Solar Modules
The first month of the fourth quarter has been a surprise for two reasons. One, it showed a strong growth in volume over the same month last year, at 34%. It also showed strength over September’s volume. If we use October’s volume and multiply over the remaining months, 1.674GW would lead to a larger amount than the third quarter’s 4.7GW. We are cautious to expect this strength to continue, due to anticipated heavy focus on China this period, but we speculate that top volume companies could actually keep their exported volumes higher than we have seen for this time of the year. Although it is risky to assume the same YoY growth of 34% to materialize in November and December, as it would suggest that the last quarter of the year would have the most explosive growth, nevertheless this is possible, due to the existence of three factors: Japan, UK demand, and the contribution of emerging markets.
In the case of Japan, we suspect that our target of 7 to 7.5GW will be met. 5.4GW was delivered to Japan in the first 9 months of the year. Now, October added another 638MW. We expect an additional 1.2 to 1.3GW in total for November and December, which would give us a similar or slightly higher volume than that of the third quarter (1.8GW). There is also potential that those numbers could be higher, because of the desire to have equipment on the ground for many grid-approved projects prior to potential FiT changes, slotted for 2015. While it is unlikely that those changes would take place in January, we suspect that prudence would force the hands of many developers.
Demand in the UK is also dealing with a deadline in March 2015. The volume in October at 127MW versus 56MW in September is already indicating a significant pickup. We also acknowledge that most of the volume recorded under Belgium and Holland is finding its way to the UK. Using an expansion of this month’s volume over the rest of the quarter, in comparison to third quarter data for the UK and Holland, the growth is around 34% sequentially. There is a lot less anxiety about the UK deadline than the potential outcome in Japan;
thus, the momentum could travel into the 34 to 50% range increase for this region, with maximum output held until Q1.
The other interesting area, developing its own momentum, is the area of emerging markets. This space is not well depicted in the top 10 destinations, even with two newcomers joining the long-present countries: Algeria, an almost exclusive destination for Yingli Green Energy at 57MW, and Pakistan at 29MW. The ROW (rest of the world) at 85MW for October is higher by about 30MW than September, but it does not include locations benefitting US-listed and Mainland companies like the 27MW delivered to Philippines, volume, which is probably fulfilling domestic demand along with serving Japan. Honduras with 21MW, Chile at 19MW, Guatemala with 18MW, and Uruguay at 14MW are large contributors, and they are certainly outside of the commonly understood top three locations. Those volumes are becoming significant, but cannot be easily spotted by markets. For example, the top 10 destinations last year had an average of 100MW; today this number is 140MW, but the growth is still concentrated in the top three locations. In this situation, the supplemental nature of having many 20MW locations has no bearing on the financial market’s perception of the demand. The outcome: deviations in the top three destinations are bound to be viewed as a concern for the overall demand. The tally of countries shipped to during October has 80 listings, and as many as 112 countries received modules in the third quarter.
The market share in October is continuing to show the dominant role of US-listed companies, at 64.7% of exports. The profitable CN4 (CSIQ, JASO, JKS, TSL) have 648MW, or 38% of the volume. In the third quarter, the number was about 40%. The top 10 companies in October owned 70% of overall volume. Leading the pack was Yingli at 230MW, achieving 172% year-over-year growth. JA solar achieved a module delivery growth of 272% in comparison to October 2013. The mildest of growth figures belonged to Canadian Solar, at only 12%. Hanwha Solar was the only company losing market at negative 12%, while ReneSola saw smaller than expected volume as well, even as we are recognizing the fact that most of the company’s production is currently from OEM.
Solar Wafer
Top wafer destinations received 768MW, with Taiwan being at 471MW. Those numbers are essentially the same as in September. October had a slightly greater concentration of deliveries from the top 10 companies, with GCL leading at 180MW versus 144MW delivered in September. The roster of locations is permanently set on South Korea, Malaysia and the Philippines, while order may vary based on volume month to month.
Solar Cell
166MW of solar cells were delivered in October versus 153MW in September. 120MW have been shipped by top 10 exporters versus 109MW in September, which suggests better demand among the leading group. This also coincides with lower volumes for JA Solar, now only in fourth place out of the top 10. JA Solar has completed establishing itself as a module manufacturer, and solar cell deliveries in the forecast for the fourth quarter are only about half of the amount from the third quarter.
Taiwanese cell imports to China during September were 236MW cells, showing against the wafer trade only about half of the wafers coming back as cells (statistically). The overall cell volume from Taiwan topped 397MW in May, and had dropped as low as 112MW in July. However, September’s 633MW was a recovery period in comparison to the overall July export figure of 453MW. The recent contract between Canadian and Neo Solar Power, for 400MW of cells, suggests a beneficial relationship with Taiwan after a moment of shakeup. It also supports a lean value chain model, using opportune procurement (Taiwanese cells are cheaper due to tariffs) of traditionally better quality material over election of equalized capacity and due to it, need for a greater expansion.
Polysilicon Imports
Volume of imported polysilicon has been steady along with steady prices. In addition to new sources of polysilicon in Malaysia, we expect a larger supply of poly coming from China in the next 12 months, namely from GCL, due to the company refocusing on poly business, capacity expansion and additional benefits of FBR production. There has been a discussion on hoarding imported poly prior to the New Year, to avoid tariffs, but the volumes are not outside the ordinary.
The one exception could be CSIQ, which also recently announced doubling its own wafer production objective and could explain larger poly purchases. Prices for poly have remained at the same comfortable level for almost a full year now, basically not having any practical impact on cost per watt. As mentioned before, new poly supply in 2015, in addition to efficiency improvements in production lines and supply moving toward tier-one companies should continue to have non-impact character on cost in the foreseeable future.
CN7 GADP (Global Average Declaration Price)
GADP quotas are down for most of the seven companies, with the exception of CSIQ and JKS. There is an interesting quota for Canadian in the amount of $0.93 per watt on 17MW delivered to the UK. This quota is precisely the same GADP dollar figure as the one the company had in the UK during September for 15MW. At this point we are considering possibility that both represent some sort of module value recognition toward solar plant ownership, based on 40MW mentioned during recent conference call. For most, Q4 guidance forecasts lower prices (assumed via lower GM), with the exception of one, JKS, stated to have potentially higher gross margin this quarter. We see JKS GADP gaining; we also see that JinkoSolar may try to have more volume on export this quarter than it did in Q3, which can improve overall profitability for the company. Pricing in the US continues to be reflective of subsidiary delivery model; here, on lower volume, CSIQ averaged about one cent higher than September. TSL did the opposite, showing one cent lower GADP on a 10% increase in volume. When it comes to Japan, only GADP for CSIQ increased, but the volume to Japan was about half of that in September. In both areas, EU and Japan firms warned about currency devaluation; we would say that Japan’s GADP shows such an impact. Using UK prices as a benchmark for the EU, the same condition seems to exist when comparing September and October GADP.
Thank you
SPVInvestor Research - Robert Dydo, Jason Tsai