Renewable Energy Corp ASA (REC), Europe’s second-largest polysilicon producer, is closing its second wafer factory in five weeks after competition from Chinese rivals drove down prices by more than two-thirds for the material used in solar panels.
REC will cease production at the plant in Heroya, Norway, in the second quarter, eliminating 460 jobs, REC said today in a statement.
Polysilicon spot prices fell to a record low last week of $24.27 a kilogram, down from $78.46 a year ago and $475 in 2008, according to Bloomberg New Energy Finance. Manufacturers have expanded production capacity, especially in Asia, leading to a glut, Ole Enger, president and chief executive officer of the Sandvika, Norway-based company, said in the statement.
“Despite solid demand growth, overcapacity continues to negatively affect wafer prices,” he said.
REC announced plans in March to close its other Norway wafer factory, in Glomfjord, which has annual production capacity of 300 megawatts, according to an investor presentation in March.
The Heroya plant makes enough polysilicon wafers to produce 650 megawatts of solar cells a year. When the Norway factories close, REC will produce wafers at a Singapore factory that has 700 megawatts of wafer capacity and also make solar cells and panels.
In polysilicon, “hardly anyone in the industry makes profits,” REC said in the presentation. The company produces polysilicon, which it turns into wafers that are cut into individual solar cells and assembled into panels.
Polysilicon makers including GCL-Poly Energy Holdings Ltd. (3800) and OCI Co. (010060) almost doubled capacity in the past two years to feed a surge in solar installations, creating a glut after output exceeded demand for the first time, according to New Energy Finance.
“This is part of the ongoing process of the industry consolidating,” Hari Chandra Polavarapu, an analyst at Auriga USA in New York, said today in an interview.
REC is competing against Chinese companies that are “juiced on ample provision of credit” and aren’t financially sound, he said. Many of REC’s competitors “shouldn’t exist.”
REC’s efforts to cut its costs by more than 25 percent annually in each of the last two years weren’t sufficient to reduce the impact of falling polysilicon prices and increased competition, especially from China, Enger said in the statement.
The company expected “significant continued losses” at the plant, he said. “We therefore have no choice but to discontinue our operations in Norway.”
REC shares gained 0.5 percent to 3.03 kroner at the close in Oslo, before the company announced the closing.
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