Norway’s REC Silicon lays off 40% of US workforce, reduces production

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Once again criticizing the ongoing solar PV trade dispute, and reduced demand for polysilicon, REC Silicon says it has been forced to further reduce its workforce by 40%, or around 100 employees, at its Moses Lake polysilicon production facility in Washington, effective today.

It has also taken the decision to reduce production to around 25% of total capacity, meaning fluidised bed reactor (FBR) production is forecast to be 2,040 MT in Q2 2018, or 240 MT below the guidance on April 26, 2018, which was 2,660 MT. Its operations at the Butte, Montana factory are not said to have been affected.

The move will help the company to maintain liquidity and meet its financial obligations, it said in a statement released yesterday, while also retaining the ability to ramp operations up, should access to the Chinese market become viable once again.

“As a direct result of the solar trade dispute, REC Silicon’s workforce has declined by a total of 500 jobs since 2011. During the same period, the company’s revenues have declined by over 70% to $272 Million in 2017,” read the statement.

It continued, “President Trump and U.S. Trade Representative Robert Lighthizer committed to pursue a resolution of the AD/CVD measures imposed by the Government of China on U.S. polysilicon. There has not been a resolution nor any re-opening of the China market to REC Silicon.

“It is now absolutely urgent that the U.S. Government takes steps to re-open the China market for U.S. polysilicon production to avoid further job losses, avoid the loss of U.S. technology leadership, to preserve this important part of the solar energy supply chain in the United States, to allow REC Silicon to re-start production, and most importantly allow us to re-hire our skilled and dedicated workers.”

In April, REC Silicon estimated that it would produce 11,590 MW for the full fiscal year 2018, and cited average polysilicon costs of US$11.6 per kg, also for the year. These predictions came on the back of a successful Q1, where the manufacturer saw its revenue and shipments increase significantly year-on-year.

At the time, the company said polysilicon prices grew in the period as a consequence of stronger demand, although they fell later in the quarter “due to softer markets because of uncertainty in polysilicon demand and the Chinese holiday season.” It added, “Solar grade polysilicon prices continue to be higher inside of China due to supply constraints caused by the solar trade war between China and the United States.”

Polysilicon spot prices inside of China at the end of the first quarter of this year were estimated to be approximately $16 per kg, around $3 less than in the same quarter of 2017. The global polysilicon market, the company added, is still dominated by long-term fixed sales contracts and high polysilicon inventory levels.

Successive layoffs

REC Silicon squarely places the blame on the U.S.-Sino trade dispute, which was initiated by SolarWorld in a petition submitted to the U.S. Government in 2011, where it claimed China’s PV manufacturers were illegally dumping product into the U.S. market.

This was followed in July 2013, by anti-dumping import tariffs in China for U.S. and South Korean polysilicon manufacturers, which were made permanent in January 2014. At the time, it was said that U.S. producers REC and Hemlock would face the highest rates.

The trade war has subsequently seen REC Silicon make a series of announcements of job cuts and revenue losses over the past few years. In July 2015, for instance, the company reduced its production in the U.S. by half, and halted expansion plans at the Washington site. Consequently, FBR production was cut by 2,030 MT.

In February 2016, it then said it would shut down remaining polysilicon production which utilizes its FBR technology at the facility, while in November of the same year, it shed 70 jobs.

In the latest news from the company, it laid off a further 30 employees at its other polysilicon production site in Butte, Montana, last September, while this February, saw it reduce its stake in the joint venture (JV) with Chinese silicon material manufacturer, NSF from 49% to 15.06% after NSF agreed to provide all of REC Silicon’s outstanding capital contribution for the project.

Originally, REC Silicon invested $1.7 billion in the construction of its Moses Lake facility, in 2010. “At its peak in 2011, REC Silicon generated $1 Billion in annual revenues from its operations in the United States and provided approximately 900 high paying jobs. Approximately 95% of REC Silicon’s revenues are generated from sales in markets outside the United States,” said the company in its statement from yesterday.

Current barriers

In pv magazine’s latest polysilicon and wafer manufacturers ranking, published in March, production editor, mark Hutchins wrote that while U.S. manufacturers have continued to be shut out of the Chinese market by duties between 55.4% and 57%, the country was responsible for around 5.5% of imports, primarily from REC Silicon’s FBR facility in Washington, and from beleaguered polysilicon giant Hemlock Semiconductor.

Hemlock, the largest U.S. polysilicon producer, has been vocal in calling for a reduction to tariffs. It delivered a letter to President Trump in January requesting that a resolution be included in the announcement on the Section 201 case, which went on to place tariffs on Chinese cell and module imports to the U.S.

While this, and China’s need for imports to satisfy all demand, could result in a reduction, analysts do not seem optimistic about the Chinese government’s willingness to negotiate.

“For the U.S. polysilicon companies attempting to sell again in the China market, this is not good news,” Karl Melkonyan, Senior Analyst, Solar Demand at IHS Markit said at the time. “First, it will not facilitate the removal of the current barriers to export U.S. polysilicon into China. Second, the announcement made recently by the U.S. administration is forecast to have a negative effect, slowing down PV demand in the U.S., which could indirectly impact on reducing the total demand for polysilicon in 2018.”