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Crystalline PV Margins and Prices to Decline in 2011
Date: 14 February 2011
Prices have begun falling sharply throughout the PV crystalline supply chain in the first quarter of 2011 according to the latest analysis from IMS Research. The leading market research firm’s latest quarterly report on the PV polysilicon and wafer market has revealed that polysilicon, wafer, cell and module prices will fall 7% on average in Q1 and will continue to decline in the second quarter. This is largely due to cuts to solar incentive schemes in a number of key markets causing installation growth to slow considerably.
The new report from IMS Research also revealed that average polysilicon contract prices fell by just 2% in Q4’10. However, spot prices declined by nearly 10% reversing the rapid increases that had occurred in the previous quarter when Tier 2 and 3 suppliers had been able to sell silicon at inflated prices on the spot market due to high demand and a shortage in supply. Both contract and spot prices are forecast to continue their decline in Q1’11, falling by 4% on average over the previous quarter. Similar price declines are predicted throughout the supply chain. Reduced incentive rates have placed increased pressure on module suppliers’ prices, these manufacturers are naturally transferring this pressure to their upstream suppliers and forcing down cell, wafer and polysilicon prices as a result.
As with polysilicon, it is likely to be the smaller module, cell and wafer companies who suffer the most severe price declines. High demand throughout 2010 meant that their larger competitors were largely sold out, and these suppliers were able to capitalize on the situation and increase their shipments and prices quickly. In particular, a large number of Chinese Tier 2 suppliers were able to gain market share and in fact, in Q3’10, Chinese Tier 2 module prices were on average higher than Chinese Tier 1 prices. As demand weakened at the end of 2010, Tier 1 suppliers’ products have become more freely available and IMS Research predicts that the smaller suppliers will be forced to price more competitively in an attempt to gain or even maintain market share in 2011. As a result average Chinese Tier 2 crystalline module prices are forecast to fall by nearly 10% in the first quarter of 2011.
Although prices are falling, suppliers’ costs are not falling so quickly. “Efficiency improvements and relatively high utilization rates are helping to continue the lowering of manufacturing costs throughout the supply chain,” commented PV Market Research Analyst, Sam Wilkinson. “However, costs are not being reduced as quickly as prices, and gross margins are beginning to tighten. IMS Research predicts that by mid-2011, some polysilicon and wafer suppliers will see their gross margins fall to half of what they peaked at in Q3’10,” added Wilkinson.
Despite declining margins for most in 2011, the overall outlook for the industry remains positive and IMS Research predicts that the polysilicon market (for PV applications) will grow by nearly 20% this year to reach nearly $8 billion.
Ongoing detailed quarterly analysis of PV module, cell, wafer and polysilicon demand, supply, pricing, margins, costs and installations is available from IMS Research. If you would like an interview with an expert in this area, please contact Ash Sharma, Research Director, Ash.Sharma@imsresearch.com or +44 1933 402255 or visit www.PVMarketResearch.com
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