Prices have begun falling dramatically throughout the PV crystalline supply chain in the first quarter of this year, according to the latest analysis from IMS Research. The company'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 the first quarter and will continue to decline in the second quarter.
The declines are largely due to cuts to solar incentive schemes in a number of key markets, causing installation growth to slow considerably. Average polysilicon contract prices fell by just 2% in the fourth quarter of 2010. However, spot prices declined by nearly 10%, reversing the rapid increases that had occurred in the previous quarter, when tier-two and tier-three 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 the first quarter of this year, 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, and these manufacturers are naturally transferring this pressure to their upstream suppliers and forcing down cell, wafer and polysilicon prices as a result, IMS Research says.
As with polysilicon, it is likely to be the smaller module, cell and wafer companies that 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-two suppliers were able to gain market share and in the third quarter of 2010, these suppliers' module prices were, on average, higher than Chinese tier-one prices. As demand weakened at the end of 2010, tier-one 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 this year.
As a result, average Chinese tier-two crystalline module prices are forecast to fall by nearly 10% in the first quarter of this year.
Although module prices are falling, suppliers' costs are not falling as quickly, the report adds. "Efficiency improvements and relatively high utilization rates are helping to continue the lowering of manufacturing costs throughout the supply chain," explains 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 the third quarter of 2010," he adds.
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.
SOURCE: IMS Research
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