Polysilicon Shortage Crisis and Market Predictions

Solar panel suppliers have been forced to slow down production due to the shortage and increasing prices of polysilicon. According to Dany Quin, the global vice president of JinkoSolar, the polysilicon prices are not expected to go down for at least six months. 

Many supply and demand factors are playing a part in the situation. What is going on, however, can be summarized by saying that there is a new level of capacity demand that simply cannot be kept up with. It is a crisis that puts a strain on everybody in the PV industry. 

A shortage of polysilicon, a key raw material used in solar energy modules, is predicted to keep prices sky-high this year in China’s photovoltaic power industry, as fears of a supply crunch drive stockpiling and module makers cap output accordingly. 

Prices of polysilicon rocketed to more than 100 yuan ($15.22) per kilogram in March, increasing more than 40% from around 70 yuan a year ago. This is a result of polysilicon suppliers – mostly based in China – struggling to keep up with demand across the solar panel supply chain. 

The price surge comes after China, the world’s biggest producer of polysilicon and photovoltaic products, saw a rise in new solar power capacity in 2020 to 48.2 gigawatts (GW) after falling for two years. 

Amy Fang, InfoLink Consulting analyst, said referring to components along the solar panel supply chain: “This year, wafer, cell, and module sectors all have plans for production capacity expansions. But polysilicon supply has failed to catch up since it does not see much newly installed production capacity. As fears of a polysilicon shortage throughout the year pervade, traders started hoarding and stockpiling, aggravating the short supply.” 

Polysilicon manufacturers undergoing equipment maintenance also aggravated the crisis, further impacting module makers after they had been hit by high glass prices last year. 

A manager at one Chinese module manufacturer estimated that polysilicon price gains have caused module prices to increase by at least 20% and said: “It’s very hard to pass on costs, you want solar energy to be affordable… Installation projects are delayed or done at a lower profit.” 

Analysts say high polysilicon prices could persist into 2022, even with new production capacity plans, which could take up to two years to complete. 

In the meantime, module manufacturers are lowering capacity utilization rates and output. This could affect China’s new solar installation growth. 

“Module makers continue to cut production since the increasing polysilicon and wafer prices show no sign of stopping,” said Fang. 

“Major module manufacturers see utilization rates under 70% during March and April, and might not be running at full capacity even in May.” 

Even though the industry has been able to lift itself after the market shrinkage caused by the Covid-19 crisis, the Tier 2 manufacturers are still heavily affected as they are at the back of the line. 

In the beginning, there was only a temporary delay in supplies when factories had to shut down during the first wave of the pandemic. Since then, the production has picked up and is now back to normal. However, the new surge in downstream demand has caused the polysilicon shortage to reach the crisis point. Contrary to the Tier 2 panel makers, Tier 1 model manufacturers will always be the first selection for polysilicon suppliers. Their scale and purchasing power make them a priority regardless of the market conditions. 

JinkoSolar’s analysts predict that the polysilicon shortage will still go on “for a while.” The whole PV supply chain will face the consequences as there is nothing on the horizon that would indicate any rapid improvements. 

Moreover, the prices of silver and copper are also expected to rise. Polysilicon prices are not predicted to decrease in the next six months, and the rising trend may continue even longer. 

EnergyTrend, a Taiwanese market research company, stated that the latest polysilicon price was around RMB135 ($20.8) per kilo. That’s an increase of 3.31% compared to the previous month. The price is expected to continue growing and reach RMB150 per kilo very soon. 

The inflation trend of the polysilicon market remained unabated in the last week of April, where mono polysilicon had experienced an apparent rise, and multi polysilicon was comparatively stable. As the end of the month was approaching, partial polysilicon businesses started to negotiate on orders for May, with new quotations sitting above RMB140/kg on average, though there were fewer concluded orders, where many businesses were still reluctant in sales. The average price of mono polysilicon arrived at RMB 145/kg, whereas multi polysilicon was still sitting on an average price identical to that of the previous week at RMB 74/kg with insignificant changes in prices.? 

Polysilicon prices continue rising after reaching the peak despite mild end-user demand, resulting in even more unpredictable price trends for the second half of the year. In the near term, Multi-grade polysilicon, on the other hand, has not seen prices change as manufacturers are still fulfilling previous orders.  

price upward trend is expected to continue for mono-grade polysilicon prices, as manufacturers and traders continue buying and stockpiling, while polysilicon makers are hoarding and wafer makers bringing new capacities online.  

The Importance of Material Cost in PV Industry 

Material charges covered by PV systems correspond to 50% to 70% of the overall cost of the technology. In addition, cost reductions are significantly affected by location, and the reduction in material consumption and the increase in conversion efficiency might affect material prices per watt. 

Today, PV technology meets the demand for any power amount?from a few watts to the MW level.? Wafer-based crystalline silicon technology is used by approximately 80% of the existing energy production systems. 

Facts About Silicon Prices 

Pure Silicon Isn’t Naturally Produced 

The type of raw material used to manufacture something heavily influences the product’s overall cost. One of the materials that are most widely used to create wafers is silicon. However, the element must be in its purest form before it can be used to produce wafers. 

Silicon makes up about 28% of the earth’s mass. However, its purest form isn’t naturally produced. Before this pure element can be used to create wafers, a tedious and time-consuming process has to be completed. After being extracted from quartz rock, silicon has to be refined and mixed with a dopant to change its properties and electrical characteristics. 

Silicon Wafer Production is Costly 

After going through several processes, a silicon ingot is produced. The purity level of an ingot reaches 99.9999%. After the ends of the ingot have been cut off, the rest of its body is sliced thinly to create wafers. The surface damage found on these wafers is eliminated via chemical etching and polishing. Then, wafers undergo various processes to produce semiconductors. 

This complicated industrial process requires costly machinery and equipment that can cost around $10 billion to construct. 

Silicon Market Overview 

The silicon metal market was valued at over 2.9 million tons in 2020, and the market is projected to register a CAGR of 4% during the forecast period (2021-2026). 

COVID-19 has affected both the demand and supply of silicon all around the world. Due to restrictions, there could not be a regular material supply, while most of the silicon metal plants stopped production temporarily. The price reversal due to COVID-19 and the recent commerce imposition of preliminary duties on all silicon metal imports may further affect the market negatively. 

Key points: 

  • The high cost of production is expected to hinder the growth of the market. 
  • In the short and long run, there is no visible option to reduce the cost of silicon metal production, as the implementations on taxes are increasing over time. 
  • Asia-Pacific dominated the market across the world, with the largest consumption from countries such as China and India. 
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