On the evening of July 1, Tongwei Co., Ltd. (600438) announced that the company signed polysilicon contracts with Shuangliang Energy Saving and Meike Silicon Energy respectively. This is the fourth and fifth long-term polysilicon purchase contract signed by the company this year. The previous three companies were Uze Semiconductor, Gaojing Solar, and Longi Green Energy.
There are five contracts, and the estimated cumulative contract value reaches 254 billion , involving 1.0594 million tons of polysilicon. Tongwei Co., Ltd. shipped 107,700 tons last year, making it the company with the largest polysilicon production capacity in the world. Last year, the national polysilicon output was 505,000 tons, and and Tongwei alone accounted for 21.3%.
At this time, why is Tongwei Co., Ltd. eager to sign such a large-scale long-term polysilicon sales contract?
Is Liu Hanyuan angry about TCL Central's "defection" from GCL, or uneasy about the crazy expansion of the polysilicon industry?
01254 billion contract: the amount is getting bigger and bigger, and the binding is getting longer and longer
254 billion, this number is a big number even for Tongwei Co., Ltd., the leader in the photovoltaic industry with a market value of 270 billion.
In 2021, Tongwei Co., Ltd.’s operating income was 63.491 billion yuan and net profit was 8.208 billion yuan.
Carbon number compiled according to the announcement of the listed company
The five major contract counterparties all have high visibility and industry status in the industry:
Longi Green Energy is the absolute leader in the photovoltaic industry and the dual leader in silicon wafers and components.
Shuangliang Energy Saving is a successful example of photovoltaic transformation in recent years. Wang Lubao, the founder of
Meike, is known as "the first person in China's photovoltaic crystalline silicon slicing". The company has just applied for listing materials.
Gaojing Solar is helmed by Xu Zhiqun, a tycoon in the photovoltaic industry and a former JinkoSolar executive. It is backed by Zhuhai state-owned assets and has a Series A financing of up to 1.6 billion, making it very powerful.
Yuze Semiconductor is a non-listed company, but its related procurement contracts have appeared in announcements from photovoltaic equipment manufacturers many times. Moreover, it is the same actual controller as another listed company, Mingguan New Materials.
These five companies have strong strength and good reputation in the market. The contract signed with Tongwei is not a piece of cake.
If the contract is fully fulfilled, it may not be able to help Tongwei achieve the sales revenue estimated in the announcement. Because the polysilicon contract has always been "quantity is locked but price is not locked". The price of polysilicon has always fluctuated violently, and is now in a price increase cycle. This year, it has increased for more than 20 rounds, and has now exceeded 280,000 yuan/ton. At the beginning of last year, the market price was only 88,000/ton.
The trading habit of "locking the quantity but not the price" of polysilicon is completely different from natural gas , petroleum, chemical raw materials, etc. This is why in the previous photovoltaic cycles, silicon material prices fluctuated greatly, leaving profound lessons for many photovoltaic companies.
021.0594 million tons of polysilicon. The sword points to three years later.
According to statistics, in 2021, my country's polysilicon will achieve an annual output of 505,000 tons, a year-on-year increase of 27.5%, accounting for approximately 80% of the global total production.
According to CPIA statistics, in 2021, the total output of my country's top five polysilicon companies accounted for approximately 86.7% of the total domestic polysilicon output. These five companies are Tongwei Co., Ltd., Daqo Energy, New Energy , GCL Technology, and Oriental Hope. In addition, the Asian Silicon Industry of photovoltaic godfather Shi Zhengrong also plays a large role in the industry.
In 2021, Tongwei's annual sales volume was 107,700 tons, mainly contributed by the Yongxiang polysilicon (old production capacity), Leshan phase I, and Baotou phase I projects with a total production capacity of 80,000 tons. At the end of last year, the Leshan Phase II 50,000-ton project and the Baoshan Phase I 50,000-ton project were put into production one after another. Tongwei Co., Ltd. said in April this year that its current high-purity crystalline silicon production capacity has reached 180,000 tons.
When considering new production capacity, it usually takes several months to ramp up. Therefore, in 2022, the company's total production capacity should be less than 180,000 tons.
According to the investment and construction arrangements, Tongwei Co., Ltd. currently has projects under construction with a total production capacity of 170,000 tons, including the Baotou Phase II 50,000 tons project, which is expected to be put into operation in 2022, and the Leshan Phase III 120,000 tons project, which is expected to be put into operation in 2023. By then, the company's production capacity will reach 350,000 tons.
In addition, Tongwei Co., Ltd. has no other expansion plans.
Tongwei Co., Ltd. did not announce the specific implementation details of the 7-year and 6-year order contracts. But corresponding to the company's production capacity plan, Tongwei Co., Ltd. should focus on locking in sales after 2023.
03Liu Hanyuan’s anger: Zhonghuan’s “defection”, LONGi’s hesitation
In the photovoltaic field, the further upstream you go, the higher the concentration of the industry.
Silicon material companies almost never rely on a single major customer. In 2021, the sales of Tongwei's top five customers were 17.1 billion yuan, accounting for 26.94% of the total annual sales.
Although Tongwei Co., Ltd. only depends on a certain customer, Zhonghuan and Longi are still very important to Liu Hanyuan. They are the twin leaders of silicon wafers and have the largest demand for polysilicon.
However, when granular silicon came out, Zhonghuan was the first to embrace GCL, betraying its long-term cooperation with Tongwei. The contract stipulates that Zhonghuan will purchase polycrystalline silicon materials including granular silicon from GCL from January 2022 to December 2026, totaling 350,000 tons.
Longi is not as direct and vigorous as Central, but Longi also said that it is already using granular silicon mixture. Since then, LONGi has also promised that between March 2021 and December 2023, the cooperation volume of polysilicon materials between LONGi and GCL will be no less than 91,400 tons.
It is worth noting that among the five companies that signed large contracts with Tongwei this year, only LONGi signed them for two years, while the others signed them for six or seven years. Is it LONGi that has an ambiguous attitude towards graininess, or is it because it has a dissatisfaction with Tongwei? After all, Tongwei and Longi have been good friends for a long time.
Longi Holdings holds 15% of the shares of Sichuan Yongxiang New Energy Co., Ltd. and 49% of the shares of Yunnan Tongwei High Purity Crystalline Silicon Co., Ltd.
Sichuan Yongxiang is located in Leshan, Sichuan, and is Tongwei's earliest polysilicon production base. The first phase of Yunnan Tongwei's 50,000-ton project in Baoshan has been put into operation. LONGi has repeatedly stated to investors that it will not enter polysilicon and has only made strategic investments. It is precisely because of these strategic investments that LONGi's silicon materials have been guaranteed during the past two years when polysilicon has been in short supply.
The price of silicon materials continues to rise, and there is a wave of signing long-term contracts to lock in silicon materials in the industry.
Tongwei Co., Ltd.’s annual report last year disclosed the performance of major contracts. The company signed several large orders in November 2020, which have been completed with Jinko, Trina Solar , and Meike. The amounts of these orders basically match the contents of the announced contracts. Only half of the contract in Central has been fulfilled, and it is estimated that it should be fulfilled this year.
Carbon number compiled according to the announcement of listed companies
It is particularly worth mentioning that previous long-term polysilicon orders were generally locked for one to two years. Silicon material companies and silicon wafer companies are now more inclined to sign longer-term contracts. The contracts signed by Tongwei this year generally expire at the end of 2026, and the contract with Meike lasts for nearly seven years.
Only Longi Green Energy has a more cautious attitude, and its orders for Tongwei and Longi will only last until the end of 2023.
04 Tongwei’s anxiety: The era when silicon is king is about to pass
In the era when silicon is king, the Zhonghuan family’s defection to GCL will not harm Tongwei in the slightest. After all, the current silicon material is "the daughter of the emperor will not worry about marrying ."
What worries Liu Hanyuan now is that this era may be passing soon, and it is unknown whether polysilicon will fall on his hands in the near future.
Last year, Yan Dazhou, director of the National Laboratory of Polysilicon Preparation Technology, said at an event that there are currently 10 companies producing polysilicon in our country, and the top five account for 86.7% of the market share.
However, as the price of polysilicon rises and companies are optimistic about the prospects of the photovoltaic industry, more and more people are increasing their investment in polysilicon.
Last year, China's largest polysilicon production base had a production capacity of less than 100,000 tons, but now companies generally plan to start at 100,000 tons.
Old player:
Daquan Energy announced in December 2021 that it would invest 33.2 billion to expand polysilicon production. In the first quarter of 2022, it launched a 100,000-ton polysilicon project and is expected to be completed in the second quarter of 2023.
Xinte Energy will invest in the construction of a 200,000-ton polysilicon project in Zhundong in 2022. The project construction period will be 24 months and will be implemented in two phases. It is expected to be put into production in succession from 2023 to 2024.
The three major bases disclosed by GCL, Xuzhou , Leshan and Baotou, have a cumulative planned production capacity of 500,000 tons.
Oriental Hope's new project planned production capacity is 400,000 tons, of which the first phase of 125,000 tons production capacity has already started. Ten thousand tons, Zhonglai Co., Ltd. , which makes photovoltaic backsheets, plans 100,000 tons...
In addition, Qingdian Energy, Qiya Group, Lihao Semiconductor, Jingnuo New Energy, etc. all plan 200,000 tons, Baofeng's The plan is 300,000 tons...
Essence Securities Research Report
According to incomplete statistics from the Carbon Rush, the old production capacity and the new planned production capacity are more than 4 million tons. New production capacity will be put into production in 2023 and 2024. A surplus of silicon material is almost certain in the future.
The silicon material market will then be in a bloody turmoil again. The skyrocketing price of polysilicon from last year to this year is exciting for newcomers, but for Liu Hanyuan, it can only be regarded as child's play.
Around 2008, the price of polysilicon soared from more than 20 US dollars to a maximum of 500 US dollars/kg, and then plunged to a low of 40 US dollars/kg. Peng Xiaofeng of saiwei fell during that crisis. Liu Hanyuan and Zhu Gongshan were considered survivors.
In September 2008, the price of polysilicon was close to US$500 per kilogram, which was equivalent to more than 3 million yuan per ton at that time, which was more than ten times the current price. Of course, that era no longer exists.
Tongwei is not the only one who is aware of this problem. Otherwise, its old rival GCL would not be interested in Zhonghuan and signed a large order of 350,000 tons with it, which was bound for 6 years.
Epilogue
Liu Hanyuan is indeed a master who has experienced business wars for a long time. He has locked in future production capacity through long-term contract orders, which will at least calm the new opponents. Of course, this can only be done in the current seller's market environment. As long as Tongwei does not lose to its competitors in terms of production costs in the future, Tongwei will be in an invincible position.
Of course, the total contract price of 254 billion is not enough for Liu Hanyuan. It cannot cover all future production capacity, nor can it even maintain current prices. According to historical rules, a long-term agreement spanning six years is enough to traverse a photovoltaic cycle. Therefore, it is still unknown whether all buyers can successfully transition to the next photovoltaic cycle. However, the 254 billion contract is enough to help Liu Hanyuan travel to the next photovoltaic cycle.
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