Charles Annis, Vice President, NPD Solarbuzz
February 15, 2013 | 0 Comments
Polysilicon suppliers to the solar photovoltaic (PV) industry have been significantly lowering plant utilization rates during the past six months, with average quarterly utilization rates falling below 70 percent, as released in the latest NPD Solarbuzz Q4'12 Polysilicon and Wafer Supply Chain Quarterly Report.
This contrasts with historic plant utilization rates at above 90 percent typically provided by the leading polysilicon suppliers to the solar PV industry. Even when polysilicon spot prices declined 70 percent between Q1'11 and Q2'12, Tier 1 polysilicon suppliers maintained these high utilization rates.
Polysilicon makers strive to run plants at optimal capacity levels, where maximizing production offers the lowest cost structures by spreading depreciation costs over a larger volume. This often results in the highest yields, avoids shutdown/start-up costs, and enables volume purchases of raw materials.
Accordingly, polysilicon suppliers maintained high utilization rates while prices remained above cash costs. When average spot prices fell below $20/Kg in Q3'12, and continued down to $16/Kg in Q4'12, even Tier 1 makers with best-of-class cost structures were forced to adjust production levels.
China, the world's largest end-market, consumed approximately 188,000 tons of polysilicon for PV applications between Q1'11 and Q3'12. However, during the same time period, 262,000 tons of materials were provided to the Chinese market from a combination of domestic production and foreign imports.
In particular, foreign imports grew to record highs during most of 2012. As a result, the 74,000 tons of excess supply contributed to a strong inventory buildup and, combined with weaker than hoped end-market PV demand during 2H'12, ultimately led to the recent utilization corrections.
Tier 1 polysilicon maker plant utilization. Source: NPD Solarbuzz Q4'12 Polysilicon and Wafer Supply Chain Quarterly Report
The reduced utilization rates have also had a profound impact on the previously aggressive capacity expansion plans of PV polysilicon suppliers. In fact, several Tier 1 polysilicon manufacturers, including Wacker, Hemlock, OCI, and Tokuyama, have now decided to delay ramping up and building new polysilicon plants.
The rationalization of supply finally started stabilizing polysilicon prices towards the end of Q4'12, and this trend continues into early Q1'13. Even so, price pressure is expected to remain strong with polysilicon makers hoping to increase utilization rates as early as possible. Moreover, several polysilicon plants are still currently scheduled for completion, but this new capacity is likely to remain idle until end-market PV demand increases.
This article was originally published on NPD Solarbuzz and was republished with permission.
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