To avoid production stops, Korean companies are selling polysilicon at a loss

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To avoid production stops, South Korean companies sell polysilicon at a loss. Source: China Times Electronics News, Author: Liang Yawen, 2016/12/5 9:57:28. South Korean polysilicon manufacturers, led by OCI, have seen an increase in imports even after anti-dumping taxes were imposed by the Chinese mainland; it is suspected that they sell the product to China at prices below cost in order to avoid losses resulting from production stops. However, this practice harms the local market in China. Recently, several polysilicon producers in the Chinese mainland, including Jiangsu Zhongneng Silicon Industry, LDK, Luoyang Zhongsi, and Chongqing Daquan, have requested that the Ministry of Commerce in China intervene to address the issue, arguing that the actual level of dumping by Korean companies exceeds 33%, and calling for an annual review of this situation. According to the First Finance report, South Korea’s imports of polysilicon reached 35,000 tons in 2014, a 65% increase compared to 2013, and this figure rose further to 48,000 tons in 2015, representing an increase of 35%. Analysis by South Korea and third-party agencies shows that the pricing of polysilicon from South Korea in the mainland market is significantly lower than its normal value. Reports indicate that, compared to previous years, South Korea’s imports of polysilicon did decrease in September this year, with monthly and annual declines of 38.8% and 30%, respectively. This was mainly due to the unprecedentedly weak demand from downstream industries in September, resulting in very few transactions. According to an analysis report by Shinhan Investment Corp, South Korea’s largest securities firm, OCI’s production cost for polysilicon last year was $19.7 per kilogram, while the cash cost was $16.1 per kilogram. According to GTM’s report titled “Polysilicon 2015–2018: Supply, Demand, Costs, and Prices,” OCI’s cash production cost last year was slightly above $18 per kilogram. As a result, when exporting to the Chinese mainland, the import-weighted price of South Korean companies’ products was lower than their production costs, forcing them to sell their polysilicon at a loss. Industry experts point out that foreign companies are willing to sell polysilicon at a loss mainly because silicon wafer manufacturers are concentrated on the Chinese mainland; most of the upstream polysilicon has to be sold there. Otherwise, companies including those from South Korea would face risks such as production shutdowns and other operational issues. If South Korean companies cannot sell their products at lower prices, they will find it difficult to compete with those from the mainland. Reports indicate that due to the massive dumping of polysilicon from abroad, the market price of polysilicon on the Chinese mainland dropped from 144,000 yuan per ton at the beginning of last year to 106,000 yuan per ton by the end of the year, representing a total decline of 26.4%. The average annual price was 124,000 yuan per ton, a decrease of 22.6%, falling below the historical low level seen before the initial anti-dumping rulings in late 2012. A few polysilicon manufacturers managed to maintain slight profits, while others suffered losses.