[Post-holiday silicon metal market activity gradually recovers; focus on operating rate changes on both supply and demand sides]: During the first workweek after the Chinese New Year holiday, downstream users of silicon metal mainly inquired about prices, with only small volumes of rigid demand restocking transactions concluded. Trading firms engaging in both spot and futures market quoted prices actively, while silicon enterprises mostly maintained stable offers and adopted a wait-and-see stance compared to pre-holiday levels. As of February 26, SMM oxygen-blown #553 silicon in east China was at 9,200-9,300 yuan/mt, #441 silicon at 9,300-9,500 yuan/mt, and #3303 silicon at 10,200-10,400 yuan/mt. On the export front, overseas users showed active inquiry performance after the holiday, but export order prices remained involutionary. In the futures market, the most-traded contract weakened on Thursday afternoon, closing at 8,335 yuan/mt at the end of the session. Throughout the week, the most-traded contract moved within a range of 8,330-8,495 yuan/mt. Most silicon enterprises maintained strong wait-and-see sentiment with stable offers, while futures consolidated at lows and trading firms engaging in both spot and futures market quoted actively, resulting in on-demand transactions in the market.

[PV Express] Tongwei Co., Ltd. (600438) announced on February 24 that the company is planning to acquire a 100% equity stake in Lihao Qingneng through the issuance of shares and payment in cash, and to raise supporting funds. This transaction is not expected to result in a change of the company's controlling shareholder or actual controller, does not constitute a connected transaction, and is anticipated not to constitute a major asset restructuring. As the transaction is still in the planning stage and relevant matters remain uncertain, upon the company's application, trading of the company's shares, convertible bonds, and convertible bond conversion will be suspended starting from the market opening on February 25, 2026, with the suspension period expected not to exceed 10 trading days. Lihao was established in April 2021 and is primarily engaged in the R&D, production, and sales of semiconductor materials such as PV-grade high-purity polysilicon and electronic-grade polysilicon. Data shows that Qinghai Lihao currently has a polysilicon capacity of approximately 150,000 mt/year.

In January, the silicon metal market experienced a relatively loose supply-demand balance, with a theoretical inventory buildup of approximately 30,000 mt. In February, both supply and demand contracted simultaneously, and the market is expected to show a tight balance or minor destocking. The current high industry inventory still requires time to be digested, and the sustainability of destocking remains a key variable affecting price trends and market sentiment.

The path for joint mergers and acquisitions (M&A) and restructuring in the highly anticipated polysilicon sector has begun to take shape. During this year's SNEC exhibition, Lan Tianshi, Co-CEO of GCL Technology (03800.HK), revealed in an exchange with media outlets such as Cailian Press that currently, leading enterprises in the industry are taking the lead in establishing a company operated by professional managers through a model of "direct capital contribution + debt". This company aims to achieve capacity exit and controlled output through acquisitions, and then repay liabilities through profits, thereby promoting the orderly exit of industry capacity. "In the future, participants may invest and repay debts with real money through equity or forms such as limited partnerships (LPs)," Lan Tianshi said.

①After a period of explosive performance growth, with changes in the PV market conditions, Hongyuan Green Energy incurred a loss of 2.697 billion yuan in 2024, marking its largest loss since going public. ②The company adheres to an integrated layout, believing that it can effectively mitigate systemic risks arising from sharp price declines in a single segment, and will not trade or sell its own polysilicon capacity. ③The company believes that self-regulated production cuts are conducive to the industry's recovery, and it is waiting for opportunities to emerge after the turning point.

"At the time of investment, I thought PV was a tech growth stock, but later realized it was actually a cyclical stock." An investor made this self-deprecating remark while communicating with the company's management at the 2024 annual general meeting of HYGREEN (603185.SH) held yesterday afternoon. After experiencing a performance boom from 2020 to 2022, HYGREEN incurred a loss of 2.697 billion yuan in 2024 amid changes in the PV market, marking the highest loss since its listing. Correspondingly, the company's market capitalization also plummeted from nearly 100 billion yuan at its peak to around 10 billion yuan now. Regarding how to cope with the impact of cyclical risks, the company's management stated that it would comply with the self-discipline production cut requirements of the industry association to stabilize market prices. On the other hand, it would continue to maintain the company's core advantage of integration, with all of the company's self-owned polysilicon capacity used internally and no consideration given to external sales. "The company is confident in recovering ahead of the industry and now only needs to wait for the market to rebound," the management said. As of Q1 2025, HYGREEN's asset-liability ratio stood at 58.15%, which was at a relatively low level among publicly listed firms in the PV industry. Integration remains an effective risk-mitigation strategy Starting from the silicon wafer business and gradually extending its industry chain upstream and downstream, HYGREEN's development path shares many similarities with that of PV leader LONGi Green Energy (601012.SH), leading some investors to refer to it as "Little LONGi." A review of its operating performance in recent years after entering the manufacturing end of the PV industry can more vividly reflect the ups and downs of this cycle: In 2019, the company began to cross over from high-end intelligent equipment manufacturing into the PV monocrystalline silicon sector. Benefiting from a significant increase in terminal installation demand, various links in the crystalline silicon industry chain, especially upstream products, were in undersupply, and product prices remained high. By 2021, the proportion of the company's new energy materials business revenue in its main business revenue had exceeded 98%. From 2020 to 2022, HYGREEN also experienced a "boom period" in performance, with net profit attributable to shareholders of the parent company increasing by 186.72%, 222.10%, and 77.22% YoY, respectively. The company's management introduced at the shareholders' meeting that as early as 2021, during the PV industry's rapid growth phase, the company had already detected the potential risk of overcapacity in the silicon wafer segment. While peers were still aggressively expanding their monocrystalline silicon wafer capacities, the company had already begun to establish a vertical integration layout covering "polysilicon-silicon wafer-battery-module." The management further stated that if it had bet solely on the silicon wafer segment at that time, although it could have achieved high short-term profits, it would have been difficult to withstand long-term cyclical fluctuations. An integrated layout could effectively avoid systemic risks brought about by sharp price drops in a single segment. However, it is worth noting that this layout model is often accompanied by controversies, especially when the entire industry chain faces challenges of periodic supply-demand imbalance, and integration also encounters the situation of "it is difficult for a large ship to change course." By Q4 2023, as this market trend neared its end, Hongyuan Green Energy's revenue and net profit began to decline, and in 2024, it recorded the largest loss since the company's listing. During the post-meeting exchange, an investor asked what the company's core "moat" was. The company's management responded that in the segmented equipment manufacturing business, the company maintains a stable leading position; in terms of PV materials, due to product homogeneity, enterprise competitiveness is mainly reflected in cost reduction. From polysilicon production to battery modules, the cost competitiveness in each segment is at the industry-leading level. Regarding the current operating status of each segment, the management did not provide a clear explanation but stated that the company is one of the few in the industry with layouts and operations in all four main material segments, and its operating rate is higher than the average. Hongyuan Green Energy has formed a vertically integrated industry chain pattern. In terms of polysilicon, the company currently has an existing self-owned capacity of 60,000 mt in Baotou, which can be increased to 75,000 mt through improved production efficiency. The company's management stated that Baotou, Inner Mongolia, is currently one of the regions in China with the greatest electricity price advantages, and its cost competitiveness is relatively obvious. This portion of polysilicon capacity is advanced capacity that has been newly commissioned in recent years, with all parameters at a relatively good level, and all output is for self-use, with no plans for sale or participation in mergers and acquisitions. Voluntary production cuts are conducive to the recovery of industry chain prices. In 2024, the prices of PV products in various segments continued to remain at low levels, putting pressure on the gross profit margins of the company's various products. Among them, the gross profit margin of silicon wafers was -4.14%, a decrease of 21.99 percentage points YoY, while the gross profit margin of solar modules and batteries was -12.42%, an increase of 1.15 percentage points YoY. The company's management frankly admitted during the exchange that the gross profit margin of modules is the lowest, but their sales account for a relatively small proportion of the company's overall business. The core reason for the losses is concentrated in silicon wafers. If calculated based on the current market price settlement, the actual gross profit margin of the silicon wafer business is -6.06%, and that of the module business is 3.18%. Regarding when the gross profit margin of the silicon wafer business can turn positive, the company stated that it depends on market conditions. In Q1 this year, driven by policies, there was an installation rush in distributed PV, leading to a significant price increase in the PV industry chain and driving an improvement in business operations. Financial reports show that Hongyuan Green Energy achieved revenue of 1.657 billion yuan in Q1 this year, a decrease of 24.37% YoY. Although the net profit attributable to the parent company was a loss of 61.88 million yuan, it increased by 56.23% YoY. The company's management stated that in the first quarter of this year, rising prices in the industry chain drove the company's gross profit margin to turn positive, making it one of the least loss-making enterprises in the PV industry. "As long as the industry shows a slight recovery, the company's operating conditions will improve rapidly. We are currently waiting for the opportunity to explode." During the exchange, investors repeatedly asked when the PV industry chain would reach an inflection point, but no definitive answer was given. The management admitted that the current situation in the industry cannot be changed by a single enterprise, and the company can only leverage its advantages within the broader environment. The company's management told a reporter from Cailian Press that the self-regulated production cuts in the PV industry since the beginning of the year have been effective in improving industry chain prices. The company will comply with the requirements proposed by the industry association to bring the industry back to a reasonable level as soon as possible. Modules are the most downstream segment in the crystalline silicon industry chain and one of the core sales sources for integrated producers. In 2024, Hongyuan Green Energy's module sales exceeded 4 GW. Regarding the module shipment target for this year, the management stated that there is no clear plan, and it will mainly depend on changes in market conditions. In terms of taking orders, the company adopts a cautious strategy, focusing on customers' payment collection capabilities and will not accept high-risk orders. However, it can accept orders that are at break-even or slightly loss-making, as it needs to maintain production line operations and provide working conditions for employees.

SMM March 19 News: On March 19, under the backdrop of a strong supply and weak demand for silicon metal, the futures price of the most-traded contract fell below the key threshold of 10,000 yuan/mt on March 11 and continued to decline intraday, hitting a low of 9,740 yuan/mt, the lowest since October 17, 2024. By the close of the daytime session, the most-traded silicon metal contract dropped 1.66% to settle at 9,785 yuan/mt. In the spot market, according to SMM spot quotations as of March 19, above-standard #553 silicon (east China) spot prices remained stable at 10,300-10,500 yuan/mt, with an average price of 10,400 yuan/mt, marking a three-year low. Click here to view SMM silicon product spot prices. The sluggish performance of silicon metal futures prices is closely tied to its weak fundamentals. Specifically: Supply Side: Supply Is Expected to Increase in March According to SMM data, silicon metal production in February 2025 was approximately 289,500 mt, down 14,500 mt or 4.8% MoM. However, on a daily average basis, February's production exceeded January's. By province, silicon companies in Xinjiang, Inner Mongolia, and Gansu operated at relatively high rates, with these three regions accounting for over 80% of total supply, while Sichuan and Yunnan contributed less than 6%. With the release of production from newly restarted silicon furnaces, coupled with additional restarts expected in March and an increase in production days, SMM estimates that silicon metal production in March will significantly increase compared to February, potentially exceeding 340,000 mt. Demand Side: Current Demand Remains Mediocre By sector, in polysilicon, SMM expects polysilicon companies' operating rates to remain relatively stable from February to March. February's polysilicon production reached approximately 90,100 mt, and March's production is expected to increase to around 94,600 mt. Although overall operating rates in March are expected to remain stable, SMM anticipates that monthly polysilicon production may rise to 110,000 mt in April-May, which could drive up demand for silicon metal. In silicone, according to an SMM survey, the operating rate of the silicone industry in February declined significantly compared to January. February's silicone DMC production was 199,500 mt, down 9.6% MoM, and March's operating rate is expected to weaken further. Some silicone monomer capacities underwent maintenance, leading to reduced production and decreased demand for silicon metal. According to SMM's latest survey on March 18, amid continued declines in silicone prices, silicone monomer companies have implemented unprecedented production cuts, with the industry preliminarily determining that this round of cuts will affect 40% of capacity. SMM expects that after this round of coordinated production cuts, the operating rate of silicone monomer companies will drop from 70% to around 60%. The actual implementation of these adjustments will require further monitoring. In aluminum-silicon alloys, performance remained relatively stable, with operating rates gradually returning to normal levels in February-March, maintaining purchasing as needed for silicon metal. Inventory: According to SMM data, silicon metal inventory saw a slight destocking in March, primarily due to the continuous decline in the most-traded futures contract price at the beginning of the month, which improved the price advantage and boosted sales. However, inventory levels remain near historical highs. Considering the stable operating rates in downstream demand and purchasing as needed, combined with high supply levels, there is currently no basis for a significant and sustained destocking. Click here to view the SMM database. Overall, silicon metal supply remains strong, while demand-side operating rates are mostly stable, resulting in little change in demand for silicon metal and purchasing remaining on an as-needed basis. The continued decline in silicon metal prices has left many producers operating at a loss. Spot market supply is abundant, and price competition is intense. Additionally, the recent slight weakening of silicon coal prices has reduced cost support for silicon metal. Under these combined factors, the downward trend in silicon metal prices persists. Looking ahead, SMM expects that after slight destocking in January-February, the supply-demand balance for silicon metal may shift back to surplus in March as operating capacity increases and production rises, while demand shows little growth. Polysilicon companies with integrated silicon metal capacities have relatively large scales, with large-scale silicon companies (annual capacity of 100,000 mt or more) accounting for a higher share of supply and offering greater stability compared to small and medium-sized companies. The fundamental outlook for silicon metal is expected to remain strong supply and weak demand in the near term. Even if some small and medium-sized companies cut production, it is unlikely to change the supply-demand dynamics significantly. Therefore, SMM expects spot silicon metal prices to remain at the bottom in the short term. Future attention should focus on the commissioning of new capacities, the possibility of large-scale production cuts in the industry amid prolonged weakness, and whether coordinated production cuts among silicone monomer companies can improve profitability and drive increased demand for silicon metal. Institutional Comments Nanhua Futures stated that spot market prices for silicon metal are running weak and stable, with market sentiment remaining sluggish. Producers are reluctant to sell at low prices, and overall supply changes little. Some small and medium-sized producers are considering production cuts or halts, but the short-term impact on actual production is minimal. The market is dominated by low-priced spot and futures cargoes, with strong downstream bargaining pressure, slow transaction pace, and persistent destocking pressure. Silicon coal prices have slightly weakened, leading to a slight reduction in cost support for silicon metal. Everbright Futures noted that the most-traded silicon metal contract has fallen below the 10,000 yuan threshold, but large plants in Xinjiang have yet to initiate production cuts. Downstream polysilicon capacity expansion has been delayed, and silicone production cuts continue. Under the pressure of high inventory, silicon metal continues to explore lower levels. Caution is advised regarding potential news of production cuts by large plants, which could trigger a significant rebound. Polysilicon remains a strong support at high levels, while phased destocking dilutes demand, limiting upward potential. Continued attention should be paid to the production schedule of silicon wafers and policy developments. Guangzhou Futures commented that from a fundamental perspective, the sluggish market has led to production cuts among small northern plants, while southwestern plants maintain low operating rates with no further room for cuts. Meanwhile, large northern plants are expected to restart production, and integrated capacity projects are gradually coming online, making it difficult for supply to decline significantly. With no significant improvement in demand, resistance to a rebound in futures prices is expected to persist. SDIC Futures stated that the prices of key raw materials, such as silicon coal in Xinjiang and Ningxia, have fallen again, leading to a continued decline in silicon metal production costs. Silicon metal inventory remains at high levels, while downstream demand shows no significant signs of recovery. Xinjiang silicon metal producers continue to increase operating rates. After futures prices hit the cash cost plus regional discount levels in low-cost production areas, the market has entered a short-term low-level consolidation phase.

["Failed Acquisition by Tongwei: Runergy Introduces Two Major PV Equipment Manufacturers Through Debt-to-Equity Swap"] ① Autowell and Jiejia Weichuang stated that the purpose of this debt-to-equity swap is to quickly resolve customer arrears, accelerate the recovery of company loans, and strengthen cooperation with customers; ② The debt-to-equity swap includes an IPO performance commitment agreement, requiring Runergy to complete an A-share listing or be acquired within five years. This poses certain challenges for Runergy, which is currently facing losses, lawsuits, production halts, and other difficulties. (Sci-Tech Innovation Board Daily)

[Tongwei Co. Ltd. Launches New "Granular Silicon" Production Project, Company Claims It as an Independent Technological Pathway] ① Tongwei Co. Ltd. has for the first time ventured into "granular polysilicon," with the project adding one silane-based granular polysilicon pilot production unit, enabling an additional granular polysilicon capacity of 10,000 mt per year; ② The PV industry is currently still at the bottom of the cycle, and for polysilicon companies, there remains stringent cost reduction pressure. (CLS)

[US PV Module Capacity Exceeds 50GW] On February 4, the Solar Energy Industries Association (SEIA) published an article stating that US manufacturing has reached a historic milestone—domestic PV module capacity in the US has exceeded 50GW. If these factories operate at full capacity, they will be able to meet all domestic demand for PV products in the US. (Polaris Solar PV Network)