As previously warned, REC Silicon has announced that it would shut down remaining polysilicon production which utilizes Fluidized Bed Reactor (FBR) technology at its facility in Moses Lake, Washington.
This morning EU time the polysilicon maker released a trading update which indicates that it will shut down remaining polysilicon production at the site, as well as shuttering one of its silane gas units which fed FBR production and keeping another closed indefinitely.
The company had reduced FBR polysilicon output at Moses Lake last July by 2,000 metric tons annually, and had warned in late September that it would be forced to shut down FBR production entirely if Chinese duties on U.S. polysilicon were not lifted.
In what was widely interpreted as retaliation for U.S. trade action against Chinese solar products, in July 2013 China imposed duties on U.S. polysilicon, and made these permanent in January 2014. This included a 57% import tariff on REC Silicons products.
Since that time the nation has also closed a loophole which allowed Chinese PV makers to use foreign polysilicon in products bound for export, however Wacker Chemie has negotiated a minimum import price agreement which allows it continue to sell into the nation. This combined with low import duties on Korean polysilicon means that a large volume of polysilicon is still imported.
China hosts around 80% of global wafer production and thus is the worlds largest market for polysilicon. Due to a combination of excess Chinese capacity and continuing import volumes Chinese polysilicon prices have crashed, and this has had an impact on all polysilicon makers, especially those operating at smaller volumes and with higher costs.
REC Silicon Chief Financial Officer James May II says that the company remains hopeful that there will be a resolution to the trade war, noting that high-level talks continue between China’s Ministry of Commerce (MOFCOM) and the U.S. Department of Commerce.
REC Silicon will continue to produce polysilicon for the electronics industry at its facility in Butte, Montana, and with the shut-down of the Moses Lake plant it will not be producing polysilicon directly for the solar industry. "There will be a little residual production in terms of what come out of Butte for the solar industry," notes James May II.
"We are focusing on trying to more fully exploit the markets outside of China. Were very restricted in terms of what markets are available."
In the first quarter of 2016, the company expects to produce only 820 metric tons (MT) of FBR polysilicon and 450 MT of polysilicon for the electronics industry, out of a total of 1,540 metric tons. REC Silicon’s output has been declining for several quarters, and REC has also been laying off workers and deferring non-critical maintenance to cut costs.
Despite the implications this has for REC Silicons results, the company has US$95.4 million in cash on hand and says that combined with expected revenues this is sufficient to pay its debts throughout 2016. This is due in part to cost-cutting measures. REC will provide further details in its Q4 results call on February 12.
The shut-down is a blow to REC Silicon, and will also impact global FBR polysilicon production levels, as the Moses Lake facility was one of the few plants to make polysilicon using this method.
In contrast to the dominant Siemens method, FBR utilizes a continuous batch process, whereby trichlorosilane or monosilane gas is injected into a chamber to grow polysilicon granules on seed crystals. These are then withdrawn from the chamber as new granules form.
A primary advantage of FBR is that it uses only 10-20% of the electricity compared to the Siemens method. Three companies are currently building FBR capacity in China and Korea, including a joint venture of REC Silicon and Shaanxi Tian Hong.
Update: This article was updated at 2:45 PM EST to include commentary by REC Silicon CFO James May II.