With no sign that the oversupply of solar polysilicon is ending, buyers are shifting their purchasing activity to the bargain-basement spot market, contributing to a sharp 11% drop in overall pricing in April, according to a recent report from IHS iSuppli.
The weighted average selling price (ASP) for polysilicon used in photovoltaic solar cells plunged to $27.20/kg in April – down from $30.70/kg in March. This is marks the first time in 2012 that the average weighted price dropped below the $30/kg threshold.
Pricing fell mainly due to larger volumes of sales on the spot market, compared to contract deals, according to IHS iSuppli. The volume of trades on the spot market, in terms of kilograms sold, increased by 22% from March to April.
The spot market accounted for 44% of polysilicon shipment volume in April – up from 36% in March. The remainder was taken up by long-term agreement (LTA) contracts.
‘Polysilicon buyers are flocking to the spot market, attracted by the lower prices compared to contracts,’ says Glenn Gu, senior analyst for photovoltaics at IHS. ‘This phenomenon is driving down contract pricing, causing the sharp decline in the overall ASP in April.
‘Spot market activity is expected to continue accelerating relative to the contract segment during the coming months, placing further pressure on pricing,’ Gu adds.
Pricing on the spot market in April ranged from $19.50/kg to $30.00/kg per kilogram with an average weighted price of $24.20, IHS iSuppli says. Contract prices with LTAs varied from $37.00/kg to $18.50/kg, with an average weighted price of $29.40/kg. Overall, contract prices in April declined by 7.8%, while spot prices decreased by 9%.
The continued increase in the proportion of spot market sales indicates that the oversupply situation and pricing decreases are likely to continue, according to the company. On the spot market, polysilicon is sold for cash by third parties and delivered immediately. In contrast, on the contract market, polysilicon is sold directly by suppliers on credit, often with LTAs for delivery and pricing.
When prices are lower on the spot market than in contracts, it indicates prices will remain on the decline. When spot market prices eventually rise above those of contracts, that shows the period of oversupply and price decreases has come to an end, IHS iSuppli says.
The global solar polysilicon industry is wrestling with an acute oversupply as production runs far ahead of demand. The decline in polysilicon prices has an impact as well on pricing for solar modules and systems, adding to the woes of the industry in what is already expected to be a challenging year.
Overall, IHS predicts global solar polysilicon market revenue will amount to $3.7 billion this year, down from $7.4 billion in 2011.