China Solar Sector: Improving supply discipline supports market rebalancing

Deutsche Bank publishes its monthly China solar sector monitor. According to SMM, planned October polysilicon output is set to fall 20% MoM to 95.6kt, driven by synchronized producer production cuts and rising electricity costs in hydropower-rich regions, improving supply discipline. We expect near-term polysilicon prices to stay above Rmb40/kg, more than 30% above the July trough. The industry aims to fully absorb roughly 0.3mn tonnes of excess polysilicon inventories by end-2027, which implies capping total output at around 1.2mn tonnes or lower, an average utilization rate of about 30%. October wafer output drops 1% MoM to 54GW, cells fall 4% to 49.4GW and modules rise 4% to 43.3GW, with utilization of about 57%, 51% and 42% respectively. Solar glass destocking progresses, with inventory days down to 42 and operating capacity down 3% MoM. Module prices are likely to stabilize. The sector may have moved beyond its most challenging period, and low-cost producers such as GCL Tech could