China Solar Module Forward Curve Enters Backwardation on Weak Outlook
FOB China TOPCon solar module forward prices shifted into slight backwardation this week, pressured by a weak demand outlook, falling production costs and a gradual transition toward higher-efficiency products, according to OPIS data and industry sources.
Third-quarter 2027 loading TOPCon modules were assessed at $0.111 per watt peak on July 7, a $0.001/wp discount to spot loading modules at $0.112/wp, OPIS data shows.
The forward curve has steadily weakened since the start of the year. In January 2026, Q1 2027 loading modules commanded a $0.007/wp premium to spot prices. That premium narrowed to $0.001/wp in June before the curve flattened in July.
One market analyst said forward prices were unlikely to deviate significantly from current spot levels in the second half of 2026, given the price uncertainty under prevailing market conditions.
The analyst added that few manufacturers had either the willingness or financial capacity to engage in another price war, while producers were increasingly reluctant to accept loss making orders.
Even so, liquidity for 2027 loadings remained thin, with market participants reluctant to enter contracts amid uncertainty over the longer-term price outlook. Based on the OPIS market survey, several trade sources expect forward prices to stabilize or edge slightly lower.
Stockpiles Weigh on H2 Demand
Several sources expected demand to remain subdued in the second half of 2026, as importers had secured a significant share of their requirements ahead of China’s cancellation of export tax rebates for solar photovoltaic products on April 1.
Market sources believe these stockpiles could suppress purchasing activity during the second half of the year. However, as rebate-eligible inventories held in destination warehouses are gradually depleted, buyers are expected to feel the impact of higher replacement costs more directly.
A top-10 manufacturer told OPIS that visibility for new distributed generation orders remained limited, with many producers expecting destination market sales to weaken during the second half.
While FOB China prices have moved lower, destination market module prices appeared to be slightly firming because of higher freight costs, potentially weighing further on demand or prompting buyers to delay procurement.
According to an industry source, container freight rates will likely remain elevated for some time, with market participants in wait-and see-mode given the repeated shifts in the geopolitical situation.
Falling Production Costs Pressure Prices
The module market outlook will also depend heavily on production costs, including upstream material prices and components such as silver paste, according to several producer sources.
Trade sources said Chinese cell and modules could have further room to decline, given that upstream polysilicon and wafer prices have already recorded steeper losses this year.
“We expect module prices to keep falling because there has been no improvement in the supply-demand balance, while production costs have continued to fall,” a top-10 integrated manufacturer said. “The question is whether any new policies will emerge to support module prices this year,” the producer added.
According to OPIS data, China Mono Premium polysilicon and FOB China N-type M10 wafer prices have fallen 39.5% and 27.2%, respectively, since the start of the year.
In comparison, downstream solar markets have not declined to the same extent. FOB China M10 cells were down 14.4% year-to-date, while TOPCon module prices remained higher 19.1% over the same period.
Silver prices remain an important consideration for both integrated and specialized cell manufacturers because silver paste is a major component of cell production costs. Trade sources estimated that silver accounted for around half of total TOPCon cell production costs.
One specialized cell manufacturer source said any increase in silver prices would raise manufacturing costs but would not necessarily translate into higher selling prices, as end users remained resistant to price increases.
Silver prices have fallen by nearly 10% over the past month and around 30% over the past six months, though they remain more than 50% higher year on year.
Shift to Higher Efficiency Modules
Demand for mainstream-efficiency TOPCon modules is also expected to weaken as buyers gradually shift toward higher-efficiency TOPCon products and alternative technologies such as back-contact or BC modules.
However, supply of higher-efficiency TOPCon and BC modules remained tighter as manufacturers continued to ramp up production to meet demand.
Several manufacturer sources expected prices for higher efficiency products to decline in the second half of 2026 as supply tightness eases, placing additional pressure on mainstream module prices.
One Chinese manufacturer said higher power output sold strongly in Europe during the first half of the year, while back contact modules were in short supply. However, the source believed these shortages would ease during the second half of this year, creating downward price pressure.
According to OPIS records, higher efficiency TOPCon modules above 650wp were heard in the low-to-mid $0.110/wp range FOB China, while BC modules were indicated in the mid-to-high $0.110/wp levels.
As demand shifts toward higher efficiency products, Chinese manufacturers are evaluating BC technologies, including hybrid production routes that build on their existing TOPCon capabilities.
Although many companies are actively promoting BC products in domestic and export markets, patent barriers and intellectual property consideration remain important constraints for leading manufacturers.
Capacity reductions fail to lift prices
Chinese regulators have introduced mandatory quality and efficiency standards for solar PV products as part of efforts to phase out outdated manufacturing capacity, address severe overcapacity and encourage technological innovation.
However, market participants remain divided over whether the removal of inefficient capacity will materially improve the industry’s supply-demand balance. Some sources said the measures could reduce nominal production capacity without significantly affecting effective operating capacity, limiting their ability to support prices.
Manufacturer operating rates have already remained low in the first half of 2026 because of weak end-user demand and high inventories.
According to OPIS records, integrated manufacturer operating rates were in the high 50% range in early, up from around 50% in June. This suggests that over 40$-50% of installed production capacity remained idle.
In a recent policy move, China’s National Standards Information Public Service Platform released the mandatory standard, “Minimum allowable values of energy efficiency and energy efficiency grades for crystalline silicon photovoltaic modules and inverters”, in late June.
The standard will take effect on Jan. 1, 2027. Separate standards covering energy consumption of polysilicon and monocrystalline silicon production will be introduced at the same time.
Market participants generally agree that tighter mandatory PV efficiency standards could increase industry consolidation and phase out lower efficiency production capacity. Industry sources estimated that the new standards across the solar value chain could affect as much as 30% of existing capacity.
With manufacturers given about six months to upgrade their production lines before implementation, some sources expect this policy to encourage the retirement of outdated capacity.
Most sources said the standard would have the clearest impact on state-owned module procurement tenders, where minimum module efficiency and power output requirements could be raised.
This could shift procurement toward higher efficiency products and encourage manufacturers to compete through technology upgrades rather than aggressive price reductions.
However, another module manufacturer said policy implementation remained unclear because authorities have not explicitly stated whether modules falling below Grade 3 would be prohibited from sale.
The source viewed the measure as an efficiency classification framework rather than a definitive market restriction, adding that further guidance would be needed to assess implementation and impact on market participants.
“We currently view this policy as a soft threshold,” another top-tier producer said. “Policy makers would likely incorporate [this policy] into tender guidelines and grid connection requirements,” the producer added.
One developer source said the policy was likely to remove only a relatively small volume or modules from the market, limiting its overall impact on supply.
—Reporting by Brian Ng, bng@opisnet.com; Editing by Mei-Hwen Wong, mwong@opisnet.com