Solar production cuts fail to ease polysilicon inventory pressure as costs squeeze wafer and glass margins
Solar supply-chain prices were broadly stable in October, but higher polysilicon and natural gas costs squeezed spot margins for wafers and glass. Polysilicon inventories continued to rise even as production was cut, while the recovery in global module demand was weaker than seasonal norms.
Original source：Goldman SachsFirst published on Unhidea：Original source date：
Key takeaway
Goldman Sachs believes production cuts across the solar supply chain are improving overall supply-demand metrics, but slow downstream purchasing, rising polysilicon inventories and cost pass-through are limiting the recovery in profitability.
Why did wafer and glass margins fall despite stable prices?
As of late October, supply-chain prices were broadly stable, with polysilicon and solar glass holding at 43 yuan per kilogram and 10.5 yuan per square meter, respectively; however, expectations for downstream demand were weak and trading was subdued.
Based on spot prices, Goldman Sachs calculates that cash gross margins for wafers and glass have fallen by 8 and 5 percentage points, respectively, since the start of October, squeezed mainly by a 24% month-on-month rise in the average monthly price of polysilicon and a 17% rise in liquefied natural gas prices during the month.
Spot calculations reflect the relationship between current prices and costs; companies' actual profits are also affected by premiums or discounts on their selling prices and by plant shutdown and maintenance schedules.
Why have polysilicon production cuts not yet curbed inventories?
Goldman Sachs expects output across the solar supply chain to decline by an average of 3% month on month in October, compared with broadly flat output in September. Polysilicon output is expected to fall 23% month on month, making it the main source of the production cuts.
Downstream purchasing has been slow, and Goldman Sachs believes polysilicon production cuts are still insufficient to relieve high inventory pressure: as of late October, polysilicon inventories had risen 8% during the month, while inventories at downstream stages had fallen by an average of 3%.
Overall supply-demand metrics have improved: the ratio of output at each stage of the supply chain to module output fell from 115% in September to 102% in October, while production-side inventory days fell from 52 to 48. This occurred alongside a continued increase in polysilicon inventories.
How far has module demand recovered?
Goldman Sachs estimates global module demand at 44 GW in September, up 35% month on month and 3% year on year; the year-on-year increase was, however, well below the 34% average for the same period in 2021–2025. The measure is the sum of module demand corresponding to installations in China, Chinese exports and module demand corresponding to installations in the United States.
Global module demand in the first 9 months of 2026 was 339 GW, down 36% year on year, tracking below Goldman Sachs' forecast of a 12% decline for the full year. China's new installations rose 41% year on year to 14 GW in September, but the cumulative total for the first 9 months was still down 54% year on year to 111 GW, tracking below the bank's forecast of a 26% full-year decline.
China's module exports fell 18% year on year to 23 GW in September, a narrower decline than the 45% recorded in August. Regional differences persisted: demand in Africa and the EU fell 29% and 26% year on year, respectively, while demand in the Middle East rose 26%.
Which parts of the supply chain does Goldman Sachs favor?
Within its coverage, Goldman Sachs favors Maxwell Technologies, Foster, Xinyi Solar and LONGi Green Energy, citing new application opportunities, potential price increases and per-unit profit expansion for solar encapsulant films, an inflection point in glass prices, and energy storage potential, respectively.
For LONGi Green Energy, Goldman Sachs also values EBITDA resilience from lower upstream prices and the mid-cycle upside potential of BC technology. It remains cautious on the polysilicon rod segment and assigns sell ratings to Daqo New Energy's US and A shares and to Tongwei.
