Market research firm calls for polysilicon production cuts

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Despite a multitude of Chinese polysilicon producers having exited the market as well as ‘temporary’ production halts by the likes of LDK Solar, overcapacity in the polysilicon sector remains and market research firm, IHS iSuppli wants the major players to starting cutting back production to bring pricing stabilization.

“Oversupply remains the dominant trend impacting the PV polysilicon market,” said Henning Wicht, Ph.D., director for PV advanced products at IHS. “The glut has caused pricing to drop precipitously, impacting profitability for polysilicon suppliers. Pricing also has been impacted by a number of related factors, including a sharp decrease in demand for solar module shipments in August, high module-channel inventory in Europe and the United States, and the possible implications of the Chinese anti-dumping tariff against international players. In order to stabilize the price of polysilicon, Tier 1 suppliers need to consider reducing production.”

According to the market research firm, polysilicon prices fell at a faster rate in August than they did in July, continuing a losing streak that started in the fourth quarter of 2011.

9N grades of polysilicon and above saw August 2012 contract prices of US$27.80/kg, while the same-grade polysilicon traded in the spot market was US$21.90/kg. The gap between the two categories widened due to the fast decline of spot prices, as shown in the figure attached. Contract pricing for 6N to 8N polysilicon was at US$22.70/kg, while that traded on the spot market was at US$20.10/kg.

Concern remains over whether the second-half of the year will lead to a recovery in polysilicon demand, potentially propping-up prices. However, pricing is also a matter of uncertainty and sensitivity due to the Chinese Department of Commerce investigation into imported polysilicon as a reaction to the US Department of Commerce anti-dumping rulings.

“Now is the time for Tier 1 polysilicon suppliers to seriously think about a cut in production, given that profit margins for these companies are already very weak,” Wicht said. “Based on the market developments in July and August—as well as the forecast for September—a worse profit/loss situation in the third quarter is forecast for major polysilicon makers than in the second quarter.”

However, Hemlock Semiconductor and Wacker Chemie, two of the leading high-purity suppliers continue to construct new plants in the US that are intended to be next-generation low-cost poly production centres. GCL-Poly in China is also continuing to develop low cost techniques while its capacity has more than doubled in the last 12-months.

Korean firm, Hanwha as well as new entrant hopefuls in Saudi Arabia are also planning to enter the market over the next 5-years. Plentiful polysilicon or at least the threat of it could continue to put pricing under pressure, not just for the short-term but for the near-term as well. 

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