L R AS Published on Sunday 13 September 2020 - n° 331 - Categories:China, silicon mono/multi
The characteristics of the silicon market (2nd part). The effect of special circumstances
Polysilicon price expected to remain high for six months, but supply will increase
The solar sector experienced two shocks, one on 21 July with the explosion at the GCL Poly factory in Xinjiang; it put a production capacity of 50,000 tonnes out of service for an estimated three to nine months. The other in August,
with the shutdown at Tongwei of production at its 20,000-tonne polysilicon plant in Sichuan (China), following flood alerts. On1 July, there were minor fires at Daqo that temporarily shut down 6,000 tonnes of production capacity. These production cuts explain why the first half's production surplus, linked to the coronavirus, was quickly absorbed, and why prices rose by almost half in two or three weeks. This destroyed production capacity compares to the half a million tonnes produced in China per year.
In the short term, prices will remain high for at least six months as upstream suppliers adapt to downstream cell and module production capacity. Module prices in China will rise in the medium term and remain high due to the recovery in demand and the temporary disruption of supply. Most supply constraints will peak in the third and fourth quarters of 2020 and continue into the first half of 2021.
Beyond these one-off incidents, there is a sufficient supply of solar-grade silicon. Less and less silicon is being consumed. Now, 4 grams per watt, or a third of the amount of fifteen years ago.
As long as GCL has not resumed production, or until new installations come on stream, there will be upward pressure on prices. With this surge in prices, manufacturers are recouping profit margins that have been undermined by the 2019 downturn. Producers have modified their sales contracts: they offer long-term contracts with monthly price adjustments, which gives them the possibility to adapt their prices to market developments.
In the event of increased supply problems, GCL-Poly and other suppliers can postpone certain maintenance operations to meet short-term demand, thus limiting the supply shortfall.
According to Chinese media reports, GCL-Poly plans to add 20,000 tonnes of new capacity this year, Tongwei 10,000 tonnes and Dongfang 30,000 tonnes, which will more than offset the impact of the commissioning of these facilities. They say that the rapid expansion of solar capacity in China will lead to additional demand for polysilicon from 2021 onwards. Some are planning further production expansions despite the decline in industry use.
Tongwei already plans to add 35,000 tonnes of new capacity in 2021 and about 70,000 tonnes each year in 2022 and 2023. However, other suppliers have not yet announced any capacity increases, perhaps for fear of influencing market demand, provoking a new cycle of falling prices and risking possible plant closures. These capacity increases would be commissioned at the end of the year or even postponed to the following year.
The author relativises the weight of GCL in Chinese production: the production stoppage (50,000 to 70,000 tonnes) represents about 7 to 8% of normal Chinese polysilicon consumption, and not 10% of world capacity as some media suggest (500,000 tonnes produced in China and 150,000 tonnes imported).
PV Tech of 8 September
