Recently, the price of photovoltaic film has been fully raised, with transparent EVA film up 10% and EPE film up 7%. Faced with the increase in film prices, the module factory appeared to be unable to resist, and the new price was officially implemented. Here are the reasons for the increase in the price of adhesive film.
On the one hand, due to the significant increase in module scheduling, EVA raw material adhesive film has taken advantage of the trend, and the cost pressure of adhesive film has been transmitted downstream. On the other hand, due to the large inflection point of market demand, the film has caused a phased supply shortage due to the high delivery pressure of some mainstream photovoltaic companies.
1. The pattern of supply and demand for market development
● Particle end
In terms of EVA, with the expansion of production by Chinese companies, the tight supply pattern of EVA is expected to ease. The concentration of CR4 in 2022 is high. From 2023 to 2025, China plans to build a new photovoltaic grade EVA resin production capacity of 1.45 million tons per year, of which 550,000 tons will be built in 2023. It is expected that the tight supply of EVA resin next year will ease, and there may be a small surplus in 2025.
● POE aspect
Its own production is not supported. China's production capacity is expected to be no less than 2.55 million tons per year, and it is expected to be put into operation after 2024.
● Film end
The industry concentration is high, and most companies will focus on expanding production in the next 3 years. The overall supply and demand for adhesive film this year is tight, and in the next few years EVA adhesive film may be excessive, and POE adhesive film is still in a tight supply and demand state.
● Market landscape
The growth of photovoltaic module production has led to an increase in the demand for photovoltaic film, and China's photovoltaic module production has increased year by year. It grew from 84.3GW in 2018 to 288.7GW in 2022, with a compound annual growth rate of 36%.
According to the industry average, assuming that the unit price of adhesive film is calculated according to 10RMB per square meter, it is estimated that the market size of China's adhesive film will exceed 30 billion RMB in 2022.
2. Industry-led driving force
China is the leading force in the global adhesive film market supply, and the industry concentration is high. At present, China's top 10 photovoltaic film companies have become the leading force in global adhesive film production, and China's adhesive film production capacity accounted for more than 95% of the global proportion in 2021.
The growth rate of photovoltaic installed capacity is still at a high level. The global installed capacity of photovoltaic is increasing year by year, which is expected to drive the demand for photovoltaic film upward. The average compound annual growth rate is 26%. It is estimated that the global installed capacity of new PV is expected to reach 322GW in 2023, a year-on-year increase of 40%.
China's photovoltaic film production capacity accounts for more than ninety percent of the world, and China's photovoltaic film production companies have become the leading force in the global photovoltaic film market, so the demand for new global photovoltaic installed capacity to maintain rapid growth is expected to drive China's film shipments to continue to rise.
● Supply and demand for adhesive film
China's EVA film and POE film maintain tight supply and demand, and by 2024, the supply of EVA film will be over, and POE film will maintain a tight balance between supply and demand.
EVA film: raw material prices stabilize and profit recovery is imminent With the recovery of module operating rates and the stabilization of EVA resin prices, the profitability of adhesive film companies is expected to recover. From March to April 2023, China's crystalline silicon module production was about 74.1GW, an increase of 92.5% year-on-year.
The increase in the operating rate of the photovoltaic module industry has driven the demand for photovoltaic film upward, which is expected to consume the excess inventory reserved by the film company when the EVA price rises. At the same time, the price of EVA resin has stabilized since 2023, which will help the company recover profits.
POE film: N-type components increase volume and drive the demand upward By 2023, TOPCon battery production capacity is expected to increase significantly, driving the demand for POE film to rise further. At present, China's N-type cells are dominated by TOPCon cells, accounting for 91.2% of the total number of N-type cells in 2022.
As of March 2023, China's TOPCon cell production capacity is about 87.4GW. TOPCon battery volume is expected to drive the demand for POE film upward. Based on the demand for about 11 million square meters of adhesive film per GW of modules, we calculate that TOPCon's POE film requirement in 2023 will be about 1.54 billion square meters, which is much higher than the existing production capacity of 786 million square meters in 2022.
3. Fluctuations in the price of PV modules
China is a major producer of photovoltaic modules. From 2018 to 2022, China's PV module production capacity increased from 130.1GW to 551.9GW, with an average compound annual growth rate of 43.5%, and its proportion of global PV module production capacity increased from 68.4% to 80.8%.
China's top 10 photovoltaic module manufacturers exports account for more than half of the world's total production, mainly to Europe. From 2018 to 2022, China's PV module exports increased from 44.8GW to 153.6GW, with an average compound annual growth rate of 36.1%. The proportion of exports to production has always been above 50%, of which 53.2% in 2022. The cost of polysilicon is high, and the profit of extrusion film is high.
Silicon costs account for about 23.6% of PV module costs. The cost of cells accounts for about 65% of the cost of photovoltaic modules, the cost of silicon wafers accounts for about 66% of the cost of cells, and the cost of silicon accounts for about 55% of the cost of silicon wafers, resulting in the cost of polysilicon accounting for about 23.6% of the total cost of photovoltaic modules.
There is an imbalance in value distribution in the photovoltaic industry chain. Due to the high cost of silicon in the cost of photovoltaic modules and strong bargaining power, the increase in polysilicon prices since 2021 has a certain squeeze effect on the profitability of other auxiliary materials such as adhesive film, and the profit of the industrial chain is seriously tilted towards polysilicon.
4. Trends in silicone prices and profitability
● Polysilicon production expansion accelerated
The expansion of silicon production in China has accelerated, and the easing of the tight supply and demand pattern is expected to drive its prices back to normal levels. From 2019 to 2021, polysilicon production capacity was stable at 556,500 tons, and in 2022, production capacity reached 1,116,500 tons, an increase of 100.6% year-on-year.
In 2022, China's polysilicon production was 774,600 tons, up 59.1% year-on-year. In 2023, China's polysilicon production capacity is expected to reach 1.15 million tons, which is expected to double. However, silicon production is concentrated in the early second half of the year, and it will take about 1-2 quarters from the production line's commissioning to the full release of production capacity, and the release of new capacity may be after September 2023.
● Demand for photovoltaic film may undergo structural changes
The market share of POE film and EPE film in China has steadily increased, and the demand for photovoltaic film has undergone structural changes. In recent years, the power generation performance of bifacial modules has been recognized by the downstream application market, and China's market share has gradually increased.
5. ConclusionAt the same time, the market share of China's N-type cells will gradually increase in 2022. Bifacial modules and N-type modules put forward higher requirements for photovoltaic encapsulant film, driving the market share of POE film and EPE film to increase. China's transparent EVA film market share is decreasing year by year, but relying on market analysis can only obtain some temporary results. The focus must still be on subsequent further development.