According to an IHS iSuppli PV Perspectives Market Brief and the companys Polysilicon Price Index, supply will significantly outstrip demand, thus leading to "major price erosion".
Both spot and contract prices are expected to be affected, depending on the contract type and purity of the polysilicon. For example, IHS iSuppli says contract pricing for 9N/9N+ pure polysilicon is forecast to fall to $32.20 in June, down from $33.40 in February. Meanwhile, it believes that spot market pricing for 9N/9N+ pure will decrease to $24.40, down from $27.90. Overall, it is predicted that polysilicon prices will hit $22 per kilogram by the end of the year.
In 2011, Henning Wicht, director and principal analyst, says spot prices fell by 65 percent. "This year is expected to bring another 56 percent reduction. All this will have an impact on pricing for solar modules and systems as well, adding to the woes of the industry in what is already expected to be a challenging year. These developments are likely to lead to long-term changes in the way polysilicon is bought and sold in the PV industry," he explains.
In particular, spot price declines are affecting long-term contract agreements (LTA), "which have dominated the industry until recently." However, IHS iSuppli does believe that since polysilicon is still not a commodity product, due to the different levels of purity, LTA contracts are not about to disappear. "Polysilicon is not fully commoditized, and different impurity levels can lead to lower solar module efficiencies, making quality control still an important part of the purchasing process," it states.
Despite this, it says LTA contracts are more likely to be signed when the pricing remains flexible to market conditions. "One way to adjust LTA prices is to link price changes to the spot market," says IHS iSuppli.
Overall, the company predicts that 328,000 metric tons (MT) of polysilicon will be produced in 2012, compared to 285,000 MT in 2011; demand is only expected to be 196,000 MT, down four percent on last year. "This means that production capacity will outstrip demand this year just like the last, with excess production actually widening to a whopping 132,000 metric tons in 2012, up from 80,000 metric tons in 2011. Supply will exceed demand by 67 percent in 2012, up from 39 percent in 2011," says IHS iSuppli.
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