong Finance App learned that CITIC Construction Investment released a research report saying that due to its characteristics of heavy assets, long construction cycle, continuous production, and large inventory footprint, production capacity is usually released in a “stepwise” manner. When module production schedules rise rapidly, it is more likely to cause phased supply and demand mismatches compared to other auxiliary materials. The bank judged the dynamic balance between PV glass supply and demand in 2024. Prices are expected to rise during the Q2 peak season, and in the long run, as industry leaders launch 1450-1600t/d kilns, a large number of 1000t/d kilns currently under construction will lose their operating value. At that time, control over the pace of additional production capacity in the industry will return to industry leaders. The industry supply and demand situation will improve year by year, and the profit center of Shanping is expected to rise.
CITIC Construction Investment's views are as follows:
Photovoltaic glass accounts for 11-17% of module costs, and is currently the auxiliary material that accounts for the highest proportion of module costs. Photovoltaic glass has characteristics such as heavy assets, long construction cycle, continuous production, and large inventory area. Therefore, photovoltaic glass production capacity is usually released in a “stepwise” manner. When module production schedules rise rapidly, it is more likely to cause phased supply and demand mismatches compared to other auxiliary materials.
The production capacity of photovoltaic glass is expected to be in a dynamic balance between supply and demand for a long time, but when the peak demand season arrives, there is a high probability that prices and gross margin will rise.
Due to policy restrictions such as hearings and the profit level of photovoltaic glass is at a historically low level, the rate of release of new photovoltaic glass production capacity has slowed significantly since 2023.
Looking at the full year of 2024, the production capacity of photovoltaic glass is expected to be 11.5 and 127,000 t/d respectively at the end of 2023-2024, corresponding to the annual effective production capacity of about 743 GW. According to the annual module output of 650 GW, the supply-demand ratio is about 114%, which is basically consistent with the supply and demand ratio of 109% in 2023. It is expected that the supply and demand for photovoltaic glass will be in dynamic balance throughout 2024;
Looking at the 2024 level, as of February, the production capacity of photovoltaic glass was about 100,000 t/d (taking into account cooling of some kilns), corresponding to about 53 GW/month, which is already lower than the estimated production schedule for March-April modules (56, 58 GW). Therefore, the number of photovoltaic glass inventory days in the first week after the Spring Festival has begun to decline. According to the current storage rate, the price of photovoltaic glass is expected to increase in April.
Looking ahead to 2025, considering that the profit level of photovoltaic glass has remained low for a long time, production capacity under construction by second- and third-tier companies in recent years has been shelved on a large scale due to difficulties in profitability, and has also become the “sword of Damocles” that has hung over the photovoltaic glass industry for the past 1-2 years; however, after 2025, Xinyi and Follett will successively put into production 1450-1600 t/d kilns, and the industry will bid farewell to the 1000t/d kiln era. This will cause the large number of kiloton kilns currently under construction to lose their operating value. At that time, the industry's control over the pace of new production capacity will return to the top of the industry In hand, industry supply and demand The situation will improve year by year.
Reviewing the stock prices of photovoltaic glass companies since 2020, it can be seen that the rise in stock prices is mainly highly correlated with expectations of a rise in the price of photovoltaic glass. Even after 2022, the market expects that photovoltaic glass will remain in the context of excess supply and demand for a long time, and when prices rise during the peak demand season, glass companies' stock prices still show signs of a rebound.
The cost advantage of industry leaders is still significant, and the cost gap will widen further after large kilns are put into operation in the future. Although second- and third-tier photovoltaic glass companies have gradually mastered 1000t/d kiln technology in recent years, and the slope of the industry cost curve is slowing down, as of 2023, H1 industry leaders still have a gross margin advantage of about 10% compared to second- and third-tier companies; 1450-1600t/d kilns are expected to be put into operation one after another in 2025, and industry leaders are expected to once again widen the cost gap.
It is expected that the leading market share in the photovoltaic glass industry will continue to increase in the next few years. In 2023, the CR2 for photovoltaic glass was 53%. Considering that industry leaders have significant advantages in terms of capacity index acquisition capacity, cost control, and cash in hand, it is expected that the next few years will focus on leading photovoltaic glass companies. The market share of Xinyi Solar Energy and Follett is expected to continue to increase.
The bank determined that photovoltaic glass will be in a tight dynamic balance in 2024. Considering that the current production capacity is already in a tight balance between supply and demand, as the number of days in inventory falls, the bank expects that the price of photovoltaic glass will increase during the peak demand season in Q2-Q3, and the net profit of a single flat is expected to increase.