Polysilicon prices expected to rise as Chinese producers cut capacity

The price of polysilicon, a crucial material in solar panels, is set to rally by the end of the year as producers cut capacity in response to a sector slump, according to the China Silicon Industry Association. Production declines are being driven by seasonal factors such as an upcoming public holiday in early October and reduced hydropower output, which is pushing up power costs.

Polysilicon prices in China have plummeted 85% since mid-2022 due to an oversupply following a massive expansion of factories. While prices have seen a modest recovery since late July as companies reduced output, the market remains in flux. Daqo New Energy Corp., the third-largest producer, cut its 2024 output forecast after reporting significant losses in the first half of the year.

China’s solar manufacturing industry, the largest globally, is undergoing consolidation due to the oversupply, which has lowered prices throughout the supply chain. This price drop has benefited the clean energy sector, enabling record deployments, but it has also led to substantial losses and bankruptcies among manufacturers.

Polysilicon producers are hoping for a quicker recovery in their sector, as restarting production after halts can be costly. Many producers are already operating below full capacity, and more are expected to suspend operations as hydropower availability declines with the onset of drier weather.

– Bloomberg