The solar industry continues to suffer from an oversupply of silicon, which has driven pricing of cells and modules downward, decreasing margins and profitability worldwide. In addition, a combination of high module inventory and low demand is hitting the industry hard.
Indeed, the “Polysilicon and Wafer Supply Chain Quarterly Report” on third quarter results for this year from Santa Clara, California-based NPD Solarbuzz finds that most polysilicon producers have been operating at a loss. What’s more is that polysilicon capacity is expected to grow 22 percent in 2012 and a further 18 percent in 2013.
The research analysts predict that average polysilicon prices for photovoltaic (PV) applications will drop 52 percent in 2012, while plant utilization is anticipated to decline from 77 percent in 2011 to 63 percent.
“The last thing the polysilicon industry needs right now is more capacity. But some of the new plants that were started two to three years ago are proving hard to abandon,” stated Charles Annis, vice president at NPD Solarbuzz. “In addition, some producers are adding capacity in an attempt to lower their costs through economies of scale. Some are improving capacity productivity, while others are upgrading manufacturing technology, such as adopting hydrochlorination, to reduce power consumption and increase scale.”
Total polysilicon capacity will exceed 385,000 tons in 2012, of which 70 percent is held by a small number of tier 1 producers. In fact, these tier 1 providers, alone, are forecast to satisfy all polysilicon demand under the most-likely end-market scenario for the next few years.
Unless end-market demand provides a strong upside surprise to expected polysilicon requirements, the analysts believe many of the 57 tier 2 and tier 3 producers are likely to exit the industry within the next 18 months.
It even is possible that a few of the less-experienced tier1 manufacturers may not survive over the long haul.
Average polysilicon prices should start to stabilize in 2013 at around $21/kilogram, as the remaining players rationalize utilization rates in line with end-market requirements while ensuring that selling prices remain above their cash costs.
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“If China’s Ministry of Commerce decides to impose anti-dumping and countervailing duties on polysilicon imports, prices are likely to increase,” added Annis. “However, this will only help a limited number of local Chinese polysilicon producers. It will hurt not only foreign producers but many Chinese wafer, cell and module makers. Also, it will not help to resolve the polysilicon oversupply issue and could restrict end-market growth due to higher prices.”
The report finds that in addition to import duties, any increase in polysilicon prices will likely be limited by first tier supply sufficiency and end market demand for the next couple of years.
However, tier 1 polysilicon producers continue to plan for longer-term PV solar involvement. Further down the road, low cost structures, economies of scale and continuously improving productivity are expected to yield benefits as shipment volumes grow.
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Edited by Braden Becker