• Polysilicon prices fall below $15 a kilo in spot market
  • New production coming online in 2016 won't help prices recover

Prices for polysilicon, the main ingredient in solar cells, have dropped to a record low amid a supply glut that won’t end soon.

There’s so much of the shiny black stuff on the market that suppliers including Europe’s Wacker Chemie AG, Hemlock Semiconductor Corp. in the U.S. and South Korea-based Hanwha Chemical Corp. are losing money at spot prices that reached $14.76 per kilogram this month, down 31 percent in the past year, according to data compiled by Bloomberg New Energy Finance.

The global surplus is unlikely to ease with polysilicon manufacturers reluctant to curtail production because demand for solar power is surging, said Jenny Chase, lead solar analyst at New Energy Finance. It’s reminiscent of the panel glut that struck the industry a few years ago that drove down module-makers’ earning, and shows that the solar-power industry is still experiencing growing pains on its path to becoming a mainstream source of energy.

“It’s another sign of how good the solar industry is at losing money,” Chase said in an interview Wednesday. “You don’t want to close an entire factory just because of a temporary drop in prices. It can take six months to shut down and start up again.”

Prices in dollars-per-kilogram
Prices in dollars-per-kilogram

Prices can’t stay this low for long before producers start to cut back, said Jade Jones, a solar analyst at GTM Research in San Francisco. For a healthy industry, a price of $20 is more fair based on manufacturing costs.

“We thought prices might start to tick-up in the fourth quarter as demand climbs but that’s not happening,” Jones said. Increased competition to garner market share has created a price war that’s not sustainable. “If the price stays this low in 2016 then I’d expect ramp-downs.”

Low prices are taking a toll. Hemlock’s parent company Dow Corning Corp. reported a 9 percent decline in third-quarter sales, due in part to declining polysilicon revenue. Not only are prices low, some orders are being delayed.

“Results continue to be impacted by fewer polysilicon shipments to Hemlock Semiconductor’s long-term contract customers,” Chief Financial Officer J. Donald Sheets said in an Oct. 28 statement.

The current price is a huge drop from polysilicon’s heyday back in early 2008, when manufacturers were getting as much as $475 a kilogram -- some companies are still benefiting from long-term contracts panel makers signed back then. Suppliers also sell higher-grade polysilicon to semiconductor makers at higher prices.

Solar Market

However, 90 percent of the world’s polysilicon supplies ended up in solar panels in 2014, up from 27 percent in 2001, according to GTM Research. While demand for panels is expected to climb 30 percent this year, polysilicon capacity is also increasing.

Polysilicon production capacity currently stands at about 350,000 metric tons a year, and there are plans to increase that by at least 10 percent next year, according to New Energy Finance. That oversupply, combined with existing inventory, will continue to pressure prices.

Wacker Chemie, the second-biggest producer, doesn’t see it that way. Chairman Peter-Alexander Wacker is predicting a rebound as strong demand for panels in the U.S. and China soaks up excess supplies.

“We always have swings based on demand but this trough in price seems to be saying that even the biggest producers are finding it difficult to rein back production,” Wacker said in an interview in Berlin.

He’s planning to open a new factory in Tennessee next year and is running the rest at full capacity, according to slides from the company’s third-quarter earnings presentation.

That’s partly why New Energy Finance’s Chase sees little chance for price recovery. “Next year does not look much better for polysilicon manufacturers.”

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