Further confirmation that overcapacity in polysilicon production will continue to force prices lower comes from a new report from IHS iSuppli. According to the market research firm, total polysilicon production capacity is expected to reach 328,000MT in 2012, an increase of 15% from 285,000MT in 2011. However, this contrasts with expected demand this year of 196,000MT, a decline of 4% from 205,000MT in 2011.

The result is an overcapacity calculated to be 132,000MT in 2012, compared to 80,000MT in 2011. IHS iSuppli said that polysilicon supply would exceed demand by 67% in 2012, up from 39% in 2011.

“Following major declines in 2011, the PV industry is in for another round of major price erosion in 2012, as polysilicon production runs far ahead of demand,” said Dr. Henning Wicht, director and principal analyst for photovoltaics at IHS. “Spot market pricing for polysilicon plunged by 65 percent in 2011, marking the largest correction the market has experienced since early 2009. This year is expected to bring another 56 percent reduction. All this will have an impact on pricing for solar modules and systems as well, adding to the woes of the industry in what is already expected to be a challenging year. These developments are likely to lead to long-term changes in the way polysilicon is bought and sold in the PV industry.”

According to its IHS iSuppli Polysilicon Price Index (IPPI) product offering, spot prices in 2012 are expected to reach lows of US$22 per kilogram by the end of 2012.

However, the supply/demand imbalance is said to start correcting in 2013, with pricing forecasted to settle at around US$23/kg by the end of 2013.