The 2024 Photovoltaic Conference held by the China Photovoltaic Industry Association came to an end a few days ago, and the meeting achieved important results, not only in response to the current market conditions, but also to determine the industry pattern in the next ten years, marking the further deepening of the supply-side reform of the photovoltaic industry and the arrival of the industry inflection point.

On December 6, 2024, the China Photovoltaic Industry Association held a symposium in Yibin, Sichuan, where dozens of enterprises signed a self-discipline pact to control production capacity and avoid blind expansion.

According to sources, this meeting, the number of chairmen of the participating companies is the largest in history, respectively, held more than a dozen different closed-door meetings, combined with the frequent discussions in the past two months, to promote the industry out of the predicament of the determination is clear, industry profits are expected to usher in repair.

Self-discipline and production restriction mechanism

Major enterprises reached a consensus to implement industry self-discipline and production restrictions, aiming to maintain market order. Prior to this, many ministries and commissions expressed concern about the issue of "involution", showing that the top level attaches great importance to it.

The meeting signed the industry self-discipline convention, determined the self-discipline framework, and implemented pricing and production restrictions: set a cost bottom line through export prices and domestic bidding prices, and guide price repair through quotas.

The convention establishes the basic principles of quotas: set quotas based on production capacity and shipments, including polysilicon, wafers, cells, etc., and calculate annual shipments taking into account industry quotas. Modules are allocated quotas based on the shipment factor.

The convention also stipulates an adjustment and punishment mechanism, with regular quarterly meetings to adjust the quota coefficient, the establishment of a black and white list system, export credit insurance restrictions and other measures.

The next stage will focus on supervising the implementation and involving third-party institutions in the audit.

Sources pointed out that from the perspective of pressure on the profitability of all links, market-oriented forces have forced many production capacity to stop, and price profits have been slightly repaired. The market's response to the self-regulatory convention has been to raise price expectations: the prices of cells, modules, films, glass, etc. have shown signs of rising; With the implementation of the follow-up self-discipline rules, the price of the industrial chain may soon see positive feedback and usher in a larger area of price increases. Considering the off-season effect and the pace of self-discipline implementation, it is expected that the pace of price increases will accelerate after the Spring Festival.

Quota coefficients and details

It is reported that the quota coefficient determined by the self-discipline convention is roughly calculated according to the current year's shipment x coefficient 1 + production capacity x coefficient 2, and the total amount is initially allocated according to 1.6 million tons of polysilicon (about 700 GW) and about 650 GW of wafers.

The details of the quota of the industry's leading companies are divided into industrial chain links

Polysilicon: Tongwei (600438) 570,000 tons, GCL New Energy (00451) 260,000 tons, Daqo Energy (688303) 180,000 tons, Xinte Energy (01799) 169,000 tons. Considering the inventory, the total is about 1.6 million tons.

Wafer segment: TCL Zhonghuan (002129) 124.7GW, LONGi (601012) 119.5GW, JinkoSolar (688223) 65.5GW, Gaojing 58.1GW, Shuangliang Energy Conservation (600481) 56.6GW, JA Solar 52.6GW, Meike 48.2GW, Trina Solar (688599) 29.9GW, Jingyuntong (601908) 28.3GW, Tongwei Energy 22.2GW, Yuze New Energy 21.5GW, Canadian Solar (688472) 17.6GW. The total is about 650GW.

Batteries: Tongwei Solar 85GW, JinkoSolar 70GW, Trina Solar 64GW, LONGi 62GW, JA Solar 62GW, Junda (002865) 36GW, Aiko (600732) 32-36GW, Canadian Solar 20GW+, Hengdian 10GW+.

In general, the large quota data has been determined, and the details are only the coefficients for calculating different technical routes.

Regulatory policy "three steps".

In the past two years, the photovoltaic industry has fallen into an "involution" price spiral due to overcapacity and oversupply, and in 2024, all links in the industry will begin to lose cash costs. According to the data, the prices of all links in the photovoltaic industry chain in 2024 will drop by an average of 60%-80% compared with the high point in 2023.

Wang Shijiang, deputy director of the Electronic Information Department of the Ministry of Industry and Information Technology (hereinafter referred to as the "Ministry of Industry and Information Technology"), recently said: "After nearly 20 years of development, photovoltaic has become a strategic emerging industry that has formed an international competitive advantage and is expected to take the lead in becoming a model of high-quality development, and is also an important force to promote energy transformation. However, it should also be noted that at the same time of rapid development, the industry has entered a new round of adjustment period, irrational competition has intensified, product prices have fallen, and business operations are under pressure. ”

Wang Shijiang revealed that the Electronics Department of the Ministry of Industry and Information Technology is closely strengthening cooperation with relevant departments, strengthening ties with industry associations and enterprises, focusing on promoting industry self-discipline, standardizing the development of the industry, promoting industrial scientific and technological innovation, promoting industrial integration and development, expanding the application market, and strengthening the guidance of standards to carry out relevant work.

Not long ago, Wang Bohua, honorary chairman of the China Photovoltaic Industry Association, said on many occasions that the scale of losses caused by the industry fluctuations far exceeded the previous three industry fluctuations. Since 2024, 39 of the 121 listed PV companies have posted net profit losses.

At the end of 2023, the Central Economic Work Conference emphasized "overcapacity in some industries", and the Politburo meeting in July this year further pointed out that it is necessary to "strengthen industry self-discipline and prevent involution vicious competition", and the "three-step" regulation policy has begun.

Step 1: Stabilize the price.

On October 14, the Photovoltaic Industry Association held a symposium in Shanghai to prevent "involution" vicious competition.

On October 18, the Photovoltaic Industry Association issued the "Analysis of the Current Cost of Photovoltaic Modules: Winning the Bid Below Cost is Suspected of Violating the Law", announcing that the minimum tax-included cost of photovoltaic modules in October 2024 is 0.68 yuan/W, restricting bids below the cost.

On November 15, the two departments reduced the PV export tax rebate rate from 13% to 9%, increasing enterprise costs to stabilize prices.

Step 2: Control the new production capacity.

On November 20, the Ministry of Industry and Information Technology revised the "Photovoltaic Manufacturing Industry Standard Conditions" and the "Interim Measures for the Management of Photovoltaic Manufacturing Industry Standard Announcements", increasing the capital ratio of new projects to 30%, limiting new production capacity, guiding photovoltaic enterprises to reduce photovoltaic manufacturing projects that simply expand production capacity, strengthen technological innovation, improve product quality, and reduce production costs.

The third step, that is, to adjust the production capacity through the convention to set the shipment volume and capacity coefficient, and to mandatorily guide the stock production reduction, which is the strongest supply-side reform in the history of the photovoltaic industry.

The inflection point of profitability can be expected

Although more details have not been publicly disclosed, it is certain that the self-regulatory convention has launched a new round of supply-side reform in the PV industry and laid the foundation for the supply pattern in the next few years. In the next five years, there should be no new capacity in the domestic photovoltaic industry, and enterprises must replace the original capacity to expand production.

The source pointed out that the implementation of the convention will be relatively strong, and the results must be seen first. The price will definitely rise, and even the effect may be more obvious at the beginning, the price signal is the starting gun, and with the follow-up information becoming clear step by step, the price signal will have a positive driving effect on the industry. However, the Spring Festival in January is approaching, the demand is insufficient, and the production of each family is also relatively large, if the demand recovers quickly after the Spring Festival, it is a good window for prices to rise.

This marks that the PV industry has entered a critical stage from policy expectations to price reversal.

A recent research report by Guojin Securities also said that the bottom of the photovoltaic boom is solid and clear, and the profit inflection point of the main industrial chain is expected to arrive in the second quarter of 2025 at the earliest.

The winter of the industry has passed, and spring is in sight.