Prices of polysilicon, an essential raw material for solar photovoltaics (PV) cells, are expected to climb higher spiked following an explosion at GCL’s Xinjiang production facility. The prices, according to a research report published by California-based investment banker ROTH Capital Partners.
The explosions are said to have resulted in about 50 metric tons (MT) of polysilicon production capacity taken offline. This amounts to over 10% of the global production capacity.
According to Mercom’s data (June 2020), the average monthly polysilicon spot prices in China and Taiwan dropped around 26% over the last year.
According to ROTH’s latest report, prices for the raw material are expected to climb higher over the coming weeks considering that GCL’s facility is expected to remain non-operational for around 3-6 months with the potential to take up to nine months. The associated government investigations, environmental reviews, alone could take as long as four months—not including the actual repair work.
Also, Xinjiang has proposed strict COVID-19 measures, which could restrict logistics and the flow of polysilicon even more, thereby adding yet another layer of supply constraint.
It noted that GCL’s plans to expand production capacity by 20,000 MT for the fourth quarter of the year may now be delayed by two more quarters.
ROTH is increasing its poly average selling price forecast by 5% for Q3 2020 to $8.20/kg from $7.45/kg, 13% for Q4 2020 to $8.80/kg from $7.80/kg, and 5% for Q1 2021 to $8.40/kg from $8.00/kg.
There were four “flash explosions” at the facility on Sunday and a fifth on Monday, as per ROTH Capital’s findings. It said that the suspected cause was overpressure in the rectification and boron removal filter leading to a leak of trichlorosilane gas.
“We expect the poly pricing impact to be immediate and exacerbated by the current state of the industry supply chain, which is currently lean as the downstream industry heads into an inventory replenishment cycle,” the report further added.
The ongoing coronavirus crisis had disrupted the global supply chain since the lockdown was first imposed in China. In a recent online survey conducted by Mercom India Research, almost 70% of the respondents said their business would be affected by over 15% due to coronavirus. Moreover, 83% of the survey participants expect solar component supply shortages because of the virus.
China added 30.11 GW of new solar capacity in 2019. Large-scale projects made up 17.91 GW and 12.2 GW of installations was through distributed projects, according to the official statistics released by China’s National Energy Administration (NEA). According to the latest statistics, installations declined by 31.9% year-over-year, compared to 2018, which saw 44.26 GW of solar installations.
Recently, the Chinese Ministry of Industry and Information Technology issued a draft that proposes several guidelines for the manufacturing capacity of solar components in the country. The draft stated that the implementation of these measures would help the solar photovoltaic manufacturing industry promote sustainable and healthy development. The move came in the wake of overcapacity in the industry and falling installations in the country.
Notably, in 2018, China terminated the levy of anti-dumping and countervailing duties on solar-grade polysilicon originating from the European Union. The duties were in place since May 2014.
Polysilicon imports to China are expected to increase in the short-term to fill the gap in supply.
Image credit: Georg Slickers / CC BY-SA
Nithin is a staff reporter at Mercom India. Previously with Reuters News, he has covered oil, metals and agricultural commodity markets across global markets. He has also covered refinery and pipeline explosions, oil and gas leaks, Atlantic region hurricane developments, and other natural disasters. Nithin holds a Masters Degree in Applied Economics from Christ University, Bangalore and a Bachelor’s Degree in Commerce from Loyola College, Chennai.