Highlights Of China PV Association Annual Meeting

On the evening of December 5, 2024, the China Photovoltaic Industry Association issued a document stating that a special symposium on promoting high-quality and sustainable development of the photovoltaic industry was held.

Representatives of participating companies discussed how to prevent "involutionary" vicious competition, and based on the previous round of meetings, made arrangements for the next step of work, and were determined to promote the healthy and sustainable development of the photovoltaic industry.

Compared with the "anti-involutionary" symposium in October, the number of companies participating in this symposium increased from 16 to 33.

The following are the relevant points and brief analysis of the meeting.

Achievement status and manufacturer motivation: Manufacturers that account for at least 80% to 90% of the industry's production capacity have reached a quota agreement and signed it. First-tier manufacturers realize that the natural clearing method has the problem of long battle lines and local resources involved, which makes it difficult to clear some production capacity, so they are willing to accept the quota system to eliminate backward production capacity;

Second- and third-tier manufacturers also realize that internal competition (involution) at the current price will make the clearing process far away, and their own pressure will continue to increase, so they also accept the quota system in order to improve the industry trend and ensure their own survival.

Quota targets and allocation factors: The main purpose of the quota system is to solve the two major problems of advanced production capacity eliminating backward production capacity and boosting prices. The fundamental purpose of the quota system in 2025 is to ensure that the supply and demand of the main chain links such as silicon materials, silicon wafers, battery cells, and components are balanced.

The allocation of quotas will take into account a variety of factors, including the output in the first three quarters of 2024 and even in October and November, the market share of advanced production capacity of each manufacturer, and existing production capacity. For advanced production capacity, there will be a coefficient increase, which makes the leading manufacturers have an absolute advantage in quota allocation. The importance of output is greater than that of production capacity, so manufacturers with advanced production capacity with high operating rates, low cost of ownership or high conversion efficiency will be more advantageous this year.

2. Impact Of The Quota System

Short-term price impact: After the quota system is reached, it is difficult for prices to rise rapidly in the short term (such as within half a month). The reason is that the demand is currently in the off-season, the overseas market is in the Christmas holiday, the domestic demand is also low, and it is about to enter the off-season in the first quarter, and there is still inventory in various links of the industry.

Medium- and long-term price impact: Since December, inventory clearance has begun to emerge, and this trend will be clearer after January. This is one of the positive effects brought by the quota system and industry alliances. The goal for next year is to achieve a balance between supply and demand in the main industrial chain. Once the demand side is boosted, the price center is likely to move up after the Spring Festival. Due to the constraints of quotas, manufacturers in the industrial chain may experience a stage of upward price center next year.

In addition, manufacturers will form a bottom price mentality, battery component manufacturers may seek regional markets with higher gross margins, and even quota buying and selling behaviors may occur, but manufacturers are likely to follow the cost floor price specifications set by industry associations.