(Yicai Global) March 22 -- China's Longi Green Energy Technology will deepen its collaboration with Tongwei by purchasing CNY44.2 billion (USD7 billion) worth of solar panel materials from the latter.

Longi's units will buy 203,600 tons of high-purity polysilicon material from four Tongwei subsidiaries till December 2023, the two solar energy equipment manufacturers said in a statement yesterday.

Based on current market prices, the orders will tally CNY44.2 billion but the actual prices will be negotiated on a month-to-month basis.

The pair has been working together before. Chengdu-based Tongwei and Xi'an-headquartered Longi have partnered on photovoltaic energy projects and they penned a long-term supply deal in May 2018.

The market is expanding quickly. Polysilicon is the main raw material to produce solar silicon wafers, used to make solar cells that form solar panels. Silicon prices almost tripled last year amid rising PV energy generation demand, according to data from the China Photovoltaic Industry Association.

PV module producers have gained on the booming demand. Tongwei's net profit more than doubled to CNY8.2 billion (USD1.3 billion) in 2021 from 2020, according to its preliminary earnings results. Revenue climbed 51 percent to CNY66.6 billion. Sales of high-purity crystalline silicon, a key product, increased by 24 percent to 107,700 tons.

Consequently, manufacturers are adding output. Tongwei said last July it will invest CNY14 billion to add 20,000 tons of annual capacity of high-purity crystalline silicon in southwestern China's Leshan to meet fast-growing downstream demand. That should boost its total annual capacity to 430,000 tons.

The latest deal failed to spark major stock price hikes. At market close, Tongwei's shares [SHA: 600438] slid 0.18% to CNY44.70 (USD7). Longi's stock price [SHA: 601012] dropped 2.54% to CNY80.49 (USD12.65), after both recorded gains in early morning trade.

Editor: Emmi Laine, Xiao Yi