A massive explosion was reported at a polysilicon factory in the city of Shihezi in China’s Xinjiang region. The plant produces raw materials for polysilicon used in the production of solar modules.

The factory belongs to the Hoshine Silicon Industry, which stated that the fire broke out at the second phase trial production line at the finished product packaging workshop of the sealing plant.

In a notification to the Shanghai Stock Exchange, the company stated that the gutted portion did not house the raw material production unit, which goes into making polysilicon. The company has claimed that the mishap has had no major impact on the company’s production and operation.

According to Hoshine, the fire has been extinguished, and no casualties have been reported. An on-site inspection has been conducted, and the pollutants are mainly particulate matter and not toxic or harmful gas. The company has stated that environmental protection departments continue to monitor air quality to ensure that no secondary disasters occur.

China’s Xinjiang region houses several major manufacturing facilities integral to the polysilicon supply chain, as the region provides 40% of the world’s polysilicon. These include Hoshine and other manufacturers of finished polysilicon, such as Daqo New Energy, GCL-Poly Energy Holdings, East Hope Group, and Xinte Energy.

According to Chinese media reports, Hoshine supplies raw materials to both Daqo and GCL-Poly.

In July 2020, an explosion at GCL’s Xinjiang production facility saw the prices of polysilicon skyrocket globally. The explosions have resulted in about 50 MT of polysilicon production capacity going offline, around 10% of the global production capacity.

GCL had warned its shareholders to expect losses to the tune of RMB 1.5 billion (~$217 million) in the first half of 2020. The total net loss for the first half of 2020 (unaudited) was RMB 1,924 million (~$281.8 million).

A small fire was also reported at Daqo’s polysilicon plant on July 1, 2020, affecting a production capacity of 6,000 MT. Similarly, heavy flooding in South-eastern China forced Tongwei Group to shut down a quarter of its polycrystalline silicon unit.

The solar industry is already experiencing polysilicon shortages, and the average spot prices have increased exponentially over the past 12 months.

With the latest explosion, speculation is rife that the polysilicon prices will spike, increasing project costs. However, based on the initial statement by Hoshine, the impact of this explosion could have minimal effect on polysilicon prices and supply. We will continue to monitor this development closely.