Will Polysilicon Achieve Supply-Demand Balance in the Long Run amid Government Restrictions on Deliberate Price Inflation

SHANGHAI, Aug 25 (SMM) - The Ministry of Industry and Information Technology, the State Administration for Market Regulation and the National Energy Administration jointly issued the Notice on Promoting the Coordinated Development of the PV Industry Chain and Supply Chain. It is specially highlighted in the Notice that in order to promote the stability of the industrial chain, relevant enterprises and public trading institutions are encouraged to reasonably build stocks of materials such as polysilicon and batteries, while hoarding is strictly prohibited. Local market supervisors shall strengthen the supervision and management, enhance cross-departmental law enforcement, and severely crack down on illegal activities such as price gouging, monopoly, and production and sale of fake and shoddy products in the photovoltaic industry.

A veteran in the photovoltaic industry said that the Notice has given the industry a solid warning at the moment when capital is "madly" pouring into the photovoltaic field. It could help to avoid repeated investment as well as waste of resources after investment in outdated production capacity. At the same time, it also reminds companies to pay attention to the win-win situation of the entire industry while focusing to their own economic profits.

Hu Qimu, chief researcher of Sinosteel Economic Research Institute, also said that since the pandemic outbreak, the prices of raw materials have continued to rise sharply. Among them, there are not only the problem of insufficient operating rates of raw materials, but also the factors of hoarding and speculation in the market. The rapid growth of upstream raw material prices is not conducive to the sustainable operation of photovoltaic enterprises. Therefore, it is necessary to promote the coordinated resumption of production in the industrial chain, in-depth cooperation between upstream and downstream entities, restore the order of market circulation, avoid bottlenecks in the industrial chain that reduce operational efficiency.

As we all know, the prices of polysilicon, the upstream material in the photovoltaic industry chain, have been on the upward trend after entering 2022 due to the occupied supply under long-term orders as well as the imbalance of supply and demand as a result of the mismatch of production capacity. According to SMM prices, as of August 24, the spot price of recharging polysilicon was 300-310 yuan/kg, wth an average of 305 yuan/kg, up 79 yuan/kg or 34.96% from 226 yuan/kg at the beginning of the year.

Recently, the power rationing in Sichuan province has aroused strong concerns in the industry. After all, Sichuan, as the "important hub" of the photovoltaic industry, is one of the main producing regions of polysilicon. According to SMM survey, although the power cut in Sichuan has led to the shutdown of many local polysilicon enterprises, which has escalated the supply tension in the polysilicon market, the recent increase in polysilicon prices has not been obvious.

It is partly because of limited transactions in the market amid few sources available in the market when it is not time for the intensive signing of long-term orders. On the other hand, the market players are generally pessimistic towards the third and fourth quarters, and high downstream cost also made the buyers say no to high prices. Therefore, it is unlikely that polysilicon prices will rise significantly.

Compared with the widely rumoured shortage of polysilicon in the market, Lv Jinbiao, deputy director of the Expert Committee of Silicon Industry Branch of China Nonferrous Metals Industry Association, once said that he prefers to define the current supply and demand environment of polysilicon as "tightly balanced". He believes that the overall supply of polysilicon in 2021 was not in short supply, but balanced.

He believes that the seasonal supply tightness and structural tension are the reasons of polysilicon price hike. For example, high-quality dense polysilicon was tight in supply, while non-dense polysilicon was able to meet the demand.

On August 24, Lin Ruhai, executive vice president of the Silicon Industry Branch and president of the Institute of Nonferrous Metals Technology and Economics, also said that the existing expansion plan can meet the long-term demand for photovoltaic installations. It is estimated that the domestic polysilicon capacity will reach 1.19 million mt/year in 2022, and its global proportion will increase to 88.3%; the output will reach 810,000 mt, taking up 85.3% of the global total.

By the end of 2025, China's polysilicon capacity will exceed 5 million mt per year. If overseas supply is counted, the capacity scale can meet the global installed capacity demand of about 1,500GW.

In terms of silicon wafers, Lin predicts that the domestic silicon wafer capacity will reach 580GW in 2022, and its global proportion will increase to 99.1%; the output will reach 340GW, taking up 99.4% of the world’s total.