Strong quarterly shipments failed to offer respite from a rapid decline in revenue and profit margins within OCI Chemicals, polysilicon production division in the third quarter of 2011. Revenue in its polysilicon segment fell from KRW572 billion in Q2 to KRW495 billion in Q3. Margins fell from 50% in Q2 to 36% in Q3, according to the company.

Significant overcapacity throughout the PV industry supply chain was cited as the key reason for the plummeting prices and the squeeze on many mid-stream companies margins and profitability.

OCI management expected the overcapacity situation to last between 12-18 months or at least until end-market demand reached 30GW, to return to a better supply and demand balance.

The company conceded that the industry was facing the next two quarters business environment being worse than seen in the third quarter of 2011.

OCI said that due to the continued weak industry demand, customers were showing a preference for high-quality (10N+) polysilicon, reinforcing the stronger shipments and lack of inventory build at OCI.

Not surprisingly with continued price declines, OCI noted that they expect further industry consolidation, especially amongst high-cost and small-scale players.

OCI also noted that an extra 7,000MT of polysilicon capacity would start to come on-stream in November after successful debottlenecking of new facilities, further supporting ongoing cost reduction strategies.