04/07/2022
Vigorous demand supports the continuous rebound of photovoltaic glass prices
1 The demand for modules is not weak in the off-season, and the domestic and exporting demand approaches in two-pronged way
The demand for photovoltaic modules has risen rapidly as the cost of electricity per kilowatt hour has fallen. Photovoltaic has gradually got rid of subsidy dependence and entered a new era of parity. It already has competitive levelized cost of electricity (LCOE) compared with fire, wind and nuclear, with support from new technologies such as large silicon wafers, N-type cells, shingles, and bifacial modules for further price decreasing. It has a strong potential for cost reduction. China is the world's largest producer of photovoltaic modules, with the world's largest demand market and supply market. In 2021, China's module export volume will reach 98.5GW, and the overseas market share will be as high as 85.6%. At the same time, China is at the forefront of the global photovoltaic installations every year, and the new photovoltaic installations will account for 30% in 2021.
In 2022, SPE raised its European installed capacity forecast and the new regulations of the Ministry of Housing and Urban-Rural Development will provide a larger-than-expected increase in module demand. The "General Specification for Building Energy Conservation and Renewable Energy Utilization" was officially implemented on April 1, requiring that new buildings must be designed and constructed with solar energy systems simultaneously. The whole county ushered in another growth point after the promotion. Affected by the conflict between Russia and Ukraine, in order to seek energy independence, the European Solar Energy Association SPE raised the forecast of photovoltaic installed capacity in Europe from 2022 to 2025 to 39, 59, 83, and 112GW, compared with 30, 38, 45, and 50GW in the original scenario, China's photovoltaic industry chain will continue to benefit 55%, 84%, 124%.
2 Photovoltaic glass is the third largest cost source of modules
Components account for about 46.5% of the cost of the terminal power station. The actual total project construction cost not only takes into account standardized products such as components, brackets, inverters, but also civil works, land resources, survey and design fees, etc. At 4.3 yuan/W, the component cost reaches 2 yuan/W, accounting for about 46.5% of the total construction cost, which is the most important factor affecting the cost in the ground power station. Photovoltaic glass accounts for about 8.2% of the total module cost. Photovoltaic glass is second only to cells and frames in the cost structure of modules, and is an important part of the module manufacturing process. In 2022, the global installed capacity of photovoltaics is expected to reach 195-240GW. According to the component price of 2 yuan/W, the market size will reach 390-480 billion yuan, of which the photovoltaic glass market will reach 32-39.4 billion yuan.
3 The demand for photovoltaic glass production capacity continues urging
From 2021 to 2024, the total demand for photovoltaic glass will reach a CAGR of 25.90%. The current increase in electricity prices around the world is expected to stimulate the growth rate of global photovoltaic installed capacity to maintain a growth rate of more than 20%. The demand for photovoltaic glass corresponding to the shipment of photovoltaic modules reached 42,575, 53,982, and 65,231t/d, respectively.
With the same daily melt volume, thinning means higher output. The current mainstream photovoltaic glass with thicknesses of 2.0, 2.5, and 3.2mm shows a state that the thinner the original film, the lower the yield of the original sheet. However, under the same daily melting capacity of 1000t/d, 2.0mm glass can match every year. 10.27GW component demand, compared with 3.2mm, the gain is 52.15%. As of the end of March 2022, the average quotations of 2.0mm and 3.2mm coated glass were 20.0 and 26.0 yuan/m2 respectively, which means that under the same daily melting volume, thinning can bring 17% additional income.
4 The inventory of photovoltaic glass continued to optimize in the first quarter
Since the photovoltaic glass production line cannot be stopped once it is ignited, otherwise it will suffer large losses, so the inventory situation of the photovoltaic glass industry can directly reflect the demand level. Looking at several major fluctuations in the history of the industry, whenever the industry inventory/production ratio rises, the price of photovoltaic glass will enter a downward trend, and the industry is in a state of oversupply. The share price of photovoltaic glass companies and glass prices vibrate in the same trend, but the share price contains price expectations and will react in advance.
Component shipments surged in early 2022. From November to December 2021, the partial correction of silicon material prices led to a large increase in overseas orders for modules, which will be transmitted to the first quarter of this year. The export of modules in my country from January to March 2022 will be 37.2GW, and the newly installed capacity in China will be 13.21GW. Overseas conflicts between Russia and Ukraine have led to high energy prices, Europe is eager to seek energy independence, and domestic distributed photovoltaics are taking advantage of the wind to superimpose large-scale wind and solar base projects, and demand at home and abroad will continue to be strong. Photovoltaic glass inventories fell rapidly, and prices gradually recovered. The inventory of photovoltaic glass companies dropped rapidly from 633,100 tons at the end of 2021 to 341,100 tons in four months, a decrease of 46.12%. The inventory-to-production ratio dropped rapidly to 29.7% in four months from 61.9% at the end of 2021. The price of photovoltaic glass continued to rebound in March, April and May, and the industry fundamentals continued to improve.
Large-scale kiln reduces cost and increases efficiency
The average design capacity of glass production lines increased rapidly. In 2010, the daily melting capacity of the mainstream photovoltaic glass production lines was 250t/d and 300t/d, and the average design capacity was only 275t/d. From 2010 to 2018, the large-scale kiln continued, and 500, 600, and 900t/d production lines appeared one after another. After 2016, the 1000t/d photovoltaic glass production line gradually became the mainstream. Until February 2021, the two 1200t/d production lines of Follett in Fengyang, Anhui and Jiaxing, Zhejiang were successfully launched and put into operation, pushing the industry's average design capacity to a new level.
Soda ash, quartz stone, and fuel make up about 80% of the production cost of photovoltaic glass. Cost competition is the eternal theme of competition in the glass industry, and cost advantages can help companies increase their yield safety pads during periods of high inventory and increase yields when industry demand is strong. Photovoltaic glass is an asset-heavy industry, and its cost advantage means a higher long-term operating rate of return, which will lead to a positive cycle in the subsequent stages of production expansion and industry concentration. The recent rise in raw material and energy prices has provided strong support for further rise in photovoltaic glass prices.
1 Soda ash price rises or suppressed glass profits
Soda ash: The current national inventory of soda ash is about 1.18 million tons, down 35.7% from the beginning of 2022, and the price of soda ash has strong support. Soda ash manufacturing is a typical cyclical chemical industry with a high degree of industry concentration, and the glass segment has weak bargaining power over the supply of soda ash. Photovoltaic glass uses heavy soda ash, which has a premium of about 200 yuan/ton compared to light soda ash. As of May 1, 2022, the spot price of soda ash is 2910 yuan / ton, an increase of over 81% compared with the beginning of 2020, which has become an important factor driving up the price of glass. The soda ash inventory has dropped rapidly since the beginning of 2022, and the current soda ash price has rebounded significantly, which may further suppress the profit of photovoltaic glass.
2 Owning mines is king, with equanimity
Quartz sand: In order to ensure the high light transmission of the original glass, the iron content of photovoltaic glass is lower than that of ordinary glass. The iron content of ordinary glass is generally above 2000ppm, and the photovoltaic glass must be lower than 150ppm, and the content of silica is required to be high. Quartz that is mature in industry needs to go through multiple processes such as sorting, coarse crushing, calcination, water quenching, sanding, screening, magnetic separation, flotation, acid leaching, washing, and drying. In the future, there will be a situation in which miner is king. At present, there are few high-quality low-iron quartz sand ore sources that are easy to mine in my country, mainly distributed in Heyuan of Guangdong, Guangxi, Fengyang of Anhui, Hainan and other places. In the future, with the growth of the production capacity of ultra-clear patterned glass for solar cells, high-quality quartz sand with limited distribution of origin will become a relatively scarce resource. The current price of quartz sand is as high as 450 yuan/ton, and it is likely to rise further in the future. China's imported quartz sand mainly comes from Malaysia, Australia and Indonesia. However, due to the influence of shipping and logistics, imported quartz sand is not stable and controllable. If glass production enterprises have quartz sand mining rights, it will greatly reduce the supply of raw materials and price fluctuations risk.
3 Large kilns drive significant cost reductions under the path of low energy consumption
Fuel: Reducing energy consumption is the core of cost competition for photovoltaic glass companies. Fuel is the largest cost component in photovoltaic glass production. The advanced level of enterprise technology, unit energy consumption and waste heat utilization rate directly affect its production cost, which is the key to the competition of photovoltaic glass enterprises. At present, affected by environmental protection policies and high gas-to-price ratio, photovoltaic glass companies have gradually shifted from the original oil and gas sharing to the mode of gas-based and fuel-assisted, and even new projects all use natural gas, and fuel is only used as a backup fuel. The price of pipeline gas is relatively stable, and there is a location cost advantage. Affected by the conflict between Russia and Ukraine, global energy prices have risen, and photovoltaic glass companies mainly rely on local pipelines to supply industrial gas or liquefied LNG. The price of industrial pipeline gas in various parts of my country is relatively stable and is less affected by international energy prices, but the price of bulk liquefied LNG is more market-oriented. Companies with fixed gas supply are also more predictable in their cost budgets. The price of pipeline gas in Jiaxing is 15.43% lower than that in Wuhu, which is reflected in a decrease of about 5% in total production costs.
The large kiln production line will dilute the cost in production and increase the gross profit margin of the enterprise. Taking Follett as an example, the company has put into operation 5 production lines with a daily melting capacity of 1000t/d and 5 production lines with a daily melting capacity of 1200t/d since 2018. Compared with the previous production lines of 300 and 600t/d, there are Higher lift. Driven by the sharp drop in the price of soda ash in 2020, the production cost of the company's photovoltaic glass rapidly dropped from 17.99 yuan/m2 in 2017 to 14.30 yuan/m2 in 2020, and then in 2021, due to the continuous rise in raw material and energy prices, the glass production cost rebounded to 17.30 yuan/m2.
The fundamental reason for large-scale furnace cost reduction is the reduction of energy consumption. Projects with a daily melting capacity of 600t/d and 1200t/d have little difference in the amount of core raw materials such as quartz sand and soda ash. This part of the difference comes from the recycling of waste such as glass slag. The reduction in unit heat consumption and power consumption is obvious. Taking the 1200t/d production line as an example, the total calorific value demand of natural gas and petroleum fuels is nearly 40% lower than that of the 500t/d production line.
Quartz sand accounts for about 15% of the cost of photovoltaic glass, which has less impact on the overall cost than other raw materials, and its price is relatively stable. However, the supply of quartz sand is affected by mining rights, transportation and logistics, etc. Therefore, if a glass manufacturer has the mining rights of quartz sand, it will greatly reduce the risk of raw material supply and price fluctuations. When the price of quartz sand is 350 yuan/kg, the production cost of a large kiln with a heat consumption of 200kgce/t is about 18.24 yuan/m 2 .
Under the same energy consumption, the cost of single flat glass is more sensitive to natural gas fluctuations. Large enterprises have long-term in-depth cooperation with the local government. During project construction, special pipelines are laid to transport gas, and the continuity of production is strongly protected. At the same time, enterprises are less affected by energy price fluctuations. On the premise that the price of soda ash is 3,000 yuan/t, the natural gas of 2.5 yuan/m 3 can bring about a cost reduction of about 2 yuan/m 2 compared with 3.5 yuan/m 3.
4 Double-sided modules and thinning continue to advance
The LCOE evaluation system increases the proportion of double-sided modules, and thinning continues to advance. Although the cost of bifacial modules is higher than that of monofacial modules, due to the increase in additional power generation gain, the whole life cycle economy is better than that of monofacial modules. The second batch of wind and light base projects will build centralized ground-based power stations in the Gobi, desert and other high-reflectivity grounds. The application of bifacial modules has broad application prospects. The notice issued by the National Energy Administration also pointed out that bifacial modules should be used where conditions permit. According to the recent statistics of the 22nd batch of 4.95GW modules purchased by SDIC in 2022, the 182mm, 210mm, N-type and other double-glass bifacial modules reached 3.05GW, accounting for about 62%.
Multiple factors create the pattern of Leading enterprises
The hearings system will promote industry concentration. This regulation sets a threshold for the increase of photovoltaic glass production capacity. Leading enterprises with first-mover advantages can further enhance the industry concentration by virtue of their advanced planning, layout, and efficiency improvement of in-transit production capacity. With the advantages of energy consumption, technology, production capacity layout and financing, Xinyi Solar and Follett are expected to continue to lead the industry in market share, and the production capacity is expected to reach 21,800t/d and 20,600t/d respectively by the end of 2022.
Photovoltaic has the property of heavy assets, and the layout of leading production capacity is more forward-looking. Photovoltaic glass, especially the original sheet processing link, has a strong asset-heavy attribute. The most advanced 1200t/d production line investment can reach 800-900 million, and the construction period is as long as 18-24 months. The leader of production capacity advantage can achieve rapid performance improvement through early production capacity layout when the market is booming, and further expand production capacity through operating profits and financing to achieve a positive cycle.
The risk of subversion of photovoltaic glass technology is low. Float glass can be used as the backplane of photovoltaic modules, but float glass has a high self-explosion rate. In contrast, ultra-white embossed tempering can meet the outdoor use of photovoltaic modules for 25-30 years, and after the price reduction of photovoltaic glass, rolled glass dominates the market with its quality advantages and will maintain its dominant position for a long time. Cost advantage shapes profit moat. Since 2018, leading enterprises have started to reduce costs in three dimensions: energy saving, large-scale production, and yield rate. The gross profit margin of Follett and Xinyi Solar has risen from about 27% in 2018 to 46.99% and 35.50% in 2021. With the implementation of the production hearing system in the photovoltaic glass industry, leading enterprises will give full play to their advantages in energy consumption and process, and go down steadily and steadily under the es**rt of policies.
