In 2021, the investment in new expansion projects for photovoltaic glass reached nearly 45 billion yuan, and the performance of 35 photovoltaic companies showed a polarized trend.

In the second half of 2020, photovoltaic glass prices rose rapidly due to tight supply and demand, with an increase of nearly 80% in less than six months. Since March 2021, photovoltaic glass prices have fallen back to historical lows. However, according to CPIA estimates, with approximately 55GW of new installations expected this year, less than 10GW were completed in the first half of the year. The supply and demand situation is expected to improve in the second half of the year, and photovoltaic glass prices are expected to rebound slightly.

Investment in new photovoltaic glass expansion projects in 2021 reached nearly 45 billion yuan.

According to incomplete industry statistics, since 2021, photovoltaic glass companies have announced at least 12 major photovoltaic glass capacity expansion projects, with a total investment of nearly 45 billion yuan. The first two projects, each exceeding 10 billion yuan, belong to Kaisheng Group and Rainbow New Energy. However, it should be noted that photovoltaic glass production capacity release takes a long time, generally with a construction cycle of 1.5-2 years. Therefore, the expansion projects this year are not expected to be fully operational until 2023, making it difficult to effectively alleviate the capacity supply situation in the short term.

Therefore, photovoltaic glass prices are expected to rebound slightly in the second half of 2021. However, in the long term, the industry will see a significant increase in new production capacity in 2022-2023, and the capacity expansion projects this year will be released in 2023. Therefore, photovoltaic glass prices are expected to continue to decline in 2022-2023.

Photovoltaic glass companies continue to thrive, but profit disparities are widening.

Among the nine upstream raw material and auxiliary material companies that have released their performance reports for the first half of 2021, photovoltaic glass companies have shown outstanding performance. Jinjing Technology saw a surge of 930.52%, making it the company with the largest increase in net profit among the 35 photovoltaic companies surveyed. Others, such as Qibin Group, saw their net profit more than triple, and Nanbo A's net profit increased by more than 200%.

As one of the most profitable industries in 2020, photovoltaic glass companies are still thriving despite prices nearly halved this year. However, the profitability of companies has begun to diverge, with leading companies that have advantages in raw material costs and production capacity continuously improving their profitability.

Among them, Jinjing Technology, which ranked first in net profit growth, stated in its announcement that the company's 500t/d thin-film photovoltaic module backsheet glass and supporting tempered deep processing production line in Malaysia, which began construction in 2018, has seen its five supporting tempered deep processing production lines officially put into operation on July 1, 2021. Ningxia Jinjing's 600t/d one-kiln-three-line photovoltaic lightweight panel production line, currently under construction, is expected to be put into operation within this year. Furthermore, the company has already formed a complete industrial chain from mining/soda ash to glass to deep glass processing. In the future, as the proportion of deep-processed products such as photovoltaic glass continues to increase, its industrial advantages will become increasingly apparent in future competition.

In its announcement, Qibin Group stated that the glass industry is experiencing further improvement in its prosperity, with both volume and price increases, leading to an overall improvement in the industry's profitability. The company's integrated supply chain operation and differentiated marketing strategy have effectively controlled production costs and improved profitability. Currently, Qibin Group not only possesses a cost advantage in centralized procurement of soda ash for photovoltaic raw materials, but also boasts a 40% self-sufficiency rate for ultra-white quartz sand. Its planned construction of five new kiln production lines are all 1200t/d large kilns, capable of meeting wide-range production needs with a single-line scale exceeding that of leading companies such as Xinyi Solar and Flat Glass. Conversely, Xiuqiang Glass stated in its performance report that the decline in the company's operating profit was due to the adverse impact of a significant increase in the price of glass raw materials.

Polysilicon profits are improving while cost pressures are decreasing.

In the polysilicon, silicon wafer, cell, and module sectors, a total of nine companies released their earnings reports, with six of them achieving positive net profit growth. Among them, two companies ranked first and second in net profit for polysilicon, with TBEA expecting a year-on-year net profit increase of 230%-250% and Tongwei expecting a year-on-year net profit increase of 177%-197%.

In 2021, polysilicon prices hit record highs for 19 consecutive weeks due to tight supply. According to pvinfolink data, the price of dense polysilicon in August increased by 140.48% compared to the beginning of the year. This continuous surge in polysilicon prices brought substantial profit margins to polysilicon companies.

In its announcement, TBEA stated that one of the main reasons for the performance growth was the increase in sales volume of polysilicon products during the reporting period compared to the same period in 2020, and the significant year-on-year increase in polysilicon prices, leading to a substantial increase in the net profit of its subsidiary, Xinte Energy, compared to the same period last year. According to Ping An Securities analysis, Tongwei Co., Ltd.'s strong performance growth in the second quarter was mainly due to the increased profit margin of polysilicon, with the average selling price of polysilicon in the second quarter expected to increase by approximately 50% year-on-year compared to the first quarter.

However, the sharp rise in polysilicon prices has begun to pass on the increased cost pressures downstream, leading to higher raw material procurement costs for downstream companies producing batteries and modules. Aiko Solar stated in its earnings forecast that the rapid increase in the price of silicon wafers, while the cost pressures from the battery cell segment were passed on to downstream customers more slowly, resulted in a significant decline in the gross profit margin of its main business. Zhongli Group stated that the cumulative increase in photovoltaic silicon material prices in the first half of the year exceeded 100%, causing a significant decline in the company's photovoltaic module gross profit margin and impacting, to some extent, the output of its two new production bases already in operation in Zibo and Siyang.

Photovoltaic equipment companies are riding the wave of opportunity

Among the eight equipment manufacturers, one photovoltaic bracket manufacturer, and one inverter manufacturer that have released their performance results for the first half of 2021, all companies achieved positive growth in net profit, with the largest increase exceeding eight times.

In recent years, with the increasing maturity of photovoltaic equipment technology and the acceleration of international substitution, the photovoltaic equipment industry, riding the wave of capacity expansion and the demand for technological upgrades in the existing photovoltaic industry chain, has ushered in a tremendous development opportunity. Photovoltaic equipment companies have ample orders on hand, and both their performance and profits are rising.

Maiwei recently announced a nearly 1.2 billion yuan order with Tongwei, a leading solar cell manufacturer. Shuangliang Energy Conservation signed orders for reduction furnaces and related equipment with polysilicon companies such as Daquan, Tongwei, Xinte, and Lihao in 2021, estimating total order value for the year to exceed 1.4 billion yuan, indicating a strong order backlog. Shuangliang Energy Conservation stated in its announcement that with the accelerated expansion of the polysilicon industry, reduction furnace orders are surging, becoming the largest source of profit, and revenue from the reduction furnace business is expected to continue to grow in the second half of the year. Aotevi's order backlog reached approximately 3.178 billion yuan in the first half of the year, a year-on-year increase of 84.02%.

Flat Glass Group signed orders worth 25.2 billion yuan with LONGi, JA Solar, and Risen Energy.

In early August, Flat Glass announced that it had signed a strategic cooperation agreement with JA Solar regarding the sale of photovoltaic glass. The agreement stipulates that JA Solar and its designated holding company are expected to purchase approximately 230 million square meters of rolled photovoltaic glass for modules from Flat Glass and its designated wholly-owned holding company over the three years from 2021 to 2024. Meanwhile, since the beginning of this year, Flat Glass has signed agreements with Risen Energy and LONGi Green Energy Technology Co., Ltd., selling 34GW (approximately 234 million square meters) of rolled photovoltaic glass for modules and 46GW of photovoltaic glass for photovoltaic modules, respectively, with order amounts of RMB 8.909 billion and RMB 11.7 billion.

In recent years, securing long-term contracts to lock in production volume has become a recurring topic in the photovoltaic industry. Taking LONGi as an example, since 2020, it has signed long-term contracts for 563,900 tons of polysilicon with multiple silicon material companies, and long-term contracts for photovoltaic glass with five companies: Jinjing Technology, Flat Glass, Deli Group, Nanbo A, and Xinyi Solar. This directly illustrates that supply chain management has become an important issue for the industry.

Some photovoltaic glass manufacturers have planned to put their production lines into operation before 2023.

Historically, Xinyi Solar and Flat Glass have consistently ranked at the top in photovoltaic glass production capacity. This year, Xinyi Solar, Flat Glass, Luoyang Glass, and Yamatong have all expanded their production capacity, and based on ramp-up rates, these are expected to be operational before 2023. Xinyi Solar and Flat Glass currently have operating capacities of 10,800 t/d and 9,200 t/d respectively. Flat Glass's two 1,000 t/d production lines in Fengyang, Anhui, are scheduled to go into operation in the second half of 2021. The total planned and under-construction capacity in China is 8,400 t/d, with a total capacity of 12,200 t/d to be completed in 2021 and 18,200 t/d in 2022.

According to CPIA forecasts, the penetration rate of double-glass glazing will increase from 30% in 2020 to 60% by 2025; the thickness of 2.5mm/2.0mm double-glass glazing is expected to adjust from 80%/20% in 2019 to 0%/100% respectively. Double-glass glazing is a major trend, and 2.0mm is the ultimate choice generally expected by the industry, with a gradual transition from 3.2mm to 2.5mm and then to 2.0mm.

Meanwhile, according to calculations by CITIC Construction Securities, based on a photovoltaic glass yield of 85%, a deep-processing yield of 90%, and a conversion efficiency of 19.8%, a 1000t/d photovoltaic glass production line producing 3.2mm thick single-glass glass corresponds to an annual photovoltaic installation capacity of 6.9GW; producing 2.0mm thick double-glass glass corresponds to an installation capacity of 5.5GW. Therefore, if all the currently converted ultra-clear float glass production is shifted back from photovoltaic glass to architectural and automotive glass by 2025, the ultra-clear rolled glass production capacity will be 111,571t/d, which can support an annual global photovoltaic installation capacity of 657GW.

Power plant companies focus on new energy strategic goals

Of the seven power plant development and operation companies that have released their 2021 first-half earnings forecasts, six saw net profit growth, while one company experienced a profit decline.

It's worth noting that, under the goals of "carbon peaking" and "carbon neutrality," companies are focusing their new energy strategies more intently. Among the power plant companies surveyed, Baofeng Energy saw the largest increase in net profit. As a traditional coal chemical company, it has accelerated the development of hydrogen energy in recent years, emphasizing the replacement of fossil fuels with new energy sources. After divesting its energy-saving motor business, Luxiao Technology focused on its core business, with its photovoltaic power generation business maintaining stable growth. Jiahe Energy, in addition to its traditional chemical industry, has expanded into photovoltaic and hydrogen energy, and the profits from its photovoltaic power generation projects are beginning to increase.