Photovoltaic industry giants "huddle together for warmth", Tongwei Co., Ltd. and LONGi Green Energy signed a long-term order of 39.1 billion

Blue Whale Finance

2024-05-11 21:11Posted on the official account of Beijing Blue Whale Finance

Image source: Visual China

Blue Whale financial reporter Wang Xiaonan

After signing a 425,000-ton purchase contract with GCL Technology in April, LONGi Green Energy signed a sales contract for high-purity crystalline silicon products with Tongwei Co., Ltd. on May 10, with an estimated total amount of about 39.1 billion yuan. With the disclosure of the 2023 annual report and the first quarter of 2024, the entire photovoltaic industry is no longer prosperous in the past, and performance pressure and stock price decline seem to have become a common status quo. In the first quarter of this year, industry giants Tongwei Co., Ltd. and LONGi Green Energy lost net profit while their revenue declined, and the two giants chose to stay warm.

The two photovoltaic giants are holding hands again

On the evening of May 10, Tongwei Co., Ltd. announced that six subsidiaries of the company (hereinafter referred to as the "seller") recently signed a sales contract for high-purity crystalline silicon products with LONGi Green Energy and its nine subsidiaries (hereinafter referred to as the "buyer"), agreeing that during the period from 2024 to 2026, the buyer will purchase a total of no less than 862,400 tons of high-purity crystalline silicon products from the seller, and the purchase price will be determined through monthly negotiation, and the total contract transaction amount shall be subject to the final transaction amount.

Based on the average transaction price of 45,300 yuan/ton of domestic N-type materials announced by the Silicon Branch of China Nonferrous Metals Industry Association in the latest phase (May 8, 2024), the total amount of this contract is expected to be about 39.1 billion yuan (including tax).

According to the statistics of the Ministry of Industry and Information Technology of the People's Republic of China, the domestic output of high-purity crystalline silicon will exceed 1.43 million tons in 2023, a year-on-year increase of 66.9%. According to Antaike statistics, the average price of monocrystalline dense material decreased from 176,200 yuan/ton at the beginning of the year to 58,300 yuan/ton at the end of the year, a decrease of 66.91%.

The price fluctuation will inevitably affect the performance, Tongwei Co., Ltd. said that this contract is a long-term sales contract, and the signing of the contract is conducive to the stable sales of the company's high-purity crystalline silicon products, which will have a positive impact on the operating performance.

As a leading enterprise of "polysilicon + battery" in the industry, Tongwei has continued to promote the construction of high-purity crystalline silicon production capacity in recent years.

In 2023, Tongwei Yongxiang Energy Technology's 120,000-ton high-purity crystalline silicon project will reach full production standards in the fourth quarter. At the same time, the construction of 200,000 tons of high-purity crystalline silicon projects in Yunnan and 200,000 tons of high-purity crystalline silicon projects in Inner Mongolia is expected to be put into operation in the second and third quarters of 2024 respectively, when Tongwei's production capacity of high-purity crystalline silicon will reach 850,000 tons. In addition, Tongwei has also successively planned supporting industrial silicon projects in Inner Mongolia and Sichuan.

As the world's largest manufacturer of monocrystalline silicon products, the counterparty LONGi Green Energy's alliance with Tongwei has also attracted much attention from the market. Speaking of which, LONGi and Yongxiang Co., Ltd., a subsidiary of Tongwei Co., Ltd., signed cooperation agreements as early as January and March 2017 respectively to carry out project cooperation in the field of monocrystalline silicon rods and high-purity crystalline silicon.

In January 2017, Yongxiang Co., Ltd., a subsidiary of Tongwei Co., Ltd., LONGi Green Energy and Trina Solar, jointly invested in the construction of a 5GW monocrystalline silicon rod project in Lijiang by way of investment and joint venture, with a registered capital of 800 million yuan, and the three invested 120 million yuan, 480 million yuan and 200 million yuan respectively. In March of the same year, Yongxiang Co., Ltd. and LONGi Green Energy jointly established a joint venture company as the main investor of the high-purity polysilicon project with an annual output of 50,000 tons, with a registered capital of 1.2 billion yuan, and the two held 85% and 15% of the shares respectively.

Subsequently, in 2018, three companies under Tongwei Co., Ltd. and four companies under LONGi Green Energy planned to sign cooperation agreements on the sales and procurement of polysilicon products, with a total sales of about 55,000 tons of polysilicon.

In June 2019, Tongwei and LONGi reached a cooperation intention on high-purity crystalline silicon and silicon wafer cooperation, and the two parties signed a strategic cooperation agreement. In September 2020, based on the strategic agreement signed, the two parties made adjustments, in addition to increasing the capital and shares of Yongxiang New Energy, which was established in 2017, LONGi plans to invest in Yunnan Tongwei (Yunnan Baoshan 40,000 tons of high-purity crystalline silicon project), holding 49% of the shares, with the two parties aiming for an annual trading volume of 101,800 tons of polysilicon.

Since then, the two leading companies have signed relevant procurement contracts. In March 2022, Tongwei Co., Ltd. signed a polysilicon purchase agreement with LONGi Green Energy for more than two years, with a total purchase amount of up to 203,600 tons, and the contract amount was estimated to be as high as 44.2 billion yuan according to the market price at that time.

This time, the two parties once again signed a large-scale "long order" for the purchase of high-purity crystalline silicon, which is also considered to be a continuation of the previous cooperation. In recent years, LONGi Green Energy has made new breakthroughs in BC cells and other fields, and has a large demand for raw materials, so it needs to further support the development of its crystalline silicon photovoltaic cell related business through large-scale procurement of silicon materials. Previously, on April 3, LONGi Green Energy also signed a long-term procurement contract of about 425,000 tons of granular silicon with Jiangsu Zhongneng, a wholly-owned subsidiary of GCL Technology.

Behind the group heating, the performance declined

The background of the signing of large orders by the two photovoltaic leaders is that the photovoltaic industry is currently undergoing structural adjustment.

On May 8, the latest polysilicon prices released by the Silicon Branch of the China Nonferrous Metals Industry Association showed that the transaction price of N-type rod silicon ranged from 43,000 yuan/ton to 48,000 yuan/ton, and the average transaction price was 45,300 yuan/ton, down 7.93% month-on-month. The transaction price range of P-type dense material ranged from 38,000 yuan/ton to 43,000 yuan/ton, and the average transaction price was 39,000 yuan/ton, down 8.88% month-on-month.

Clearly, polysilicon prices are still falling, and have fallen by nearly 90% from their 2022 peak of over 300,000 yuan/mt. Judging from the current situation, the current polysilicon price may have fallen below the cost of non-leading companies, or even approached the cost of leading companies. Tongwei also said in its 2023 annual report that the overall operation of enterprises in the industry is under pressure, with significant differentiation, and some companies have unsalable products and operating losses, and investment projects have been forced to be postponed or cancelled.

Affected by the decline in polysilicon prices, the performance of polysilicon leader Tongwei has also been affected. In 2023, Tongwei's revenue growth will decline again after 7 years, and the net profit attributable to the parent company will drop by 50% again after 11 years. Last year, Tongwei's revenue was 139.104 billion yuan, down 2.33% year-on-year; The net profit attributable to the parent company was 13.574 billion yuan, a year-on-year decrease of 47.25%.

In the first quarter of 2024, the company's revenue will be 19.57 billion yuan, a year-on-year decrease of 41.13%; The net profit loss attributable to the parent company was 787 million yuan, a year-on-year decrease of 109.15%, while in the first quarter of 2023, it made a net profit of 8.601 billion yuan.

Last year, LONGi's revenue increased slightly by 0.39%, and its net profit attributable to the parent company also decreased by nearly 30%. Similarly, this year, LONGi Green Energy also announced a quarterly report with a loss, with revenue of 17.674 billion yuan, a year-on-year decrease of 37.59%; The net profit loss attributable to the parent company was 2.35 billion yuan, a year-on-year decrease of 165.03%.

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