Lithium and solar module prices continue to fall

Chinese solar giants point to falling prices as cause for concern

For China’s two biggest investments in the energy sector in the past decade, namely battery storage and solar power generation, June continued to bring bad news in terms of price trends.

Lithium prices continue to fall

Taiwanese firm TrendForce released a report that lithium prices fell significantly in June as the downstream battery sector focused on reducing inventories. Weak demand for lithium salts and slow lithium carbonate deliveries — compounded by short-term oversupply — drove lithium carbonate prices to a new low this year. Prices fell from over CNY100,000 per tonne last month to the CNY90,000 per tonne range, a far cry from the “low” of CNY230,000/tonne in August last year.

Battery costs have fallen as raw material prices have fallen, leading to a sustained decline in EV battery cell prices. TrendForce research shows that EV battery cell prices fell by 1-2% in June compared to May. The monthly average selling price for square ternar, square LFP and pouch ternar EV battery cells was CNY 0.49/Wh, 0.42/Wh, 0.51/Wh, respectively.

In the ESS sector, the mid-year peak in grid-connected installations in China has ended, leading to a decline in ESS orders. In addition, the decline in lithium carbonate prices did not provide stable support for ESS cell prices, leading to lower prices. In June, the average price of LFP ESS cells was CNY0.41/Wh, down 4.2% from May.

TrendForce analysis indicates that ESS cell price competition remains intense, with cell and system manufacturers adopting low-price strategies to secure orders. This has pushed current ESS cell and system prices below the cost range for most cell manufacturers and poses a significant challenge to cost control. Major cell manufacturers are currently competing in the high-capacity 300Ah+ cell product segment, and by 2Q24, most major suppliers are likely to begin mass production of 300Ah+ cells, potentially leading to further cost reductions.

TrendForce notes that the lithium battery market experienced a peak season from March to May. However, demand for battery cell raw materials weakened after June due to sufficient advance inventory in downstream sectors. Lithium prices are under pressure due to the current market conditions with relatively loose supply. Market demand is expected to remain weak in July, with lithium prices expected to fall to the sensitive range of CNY 80,000-90,000 per ton. Despite some decline on the supply side, overall supply will still exceed demand as the weak price trend continues.

As a result, cost support for EV and ESS cells will continue to weaken, and cell prices are likely to come under downward pressure in early Q3. Price stability or recovery will depend on demand replenishment during the peak season late Q3.

In India, lower prices coincide with a shift towards energy storage, especially battery storage. They should provide a strong impetus to these plans as finances will become much more cost-effective.

Solar module prices continue to fall, with little hope for a rebound

Similarly, solar modules are in the spotlight, with China-based or controlled companies accounting for over 80% of the global market share. Chinese solar module prices have hit record lows, according to the latest data from OPIS. The benchmark for TOPCon modules from China fell to $0.100 per watt, down $0.005 per watt from the previous week. Similarly, Mono PERC module prices also fell $0.005 per watt, now at $0.090 per watt. These price cuts reflect a broader trend of subdued market activity due to weak demand. In response, module manufacturers are lowering prices to secure new orders and maintain cash flow. The current trade indication for TOPCon modules is reported at $0.10 per watt Free-on-Board (FOB) China. As the market grapples with weak demand, these new record low prices underscore the ongoing challenges facing Chinese solar module manufacturers.

Slow domestic demand (relative to supply and capacity), in addition to intense price competition in newer markets such as Latin America and the Middle East, has worried Chinese module manufacturers. Prices in the US could also face stiffer competition as new countervailing duties kick in this month, while shipments from Europe will face increased shipping costs in the Red Sea region. While it would be an exaggeration to call this a perfect storm, given the uncontrolled capacity expansion by manufacturers with no clear signs that the market is ready for it, the fact remains that module prices are not going anywhere anytime soon. This means there is a great opportunity for those in the planning stages to act now, as instead of waiting for further declines, they should lock in the current low prices and jumpstart their solar transformation.