Polysilicon foam may collapse

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They were once the favorites of market funds; they gained investors’ favor by associating themselves with polysilicon, and even they themselves were tempted by the huge profits in this industry. 　　However, as downstream demand declined and new production capacity began to be released in large volumes, these polysilicon-related stocks that were once so powerful and popular during the bull market suddenly found that instead of the feast they had hoped for, all that awaited them was leftovers. 　　A seller’s market turned into a buyer’s market. In the first half of last year, polysilicon prices continued to rise, but at that time the industry had already recognized the risks underlying this prosperous situation. Brokerage analysts who have been monitoring the photovoltaic industry on a long-term basis have stated in their reports that as new production capacity is brought online at a rapid pace, the supply-and-demand balance will reverse next year, leading to a significant drop in polysilicon prices. 　　The financial tsunami that erupted suddenly at the end of the third quarter last year turned analysts’ predictions into reality ahead of schedule. New entrants that have only started to expand their production capacity this year will miss out on the era of huge profits in this industry. 　　The imbalance between supply and demand is likely to widen gradually. On December 25, 2008, Jiangsu Sunlight’s polysilicon production facility in Shizuishan, Ningxia, with an annual capacity of 1,500 tons, began operations. 　　On January 9, 2009, the annual production capacity of 1,500 tons of high-purity polysilicon at Nanbo A’s Yichang subsidiary was also put into operation. 　　According to the original plan, by the end of this year, two ongoing projects owned by Tianwei Baobian’s polysilicon company will come online, with a combined production capacity of 6,000 tons. 　　It’s not just listed companies that are expanding production capacity this year. The disclosed project plans show that Jiangxi Sunwoda’s 5,000-ton project will come online in June this year; Asia Silicon’s annual 6,000-ton polysilicon production project also began trial production at the end of last year. Jiangsu Daquan’s 2,650-ton expansion project is scheduled to be completed by the end of this month... According to incomplete statistics, following a series of expansion and new construction projects in 2008, the planned polysilicon production capacity in China now stands at 88,000 tons, with another 44,000 tons in the process of being built. 　　“This industry has become distorted. ”Not long ago, senior executives from a large silicon company in the southern provinces and cities of the country told reporters as much. 　　Analysts at Great Wall Securities say that the imbalance between supply and demand will gradually widen in the coming two years. The global supply of polysilicon for solar cells is expected to reach 82,000 tons and 144,000 tons in those two years, while demand will be only 56,000 tons and 65,000 tons respectively. 　　The market is tilted in favor of buyers. “Previously, this was a seller’s market, but it will turn into a buyer’s market this year.” ”Analysts at Great Wall Securities said. 　　The senior executive mentioned earlier described the situation in previous years to the reporters, saying, “At that time, all buyers came to the factory to purchase goods in stock; some, worried about not being able to get what they wanted, would even pay an advance deposit.” ” 　　So, what is it like now? At the site of a project launched not long ago by a large enterprise in the south, the reporter ran into customers who had come to inspect the goods. This individual comes from a solar silicon wafer factory in Jiangsu and Zhejiang; he told reporters that there are more options available now, and downstream manufacturers have greater bargaining power. “The most typical change is that we can place long-term orders without having to stock inventory in advance. ” 　　From spot to long-term orders – this is probably the biggest change in this market. An analyst at Great Wall Securities told reporters that starting in 2004, over a period of five years the spot price of polysilicon soared from $40 per kilogram to $400 per kilogram, while the price for long-term contracts only rose to $150 per kilogram at its highest point. 　　Now, what polysilicon manufacturers prioritize is ensuring they have customers and that their products can be sold. According to Daily Economic News, which obtained information from Jiangsu Sunshine, its subsidiary Sunshine Silicon Industry has signed a supply contract with the downstream silicon wafer manufacturer Hailun Technology, to supply 1,000–1,200 tons of polysilicon to that company this year ； Asia Silicon Industries also revealed not long ago that its 6,000-ton polysilicon project has entered into a supply contract with Suntech Power in Wuxi, valid for seven years! This was completely unimaginable during the boom in the industry a few years ago. 　　The financial crisis has hit the global photovoltaic industry hard. ◆ An analyst at Great Wall Securities said, \"The current situation in the (polysilicon) industry is the result of many factors coming together last year.\" ” 　　◆Han ****, the chief information officer of China Energy Network, told reporters, “This is a typical Christmas industry.” ” 　　◆A senior executive from one of the aforementioned large silicon companies said, “If there had been no financial crisis, the downturn in the polysilicon industry would not have come so quickly.” ” 　　Many photovoltaic companies have suspended or reduced their production. As part of the downstream segment of this industry chain, China’s photovoltaic module manufacturers are highly dependent on exports. The financial crisis severely impacted the real economies of Western developed countries, and China’s photovoltaic enterprises were inevitably affected as well. The decline in downstream demand is a severe challenge faced by polysilicon manufacturers as well as the entire global photovoltaic industry. 　　Policies remain the decisive factor in shaping the development of the photovoltaic industry. Currently, the industrial support policies in major developed countries are beginning to be revised downward. The feed-in tariff subsidies for solar power generation under the 2004 Renewable Energy Act enabled Germany to become the world’s largest photovoltaic market. 　　Analysts at Great Wall Securities argue that Germany’s substantial subsidies have instead led to persistently high prices for photovoltaic modules, deviating from the effects it intended to achieve ； Coupled with the financial crisis, continuing with the previous support policies would put strain on financial resources; as a result, countries have begun to adjust their industrial policies in a negative direction, and global photovoltaic installation capacity will gradually slow down. 　　Han **** pointed out that the decline in end-demand is the fundamental problem; even with subsidies in place, there will be many fewer users willing to make purchases at present ； “As long as the economic situation abroad does not improve, the decline in demand for polysilicon will continue. ” 　　Previously, there were reports that 300 photovoltaic module manufacturers in the country have closed down, and this figure was confirmed by the person from the silicon wafer factory mentioned earlier. He told reporters that Europe is the main market for the export of photovoltaic modules, but now Germany and Spain, the two major photovoltaic countries in Europe, have reduced their support for this industry. Coupled with exchange rate losses, many module manufacturers that do not have a stable customer base have stopped or partially suspended production. The individual also revealed that since the second half of last year, the production capacity of his company has not been fully utilized. 　　“Under the current circumstances, photovoltaic companies either go bankrupt or must develop new markets. ”Previously, Meng Xiangan, secretary-general of the Chinese Society for Renewable Energy, told the media. 　　New technologies pose challenges to crystalline silicon cells. New entrants have to worry both about the sales of their products and about technological upgrades. At the beginning of this year, solar thin-film cells attracted attention and investment from funds in the secondary market. 　　In terms of the most important indicator for evaluating the quality of batteries—the photovoltaic conversion efficiency—thin-film batteries have been proven to be superior to traditional crystalline silicon batteries. Han **** explained that the thickness of polycrystalline silicon wafers is currently around 180 micrometers, but only 3 micrometers of it is useful for power generation; the remaining portion does not allow light to pass through, so no electricity can be generated. Thin-film batteries avoid this problem associated with crystalline silicon batteries. 　　In the view of Han ****, the prospects for thin-film batteries are even more promising. Han **** also said that, strictly speaking, polysilicon cells are not entirely clean energy sources; it is an industry that involves high energy consumption, high pollution levels, and high investment costs. Therefore, as new technologies mature, polysilicon cells will also face challenges. 　　Proactive venture capital funds have flocked to this new field. Last July, Lenovo Investment funded Zhejiang Advanced Solar ； In November, Intel Capital and the International Finance Corporation invested in Shenzhen Chuangyi Technology and Hebei Xinao Solar respectively; both of these companies are engaged in the production of thin-film solar cells. Analysts at Great Wall Securities say that in this round of industrial restructuring, the two types of manufacturers that will survive are those whose supply chains extend downstream ； There may be efforts to build up expertise in thin-film battery technology. 　　Hundreds of millions in investment at risk: What’s the future for polysilicon companies? According to incomplete statistics, more than 10 A-share listed companies have invested in polysilicon projects to date; the amount of investment announced so far is nearly 6 billion yuan, with the total investment amount reaching over 30 billion yuan. If this scope is expanded to include unlisted as well as overseas-listed companies, the total investment amount will exceed 100 billion yuan. 　　Currently, the industry is under pressure from both excess production capacity upstream and shrinking demand downstream; when will these companies be able to recoup their investments? 　　Han **** said that companies that entered the market early were able to reap huge profits to some extent, but it’s hard to say the same for those that enter later. Analysts at Great Wall Securities noted that the cost price for domestic polysilicon manufacturers is between $40 and $50 per kilogram, which means they can still make a profit. 　　However, the senior executive from the aforementioned silicon company believes that prices will continue to fall, and may even reach the cost level. Experts expect that as production capacity is rapidly expanded this year, polysilicon prices will continue to fall, with spot prices moving closer to those of long-term contracts. 　　Almost no one is optimistic. As early as September 2007, Shi Zhengrong, the chairman of Suntech Power, told the media that he expected a significant reshuffle in China’s photovoltaic industry by 2010 ； In the polysilicon industry, some analysts even believe that only 3 to 5 companies will ultimately survive. 　　So, how are those huge investments recovered? How should these newly established companies cope this year? The reporter contacted several listed companies such as Jiangsu Sunshine, TBEA, and Nanbo A regarding this matter, but regrettably, none of them provided a response. 　　Among the photovoltaic stocks listed in the U.S., Wuxi Suntech, one of the top three photovoltaic module manufacturers in the world, had a share price of nearly 50 dollars a year ago; today it is only 7.40 dollars ； Meanwhile, the stock price of Sunwah LDK, the world’s largest silicon wafer manufacturer, has also dropped from over $51 last year to $4.85 at present. In the common A-share trading software, today’s daily prices of overseas Chinese photovoltaic stocks represented by Wuhan Suntech can no longer be seen among stocks related to concepts such as Tianwei Baobian. Extracted from an online article; original source: (http://solar.nengyuan.net/200903/21-6005.html) This post was last edited by LHY8771 on 2009-3-25 at 15:23.]