In its Q4 2012 Polysilicon and Wafer Supply Chain Quarterly Report, NPD Solarbuzz has found that contrary to historical practice, suppliers of polysilicon to the photovoltaics industry have been "significantly" lowering capacity utilization rates, following spot market price decreases to US$20/kg in Q3 2012 and $16/kg in Q4.
This presents a marked difference to past activity, said the research company, which historically saw many producers maintain plant utilization rates at above 90%, even in the face of spot market price declines of 70% between Q1 2011 and Q2 2012.
"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," commented Charles Annis, vice president at NPD Solarbuzz.
A key reason for the lowered utilization rates, continues NPD Solarbuzz, is the oversupply of polysilicon to China. Cited as the worlds largest end market, the company found that while 188,000 tons of polysilicon were used for photovoltaic applications in China between Q1 2011 and Q3 2012, 262,000 tons were supplied to the market.
Supply came from both domestic and foreign sources, however foreign imports are said to have grown to "record highs" during 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 2H12, ultimately led to the recent utilization corrections," said NPD Solarbuzz.
Overall, this polysilicon supply rationalization saw prices stabilizing towards the end of the last quarter, and the company expects this to continue into Q1 2013. Despite this, Annis said that price pressure is predicted to remain strong.
Many capacity expansion plans have been put on hold due to the lower utilization rates and while there are several plans that said to be scheduled for completion, he believes capacity will remain idle until end market demand picks up.
Last week IHS iSuppli issued its monthly polysilicon price tracker. In it, Henning Wicht, principal analyst, photovoltaics, for IHS i-Suppli Deutschland said indications are that supply is falling more closely in line with demand. The company added that prices could rise slightly towards the end of March.