Closure of GCL-Poly’s Xinjiang plant after explosions threatens short supply of polysilicon in 2020

SHANGHAI, Jul 31 (SMM) – GCL-Poly Energy, one of the world’s largest producers of polysilicon, has been compelled to shut a production facility in Xinjiang after explosions of the refrigerant mixture on July 19. The Xinjiang plant has an annualised capacity of 48,000 mt, with 20,000 mt/year of capacity slated to come online in the Q4. 

Several production accidents recently occurred at silicon producers in Xinjiang. A gas leak in early July at Xinjiang Daqo New Energy, another major producer of polysilicon in China, affected its production capacity by 6,000 mt/year. East Hope had shuttered all its 300,000 mt/year of silicon metal capacity due to an explosion at a silicon powder plant. While the explosion did not affect its polysilicon production, East Hope kept running only 60% of its overall 80,000 mt/year of polysilicon capacity in July amid equipment maintenance and ramped-up operation of new capacity. 

Silicon mills in Xinjiang have been required by the local government to conduct safety checks. SMM expects GCL-Poly’s Xinjiang facility to resume production in October at the earliest, given the impact of the COVID-19 crisis on the approval process and equipment restoration. Xinjiang Daqo, meanwhile, is expected to normalise production in August. 

Global production capacity of polysilicon is highly concentrated as the top 10 producers, among which six are located in China, account for over 80% of the total capacity. The concentration of capacity has further increased with the rise of low-cost capacity in China and the phasing out of outdated capacity worldwide. 

GCL-Poly’s Xinjiang plant and Xinjiang Daqo, both enjoy cost advantage in their capacity, will likely see a combined decline of 20,000 mt in output for the whole year, due to the accidents. 

SMM estimates China’s production of polysilicon at 425,000 mt in 2020, up 23.5% year on year, with imports standing at 95,000 mt, down 34.9%. This, together with an estimated consumption of 530,000 mt this year, will lead to a supply gap of 10,000 mt.

The domestic supply gap, caused by maintenance and production accidents, will unlikely be offsetted even as OCI’s Malaysia plant plans to resume operation in August.

The supply shortage will cause a rally in polysilicon prices, on the backdrop of the commissioning of the domestic expanded capacity of silicon wafer in the second half of the year and recovery of overseas demand. The situation will sustain until the effective control of the COVID-19 pandemic in Xinjiang and the resumption of work at local large producers.