OUTLOOK ’12: Asia polysilicon likely to be soft on economy, trade

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SINGAPORE (ICIS)–Polysilicon spot prices in Asia are likely to be depressed for the first half of next year because tougher financing in debt-stricken Europe will dampen solar investments and the unfolding solar trade row between the US and China may affect the market, traders said.

The spot prices have plummeted by 91% from the boom years of 2007–2008 to an average of US$26/kg (€20/kg) FOB (free on board) NE (northeast) Asia by the end of November, according to ICIS, which launched the weekly polysilicon pricing report in June (see figure 1).

Prices on a DEL (delivered) China basis fell by 51–55% from July this year, to yuan (CNY) 190,000-220,000/tonne (US$30,000-34,800/tonne) in the week ended November 30, ICIS data showed (see figure 2).

“The outlook for the first half of 2012 will be poor. Demand is expected to be dull and it’s less meaningful for market players to secure material on a long-term basis. There is ample supply in any case,” said a trader.

Reflecting on the gloomy market, polysilicon prices took a deep plunge from late 2008 compared with 2007–2008 when prices ballooned to US$300/kg, traders said. Back then, the industry faced a severe supply crunch and rapid growth in solar demand.

In 2000, only 10% of polysilicon was used for solar cells. The bulk was used in the semiconductor industry. The ratio surged by 50% in 2008 as a result of rapid investment in capacity expansion and new polysilicon plants. Subsequently, the market flipped when the financial crisis in late 2008 pushed governments to reduce their solar incentives – the cornerstone of sector growth.

Solar polysilicon feedstock is used to manufacture mono- and multicrystalline ingots, wafers, solar cells and solar panels. Just 1MW of photovoltaic (PV) power requires seven tonnes of polysilicon material, which is traded in chunks, rods and granules.

At present, the entire PV chain suffers from hefty inventories and snail-paced demand for solar installation. The buy-sell gap is continuing to widen in a sluggish market.

The bleak macroeconomic environment is hitting the solar sector hard, with banks tightening credit and funding for solar investments drying up in key European markets.

The China Photovoltaic Industry Alliance (CPIA) plans to conduct an antidumping and anti-subsidy survey on PV products imported from the US, according to CPIA. The major members of CPIA, including GCL-Poly Energy Holding Ltd, Trina Solar, Yingli Solar and Canadian Solar, plan to conduct the survey on PV sectors such as polysilicon from the US. The move is in response to a US antidumping investigation into the export practices of Chinese solar cell manufacturers. SolarWorld AG and several other US-based solar cell companies submitted a petition in October, alleging that Chinese companies sold solar panels at below cost in the US market, according to a report from CPIA.

China spends US$2bn per year to import raw materials such as polysilicon for PV solar cell production from the US, according to the Chinese Renewable Energy Industries Association (CREIA). The falling polysilicon prices have forced many of the smaller polysilicon makers in China, with an individual capacity of 3,000 tonnes/year and below, to shut down their plants indefinitely. “We don’t know when we plan to restart the plant,” said a producer in Jiangsu Province.

The fact that these Chinese producers opted for the costlier option of taking the plants off-line shows that the solar industry is indeed in a dire state, market players said. China is expected to reduce its imports of polysilicon in the next several months. Already for October, the official customs data showed that China imported less polysilicon in October because of plant shutdowns and with lower operating rates.

For that month, Chinese polysilicon imports fell by 30% from September to 4,566 tonnes, according to customs data.
However, October imports grew by 8% year-on-year. China exported 77 tonnes of polysilicon in October, down by 11% from September and a 54% plunge from October 2010.

Norway’s Renewable Energy Corporation (REC) is planning to temporarily halt 60% of the capacity at its 650MW multi-crystalline wafer facility at Herøya in Norway because of poor demand in the solar market.

The temporary shutdown is expected to last from December 1, 2011, to the first quarter of 2012. The market prices of modules and wafers have dropped by 10% and 30% respectively, since October 1, 2011, while the prices of polysilicon have fallen by 35%, according to REC.

The market environment remains challenging and tough, many players agreed. “There will be consolidation in the industry,” another player said.

For more information, please visit ICIS.

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