‘Polysilicon price will stay above $5.50/kg for at least a year,’ says analyst

Polysilicon prices fell to $6.70/kg last week, after remaining stable at a historic low of $8/kg throughout the first few months of 2024.

“This has accounted for roughly half of the simultaneous drop in module prices, which were also stable for the first few months of 2024, from $0.130/W to $0.122/W,” Andries Wantenaar, solar analyst at Rethink Technology Research, told pv magazine. “These are prices from China before any shipping or tariffs.”

Wantenaar said massive overcapacity is driving this decline. He noted that several more multi-hundred-thousand-ton facilities coming online this month are also pushing down prices.

“The price drop was especially notable for n-type-grade polysilicon because those new facilities were of that grade,” he explained, noting that China reached 2.4 million tons of production capacity at the end of 2023, with 1.43 million tons of output, which corresponds to approximately 550 GW. “With just a little further adoption of thinner wafers, 2.4 million tons would be enough to make 1,000 GW of solar once a usage rate of 2.4 g/W is reached.”

Wantenaar said it is not worth beginning construction of any new facilities at this point.

“The construction period is 18 months and prices were still good 10 months ago, so we still have more coming through from that time,” he said. “If everything announced got built, China would end 2024 with 4 million tons of production capacity, and back in 2023 the peak number for all potential facilities was 7 million tons. Half of it, however, was ‘dependent on market conditions’ and therefore canceled.”

Wantelaar described the new polysilicon price decline as not particularly large in absolute terms, but he acknowledged that there must be very little profit margin left.

“In the past, the marginal cost of production was $7/kg, but with the addition of so many extra-large and modern facilities in the past two years, we believe this has dropped significantly,” he explained. “Daqo New Energy recently claimed that its Q4 2023 marginal cost of production was just CNY 40.69 ($5.60)/kg, although Daqo’s full-year cost, including sales, was $6.70/kg – the same as the current market price.”

If the global polysilicon industry reaches 3 million tons of capacity (1,250 GW) later this year, this would be twofold overcapacity, even compared to the theoretical 2025 global demand of more than 600 GW. This would mean that only the 50% most cost-efficient production capacity would remain operational.

“Overcapacity and the harsh competition it brings is currently forcing all companies to cut costs and become as efficient as possible, so it’s a moving target,” Wantelaar said. “But we expect that the polysilicon price will stay above $5.50/kg for at least a year. Module prices should fall to $0.110/W, which would be half price compared to the mid-pandemic low point in 2020, by the end of 2024.”

The rest of the supply chain is also experiencing overcapacity combined with more factory additions, aside from a few niches such as silver paste and high-purity quartz. For the shorter-term outlook, it is also possible that prices will rise a little in the third quarter and the fourth quarter due to seasonal improvements in demand, before falling again in the first quarter of 2025.

Wantelaar said it is difficult to make predictions about potential factory closures.

“For now, it seems to be more a case of very low utilization rates throughout the supply chain, some as low as 20%,” he claimed. “Most production capacity expansion was conducted by the pre-existing giants although there are some new entrants. It’s hard to say who will lose out first.”