According to pv international magazine.
Polysilicon prices fell to $6.70/kg last week, after remaining stable at an all-time low of $8/kg throughout the first months of 2024.
“This contributed to around 50% of the concomitant drop in module prices, which had also remained stable during the first months of 2024, from $0.130/W to $0.122/W,” said solar analyst Andries Wantenaar. at Rethink Technology Research, at pv magazine. “These are the prices in China, before any shipping and application of customs duties.”
According to Andries Wantenaar, this drop is due to massive production overcapacity. He noted that several other facilities representing more than 100,000 tonnes of capacity, which will come online this month, will also bring down prices.
“The drop in prices was particularly notable for n-type polysilicon, because these new facilities were of that quality,” he explained, noting that China reached a production capacity of 2.4 million tonnes. at the end of 2023, with 1.43 million tonnes of production, which corresponds to approximately 550 GW. “With a slightly greater adoption of thinner wafers, 2.4 million tonnes would be enough to produce 1,000 GW of solar once the utilization rate of 2.4 g/W is reached. »
According to Andries Wantenaar, there is no point in starting construction of new facilities at this stage. “The construction period is 18 months and prices were still good 10 months ago. If everything announced is built, China will end 2024 with a production capacity of 4 million tonnes, and in 2023 the maximum figure for all potential facilities was 7 million tonnes. However, half of this project depended on market conditions and was therefore canceled. »
The analyst believes that the further drop in the price of polysilicon is not particularly significant in absolute terms, but he recognizes that only a very small profit margin must remain.
“In the past, the marginal cost of production was $7/kg, but with the addition of a large number of modern facilities over the last two years, we believe this cost has come down significantly,” he said. he explained. “Daqo New Energy recently said its marginal cost of production for the fourth quarter of 2023 was only 40.69 CNY ($5.60)/kg, while Daqo’s annual cost, including sales, was 6 $.70/kg, the current market price. »
If the global polysilicon industry reaches a capacity of 3 million tonnes (1,250 GW) later this year, this would be twice as much excess capacity as needed, even relative to theoretical global demand. of 2025, which is more than 600 GW. This would mean that only the most profitable 50% of production capacity would remain operational.
“Overcapacity and the fierce competition it brings are currently forcing all companies to cut costs and become as profitable as possible, so it is a moving target,” said Andries Wantelaar. “But we expect the price of polysilicon to remain above $5.50/kg for at least a year. Module prices are expected to fall to $0.110/W, which would be half the price compared to the mid-pandemic low point in 2020, by the end of 2024.”
The rest of the supply chain is also experiencing a phase of overproduction combined with an increase in the number of factories. Only a few niches, such as silver paste and high purity quartz, are not affected by this situation. Looking at the short-term outlook, it is also possible that prices will increase slightly during the third and fourth quarters due to the seasonal increase in demand, but fall again during the first quarter of the year. year 2025.
Andries Wantelaar said it was difficult to make predictions about possible factory closures. “At the moment it appears that utilization rates are very low throughout the supply chain, with some as high as 20%. Most of the production capacity expansions have been carried out by the pre-existing giants, although there are some new entrants. It’s hard to say who will be the first loser.”
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Translated by Marie Beyer.
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