Summary of Key Points
In the past two weeks, the domestic polysilicon market has come to a standstill—no orders have been placed, and companies have collectively stopped quoting prices. The reason behind this is that prices have fallen below the industry's cost threshold, coupled with the industry's efforts to promote price discipline. At the same time, the entire photovoltaic (PV) supply chain is introducing new regulatory standards regarding cost accounting, energy consumption, and safety. However, the current imbalance between supply and demand (excessive supply and weak demand), along with high inventory levels, has led all market participants to wait for a new price consensus and clearer market signals.
Detailed Analysis
1. The Polysilicon Market Has Come To A Standstill: Why Are Companies Not Quoting Prices or Making Transactions?
The polysilicon market has effectively been put on pause over the past two weeks, with no companies willing to offer prices or any transactions occurring. According to the Silicon Industry Association, this is due to two main factors: first, prices have dropped below the cost point, meaning companies would incur losses if they sold; second, the industry is implementing price discipline to avoid competitive undercutting. Companies are waiting for a change in the market situation—either an increase in downstream demand or the realization of the benefits of self-imposed price controls.
2. Eight Leading Companies Join Forces to Maintain Prices: Why Can’t Sales Be Made Below Cost?
Recently, eight major polysilicon manufacturers, including Tongwei and GCL, have jointly announced a ban on selling polysilicon below cost and have pledged to strictly adhere to energy consumption standards. For example, if companies sell silicon at a loss to attract customers, they may secure short-term orders, but this could lead to long-term financial difficulties for the industry, preventing investment in research and development, equipment upgrades, and potentially even company failures. This initiative is a form of self-help to prevent lower-quality products from dominating the market.
3. The PV Supply Chain Establishes New Rules: What Do These New Standards Cover?
The PV industry has introduced several new regulations to improve transparency and efficiency:
- Cost Accounting Models: Previously, companies could claim whatever costs they wanted; now, there are unified calculation methods to prevent misleading cost reports (e.g., claiming high losses when actual costs are lower).
- Energy Consumption Standards: These standards specify the maximum amount of electricity and energy that can be used in the production of polysilicon and silicon wafers, preventing inefficient companies from gaining an advantage.
- Component Safety and Labeling Standards: These ensure the quality and accuracy of PV components, such as their power output and lifespan, to prevent the sale of substandard products.
4. High Inventory Levels Despite Weak Demand: Why Can’t Polysilicon Be Sold?
The main issue is the imbalance between supply and demand:
- Supply: In July, domestic polysilicon production reached 105,100 tons, exceeding the demand from downstream silicon wafer manufacturers, resulting in a new inventory of 9,600 tons and a total inventory of 522,000 tons (equivalent to nearly five months' production).
- Demand: Downstream silicon wafer manufacturers are operating at low capacity due to slow installation progress in PV power plants (e.g., due to weather or policy factors), leading to reduced purchases. With more supply than demand, companies struggle to sell their products.
5. How Long Will the Market Remain Wait-and-See? The Future Depends on Two Signals
The market is in a transitional period of price reconfiguration, and all parties are waiting for two key indicators:
1. Effect of Industry Discipline: Whether the eight companies' initiative will effectively stabilize prices and prevent further price cuts. If it works, prices may stabilize.
2. Changes in Supply and Demand: Whether downstream demand will increase (e.g., faster installation of PV power plants) or if supply will decrease (e.g., reduced production by manufacturers). Only when supply and demand are balanced will the market begin to recover.
In Summary
The polysilicon market is currently at a crossroads, with companies trying to maintain stable prices but facing challenges from imbalances in supply and demand. While the introduction of new regulations is positive, resolving inventory issues and boosting demand are crucial for the industry's recovery. In simple terms, there is an oversupply of raw materials in the PV supply chain, and the industry is taking steps to self-regulate. The future success will depend on whether downstream demand can catch up.