LDK Solar Plans to Triple Polysilicon Capacity as Prices Fall

LDK Solar Co. Ltd., the second-largest maker of wafers, plans to triple its capacity to produce polysilicon by 2014 as prices for the raw material for solar panels dropped to levels not seen in eight years.

The Chinese company started building a factory that will help boost its annual production capacity for polysilicon to 55,000 metric tons by the end of 2013 from 17,000 tons now to make it one of the world’s biggest manufacturers, it said today in a statement. The plant in Hohhot City, Inner Mongolia, will be able to make 30,000 tons of the material a year.

The ramp-up comes as the spot price for the raw material, used to make most solar panels, continues to fall, driven by oversupply. Its average selling price, which has been dropping since August, slid 7.7 percent to $34.51 per kilogram in the week to Oct. 31, a Bloomberg New Energy Finance survey shows.

The price tumbled by 21 percent last month and is nearing the levels from before the solar industry took off in 2004.

Polysilicon makers such as Renewable Energy Corp. ASA and Wacker Chemie AG have seen spot prices fall more than half since March as subsidy cuts reduced demand for solar panels in Europe, the world’s biggest market, just as manufacturers increase production capacity.

LDK’s plans seem “extremely” counter-intuitive and are presumably an attempt to deal with crashing prices by building new low-cost plants for use in 2014, Jenny Chase, head of solar analysis at the BNEF research firm, said today in an e-mail.

“We are moving further into polysilicon oversupply, with prices not seen since 2002,” she said. “The oversupply will deepen in 2012, when there will be about 35 percent more silicon available to the solar industry and demand roughly flat.”

Crashing Prices

LDK, based in Xinyu, Jiangxi province, makes polysilicon, silicon wafers and solar panels. Its shares have dropped 62 percent this year, including a 6.5 percent drop to $3.87 at 10:15 a.m. today in New York trading.

U.S.-based Hemlock Semiconductor Corp. and Germany’s Wacker Chemie AG were the largest in terms of production capacity with 36,000 tons and 30,000 tons at the end of 2010, respectively, BNEF data shows.

Asian peers such as LDK, OCI Co. Ltd. and GCL-Poly Energy Holdings Ltd. are expanding at a faster rate, seeking to drive costs lower and increase their share in a market where most of the supply is still under long-term contracts.

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