Summary of Key Points
On August 3, the main contract for polysilicon futures suddenly hit a daily limit up, and the A-share photovoltaic sector saw a significant increase. The catalyst was a series of recent policies issued by regulatory authorities (cost accounting standards + price compliance guidelines), which led investors to expect that the industry would move away from "price wars" and eliminate outdated production capacity. However, the underlying issues of excess supply, losses across the entire value chain, and high inventory levels remain unchanged. There is a clear divergence of opinion among institutions as to whether this surge represents a short-term rebound or a long-term reversal.
I. Why Did the Policy "Combination" Trigger the Market?
Two recent policies directly stimulated market sentiment:
1. Cost Accounting Guidelines (July 27): These guidelines unified the cost calculation methods for silicon materials, silicon wafers, solar cells, and modules, providing a clear benchmark for "low-price dumping." Previously, there was no evidence to prove that companies were selling products at a loss; now, with a standardized approach, regulators can enforce laws accordingly.
2. Price Compliance Guidelines (July 31): These guidelines urged companies to shift from competing on price to focusing on quality, preventing the industry from engaging in vicious competition.
These policies are not just empty slogans but are backed by enforcement power. The market believes that outdated production capacity (with high costs and energy consumption) will be eliminated, reducing supply. As a result, funds flocked to buy polysilicon futures and photovoltaic stocks, driving prices up to the daily limit.
II. How Poor Is the Industry's Fundamental Situation?
Although the policies have boosted sentiment, the industry's fundamental problems persist:
- Losses Across the Value Chain: Silicon material production is losing nearly 50% (losing half of the cost per ton sold), silicon wafer production is losing 73%, solar cell production is losing 16%, and module production is barely breaking even (with a profit margin of 0.18%).
- Excess Capacity: China has an annual polysilicon production capacity of 1400 GW, which could produce 1400 GW of modules, but global demand in 2026 is only 600-650 GW—more than double the supply. The utilization rate in the first half of the year was less than 40% (only 4 out of 10 factories were operating).
- High Inventory Levels: Weekly inventory amounts to 523,000 tons. Downstream companies purchase materials as needed and do not hoard them. Three more silicon factories are set to increase production in August, further increasing supply.
- Energy Consumption Standards: Only 45% of the current capacity meets the required standards (energy consumption below 6.3 kgce/kg). Without upgrades, half of the capacity could be shut down. However, some institutions suggest that the actual closure will affect only already outdated facilities, with limited impact on overall supply.
III. What Do Futures Market Movements Reveal?
Data from the futures market indicate that the surge may not be sustainable:
- Significant Increase in Trading Volume: From a low level, trading volume surged to 189,000 lots, indicating many investors are entering the market.
- Decrease in Open Interest: From 115,000 lots to 104,000 lots, suggesting that those who bought futures at higher prices have made a profit and are selling, while those who went short are taking losses. No one is willing to hold positions for the long term; this rise seems more like a short-term emotional outburst rather than a genuine positive outlook.
IV. Disagreement Among Institutions: Rebound or Reversal?
Optimists (such as Guosen and Everbright) believe that the policies will end price wars and accelerate the elimination of outdated capacity, leading to stable industry pricing and reduced volatility in futures prices over the long term.
Pessimists (such as Chuangshou and Tongguan Jinyuan) argue that fundamental issues remain unchanged—excess capacity and high inventory levels will continue to pressure the market. With increased supply in August and cautious purchasing by downstream companies, the rise is likely to be short-lived, followed by a decline.
In summary, the current increase in polysilicon and photovoltaic prices is driven by short-term policy-induced sentiment rather than a fundamental reversal. Only if subsequent policies effectively eliminate outdated capacity and reduce inventory will prices remain stable. For ordinary investors, it's important not to be misled by temporary price spikes; they should focus on whether the industry's fundamentals have truly improved.
Conclusion
The recent rise in polysilicon and photovoltaic sectors is a short-term rebound driven by policy momentum, not a fundamental reversal. If policies can effectively reduce outdated capacity and inventory levels, prices may continue to rise. Otherwise, the market will likely return to a state of stability after the surge subsides. Investors should be cautious and assess whether the industry's fundamentals have truly improved before making decisions.