Industry Meeting Again? Polysilicon Supply-Side Reform to Take Place First? [SMM Analysis]

On the morning of October 29, a rumor widely circulated in the PV market: "Upstream players held an anti-cut-throat competition meeting in the polysilicon segment and reached a consensus on production cuts. All players will reduce their operating rates to below 50%. Tongwei and GCL are now... polysilicon inventory reduction has officially begun."

What is the truth behind this? Are polysilicon companies also planning to reduce production together? How will the supply-side reform be implemented? Is a market turning point coming?

According to SMM, an industry association indeed held a related meeting with some polysilicon companies in Shanghai yesterday (October 28). However, no immediate consensus on production cuts was reached. Regarding the claim that all players will reduce their operating rates to below 50%, many industry insiders responded that this is almost impossible for some companies in the short term. The "remaining" companies are already operating below 50%.

Regarding the current production reduction situation, SMM survey data shows that polysilicon production is indeed expected to decline in November. Domestic total production is expected to drop from 132,000 mt in October to around 115,000 mt. The main reductions are due to top-tier enterprises in Sichuan gradually reducing production from early November, with complete shutdowns expected by mid-November. Additionally, other companies in Inner Mongolia will see a reduction of around 2,000-3,000 mt. The production of other small and medium-sized enterprises will fluctuate slightly in November, with no significant collective production cuts, mostly due to spontaneous actions by the companies.

Regarding the rumored supply-side reform, SMM understands that the industry does have similar ideas. However, specific reform measures have not yet been implemented. Recent meetings have indeed seen various proposals, and some surveys have even looked to other non-ferrous and ferrous industries for insights. The meeting on the 29th is part of a series of related meetings, and viewing it in isolation may be "narrow." Some industry insiders also stated, "This reform will be cautious and comprehensive to avoid the issues of 2021."

Currently, there are two main approaches to future production cuts:

One is quota restrictions—limiting the operating rate based on each company's (or region's) capacity to achieve a relative supply-demand balance.

The second is energy consumption restrictions—shutting down a certain percentage of high-energy-consuming companies based on their electricity consumption (or silicon consumption) to achieve a supply-demand balance.

Regarding the current market turning point, SMM believes that the recent frequent production cuts (in polysilicon, PV wafers, and solar cells) have indeed provided some support to the PV market from the fundamentals side. Additionally, the upstream cost pressure is nearing its limit, and the recent peak in module deliveries has gradually stabilized the overall market, with some segments even seeing slight increases. However, given the upcoming off-season from New Year's Day to the Chinese New Year and historical inventory factors, SMM believes that a fundamental and significant market increase is still challenging.