Chinese PV product manufacturers LONGi and Tongwei have inked another major long-term supply agreement. According to a statement released by LONGi on March 21, eight of LONGi’s subsidiaries and four of Tongwei’s subsidiaries have signed a contract under which the latter will supply 203,600MT of polysilicon to the former during the period from January 2022 to December 2023. This story was first reported by other Chinese renewable energy news outlets.
While the total quantity is locked in, the price is not. LONGi will be procuring Tongwei’s polysilicon in batches, and the price will be negotiated on a monthly basis. According to industry association China Silicon, the average transaction price of high-purity mono-grade polysilicon came to RMB 245,300 per MT on March 16. Using this price as reference, the contract is estimated to be worth RMB 44.2 billion. This figure excludes tax and does not constitute an actual price commitment. According to the reporting from Chinese news outlets, this figure also represents 107.42% of LONGi’s audited operating costs for 2020.
LONGi in its statement said that the latest contract with Tongwei is going to improve the long-term stability of its polysilicon supply and is thus essential for meeting the future needs of its business operations. Furthermore, the cost of the contract will not have a direct impact on the company’s short-term financial performance.
LONGi and Tongwei have been trading products with each other for some time. For instance, Tongwei in September 2020 updated its wafer supply agreement with LONGi and raised its procurement quantity to 2.6 billion pieces. These wafers will be delivered during the three-year period from 2020 to 2022. Apart from these long-term supply agreements, both sides have also signed strategic cooperation agreements that have created joint ventures for the development of the production capacity for upstream materials.