The recent surge in the price of polysilicon futures has sparked discussions among analysts regarding its sustainabilityOn January 17, the leading futures contract for polysilicon reached an impressive peak of 45,190 yuan per ton during trading, marking a record high since its introductionThe contract concluded the trading day at 44,940 yuan, reflecting a notable increase of 1.97%. This rise in price has raised questions about the future trajectory of polysilicon in light of current market dynamics.

Key factors influencing the recent robustness of polysilicon futures can be traced back to the uptick in spot market transactionsSun Weidong, the chief analyst for non-ferrous metals at Dongzheng Futures, points out that the surge is primarily fueled by rising spot pricesRecently, the finalized price for N-type compact polysilicon between leading silicon producers and prominent wafer manufacturers stood at 42,200 yuan per ton

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This figure represents a 1,000 yuan increase from the previous week and highlights a 2,000 to 3,000 yuan increase over large transactions that took place in late December 2024. However, it is crucial to note that these transactions mainly reflect replenishment from downstream single orders rather than representing significant procurement volumes.

The market's psychological landscape has also been affected by various news reports, such as the high-level meetings within the photovoltaic industry, anticipated regulatory announcements regarding energy consumption, and upcoming bid outcomes for construction projectsThese factors collectively contribute to shaping market sentiment and, to some extent, influence price movements in polysilicon futures.

Looking at the spot transactions, the latest statistics from the Silicon Industry Association reveal that prices for N-type recycled materials have fluctuated between 39,000 and 45,000 yuan per ton this week, with an average price settling at 41,700 yuan per ton

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This represents a deceleration in the rate of increase compared to previous weeks.

Wang Yanqing, chief analyst for photovoltaic products at CITIC Jiantou Futures, echoes the sentiment that the price increase for polysilicon futures is fundamentally supportedHe emphasizes two significant aspects: first, an upward adjustment in industrial silicon prices recently has provided a degree of cost support for polysilicon; and second, production cuts and price stabilization efforts by upstream companies are fostering a warming environment in the polysilicon marketNonetheless, he cautions that weak demand and inventory pressure limit the extent of price increasesThe adequate supply of silicon wafers, combined with reduced stocking needs, tempers the optimism surrounding the pricing dynamics.

As we delve deeper into the photovoltaic supply chain, Sun Weidong expresses skepticism about the short-term sustainability of polysilicon prices

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He cites the high inventory levels of polysilicon as a critical concern: in January 2025, polysilicon production is projected at 90,000 tons, while wafer production is anticipated at 46 GW; however, the existing polysilicon inventory is already significantly elevatedAccording to the data from SMM, the inventory held by polysilicon plants by January 10 reportedly stood at 230,000 tonsWhen adding the raw material stocks from downstream, the entire industry's inventory level exceeds 400,000 tons, with raw material stock availability nearing two monthsThe hesitance of downstream entities in promptly purchasing polysilicon is evident.

Moreover, Sun highlights the challenge of effectively transmitting any price increases down the supply chainFollowing previous reductions in inventory, the prices of silicon wafers have risen noticeably, with 183N and 210N models costing 1.18 yuan and 1.55 yuan per piece, respectively

However, with the photovoltaic industry entering a demand lull ahead of the Spring Festival and components also maintaining elevated inventory levels, the capacity for significant price acceleration on battery pieces appears constrained.

To illustrate, based on the selling price for silicon wafers (183N model), which stands at 1.18 yuan per piece, this equates to an effective polysilicon price of around 42,000 yuan per ton that merely covers cash costsShould polysilicon prices continue to escalate, it would become increasingly difficult for wafer manufacturers to absorb these costsConsequently, even though high inventory and weakened demand present significant bulwarks against continuous price increases, there is equally no substantial rationale for prices to plummet.

Looking forward, Sun expresses optimism regarding potential demand revival and price recovery post-Spring Festival

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Should the demand from end users improve, the market could witness a release of pent-up expectations for price increases, which could stimulate price movements for battery pieces and silicon wafersAlthough polysilicon production is not expected to undergo dramatic shifts in the short term, the potential return of certain northern capacities post-holiday suggests that monthly production rates from March to May may hover between 100,000 to 110,000 tons, allowing the market to possibly shift towards a destocking phase—an environment supportive of price increases for polysilicon.

Wang elucidates that a near-peak price for polysilicon futures has emerged, indicating a potential weakening of short-term price growth momentumFrom an arbitrage perspective involving deliverable items, recent quotes for P-type polysilicon from the Silicon Industry Association stand at 32,000 yuan per ton, compared to the futures market rate of 44,225 yuan per ton, indicating a significant spread

Should these arbitrage opportunities materialize compellingly, the burgeoning supply chain could enhance downward pressure in the future.

Long-term, Wang perceives a comforting trend is emerging towards a recovery in the polysilicon sectorGiven the current oversupply scenario juxtaposed with the robust demand for solar installation, polysilicon prices may experience slow ascension going forward.

However, Lu Shiyuan, director of the new energy project department at Zheshang Futures, warns of the long-standing issues of insufficient trading segments in the polysilicon industryHe speculates that the implementation of futures trading will significantly shift market dynamics, necessitating keen observation of how downstream manufacturers adapt to new trading modalitiesFor instance, the power dynamics in pricing negotiations may undergo crucial transformations, induced by changes in how delivery rights are managed—which could, in turn, translate to volatility in polychlorinated prices.