No signs of increase in Poly prices

Solar panel prices have increased sharply over the last one year from the catastrophically low levels reached during 2012. Poly and wafer prices had also plunged as overcapacity stuck all parts of the supply chain. Though panel prices have gone up recent days, poly prices have remained more or less stuck in the $20 range. Many of the small poly producers who had entered the market have gone belly up and only the lowest cost players such as GCL, OCI, Wacker are managing to remain profitable today. These companies had also dramatically increased their capacity which put pressure on the global prices. With solar demand increasing sharply in 2013 and forecasted to increase by almost 50% in 2014, there are little signs of increase in poly prices.

The reason is that poly capacity has become quite large and companies have been running plants at low utilization. There are also signs that the major poly players are starting to defreeze their expansion plans after putting them on hold. This means that poly prices will not increase much in 2014, despite projection of a 50% increase in solar panel demand. Most of the small Tier 2 and Tier 3 players will not be able to come back, as prices are still far below their costs.

OCI recently announced that their 10,000 ton capacity would come online, while others such as Wacker are continuing with their long term capacity increases. The good news is that utilization rate increases will lead to better margins for the major polysilicon makers. One of the major headwinds for the polysilicon companies is the continuous decrease in poly usage per watt of solar panels. This has come down substantially over the last few years from around 7-8 grams per watt to 5 grams per watt. This has been done as companies have become more efficient in processing ingots and wafer. They kerf loss has decreased as companies have looked to cut cost in every possible way.

The picture for poly is mixed. While prices will not jump, they will not decline either and the volume realizations will increase. The Tier 2 and Tier 3 players have a bleak future and will probably shut down leading to a healthy consolidation in the sector.