The Zhitong Finance App learned that China Merchants Securities released a research report saying that after experiencing a major expansion in production during the previous boom period, the price of photovoltaic glass remained low for a long period of time, and second-tier glass companies were generally unprofitable last year. In recent years, approval for new production capacity has begun to be restricted. Coupled with changes in financing capacity, the industry's supply expansion is still relatively orderly. The bank estimates that in the next few quarters, if PV modules are scheduled to be produced more than 55-60 GW in a single month, the supply of photovoltaic glass may become tight.

In March '24, the PV module production schedule was close to 50 GW, and the probability of module production continued to increase in April. The bank's estimated production schedule could reach about 55 GW. Under this scenario, PV glass is likely to rise in price, and it will take some time for the price trend and supply and demand situation to improve.

The views of China Merchants Securities are as follows:

The supply of photovoltaic glass is relatively orderly. Since the price of photovoltaic glass continued to rise in June 2020, industry prices have been low for a long time due to the sharp expansion of supply. In 2023, second-tier companies were generally unprofitable. Beginning in mid-2021, building new photovoltaic glass production capacity requires comprehensive consideration of risk warning opinions and hearing opinions from the Development and Reform Commission and the Ministry of Industry and Information Technology. Last year, implementation became stricter. Overall, the industry has added production capacity in a relatively orderly manner in the past few years. Currently, the photovoltaic glass industry has a daily melting capacity of about 100,000 tons. If production capacity is released as scheduled through the hearing, the industry's production capacity is expected to increase by nearly 30% by the end of 2024, which is in line with the industry's growth rate.

The component production schedule is improving, and glass prices are expected to rise. In March, the PV module production schedule was close to 50 GW. Combined with downstream industry chain demand, the industry reported a significant decline in glass inventories. We expect the PV module production schedule for April '24 may be close to 55GW in a single month. According to the current glass supply situation, we analyzed that the monthly production schedule of components is 55-60 GW, and glass supply and demand may be tightening. Therefore, we expect glass prices to rise.

Demand exceeding expectations underlies the rise in glass prices. As component costs have dropped by more than 50% in the past year, BOSS costs have been reduced after superposition efficiency has been improved, PV LOCE has been significantly reduced, the economy is better, the owners' willingness to install equipment is relatively stronger, and global demand has the potential to exceed expectations. On the domestic side, the tender volume for power plants in 2023 is close to 300 GW. Among them, significant tenders may be transferred to 2024. Driven by domestic power plant demand, domestic installed capacity is expected to exceed expectations. If risk-free returns decline in subsequent quarters, overseas power plant demand is also likely to exceed expectations year by year. Furthermore, the current TopCon packaging solution is mainly double glass. While the TopCon penetration rate is rapidly increasing, demand for glass is expected to increase further. According to industry feedback, the penetration rate of 2.0mm glass has now increased to 70-80%.

Risk warning: Global installed capacity falls short of expectations, production schedule falls short of expectations, and PV glass profit expansion falls short of expectations.