China curtails polysilicon production to boost prices

A 60% plunge in world prices sees China artificially curb supply to boost demand—and prices.

China’s polysilicon industry, the world’s biggest supplier to solar-panel manufacturers, has temporarily halted about a third of its production in a bid to inflate prices. Some 30% of China’s polysilicon makers are estimated to have shut down production.

China has about 45% of the global production capacity that purifies silicon into polysilicon.

Sources said the Chinese might maintain the production cap until lost revenues are recovered while others said market realities might force an early end to the artificial shortage of polycrystalline silicon, also called polysilicon.

Polysilicon is the most expensive ingredient in solar panels. It’s a key component in solar panel construction and over half of world production is used to make solar panels.

“The freeze in production won’t last too long,” believes Xie Chen, an analyst from the China Nonferrous Metals Industrial Association, a trade group that advises the government.

“Many companies have said they will return to manufacturing if prices rise to $47 a kilogram” from the current level of about $28.80.”

He forecasts prices will jump to $40 to $50 a kilogram this year. That could be sufficient to encourage a return to production in the first half by most of the plants that have stopped production.

Demand for solar products is recovering and is expected to shift from Europe to Asian and U.S. markets.