Polysilicon price rises only temporary, says Deutsche Bank analyst

Recent months have seen polysilicon spot prices sink below the US$30/kg mark as weak demand and overcapacity dogged the sector. Prices were at or below manufacturing cost for the majority of over 100 small-scale producers.

However, in recent weeks with low trading volumes, pricing has stabilized and inched higher to around US$28-30/kg versus low to mid-US$25/kg levels. However, Deutsche Bank Securities' financial analyst, Vishal Shah, believes this is only a temporary move.

According to Shah, channel checks have revealed that many of the small polysilicon producers, especially in China, Taiwan and Korea, have stopped production and closed down operations as prices are below cost. Many had sold polysilicon in the last quarter to clear inventory before shutting operations.

The Deutsche Bank analyst highlighted in a research note that small producers, including Woongjin, JCC and TPSI, had confirmed closures.

In contrast, the major producers - Hemlock, GCL, Wacker and OCI - had been more rigid in pricing, though some were claimed, one being Wacker, to be offering blended polysilicon prices near US$35/kg, while Hemlock was said to be offering discounted pricing (US$25-30/kg) to high volume customers and US$30-35/kg pricing to regular customers. The big suppliers' production costs remain below these selling prices.

The improved pricing points were said to possibly continue for the next few weeks should volume trading remain low. However, those still producing polysilicon will more than likely be building inventory in advance of a demand uptake.
Shah believes that most of the pricing development is supplier-driven as opposed to customer-driven and as such, the risk of another fall in polysilicon pricing is relatively high.

It should also be noted that significant new polysilicon capacity from the major suppliers is due to come on-stream in 2012/13.



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