With pricing for photovoltaic polysilicon declining at an accelerated rate in August, there are no signs that the glut plaguing the industry has abated, behooving tier-one suppliers to consider reducing production in order to stabilize market conditions.
PV polysilicon prices last month fell at a faster rate in August than they did in July, continuing a losing streak that started in the fourth quarter of 2011, according to a new report from information and analytics provider IHS.
In August, the contract price of 9N polysilicon and above grades amounted to $27.80/kg, while pricing of the same-grade polysilicon traded in the spot market was much lower – at $21.90/kg. The gap between the two categories widened due to the fast decline of spot prices. Contract pricing for 6N to 8N polysilicon was $22.70/kg, while the price on the spot market was $20.10/kg.
‘Oversupply remains the dominant trend impacting the PV polysilicon market,’ says Henning Wicht, director for PV advanced products at IHS. ‘The glut has caused pricing to drop precipitously, impacting profitability for polysilicon suppliers.
‘Pricing also has been impacted by a number of related factors, including a sharp decrease in demand for solar module shipments in August, high module-channel inventory in Europe and the United States, and the possible implications of the Chinese anti-dumping tariff against international players,’ Wicht continues. ‘In order to stabilize the price of polysilicon, tier-one suppliers need to consider reducing production.’
Will demand return?
Looking ahead to polysilicon demand in September and October, IHS sees a potential revival. However, an impending trade war with China in this market creates an air of uncertainty that may frighten away some buyers. If these pressures continue, September and October could potentially see weak demand, putting additional pressure on polysilicon suppliers worldwide.
Price is also a matter of uncertainty because of the anti-dumping situation in China. If a punitive tariff is imposed on Korean and EU/U.S. polysilicon makers in the next three months by the Chinese Department of Commerce, these companies will be forced to accelerate price declines because China is the dominant buyer of polysilicon.
Although tier-one polysilicon manufacturers reduced utilization slightly in August, their production rates remain high. Furthermore, resold polysilicon is in plentiful supply. If Tier 1 suppliers maintain high utilization levels, the polysilicon oversupply situation will continue for the next 12 months, the report says.
‘Now is the time for tier-one polysilicon suppliers to seriously think about a cut in production, given that profit margins for these companies are already very weak,’ Wicht notes. ‘Based on the market developments in July and August – as well as the forecast for September – a worse profit/loss situation in the third quarter is forecast for major polysilicon makers than in the second quarter.’
August turned out to be a very slow month for polysilicon demand; at least 10% to 15% less polysilicon was traded during the month compared to July. The lower demand is having a significant impact on the market for spot polysilicon because buyers still need to fulfill their long-term agreements with major suppliers, even though some buyers tried hard to keep the volume to a minimum.
This is another reason tier-one suppliers should consider cutting production in the coming quarters, the company explains. August was also sluggish for crystalline silicon module demand in Europe due to high channel stockpiles and the holiday season. On the other side of the Eurasian landmass, demand from China is ready to take off soon – even though it has yet to materialize.